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Warren E. Burger: Mr. Kneedler, I think you may proceed whenever you are ready. Edwin S. Kneedler: Thank you, Mr. Chief Justice, and may it please the Court: The question presented in this case is whether respondents have a right to judicial review of matters concerning the amount of benefits under Part B of the Medicare program. Part B establishes a voluntary program of supplementary medical insurance that pays in general 80 percent of the reasonable charge of physician services and other services. Part A of the program, which establishes the basic hospital insurance program, is not directly involved in this case. The principal relevance of Part A here, however, is that under Part A Congress has expressly provided for judicial review of benefit determinations where the amount in controversy exceeds $1,000, and this demonstrates that where Congress intends to provide for judicial review under the Medicaid program, it expressly does so. Under Part B, however, Congress has not affirmatively authorized judicial review. Four terms ago, in United States versus Erika, this Court unanimously held that by this omission Congress had deliberately foreclosed judicial review. The Court there relied on what Congress perceived to be the relatively insubstantial amount of money involved in the typical Part B claim. The Court adhered to this view of reviewability under Part B just two terms ago in Heckler versus Ringer. Although Congress has extensively revised the Part B program in a number of respects since Erika was decided, it has not enacted legislation to overrule that decision. Bills have been introduced to accomplish that result, however, and as we point out in our reply brief the committee reports on those bills demonstrate Congress's understanding that under existing law judicial review is entirely foreclosed under Part B. In these circumstances we believe it would be especially prudent for the Court to adhere to its rulings in Erika and Ringer and leave to Congress, which is studying the matter, the question of whether exceptions should be carved out to that preclusion. Sandra Day O'Connor: Mr. Kneedler, do you think that constitutional challenges to the application of the Secretary's guidelines concerning Part B can be challenged in court? Edwin S. Kneedler: Well, as we pointed out in our brief, of course we think that issue is not presented here because the particular-- Sandra Day O'Connor: Well, they've certainly made a constitutional claim. Edwin S. Kneedler: --They have made a constitutional claim, but it is our submission, for the reasons we have stated in the brief, that it is so insubstantial as not to vest the Court with subject matter jurisdiction under the rationale that the Court disposed of the constitutional claim in Ringer itself. We think that's so because the regulation that's being challenged simply authorizes the establishment of separate charge screens, or prevailing charge screens, based on the charging patterns that exist in the community, and where a carrier implements that principle and adopts separate prevailing charge screens that are simply based on the charging patterns in the community, we think that that can in no way be thought to be so utterly lacking in rational justification under Flemming versus Nestor as to-- Sandra Day O'Connor: Well, it did... it did appear to me, anyway, that the plaintiffs below made three different kinds of challenges. One was to the carrier's utilization and application of the Secretary's rules on Part B, and second was a challenge to the Secretary's regulations themselves, and an allegation that the Secretary's regulations did not meet the statutory requirements that Congress had laid down, and third, a constitutional challenge. Now, do you think that Erika precludes the constitutional challenge? I guess you think not, but you think it's insubstantial? Edwin S. Kneedler: --Well, yes. Erika, we think, didn't address it because there was not a constitutional question raised. Sandra Day O'Connor: What about an allegation, that the regulations of the Secretary simply don't conform to the statute? Edwin S. Kneedler: On that question, we think the judicial review is plainly foreclosed. In Erika... Erika itself involved a challenge to instructions from the Secretary that is, insofar as the carrier is concerned, there is binding regulations, and the Court-- Sandra Day O'Connor: The language in Erika doesn't make too clear that that was intended. Edwin S. Kneedler: --But the Court of Claims decision in Erika, however, at pages 590 to 591 of 634 F. 2d do discuss the carrier's challenge to the intermediary letter upon which the carrier relied and also several additional letters implementing that, and the Court of Claims did review the carrier's... the question of the carrier's reliance on those letters and held that they were not a valid basis for the carrier to deny claims. Sandra Day O'Connor: Well, why would a challenge to the regulation as not meeting the statutory requirement be a burden to the Court such as review of the typical Part B benefit claim? Edwin S. Kneedler: Well, the typical Part B benefit claim might well often include a challenge to a regulation or instruction or legal principles upon which the carrier relied, and it would not be difficult for a claimant to allege that. And I would point but that there are now over 300 million claims a year filed under the Part B program and more than 30 million enrollees, so the potential for bringing these questions into court is rather substantial, in our view. Also, the premise of Erika that Congress has precluded judicial review of matters concerning the amount of benefits extends not simply to the factual determinations but to the legal ones as well, because a decision on a claim for benefits is really analogous to a court's judgement which includes not simply findings of fact but the application of law to it, and so where Congress has precluded review of a decision concerning the amount of benefits, that necessarily includes the legal rules that the carrier has applied in arriving at that determination. As we have pointed out in our brief from the beginning, the regulations governing the carrier hearing program have provided that the carrier's decision on a claim for benefits is final and binding and it is not subject to further review, and that the carrier is to adhere to the Secretary's view of the meaning of the statute and regulations. Putting these together, we think it's quite clear that the preclusion of review of amount of benefits under Part B includes questions of law or regulations. One other point I'd like to make in this regard is if the Secretary had never issued the regulation involved in this case, and the carrier had simply relied on its own interpretation of the statute, that it's clear that judicial review would be precluded under the rationale of Erika because there in Erika as here, there was a statutory challenge to the prevailing fee limitation that the carrier was using. In fact, it was a challenge based on the very same sentence of the Act upon which respondents rely in this case. All that has happened here is that the Secretary has given some interpretive guidance to the carriers explaining what he understands the Act to mean, but the issuance of a regulation should not in our view provide a vehicle for judicial review. John Paul Stevens: What if the Secretary promulgated a regulation abolishing carrier review entirely? Would that be reviewable, do you suppose... just said it cost too much money? Edwin S. Kneedler: Well, I guess at some point the Secretary's actions would be so far removed from the administration of the program and-- John Paul Stevens: Do you think that would be reviewable? Edwin S. Kneedler: --I would hesitate to give definitive answer, but I would think it might well be because for one thing it doesn't really concern the amount of benefits or-- John Paul Stevens: Well, let's say he just abolished carrier reviews for certain kinds of injuries, broken legs or something, no carrier review in certain kinds of injuries. Would that be reviewable? Edwin S. Kneedler: --Well, it may well be, but because the Secretary would not be giving directions on how to adjudicate particular claims-- John Paul Stevens: The argument would be, he's not complying with the statute? Edwin S. Kneedler: --No, it would be beyond that. That would be, among other things, collateral to the substantive determination of the claim and the amount of the claim. John Paul Stevens: But the particular claimant wouldn't get his broken leg paid for. I mean, whatever category of review you take out, you know, it would affect some claims. Edwin S. Kneedler: It will effect the claim, but what we have here is something that goes directly to the amount of benefits which is at the core of what Congress has precluded. It's what 1395 FF affirmatively authorizes review of under Part A and hence precludes review of under Part B. The prevailing fee limitation is an essential element in the calculation of the reasonable charge, and claimant cannot separate out that particular issue, legal issue of the prevailing charge. John Paul Stevens: In other words, the scope of your position is that whatever is authorized under A is necessarily forbidden under B, but something that's forbidden under both, you could review under B? Edwin S. Kneedler: Well, that is essentially our position. The abolishment of the claims adjudication process is not an issue that arises in the adjudication process itself. It's wholly external to it. And once you get out of the claims adjudication process, then the argument for judicial review might be stronger. But the principle that we're relying on, and it's not just in the Medicare program but it's reflected more broadly in Section 405-H of the Act, is that in the Social Security Act Congress has carefully considered when it wants to have judicial review. It affirmatively authorizes it typically by incorporating Section 4O5-G, the provision for judicial review in District Court. Sandra Day O'Connor: Mr. Kneedler, Erika said it didn't rely on 405-H. Edwin S. Kneedler: That's correct. Sandra Day O'Connor: Does that mean it's open to us to hold that 405-H just precludes review of claims for which review is available under 405-G? Edwin S. Kneedler: No, I think not. I think Ringer forecloses that argument. In Ringer the argument was made that because the one claimant, Ringer, had not submitted a claim for benefits and therefore could not get into the claims adjudication process that culminates in 405-G, that he should have a right of action under the general type of question jurisdiction, 1331, the argument being that 405-H shouldn't preclude review where it's not available under the Act. And the Court rejected that proposition, saying that the scope of 405-H does not expand or contract depending upon whether review is otherwise available. In fact, the whole purpose of 405-H is to preclude review except where Congress has provided for judicial review. This, we have shown in our brief particularly by reference to the legislative history of the enactment of 405-H. The second sentence of that provision on says that no findings or decisions of the Secretary shall be reviewed by any tribunal except as herein provided, referring to Section 405-G, and under the Part B program the carrier acts as the Secretary's agent and as the Court recognized in Erika, the Secretary is the real party in interest on an issue arising under Part B. Sandra Day O'Connor: Mr. Kneedler, in Ringer it seemed to me the claimants could obtain judicial review as provided under 405-G, and that just isn't the case here so I suppose we haven't technically answered that. Edwin S. Kneedler: Well, the one claimant had not filed a claim and therefore was not within the judicial review... the administrative review process that would culminate in Section 405-G, and he was saying that because 405-G was not available, that federal question jurisdiction should be available. John Paul Stevens: Well, he hadn't, had the operation, either. Edwin S. Kneedler: He hadn't had the operation, but that was simply-- John Paul Stevens: All he had to do was get the operation, file a claim, and he would have review. He just couldn't afford it, but that's-- Edwin S. Kneedler: --Well, that's right, but the Court made the point that a court cannot essentially issue a declaratory judgment under the 1331 jurisdiction to expound on a legal issue arising under the Medicare program. The legal issues have to be taken to court, if at all, under 405-G and that's... the same principle applies here. Congress has not permitted the courts to grant declaratory judgments or injunctive relief under the general grant of federal question jurisdiction. It has provided a review mechanism, but unlike, under the Part A program involved in Ringer, Congress has withheld judicial review. And the third sentence-- John Paul Stevens: --Excuse me. You say they have provided a review mechanism for the claim, the doctors-- Edwin S. Kneedler: --Before the carrier. John Paul Stevens: --But how can these doctors assert that claim? Edwin S. Kneedler: A doctor can assert a claim before the carrier if he accepts assignment from the Part B beneficiary, The doctor's rights are then entirely derivative of those of the patient and he can submit a Part B claim to the carrier. Lewis F. Powell, Jr.: Mr. Kneedler, will you clarify for me why the difference between Part A and Part B review is so significant? Part A provides very substantial review. Edwin S. Kneedler: It does. Lewis F. Powell, Jr.: Judicial review, and my understanding is, Part A provides for reimbursement of hospitals. Edwin S. Kneedler: That's correct. Lewis F. Powell, Jr.: Why the difference? Edwin S. Kneedler: Well, it was Congress's judgment in enacting the Medicare program that Part A was typically going to involve much greater amounts of money in a typical claim. Lewis F. Powell, Jr.: Part B would involve greater amounts of money? Edwin S. Kneedler: No, Part A. I'm sorry. Part B, claim can consist of nothing more than a claim for doctor's visit which can be $10 or $15, and Congress was concerned shout flooding the courts with these relatively insignificant claims, whereas a hospital visit is likely to give rise to a substantial medical bill. And Congress did provide for judicial review, but significantly it limited it to situations in which there's $1,000 or more in controversy. In this case, the district court allowed review apparently without regard to any amount of controversy. Indeed, the one beneficiary who is a plaintiff in this case, the practical difference, the difference in reimbursement levels that's at issue here is about $1.60 an office visit. It seems to us that this is precisely the sort of minor reimbursement dispute that Congress wanted to keep out of the courts. As we point out in our brief, also the bills that are pending before Congress now would make the Part B review provisions parallel to those under Part A and allow for judicial review only where there is that $1,000 in controversy. Sandra Day O'Connor: Do you think it's open for the Secretary to provide by regulation for administrative review of claims like this under Part B? Edwin S. Kneedler: It may well be. There are existing mechanisms for the Secretary to review, not in every case but the Secretary has a quality review mechanism whereby a sample or the carrier's cases are reviewed periodically. Sandra Day O'Connor: What is the mechanism in place now to review a carrier's development of guidelines or rules to govern how physicians' services are going to be compensated? Edwin S. Kneedler: There are several. There is an annual evaluation of the carrier's performance that is conducted by the... that is conducted by HCFA, the Health Care Financing Administration, which is an assessment of the carrier's overall performance. This is discussed at some length in our briefs in McClure four terms ago. One aspect of that, and it's discussed in the testimony in the record in this case, was that there was an evaluation of the prevailing charge levels that the carrier uses, not necessarily poring over the statistical data but just making sure that the carrier is using the right approach in evaluating that question. The other form of oversight is, as I mentioned, quarterly quality reviews of the carrier's performance by individual hearing officers. Another mechanism available to a person affected by the Part B program would be to file, and particularly in this case where there's a regulation of the Secretary, would be to file a rule-making petition with the Secretary. If the respondents in this case believe that in fact the data now supports elimination of any differential in charging patterns based on specialty, that a petition for rulemaking could be submitted to the Secretary along with relevant supporting data. So, there are mechanisms that can be resorted to, and along these same lines Congress had last year commissioned a study by the Office of Technology Assessment which we also point out in our brief under the Deficit Reduction Act of 1984, to study the differences in charge levels for physicians' services according not only to specialty differences but the locality and the type of service. So, there's also rather extensive congressional oversight or the way in which the Part B program is administered. Sandra Day O'Connor: But the question here is so basic. It's an allegation that the statute says if the services provided by the physicians are identical, that no different level of compensation is permitted, based on specialization, and that's a pretty basic question, isn't it? Edwin S. Kneedler: Well, what the statute says is that the reasonable charge cannot exceed 75 percent of the customary charges for similar services. It certainly seems to us to be a reasonable construction of the phrase, "similar services, to take into account differences in specialty, and in fact this regulation was promulgated at the very time the Medicare program was being implemented. " So, we don't have here any aberrational or startling implementation of the Act. In 45 states the carriers are using this. I would point out again that in Erika the statutory challenge to the prevailing charge ceiling was under the very same statutory provision. That sentence requires that the similar charges be accumulated and evaluated as made during the preceding calendar year, and the provider there argued that during the calendar year means over the course of the calendar year. It doesn't permit the carrier to select just one date in the middle of the year. And, I submit that that is every bit as, in one sense, basic to the way the program is being administered, but the Court unanimously held that judicial review is foreclosed. And this is essential in a program of this magnitude with 300 million claims annually, to have the oversight be conducted by an expert agency, by the Secretary, in reviewing the manner in which the carriers perform. And this is done, as I have said, through the oversight function, and to have judicial review of these matters without regard to the amount in controversy as permitted here would substantially undermine the efficiency of the program. One other point I wanted to make about reviewing the regulation is that not only did Erika involve instructions analogous to a regulation but so did Ringer itself. In fact, that was the principal challenge of Ringer, was a contesting of an instruction that prohibited a carrier from paying any amount of benefits for a particular service. What we have here is not a prohibition of the payment of any amounts, but just concerns the amount of benefits which is something that the carrier is particularly expert in addressing. Several other ways in which the respondents and the court of appeals have attempted to avoid the force of Erika and Ringer in this case, I think also should be addressed. One is that the Court of Appeals suggested, is that the preclusion of review under Erika and Ringer doesn't apply to someone other than the claimant for benefits. The Court of Appeals didn't explain what it meant by that, but it apparently meant positions rather than the Part P beneficiary. Respondents don't defend that argument here, and I don't see how it could be defended, because in Erika itself it wasn't the beneficiary. It was the assignee, the provider of the services who brought the action, and judicial review was foreclosed. By the same token, respondents argue that they aren't really bringing a claim for benefits in the sense that they want monetary relief directly from the court. They are just challenging the methodology for the calculation of the prevailing charge. Again, this was exactly what was at issue in Erika. The Court of Claims, whose judgment was reviewed here, did not get into the question of adjudicating individual claims. They remanded to the carrier to apply what it viewed as the correct standards, and had the carrier process the claims. So, again that furnishes no basis for distinguishing Erika or Ringer. John Paul Stevens: May I just ask, Erika was a suit for monetary judgment though, was it not? Edwin S. Kneedler: It was brought in the Court of claims. John Paul Stevens: Whereas this is a suit for an injunction against enforcement of regulation? Edwin S. Kneedler: That's correct, but the-- John Paul Stevens: The Court of Claims could not have granted injunctive relief, could it? Edwin S. Kneedler: --It could not have, although in a sense it granted the equivalent by a remand to the carrier. It didn't award a money judgment. It remanded the matter to the carrier to compute the benefits under what the Court of Claims viewed as being the proper legal standard, which is exactly what... exactly the relief that the respondents ask for in this case, as to how the prevailing charge screens were formulated. John Paul Stevens: Well, but they might conceivably be reformulated without their getting any more money. Couldn't they be uniform at the lower level, for example? Edwin S. Kneedler: Well, that would be unlikely to happen because if there appears to be on average... the nonspecialists are reimbursed at a lower level, so if they're put in one screen presumably-- John Paul Stevens: Well, presumably but not necessarily? Edwin S. Kneedler: --In individual cases it-- John Paul Stevens: It would be possible, would it not, to grant all the relief that they're entitled to, claiming this uniformity principle, without giving them any money? Edwin S. Kneedler: --Well, this lawsuit wouldn't give them money, but the consequence of the judgment would in most cases, particularly-- John Paul Stevens: Not if you reduced to the lowest level, would it? Edwin S. Kneedler: --But the Secretary isn't authorized to reduce it to the lowest level. The calculation has to be based on 75 percent, what would cover 75 percent of charges in the area. So, if the Secretary says, or if the Court said that you had to combine the lowest prevailing charge level with the highest, bring them together, then the consequence is going to bring up the lowest and bring down the highest. So, it will have the consequence of raising the amount of benefits payable in most cases to the people treated by family physicians. There may be some situations, and the record suggests there are a few situations, in which general practitioners or nonspecialists actually receive more, but in the typical case they receive less, or the beneficiary receives less, and so it would nave the effect of raising the benefits. Of course, in Ringer you had much the same situation. You had a regulation that absolutely precluded recovery. The consequence of that, even though not what the Ninth Circuit would have ordered, but the consequence of saying that the Secretary could not rule it out would be to-- John Paul Stevens: Yes, and I of course thought that argument was persuasive there, but the holding of the Court still is, there is another avenue of review. The thing that's novel about this case, and you correct me if I'm wrong, but is there any other case, any other time the Court has held that any government official can issue a nationwide regulation that is not subject to judicial review of any kind, for failure to comply with the statutory mandate? I don't think this is ever... it's ever contended disposition before, has it? Edwin S. Kneedler: --I'm not aware of the situation but analytically it's no different from precluding judicial review of any administrative action, because in administering a program an executive agency relies on law, statute, and implementing regulations, and if Congress can preclude judicial review even where someone's alleging that there's a statutory violation, as was true in Erika. John Paul Stevens: Yes, that's true, but in the vast majority of the cases that come up through the Social Security system, and their particular factual controversies, and you've got findings and the formal things that-- Edwin S. Kneedler: Well, there are quite a few of them that involve... quite a few of the cases that involve challenges to regulations. John Paul Stevens: --Well, sure, and I think your position would be, then, in Ringer there could have been a challenge to the regulation if you followed the statute? Edwin S. Kneedler: That's exactly right. In fact, as we point out in our brief, Section 405-G contemplates review of regulations as part of review of the final decision. John Paul Stevens: Right. Edwin S. Kneedler: And that seems to us to be clear, that Congress views 405-G as the avenue not only for review of factual issues but review of regulations and the legislative history expressly says that a court can review questions of law on review. So, when Congress makes 405-G applicable, it is saying, we are authorizing judicial review not only of facts but of regulations and law. Where Congress has withheld it, it has withheld those same issues from judicial review. If there are no more questions now, I would like to reserve the balance of my time. Warren E. Burger: Mr. Gilchrist. Alan G. Gilchrist: Thank you, Mr. Chief Justice, and may it please the Court: There are two basic issues on the merits of this case where petitioners state the respondents have no relief whatsoever. The first issue pertains to the equal protection claim, and the placement of family physicians, and those patients who choose family physicians, separate from all other physicians and essentially equating the selection of a family physician with that of a chiropractor or a podiatrist. Now, the government states today that that equal protection count had no merit. The fact of the matter is, the government filed a motion for summary judgment on that issue. It was heard. It was denied. And the government did not appeal that decision. It is also a fact that the lower court in this case stated that the government's action utterly lacked merit, utterly lacked reason, rather. The Sixth Circuit pertained to the government's action as durational. But perhaps most important, as to the government's position today, as the government conceded at trial it had no rationale for the placement of board eligible family Physicians who all, by definition, have completed residency programs along with chiropractors and podiatrists and sep rate from their peers. The statutory question is basically the other major issue. It's important to bear in mind that the Medicare statute repeatedly uses the word "similar services" in determining reasonable charges under Part B of the Medicare program. The regulation in question doesn't even contain the words "similar services". Nobody testified at trial in this case that the Secretary attempted to define "similar service", or that the Secretary even considered similarity of service in implementing this regulation. Basically, it is the respondent's position that a reasonable and consistent interpretation of the Medicare statute is that there is 1331 jurisdiction for both these issues. We've also addressed the issue of due process and separation of powers, but I think it is essentially not important for purposes of a statutory interpretation because we firmly believe that a consistent reading of the statute supports the respondent's position. And we have tried to set forth in detail the types of issues for which there is no judicial review and the types of issues for which there is judicial review. One of the problems I have with the petitioner's position before this Court is, they have never explained in any detail what types of issues there may be judicial review of. Let me give you an example. Do the petitioners maintain today that when a lawsuit is filed on the basis of equal protection, and the government concedes no rationale for its actions, that there is no federal court judicial review or no forum anywhere to address the issue? The government makes that concession, at least to the portion of the claim in this case, and then ignore it, and essentially they refuse to grant any relief voluntarily and they maintain no jurisdiction in the district court, and apparently by making that concession all they want to accomplish is to have the respondents quit talking about it. To give another example, let's assume that the Secretary, by regulation, decided not to pay family physicians at all, or the patients that choose family physicians, But those services aren't similar to anybody else's services, so they just won't pay them at all. Is that subject to review anywhere? Or, the Secretary is satisfied that the office visits performed by family physicians... and incidentally, their paint of $1.50 an office visit, that was one type of office visit. As a matter of fact, for comprehensive office visits for Carol Diedrich, they cut it in half from $50 to $25. But if the Secretary is prepared and satisfied that the office visits performed by family physicians are similar to office visits performed by chiropractors, I suppose the Secretary might take one... just one step further and decide that they were only covered for office visits and spinal stipulations on the part of family physicians. Is that subject to no review? If the Secretary promulgates the regulation of sickle cell anemia, services will not be paid. Is that subject to review? Perhaps that's a suspect clasification, well, let me give another example. A terminally ill patient, they die too soon. We won't pay for those services. Clearly in conflict with the statute, does the government state there is no review for those types of issues? Now, I've conceded under the Erika case, there is no judicial review of an amount of benefit determination made by a clearing officer after hearing, and that is the issue in the Erika case, not whether there is judicial review of any issue concerning the amount of benefits for which there may be no other determination available. It says a mouthful, that concession, and the case law tells us the types of issue the carrier routinely conducts hearings on. In the McClure case, for example, whether a sex change operation is medically necessary, whether an ambulance should have taken a patient to the nearest hospital or to a hospital 30 miles away, whether an appendectomy performed on the same patient on the same day can be billed along with other major abdominal surgery or if it is incidental to and included as part of the bill for the appendectomy, from the Herzog case from the Sixth Circuit, or the Rainer case, whether a medical procedure is a recognized and bona fide medical procedure that the Medicare program should pay. Warren E. Burger: Are these hypotheticals of yours based on a decision without a hearing of any kind? Alan G. Gilchrist: That's precisely the point, Your Honor, that this issue in this case, several issues of statutory construction, but the reality of this case is, there is no hearing, The carrier has expertise and authority, expertise and experiencer, rather, as well a authority to make the decision on issues such as the issues that I've set forth. They make those types of determinations every day in their private insurance business, and Congress delegated to a private insurance company under 1395-U the authority to make the same types of determinations and to conduct hearings to make those types of determinations under Part B. That's in substantial contrast to this case. this case involves a constitutional claim and a claim that a regulation promulgated by the Secretary violates the Medicare statute. Certainly the carrier, non-lawyer hearing officer, has no great expertise and experience to address this type of issue, but perhaps more importantly the Secretary recognizes that fact when the Secretary implemented the statute, because the Secretary specifically barred the carrier hearing officer from making any comment on it, never mind making a determination on the legality of a regulation promulgated by the Secretary. Here we asked for a hearing and the government quite correctly stated we're not entitled to a hearing on these issues, and then they turn around in the same breath state, well, if there's any mechanism at all it's the carrier hearing mechanism. Congress simply did not intend to delegate those types of issues. The legislative history makes that clear. Let me point out just very briefly, on the separation of powers and the due process issue that I've pressed from the briefs... I don't want to get into detail as to Northern Pipeline, the Mathews versus Eldridge, and the McClure case which is a Medicare Part B case, but I concede that there is a great deal of flexibility in the amount of due process that must be afforded in social welfare cases to balance the private interest involved and the risk of erroneous deprivation versus the public interest in avoiding the burden of having to provide additional hearings. By the way, both the Mathews case and the McClure case were allegations of entitlement to additional hearings. Here there can be no meaningful hearing at any time on the issues that have been raised, and I think this Court has steadfastly maintained the position, they certainly did in the Mathews versus Eldridge case, that if due process means anything it means a meaningful hearing at a meaningful time. Here there is no hearing before the carrier. There is no hearing before a federal agency. And if you accept the petitioner's position in this case, there's no hearing before any court. Erika, according to petitioners today, stands for the proposition that there is no judicial review of any issue that may affect the amount of benefits under Part B of the Medicare program, whether there's a determination available anywhere else. I've gone back and looked at the Erika case. I've looked at the decision of the carrier in that case. I've looked at the Court of Appeals decision in that case. And I simply don't agree that the carrier is bound by any instructions in that case. The issue was, during the last preceding year, the statutory issue, the regulation used the same words, during the last preceding year. There was a small issue, basically a side issue concerning retroactive adjustment in that case, that may or may not have involved a carrier following instructions from the Secretary in the form of letters, I guess. But I couldn't find in the opinion where the carrier stated that they were bound and could not make such determination. But I think more important than that, if the government wants to take the position that Erika stands for the proposition that there's no hearing on any issue that may involve the amount of benefits, whether another available mechanism is available, even through a carrier hearing, they should have disclosed that to the Court at that time. I note that Justice Powell's opinion in the Erika case paraphrases in essence what the position of the petitioners was at that time. There it is stated that the petitioner argues that Congress specifically precluded review in the Court of Claims of adverse hearing officer determinations of the amount of Part B benefit payments. The position of the respondents today is that a consistent reading of the Medicare statute... and incidentally, the Erika case was based upon not a specific statement from Congress because... from the statute, because 1395 double-F does not explicitly bar judicial review of anything. Rather, it relied upon the grant of judicial review of determination for the amount of benefits under Part A of the Medicare program and silenced the Part B, coupled with the legislative history to reach the conclusion that there's no review of hearing officer determinations after hearing the amount of benefits under Part B of the program. But the legislative history, and a logical and a consistent reading of that statute, is that the congressional intent to bar jurisdiction under Part B ties in directly and is related to the issues where Congress gave authority to the carrier to make those types of determinations under 1395-U. And the issues that Congress intended to bar are those issues such as the types I've already raised where the carrier has expertise and has authority, and the legislative history supports not petitioner's interpretation about that, but rather respondent's. The Senate committee report which petitioners cite as authority for their position at the inception of the passage of the Medicare statute simply stated that there was a hearing on the amount of benefits under Part B of the Medicare program by the carrier and there is no judicial review of such determinations. Or when the statute was amended in 1972, again petitioners rely upon this language, the conference committee report also cited in Erika opinion, states there is no authorization for judicial review under Part B for matters involving solely... and that's Congress's word, not mine... the amount of benefits. It's simply the logic and consistent reading of the statute, taken in proper context, is Congress intended that some issues certainly be conducted through a carrier hearing, and there is no judicial review of that carrier determination. But there is nothing in the legislative history that Congress intended to preclude any issues under Part B of the Medicare program. Let me talk about Weiner and Salfi for a moment, as well as 405-A. John Paul Stevens: Before you do, Mr. Gilchrist, I'm not sure you've completely answered Mr. Kneedler's argument that the doctor, if he takes an assignment of a claim and he doesn't like the two tier or three tiers, whatever it is, is really asking for recovery that relates solely to the amount of benefit that he can get. Why isn't solely the amount of benefit involved here? Alan G. Gilchrist: First of all, there's a serious question here as to whether this could be an amount of benefit case at all, and let me give you some examples. The board certified family physicians, respondents in this case, are asking for a reduction in benefits, in essence, if you accept the government's position about equalizing the amount of payments because they are in the specialist screen. The context of amount of benefits, the language of the legislative history that pertains to determinations on amount of benefits, and even within Part A where they grant judicial review of determinations on amount of benefits, has to be tied in together with the grant of authority to the carrier to make determinations on amount of benefits. We could dance all day in terms of what those three words mean, amount of benefits. But the fact of the matter is, when we read the legislative history we know what Congress meant by those words. It meant those issues for which the carrier has expertise and experience and for which a hearing can be conducted at the carrier level. Does that help clarify it at all? Okay, thank you. As to 405-A in Salfi and Weiner, the interesting part about the petitioner's brief is, they don't cite a single case for the proposition that the last sentence of 405-H which states that there is... no action may be taken under 1331 against the Secretary, U.S. Government officer and employee thereof to recover on any claims. They don't cite a single case where that last sentence was taken out of context with the balance of 405-H which is clearly precluding 1331 jurisdiction of findings and decisions of the Secretary after a hearing, and precluding judicial review by any tribunal of findings and decisions of the Secretary after a hearing. I don't want to get into a dispute as to whether or not Ringer had a sufficient reason for attempting to bypass, and that's clearly what that was, a bypass of the review mechanism under Part A. He attempted to bypass 405-B and 405G. I think the strongest statement that may be made from the Weiner decision is where Congress has provided for a federal administrative hearing such as they did under 405-B and where Congress has provided for judicial review of that federal administrative hearing such as they did in Weiner under 405-G, that mechanism must be followed and there is no reason that may justify a bypass. I think that's about as we can go in the Weiner decision, and that states it very strongly. Justice Rehnquist in that decision stated that the last sentence of 405-H cannot change meaning based upon whether or not a party has followed the mechanism available within 405-G, whether they've satisfied prerequisites, I think were the exact words. But here that's an absolute, irrelevant issue. There are no prerequisites under 405-G for the respondents to follow because 405-G simply doesn't apply, and the proper context, the last sentence of 1331, simply states that one may not bring 1331 jurisdiction to review a decision by the Secretary through an administrative hearing process where 405-G provides the judicial review. That's in essence, also, the finding in the Salfi decision. As I stumble through the interpretation of the Medicare statute I'm reminded by a statement Justice Powell made in the Gray Panther lawsuit. He quoted from lower court decision that characterized the Social Security Act a an aggravated assault on the English language, and I certainly agree with that statement. The fact of the matter is, a single sentence from the statute or even worse, a single sentence from the legislative history can be taken out of context to support virtually any position anybody wants to take, and I think that's in essence what the government has done here. They've taken the last sentence of 405-H and they've ignored the balance of that section which is clearly in the context of no 1331 jurisdiction, where Congress has provided for a federal administrative hearings for judicial review, and they are attempting to take that sentence outside of that context and say that clearly and convincingly, Congress intended to bar 1331 jurisdiction for any claims under Part B. Warren E. Burger: Has anyone, authoritatively or otherwise, made any guess or estimate as to how many such claims for judicial review are in the offing? Alan G. Gilchrist: I find that very... I'm glad you asked that question because I meant to talk about the court case. I handle a great number of Part B cases. I think I'm familiar with a number of Part B cases for which one goes into federal court in the State of Michigan, at least, and I would wager... I'm not positive... that this Court has been asked to hear more Part B cases involving jurisdiction, and there's been Part B cases filed in the Senate of Michigan, in Federal District Court on the merits, and as a matter of fact Michigan is... Blue Cross Blue Shield of Michigan is the tenth largest carrier in the country. But what the government does is to keep raising this floodgate issue, but as a matter of fact circuits prior to Erika found jurisdiction even on the types of issues we now concede there's not jurisdiction, and they've never supplied this Court with the data as to the number of cases that have been filed, the number of Federal District Court cases or Court of Claims cases. And to date they haven't. I simply don't feel that there ever was a floodgate. I don't want to rehash the Erika case, but the fact of the matter is today they raise the issue of floodgates but they don't... they don't provide this Court with any data that would indicate that in fact there would be such result. I think that this is a very unusual case, as a matter of fact, a case that first of all the government sees no rationale in the equal protection issue, and also as Justice O'Connor indicated, it's quite a very basic statutory point, and furthermore-- William J. Brennan, Jr.: Do you agree with Mr. Kneedler's statistics of 300 million claims and 30 million are in Part B? Alan G. Gilchrist: --I don't quarrel with that. Those are claims submitted in Part B of the Medicare program. The question I'm raising is a number of cases filed in the Federal District Court. That's the issue of raising the floodgates. Warren E. Burger: My question is not as to how many have been filed, How many potentially could be filed if you prevail? Alan G. Gilchrist: I'm sorry. I misunderstood. On this precise issue, very, very few. I mean, I suppose even if I don't prevail, the courts are open from nine to five. Anybody can file a lawsuit. But on the limited construction that I am stating, where there is judicial review on those issues where, the carrier cannot and has been stripped Of authority to make a determination, I'm not sure if there is another case like this to be honest with you, and there have been other cases filed in federal court. I'm not sure if there's been a case in the country where the government when finally pushed to the wall stated that they had no rationale whatsoever for its actions in the face of an equal protection attack for example... so I simply don't feel there would be many. I obviously can't give a precise number, but it certainly would be few. The lower court stated this issue, and not the trial judge but the judge who heard the motion for summary judgment, better than I can state it. He stated that he finds it improbable that Congress would delegate to a private insurance company the authority to violate the United States Constitution or the Medicare statute in Congress's name with impunity. And that's the issue of this case. I submit that-- Warren E. Burger: When it's put in those terms it's pretty difficult to argue with it. Alan G. Gilchrist: --That's right, but that is those are the terms. That is the issue in this case. But what I submit is that if Congress intended this, Congress would have said so. The section 1395 that the petitioners rely upon on their 405-H argument simply says that 405-H shall apply to Medicare to the extent applicable to Title 2 cases. Is that a clear statement by Congress that they intended this result? And the result, I think, should be made even more clear. What petitioners are alleging today is that Congress, while it's provided a forum for insignificant disputes, albeit without judicial review, performed before the carrier to decide issues such as whether an ambulance should have taken a patient to the nearest hospital or to a hospital 30 miles away, Congress intended no forum and no authority for anybody to address constitutional issues and statutory issues. Stated another way, the more significant the issue the less likely that Congress afforded any remedy whatsoever or intended to afford any remedy whatsoever for those affected by the violation of the statute or the U.S. Constitution to obtain any relief. If Congress intended this, somewhere but not within the statute at least within the legislative history, I submit petitioners should find a statement where Congress says this, and they simply haven't. If there's no questions, I basically have no more to add. Thank you. Warren E. Burger: Do you have anything further, Mr. Kneedler? Edwin S. Kneedler: Yes, several points, Mr. Chief Justice. First, the government did not concede in District Court that the exclusion of board eligible family physicians from the one charge screen was unconstitutional or irrational. We simply said that by virtue of the changing of the eligibility requirements for family physicians, they should now be included. So, this is not a case that ever, I would argue, raised a substantial constitutional question. The other point-- Lewis F. Powell, Jr.: May I ask for clarification, are you simply stating that the equal protection question is not before us at all? Edwin S. Kneedler: --Well, there's several points. Neither court below decided that question. We also think that in any event, that is so insubstantial on the merits that it does not vest this Court with subject matter jurisdiction the same way that the claim in Ringer itself did not. Lewis F. Powell, Jr.: Did the lower court say that the equal protection issue was so insubstantial? Edwin S. Kneedler: No, the lower courts did not resolve the equal protection question. Lewis F. Powell, Jr.: What is the AG's position? Edwin S. Kneedler: Our position is that the equal protection argument is insubstantial, so insubstantial as to not vest the Court with-- Lewis F. Powell, Jr.: Is it your position that the construction of the statute is not here either? Edwin S. Kneedler: --The construction of the statute is not here because we believe Congress has precluded judicial review of the question of the construction of the statute. The Court of Appeals did address the question of the construction. Lewis F. Powell, Jr.: So, you would leave the construction of the statute to somebody engaged by Blue Cross-Blue Shield who may not be a lawyer at all? Edwin S. Kneedler: No. The issue of statutory construction involved here is embodied in the regulation issued by the Secretary, and in fact issued by the Secretary in 1967 when the Medicare program was-- Lewis F. Powell, Jr.: But you're still going to leave the construction of the regulation to someone... to Blue Cross-Blue Shield to make that decision with no appeal? Edwin S. Kneedler: --Well, there's oversight by the Secretary, as I pointed out earlier, annually. Lewis F. Powell, Jr.: What sort of oversight? Edwin S. Kneedler: There's an annual review of the carrier's performance by the Secretary's agents to make sure that the regulation is being properly implemented. We would also like to point but that this-- Lewis F. Powell, Jr.: Has that sort of annual oversight ever been accepted as satisfactory in terms of providing some sort of appropriate administrative or judicial review of a major issue? Edwin S. Kneedler: --Well, the Congress has frequently foreclosed judicial review of questions of law. Last year the Court held that judicial review was foreclosed in the Chaney case. In Erika, in fact, Congress held that a question relating to what the carrier did was lawful under the statute was foreclosed by Congress. Lewis F. Powell, Jr.: Basically, Erika simply involved the question of whether or not individual claimants could argue about the amount of benefits? Edwin S. Kneedler: But the basis for their claim was that the approach the carrier took to computing the prevailing charge was inconsistent with the statute, inconsistent with the same sentence of the statute upon which the respondents in this case relied, and similarly in Ringer there was a regulation issued by the Secretary, of nationwide scope, that could not be appealed to the Secretary. Sandra Day O'Connor: Mr. Kneedler, in the other cases the Court has had, wasn't at least review by the carrier of the issue available? Edwin S. Kneedler: Not in Ringer. Ringer involved Part B as well as Part A, and one of the claims in Ringer was that the Secretary's instructions that barred the carrier from awarding any benefits for the particular service was invalid, and the Court held in footnote 4 of its opinion that judicial review is entirely foreclosed even as to that statutory challenge to the regulations at issue in Ringer. So, it was not a situation involving another avenue of judicial review. Thank you. Warren E. Burger: Thank you, gentlemen. The case is submitted. We'll hear arguments next.

Warren E. Burger: We will hear arguments first this morning in Larson against Valente. Mr. Salustro, you may proceed whenever you are ready. Larry Salustro: Mr. Chief Justice, and may it please the Court, this case involves the narrow issue of the constitutionality under the establishment clause of an exemption provision in Minnesota's Charitable Solicitation Act. The provision in question exempts from the financial disclosure requirements otherwise applicable to charitable organizations in the Act those religious organizations and societies which solicit more than half of their contributions from their members and from their affiliates. The appeal presents the question whether the establishment clause prohibits a state from tailoring a regulatory program to allow coverage of some religious organizations where the application of the law to religious organizations is based on criteria unrelated to matters of religious belief or dogma. Plaintiffs in this case are the Holy Spirit Association for the Unification of World Christianity, Incorporated, and four of its members. Defendants are the two state officials in the state of Minnesota responsible for enforcing the provisions of Minnesota's Charitable Solicitation Act. I will discuss the provisions declared unconstitutional, the procedural history of the establishment clause issue in the court below, and why this Court should reverse the decision of the court of appeals. Speaker: Where are the provisions set out completely? Larry Salustro: The provisions of the-- Speaker: Minnesota law. Larry Salustro: --Minnesota law are set out completely in the jurisdictional statement. Speaker: Not just the provision that you are talking about. Larry Salustro: Provision of the entire Charitable Solicitation law set out as an appendix to the jurisdictional statement. Speaker: Thank you. Larry Salustro: Through financial disclosure, the state of Minnesota seeks to inform charitable contributors of the organizations that are soliciting contributions from them. The state seeks to protect contributors from fraud and from misrepresentation by those organizations as to the identity of the organization, the purpose of the organization, and the use to which funds are put by that organization. Through a series of six exemptions, Minnesota has determined that disclosure is not always necessary to effectuate the state's objectives. One of these six exemptions is the exemption for religious organizations and societies that solicit more than half of their contributions from their members and affiliates, and the narrow issue here is the application of the establishment clause to that provision. The procedural history here-- Speaker: Mr. Salustro, what is the rationale for treating religious organizations differently from patriotic and fraternal ones? Larry Salustro: --The criteria used in religious organizations and in fraternal and patriotic organizations, the criteria for exemption is the same, namely, the extent to which they solicit contributions from the general public. The only difference is that the point of the... the point on the line where the exemption is drawn is different for those organizations. This has the result of exempting more religious organizations than fraternal and patriotic organizations, so to that extent it is a more-- Speaker: You think it exempts more religious organizations? Larry Salustro: --Yes, unquestionably. It exempts more religious organizations. Speaker: Is that a fact? Larry Salustro: It's not a fact, but I think it is a mathematical certainty, because the fraternal and patriotic organizations that raise any of their money from the general public outside their membership lose their exemption. The religious organizations can raise up to 50 percent of the money from... up to 50 percent of the money from the general public and not lose the exemption, so it is a more beneficial, a more hands-off treatment of religious organizations as a class than fraternal and patriotic organizations as a class, although the criteria used is exactly the same. Speaker: Counsel, the point raised by Justice Blackmun is one that I would like to pursue with you also, because I don't understand the answer. What is the reason for the different treatment of these types of organizations? What is the reason that is advanced by the state for that difference? Larry Salustro: Well, the reason that is advanced by the state is that the state of Minnesota wants to be more careful about extending its regulatory program to religious organizations. Where the state interest in those organizations is small, then it is concerned about extending its regulatory program to fraternal organizations. There are... we have a very different interest in religious organizations among themselves in this program. The purpose of the program is to provide information to donors and contributors who don't have that information. There are a wide range of kinds of charitable... of religious charitable organizations. There are religious charitable organizations that solicit exclusively from members of the public, 100 percent from the general public. As far as our interest in providing information to donors that don't have it, we have a very great interest in disclosure by those organizations. On the other hand, there are organizations that solicit only from members who are intimately familiar with the finances of the organization, at the other end of the spectrum. We have much less interest in requiring disclosure, public disclosure from those organizations because the members who are the donors of those organizations already have that information available to them or can get it. Speaker: Are there not more hurdles to get over when you are dealing with a religious organization? That is, a religious organization has all the protection of the speech and press clauses, I would assume, and in addition to that it has the protection of the religion clauses which are not necessarily available to fraternal and patriotic organizations. Is that not so? Larry Salustro: Yes, sir, that is correct, Your Honor. What I was trying to explain is that we have a different... we have a relatively lower interest in some religious organizations and the exemption provision is different because we want to leave organizations alone where our interest is so small. There is no doubt that there are many cases by this Court, many charitable solicitation cases by this Court, and what we are talking about here is solicitation from the general public, and in a number of those cases, the Court has... the Court has looked at disclosure type programs and distinguished the kind of regulation that disclosure type programs have from prohibitory regulation, and in the Cantwell case and in the Schaumburg case, and in some other cases where the Court has looked at this particular question, it has determined that disclosure kind of regulation does not have to meet the same tests as regulation which has the effect of directly prohibiting organizations and members of organizations from soliciting contributions from the general public. Speaker: You also have a category in your law of charitable organizations generally. Larry Salustro: Charitable organizations, yes. Speaker: Different from fraternal and patriotic. Larry Salustro: They are different-- Speaker: Well, it says charitable organizations are exempt if they didn't receive more than $10,000 from the public. Larry Salustro: --Charitable organizations as far as that exemption is concerned includes the entire list of organizations. It includes religious organizations. It includes fraternal organizations. It includes all organizations soliciting contributions for charitable purposes. A $10,000 limitation... or exemption is available to all organizations. It is available to religious ones who are not exempted by the other provision. It is available to fraternal and patriotic ones who are not. So, any of the organizations-- Speaker: But charitable organizations generally can raise up to $10,000 from the public without registering. Is that it? And fraternal organizations can't raise any from the public without registering it? Larry Salustro: --Fraternal... any organization, charitable, fraternal, religious, can raise $10,000 from the public without registering. Speaker: That isn't what Subparagraph D says about fraternal and patriotic organizations. Larry Salustro: Fraternal and patriotic organizations have two different criteria for being exempt. One criteria is that they raise all of their money from their members. The other criteria is, and completely independent, that they raise less than $10,000. The same is true with religious organizations. There are two different possibilities of being exempt. One is raising most of their money from their membership or affiliates. Two, raising up to $10,000. Speaker: In any event, you suggest that you treat religious societies the most favorably. They get the most favorable treatment as compared to charitable organizations generally? Larry Salustro: They are treated better than fraternal or patriotic organizations-- Speaker: Or charitable. Larry Salustro: --even though the-- Speaker: Or charitable generally. Larry Salustro: --Yes, or charitable, even though the criteria for the exemption in question is the same, and has nothing to do with religion. We think that based on... well, there are two different parts of the analysis of the exemption provision. One is the decision that there is going to be an exemption provision for religious organizations. That kind of decision takes... takes into consideration that the state has some leeway in treating religious organizations somewhat better, somewhat more liberally, somewhat more at a distance than other kinds of organizations, and the Court said in the Walz case and the Court said in some other cases that there is some leeway for the state to do that without necessarily violating the establishment clause. So, that criteria of religious organization is there. The second question is, once it is determined that there will be a religious exemption, how should the exemption be structured, and in Minnesota's case, what we have done here is used a secular criteria to structure the exemption. The criteria has nothing to do with religion, with religious values, with the content of free speech. The value is purely secular, whether the organization solicits from the general public. It is not only secular, it is tied to the purposes of the Act, which is providing information to people that don't have information that receive solicitations from charitable organizations. Speaker: May I ask you a question right on that point? Suppose you have two religious organizations, each of which raises $500,000 every year, and for one of them that is substantially all they raise; for another, they also raise internally $600,000. Why should the state interest be different for those two organizations? It is the same amount of solicitation of funds from the public. Larry Salustro: The state's interest is different in this exemption, and your question is correct. One of those organizations will be exempt and one not, and that is the way-- Speaker: Isn't the state interest the same for the two? There is precisely the same amount of solicitation from the public. Larry Salustro: --No, we think that there is a difference in that one organization is raising most of its money from the general public. One organization is raising most of its money internally, and that goes to the extent to which the organization can raise money from the public and take advantage of the opportunity if it chooses to to engage in misrepresentation. It is very correct that if dollar-- Speaker: Don't they both have the same opportunity to misrepresent? Larry Salustro: --If dollar figures, if dollar criteria would be different, then you could ask me, what about the dollars here and the dollars there, and doesn't that mean that one organization raises 95 percent of its funds internally and another raises 5, and it doesn't make any sense. It is our position that this is a reasonable way to do it. There are other reasonable ways to do it, but the standard that we have to find with this particular criteria is whether the line we have chosen is not rational, whether it is arbitrary, whether it is invidious, and that comes out of the United States versus Gillette test, United States versus Gillette case, and it is not arbitrary, and it is not invidious merely because there are other ways it could have been done, but had one of those other ways been chosen, the dollar way, then you would have exactly the same opportunity to ask me that kind of question. Speaker: In other words, your answer, as I understand it, is, you've got to draw the line some place, and so this is as good as any other line. That is the only reason for drawing this particular line, as I understand your argument. Larry Salustro: No, I think the line can be... the line is justified as being drawn here because it is the place where a charitable organization relies primarily on public funding rather than primarily on internal funding, and whether primarily public funding is a tiny amount of money or whether it is a large amount of money, that fact remains that now this organization relies more on the general public to raise its funds than it does internally. Speaker: When you say internal funding, you mean members or communicants or whatever it may be? Larry Salustro: We mean members and we mean affiliated organizations. We are not saying that the state does not care about fraud committed by organizations on the members of the organization. That is not the question. But this legislative solution goes to providing information to people that don't have it and don't have the opportunity to get it. Without public disclosure, the general public does not have the opportunity to get that information. That is why it is important that it be supplied as far as the general public is concerned. With members, members have the opportunity to get it, and it is not that we are not concerned about fraud-- Speaker: That was not my question. I understand your argument about members. I am talking about non-members who contribute $500,000 every year to an organization that gets $600,000 from its own membership. They don't have any different access to information than if they were in the other category, do they? Larry Salustro: --No, that's correct. That's correct, Your Honor. That's correct. Speaker: Well, what is the explanation? I haven't heard it quite yet. Why shouldn't the same public that is without that information, why shouldn't they have it with respect to the $500,000, that is less than half of what the organization raises? Larry Salustro: The point is drawn at the place that it is drawn. Speaker: I know. That is restating your position, but you haven't said why, or what the justification is. Larry Salustro: We have a continuum. It is clear that at one end of the continuum organizations raise their money solely from members, and it's our position that we can stay away from that end as far as extending this regulatory program because we don't have a sufficient interest arguably to reach that end of the spectrum. As we move up this way-- Speaker: Well, why don't you have? I know you keep saying that, but-- Larry Salustro: --Because-- Speaker: --Suppose two organizations raise $500,000 from ten people, from ten people. The same ten people give the same amount of money to two organizations. And in the one case you will say those ten people must have information about the organization and in the other case they aren't told a thing. They don't have to be told a thing, as long as the money they give is less than half of the organization's funding. Larry Salustro: --That result comes out of the particular criteria that are used. We don't think, although the result appears unusual, we don't think it is arbitrary. We don't think it is invidious, and we don't think it is drawn on any basis of religion. Speaker: I know that. I grant you... I understand your assertion, but you haven't explained why you distinguish between those two organizations yet. But I guess you have said about as much as you can. Is that it? Well, aren't you also saying that where you are talking about any organization that receives a certain percentage of its funding from members or communicants that it is more likely to be controlled or... I can't think of the exact word I want to use, but subjected to internal discipline by its own membership than, say, an organization which gets 1 percent of its funding from its own members and solicits 99 percent from the outside? Larry Salustro: Yes, Your Honor, exactly. This is a charitable solicitation law. We are worried about matching representations about what is going to be done with funds contributed to what actually is done with the funds that are contributed. Members are going to be aware of what is done with the funds contributed, and members are not going to be in the same position of vulnerability as far as representations made, this is what I am going to do with your money, as are strangers to the organizations. Members have controls. Members have the ability to see books. Members can ask questions. Members have a general idea of whether the people that are running the organization are trustworthy. Speaker: Well, Mr. Salustro, presumably those same reasons apply to non-religious charitable groups, right? Larry Salustro: Yes. Yes, they do. Speaker: And yet you apply a different standard to those entirely. So it is just difficult to understand how the state can justify the 50 percent line within the religious charitable organization category but not the others, because your arguments would apply equally well to the other types of charitable organizations, would they not? Larry Salustro: They would, Your Honor, and it is the position of the state that it can, as far as requiring information from organizations, it is the position of the state that it can be more liberal with religious organizations, that it can keep its distance somewhat from religious organizations where the state interest is not as pronounced, and that comes out of the Walz case, among other cases. The state can accommodate religious values. It comes out of the religion clauses. It doesn't necessarily come out of the First Amendment. We think we could do the same thing with other First Amendment organizations, and in fact we do with the $10,000 limitation. We don't treat them identically. They can both have First Amendment rights; if one organization raises less than $10,000, it is exempt. And that is a discrimination that is made on the same kind of criteria we use here. It is a reasonable criteria. The lines are not drawn arbitrarily or invidiously, and we can treat those kinds of organizations differently. We don't have to put them all in one boat. And that is what we do with religious organizations, but it happens that a little bit some more of them are going to be exempt because we are not interested in extending regulatory programs to religious organizations where we don't think we have that interest, and we don't think that the establishment clause requires us to extend regulatory programs to religious organizations, to increase the contact with religious organizations where we don't think we have a sufficient interest, certainly not the establishment clause requiring that we do that. So that is why the line is drawn differently for religious organizations. Speaker: You might be in trouble, might you not, under cases like Sherbert against Verner and Indiana... Thomas versus Indiana Employment Security Commission, if you were to get too close to a religious organization? Larry Salustro: Yes, Your Honor. I agree with that. We would have some difficulty, and we... there are two questions. One is, would we have difficulty, would that be unconstitutional under the religion clauses as in some cases it might have been under those cases. The second question is, even if we don't reach the limit or the point of unconstitutionality, can the state nonetheless draw back somewhat from that? And it is clearly stated in the Walz case, I think, that the point at which the state can accommodate religious organizations is not the same point at which the religion clause, the free exercise clause requires that the state do that. Speaker: Would you say it would be permissible for the state to have precisely the same requirements with respect to all charitable and religious organizations insofar as registering and disclosure is concerned? Larry Salustro: Yes, Your Honor. Speaker: You could just have across the board... is there some case like that? You are saying that you may regulate religious solicitations in the identical way you may regulate non-religious charitable solicitation. Larry Salustro: Yes, I am saying we may do that. And we do make distinctions between First Amendment... the $10,000 limit applies to First Amendment free speech type organizations and religious ones, and we could do that across the board. Speaker: And it would be valid if you just eliminated Subsection... the religious... the particular religious provision here? Larry Salustro: The legislature could have... the legislature could have made the decision to do that, yes. Speaker: Is there some case you rely on that you can treat... that you can regulate religious solicitations? Larry Salustro: We can regulate religious solicitations? Well, Cantwell versus Connecticut certainly concerned a religious organization. Village of Schaumburg didn't concern a religious organization, but I am not clear that this Court has held that there is a hierarchy of First Amendment values, that religious organizations have more First Amendment protection than other free speech type organizations. So I think we can treat them identically as charitable organizations, as a group of charitable organizations, as the Court did in Walz. It included the whole group of charitable organizations for the purpose of tax exemption. Speaker: Well, what if a religious organization as a part of their doctrine... suppose part of their doctrine is the duty to raise money? Larry Salustro: We are not prohibiting them from the duty to raise money. The right that they would have to assert would be the right... the right to raise money from the general public, from strangers, and the right to refuse to tell the general public what they have done with the money. They have to assert those two rights. Now, it is theoretically possible that there could be such a religious organization that asserts those rights, but I think the proper remedy there would be to create an exemption for that particular organization on religious rights grounds, and not to throw out the entire statute here because there is some possible application in the future that is going to conflict with religious doctrine. Speaker: What bearing do you think the Krishna Consciousness case that the Court decided last spring has on this? Larry Salustro: Well, it is a case concerning solicitation, and it is a case concerning... well, a case concerning raising funds and state regulation. In that case, the Krishnas could be treated as other First Amendment groups were. The notion that religious organizations have more First Amendment protection as far as raising money is concerned than other First Amendment organizations do, that seems to have been rejected in that case. The other issue that is before the Court is the issue of whether plaintiffs have standing to invoke the jurisdiction of the Court to declare this exemption provision unconstitutional on establishment clause grounds. This argument is set out in our brief. The cases say that the proper inquiry is whether plaintiffs have a personal stake in the outcome of the action and suffer an injury which will be redressed by a favorable decision. The procedural posture of this case in the court below is crucial. This is plaintiff's motion for summary judgment that is on appeal here. On plaintiff's motion for summary judgment, the disputed facts are resolved against the plaintiffs. One of the disputed facts in the district court and the circuit court, and plaintiffs acknowledge it here, is whether they are a religious organization. Because summary judgment is involved, as a matter of law on this motion, plaintiffs are not a religious organization. This appeal concerns only the exemption provision for religious organizations. Only religious organizations are affected by it. Plaintiffs are not a religious organization. They don't suffer injury from it. Speaker: Counsel, did the state treat the plaintiffs as a religious organization originally by initiating some kind of action? Was it not-- Larry Salustro: This action was initiated by plaintiffs in federal court. The action that we started in state court we alleged that they were a charitable organization and that they did not register, and therefore-- Speaker: --But did the state take the position that it was a charitable religious organization governed by the 50 percent? Larry Salustro: --No, our pleading in state court says that it is a charitable organization, and naturally it is up to them if they decide that they are exempted because of the religious exemption, it is up to them to raise that point. If this Court should strike down the exemption provision for religious organizations, it will not as a matter of law do plaintiffs any good in this case. We think this is a clear case that there is no injury, there is no redressability, and there is no standing. I reserve whatever time I have. Warren E. Burger: Very well. Mr. Fisher. Barry A. Fisher: Mr. Chief Justice, may it please the Court, after 17 years with a charitable solicitation statute like other states, categorically, neutrally, evenhandedly exempting all churches, Minnesota amended its statute, taking that exemption away from some but not other churches, subjecting them to the statute's comprehensive regulatory and licensing requirements, including extensive recordkeeping, CPA certification, substantial record filings, expenditure limitations, access, disclosure, and publication of church documents, and an open-ended nationwide investigation, all provisions, I think, which comrephensively facilitate a sustained, detailed enforcement audit as to what are bona fide religious expenditures, solicitations and religions. And the statute, Your Honors, arms the licenser with broad investigative powers and provides for license suspension, revocation, receivership, criminal prosecution for enforcing this law and this regulatory scheme which surely imposes burdens, substantial burdens on churches, burdens which simply aren't remote or de minimis. Speaker: Mr. Fisher? Barry A. Fisher: Yes, Your Honor. Speaker: You don't contend that a state couldn't require some disclosure from all religious organizations which seek to solicit funds, do you? Barry A. Fisher: That is certainly not this case. I think that it may, if it were evenhandedly applied to all churches, may, depending on how it is done, pose some entanglement problems possibly. But it is certainly not this case, Your Honor. Speaker: Suppose the Exemption B, which is the one that is at issue here, 309.515(b), suppose that were just not in the law, and that all religious organizations were covered under the charitable provision. Barry A. Fisher: Again, then there would be evenhandedness. There would not be a problem of neutrality and evenhandedness, and there would be, I think, the problems of entanglement that are addressed in-- Speaker: You would say arguably then religious organizations could not be treated the same as charitable ones? Is that it? Barry A. Fisher: --I think also there would be the problem that has been addressed by some of the questions this morning respecting unequal treatment of churches vis-a-vis other charitable organizations. Yes. Speaker: Don't you agree, though... as I understand it, churches can either... they can raise... any church can raise up to $10,000 without registering. Barry A. Fisher: Yes. Speaker: But then they can also raise up to one-half, up to 49.9 percent of their funding. Barry A. Fisher: Correct. Speaker: Which other charitable organizations can't do. Barry A. Fisher: That's correct. Speaker: So they are given a better break. Barry A. Fisher: Some churches are, and I think-- Speaker: Well, some churches are, but they all get the charitable... all other churches are at least given $10,000 exemption. Barry A. Fisher: --That's correct. That's correct. I think that this legislation which dose impose burdens on those churches that it does apply to deserves the Court's scrutiny, both as to the substantiality of the reason for drawing any line at all treating churches unequally, saying that some have to bear the onus of regulation and others don't and the substantiality of the reason for drawing the line where it is, and this close scrutiny, I suggest, is called for by the establishment clause's core, most essential principle of scrupulous intersectarian evenhandedness between churches. And what is the reason here for this disparate treatment, this gerrymandering of churches? Your Honors, absolutely no facts, no logic or reason I think explain this disparate treatment. There is no mention whatsoever of any reason for this in the legislative history, and strikingly, absolutely, there is not a single mention whatsoever of any purpose or reason for this law mentioned by appellants to the court of appeals. Nothing. There is nothing in their briefs, nothing in their argument. It wasn't until the eleventh hour of this litigation before this Court that in their briefs they start positing possible explanations for this law, and it really changes. If you look at the jurisdictional statement and their opening brief and the reply brief, and particularly Footnote 6 of their reply brief, you see changes. They are grappling. There really isn't a purpose. There wasn't one. Speaker: Is there anything unusual about lawyers going on in litigation and losing a case the first two rounds and then deciding that they had better change their approach to the problem? Barry A. Fisher: Well, some would call that admirable. I don't know. But I mean it underscores the problem here of-- Speaker: Admirable or not, it might be sensible, might it not? Barry A. Fisher: --It might be, but I think it doesn't work here. I think that the shifting around and the search for a reason for this unequal treatment just doesn't work. The premise of the reason which they give now, which is member control, isn't supported by any logic, reason, or facts here. Speaker: Mr. Fisher, how do you distinguish the Gillette case? Barry A. Fisher: Your Honor, I don't think that this is the same as Gillette, nor... even if it were-- Speaker: Well, why? Barry A. Fisher: --Even if it were, Gillette's depth of analysis, I think, would decide this statute's unconstitutionality. The analysis in that case was substantial, and not the appellant's proposed test here of some one-dimensional application of a mechanical test, just looking to see if you can find any secular purpose whatsoever and then that is the end of the inquiry. That isn't what the Court did, and if it was, or if the Court were to adopt such a test, it would eliminate two-thirds of the tripartite test in Lemon, a test which was... brought together all the extant strands of establishment clause cases at that time and discussed them, didn't even mention Gillette, nor has Gillette ever been mentioned by any establishment clause case of this Court in the ten years since decided. It is just... there is a complete analysis there as to the justification for the underinclusiveness in Gillette, including that the Congress went as far as it could, accommodating free exercise, that the... to go any further would pose entanglement problems, and it would be impossible to administer, and that the Court was deferring to the government's overriding Article 1, Section 8 interests that were the basis of that legislation. This legislation here is legislation regulating churches on its face, directly. In Gillette, the Court also pointed out that that was a law not on its face with disparate de facto impacts. This is legislation saying that some churches should be regulated, some shouldn't. The legislature absolutely understood that there were churches on both sides of the line or they wouldn't have amended the law after 17 years. Speaker: I suppose you would make the same argument if instead of 49.9 it was 90 percent. Barry A. Fisher: There would still be-- Speaker: If it exempts any church from registration if it raises 90 percent of its funds from its members. Barry A. Fisher: --I would be making the argument that the differential treatment must be closely examined to see what the reason is, whether it is 90 percent, 20 percent, or 50 percent. Speaker: Well, suppose the reason is that the state thinks it is a good enough guarantee against fraud because there is... if it raises that much money from its members who really know what is going on, that is a decent enough safeguard. Barry A. Fisher: Well, the problem there, Your Honor-- Speaker: Well, that is a judgment, that is an argument. Barry A. Fisher: --Yes, it's an argument, here not supported, I think, by any logic, reason, or facts. I mean, plainly, members of churches on one side of the line, those supported by 50 percent member contributions, have no more power and are no more likely to protect the public by scrutinizing public solicitations and expenditures of moneys collected from the public than are those churches on the other side of the line. Speaker: What if the legislature had made findings to that effect? I know you probably wouldn't agree with them, but at least it would have been a legislative judgment. Barry A. Fisher: It would depend on what they were, but here there is nothing. It just doesn't follow. Many churches, as the Court well knows, are hierarchically structured, non-democratic kinds of organizations, and just mere membership accords nothing, and of course membership isn't even defined in the statute. We don't know if this is occasional congregants, true believers, card-carriers, or what. I mean, there is no reference in here. Speaker: Well, would you agree that the legislature would be entitled to think that most churches, most churches raise their funds from within their own membership? Would that be a reasonable starting point? Barry A. Fisher: I don't know. Frankly, I don't think so. Speaker: Don't you know whether that is a fact? Barry A. Fisher: It isn't my belief. Speaker: No, do you know whether... do you suggest you don't know whether that is the fact? Barry A. Fisher: I don't believe that it is. Speaker: Well, suppose the legislature started with that premise, then, without respect to subjective relief. Suppose the legislature said that. Barry A. Fisher: Well, again, it would be a matter of careful scrutiny. If there was just a categorical statement, as there is an argument today, that this is a fact, I think that the Court should examine that, and-- Speaker: Well, now, I have changed it from fact to premise. If that was the premise of the legislature, that most churches raise their money from their members, and as Justice White suggested, then the members are going to conduct their own surveillance of the use of that money, but that they are looking at people who claim religion clause exemptions where perhaps they have 1 or 2 percent raised from the membership and the balance raised from doing what was done in the Hari Krishna case last year in this Court, soliciting on the street and in public places. Do you think the legislature would not be entitled to address that problem? Barry A. Fisher: --Well, it is certainly entitled to address the problem, but again, when it draws lines, putting churches into different categories, we have to look to the premise and the facts that support this differential treatment, and if there was proof that there was self-regulation, that satisfies part of the problem, but there is another problem with this. There is no explanation whatsoever for this odd gerrymander line that is tied to an abstract proportion, that isn't related to the degree of the effect on the Minnesota public at all. You could raise tens of millions of dollars from the Minnesota public, and there could be an enormous impact on the public, but that church could be exempt, but one collecting merely $10,000 unmatched by member contributions would be regulated, and there is just no correlation-- Speaker: What about the procedural posture of the case-- Barry A. Fisher: --Yes, Your Honor. Speaker: --where the state comes in and files a complaint and says, we don't think this is a church at all, it is a bucket shop operation, and you are just making a lot of phone calls from a basement trying to raise money, and you say, no, we are a religion, and we want summary judgment on that basis. Do you think you are entitled to summary judgment? Barry A. Fisher: If we are talking about with respect to this statute, which I assume we are, there is such an allegation, it would depend on the normal rules of summary judgment and their application to what is before that Court. However, assuming that there was a dispute on that fact, then on the establishment clause issue, I should underscore that what Your Honor is suggesting is precisely what the case is here. The Eighth Circuit vacated summary judgment below, and they remanded the case for a factual determination of that merits issue as to whether the appellee is entitled to an injunction. The case stands before this Court without final order. It is an interlocutory matter at this time. That determination will be made, and we don't disagree with the making of that determination, and it might have been a more expeditious thing if that is what appellants wanted had they gone back to the district court then. There is no question that the appellees have had standing at every... every proceeding of this case. So far it has been properly alleged. There was even a preliminary determination as a matter of fact on that very issue when the court granted the preliminary injunction below. Speaker: What factors will be open on review in the district court? Barry A. Fisher: The factors open will be with respect to the standing, and that is just one of some seven different constitutional attacks to the statute that were raised below, the district court finding it only necessary to reach establishment clause, but the fact determination will be a... for the district court to make a final determination of that which he may preliminarily, that is, whether appellee is a church organization. Speaker: And if it is, then the statute is invalid under the Eighth Circuit's-- Barry A. Fisher: Well... if once that determination is made a final order may issue in the case dealing both with the law, which has been the matter of a determination by the district court in the Eighth Circuit, and this question of whether an injunction should issue with respect to this particular organization. Speaker: --Well, won't it just mean that that particular exemption is unconstitutional? Barry A. Fisher: That's correct. Speaker: So you will still be subject to registration and disclosure. Barry A. Fisher: Well, with this additional fact determination, which the matter was remanded for the Court depending on its ruling, assuming that it finds this appellee a church organization-- Speaker: Well, suppose it does. Barry A. Fisher: --will... could enter an injunction saying in addition this law cannot be applied. Speaker: Well, just that particular... just (d). Just Exemption (d). That is the one that distinguishes between one church and another. Barry A. Fisher: Right, but assuming that that is held unconstitutional-- Speaker: Yes. Barry A. Fisher: --then there will not be provisions with respect to churches. Speaker: Why not? I thought the state says that... and I thought you conceded that a church, like anybody else, can raise up to $10,000. Exemption (a) exempts any charity up to $10,000. Barry A. Fisher: Well, the holding of the-- Speaker: But any charity that raises more than that from the public has to register. Barry A. Fisher: --Well, the holding of the district-- Speaker: Why doesn't that apply to a church? Barry A. Fisher: --Well, the holding of the district court and the court of appeals was to find this statute constitutionally inapplicable to churches, to any church, because of the disparate treatment. It didn't extend the statute taking away the exemption so that it applied. Speaker: The only thing at issue was Exemption (d). Barry A. Fisher: Well, but that exemption... Exemption (b). Speaker: (d). Barry A. Fisher: The exemption that was-- Speaker: Yes, (b). Excuse me. I am sorry, (b). Barry A. Fisher: --Yes, (b). The exemption-- Speaker: That is the only one that is at issue, isn't it? But the relief granted was to extend the exemption rather than to-- Barry A. Fisher: --Yes, rather than make the determination that the legislature would have if faced with the option have taken away the exemption as to any church, they... it held that the statute could not be applied constitutionally to any church. Speaker: --Why isn't the validity of that relief at issue here too? Barry A. Fisher: Well, it isn't. It certainly hasn't been raised in any pleading, and I don't believe it is. Speaker: Well, the judgment below is challenged. Barry A. Fisher: It is challenged, but no one for appellants has mentioned that in brief or in-- Speaker: Well, isn't that needlessly destructive of this statute-- Barry A. Fisher: --No, I think to the contrary. Speaker: --to say that no part of the statute may apply to any church? Barry A. Fisher: To take the exemption, I mean, to go the other way and to take the exemption away from all churches, making them all subject to this law, I think, would even heighten, greatly heighten the entanglement problems, and I think it-- Speaker: Well, at least it would be treating churches evenhandedly with all other charitable organizations. Barry A. Fisher: --Well, I think that with all due respect it may be better for a legislature to make the determination that all churches are going to be regulated than for a court to do that, and I think the legislative history, scant as it is, and it is before the Court, makes clear that the legislature did not want to, in the words of one legislator, did not want to "mess around" with some churches, and they were careful to make sure that this was written in a way that would exclude the Catholic Archdiocese, but on the other hand make sure that the exemption was taken away from others. There are references in the legislative history to that. I don't think they intended to bring in the Catholics and the Lutherans and the Protestants and the other groups, but perhaps the Court could enter such an order, but it would not be popular. Speaker: In the case of a federal court reviewing a state statute, do you think it is entirely at liberty if it concludes one portion of a statute is unconstitutional to either strike down that provision or to extend the provision in a way that it believes would make the whole statute constitutional? Barry A. Fisher: I think that the Court perhaps would have that option. I think, though, in selecting an option of relief, both the district court and the court of appeals were correct in treating it the way they did, which put it to a status quo, leaving the entire Charitable Solicitation Act intact as it was extant until 1978, when this amendment came in. It also, I think, was perhaps judicious of the district court to rule just on this one issue, because this law was also challenged on free speech, standardless licensing, vagueness, and many other issues challenging the law across the board in its application to any charity or religion or non-profit organization, and the court ruled just very narrowly on the establishment clause issue, leaving the rest of the statute intact and enforceable as to others. So, I mean, there are options. Speaker: Until they attack it. Barry A. Fisher: Excuse me? Speaker: Until they attack it. Barry A. Fisher: Yes, Your Honor. Yes. I just don't think that there is any necessary correlation, as I was saying before, between the amount of money that a given organization collects from the public and the percentage of that organization's total that comes from the public. A million dollars can be 10 percent, 80 percent, 5 percent. There is just no correlation. Your Honor, I think that-- Speaker: No correlation with what? Barry A. Fisher: --There is no correlation between the abstract proportion, this member-public contributions, and correlation with the amount of money that is collected from the public. In other words, looking at the ratio, if you saw that it was 40, 60 percent or whatever, wouldn't tell you anything about what the impact on the public is. Speaker: Well, I thought you had conceded in response to Justice White's questions ten minutes ago, more or less, that there is a certain assurance to the public that if a large part, without putting a fixed figure on it, if a large part of the support comes from the membership, that then there is reasonable assurance that the surveillance of the church's, the organization's activities is ongoing. Do you suggest that is not a reasonable subject of inquiry now? Barry A. Fisher: No, I did not... that may be a reasonable subject of inquiry, to see if that is really true, or you know, if it logically follows, or it follows as a matter of fact. It is certainly not here. It is not presented here. It is something that was thought of... There just isn't anything in this case that-- Speaker: It can be advanced in support of the legitimacy of the legislation, may it not? Barry A. Fisher: --Yes, and I think that if it stands on logic or reason, on its own, without requiring any facts, then maybe the Court, you know, is free to embrace that, but here it is completely speculative. I suggest that it isn't true, that there is no reason to believe that a 49 percent membership group as opposed to a 51 will have any more power or access, any more inclination, any more desire, or will be just more likely to have access to anything... we are talking about mere members... than those on the other side of the line. I think it is interesting, too, that there was an amendment, you could see, following the legislative history, to, one, the treatment of groups other than religious, and one regarding religious. The one regarding other than religions said that to be exempt you have to have 100 percent come from members, but not just any members. They must be real control members. They must be voting members. And there was a provision for voting members in an early draft of the religion one, and you know, that was taken out, and it was taken out during a colloquy that said, you know, if we leave that in as to voting members, that is going to mean that the Catholic Archdiocese and other hierarchical, non-democratically organized groups are going to lose theirs, and we don't want to mess around with them, so we had better take that voting requirement out. So we know that it is just rank members, and we don't even know, again, what that means in the context of this statute. And I think that there is a... this legislative history gives particular reason for the Court's close scrutiny, because I think there is an inherent potential risk that by fashioning legislation that focuses on churches, taking into account differences in membership, organizational structure, funding sources, and what have you, all matters, by the way, I think, which are constitutionally sensitive inquiries, because they are often dependent on church doctrine or how churches perceive their mission, and what have you-- Speaker: Mr. Fisher-- Barry A. Fisher: --Yes, sir. Speaker: --this statute wasn't aimed at churches, period, was it? Barry A. Fisher: This amendment-- Speaker: It was aimed at charitable... raising funds for charity. Barry A. Fisher: --That's right. When it was enacted-- Speaker: Well, I just... I thought you had forgotten that. Barry A. Fisher: --No. I mean, when it was initially enacted 17 years before the amendment, it focused on charities, just like other states have charitable solicitation statutes. It is this amendment, which is unprecedented in the country, save for the North Carolina amendment, which was found unconstitutional by the North Carolina Supreme Court in the Heritage Village case recently. It is unprecedented, and I don't think there has been a case before this Court where a legislature actually sits down and decides that some churches are going to be regulated and others aren't, and setting out some very substantial regulatory burdens that some, but not others, are going to have... be saddled with. Speaker: You would agree, though, would you not, that a state can properly pass a reasonable disclosure law applicable to all churches who solicit funds from the public? Would you agree with that? Barry A. Fisher: Well, I agree that this is possible. I suspect that it could very well raise potential free exercise problems, some entanglement problems or what have you, depending on what that disclosure is and to whom and what have you. Certain things obviously are more sensitive than others. Internal church documents regarding doctrine, membership lists, and this sort of thing, depending on what follow-up is attached to the disclosure... there could be substantial problems. Speaker: What about if the statute were confined strictly to a church-sponsored retirement community? Barry A. Fisher: Well, I think that when you are talking about the jugular of the lifeblood flow of funds for the church's support, you are talking about one thing, as this statute talks about. When you are talking about the charitable kinds of activities that churches often are involved in, I think that that perhaps is another question, and the... this law, though, goes to the question of regulating the church support fund question itself. Does that answer the question? Speaker: Yes. Barry A. Fisher: Again, I think that the legislative history dramatically illustrates the potential risk when there is line drawing that the legislature may be subject to kind of... more likely to be influenced by the result or the effect of where they draw the line, and I think that there are some seven references in the legislative history to let's make sure about the Catholic Archdiocese. On the other hand, let's make sure that we get the people at the airports, and... and there is one comment that I think is right on, the heart of the matter, by a Senator Celoff, who says, let's make sure... I mean, that this applies to those institutions that are not substantial institutions in our state, and there is also a reference to something like, why are we so hot to get the Moonies? I mean, there... and there isn't anything else. I mean, there is nothing that tells you the reason for the legislation or anything, but when it gets down to where to draw the line, there is some concern, and I think that that just is more reason why the Court should give this close scrutiny. Speaker: In your view, is there any line that could be drawn by the legislature that would sustain the constitutionality of the Act? Barry A. Fisher: I think that if-- Speaker: In place of the 50 percent. Barry A. Fisher: --Well, the problem with the 50 percent is that there is just nothing that supports it in fact or logic. If there were, if there were findings and studies where it really was shown that there was control by the public, then it would be a harder case if and only if there was some sort of real tying of the line to the impact on the public. In other words, here you have an abstract proportion that doesn't... really isn't correlated, doesn't really relate to how much money is really being taken from the public, because your interest is the public. If it did have some sort of a figure, and there were findings that some kinds of groups would take care... that would be able to self-police, to self-manage their solicitation practices and their uses of-- Speaker: Let me get back to the question. Is there a line that would be constitutional, in your view? Barry A. Fisher: --Well, there might be. There might be. I am not-- Speaker: Ten percent, 25 percent, 33 and a third percent? Barry A. Fisher: --Well, again, I am saying it is possible, but it would depend on a real showing of, you know, a meaningful line drawing that... where there is a legitimate reason for distinguishing. I think in many of the Court's cases where such line drawing may have been allowed... I mean, Gillette allowed some under inclusiveness. I mean, there was analysis. There were reasons for upholding this, and I just don't think that there are here, and that is really the crux of the matter. I mean, there is just nothing that really supports a lack of evenhandedness. In the Krishna case, in Hefron, I mean, that was evenhandedness. That was treating... the problem there was that the Krishnas perhaps were seeking some special treatment. Speaker: Wasn't the argument made when that Minnesota case was here? Barry A. Fisher: Well, no. But that would have been perhaps the effect, and it was conceded, I think, in that case by counsel, that they really didn't... in that particular case they shouldn't have a claim of special treatment, but that would have been the effect, I think, of a ruling, and the Court said this was a rule being evenhandedly applied to everyone, the Booth requirement. Speaker: Well, I get back to Justice O'Connor's question. Suppose there weren't any 50 percent limitation here at all, just a complete requirement of reporting by every church. Would you object? Barry A. Fisher: Well, first of all, there is more than just reporting here, but assuming that there was evenhanded treatment, neutral treatment, then I think that there would not be a neutrality problem, as we have argued, but there would be an entanglement problem. There would be, I think-- Speaker: In what respect? All they have to do is file reports, period. Barry A. Fisher: --Well, that is not this-- Speaker: Forget about all the other fringe material which is in the statute. Barry A. Fisher: --Right. Okay. Well, that fringe material makes it plenty more than just disclosure. If it did, I think it would be obviously a much more difficult case. Speaker: Well, I would like you to address Justice O'Connor's question, which I think you still haven't answered. Barry A. Fisher: Yes, Your Honor. Speaker: And that is, as I recall it, whether you would find unconstitutional a neutral reporting statute without any percentage limitation in it. Barry A. Fisher: Without seeing it, but giving an answer, a yes or no, I would say I would not find that constitutional. I would still have a problem with that, even that type of law. Speaker: Well, the court below indicated that it would uphold exempting any organization, including a church, if it raised all of its money from its members. Barry A. Fisher: That also would be a more difficult case. Speaker: But that would distinguish between churches, those that raise all their money from members and churches that don't raise all their money from members. Barry A. Fisher: That's correct. Speaker: So you would disagree with the court below in that respect? Barry A. Fisher: I have problems with that, yes. Speaker: Well, but if the court below, though, it seems to me, would have sustained the law if it distinguished between churches on that basis, and yet they disagreed if the legislature made it 50 percent. Barry A. Fisher: I think the court was grappling for what is an answer in this area, and it is a difficult question. Thank you. Warren E. Burger: Mr. Solicitor, you have one minute left. Larry Salustro: The argument has been made here that our provision, the criteria has to be supported by a factual inquiry. What was done below was, on summary judgment, this provision was declared facially unconstitutional as to all religious organizations. It is not up to us on their motion for summary judgment to supply facts that support our criterion and the 50 percent part of it. Furthermore, in their brief, they have acknowledged that this statute has a rational basis, on Page 23 of their brief. That is the standard that comes out of Gillette. If there is a secular criteria, if there is no religious gerrymandering in the exemption, all we need is a rational basis. There is a secular criterion here. There is no gerrymander here. And there isn't a gerrymander because of these references to legislative history and what the Catholics thought and what the Moonies were doing. In fact, if you go through that material you will find there was a Catholic organization, the Pallatine Mission, that was the reason for this legislation, because they were a direct mail organization. There is no attempt here to separate organizations by who is controversial and who is not, who is traditional and who is not. Controversial organizations like the Church of Scientology, the Jonestown Peoples' Temple, those organizations are exempt. Traditional organizations like the Pallatines or Billy Graham Crusade, those organizations are not exempt. This does not cut across controversy. This is not a religious gerrymander. We only need a rational basis. Thank you very much. Warren E. Burger: Thank you, gentlemen. The case is submitted.

John G. Roberts, Jr.: We will now hear argument in Wagnon vs. Prairie Band Potawatomi Nation. Mr. Olson. Theodore B. Olson: Thank you, Mr. Chief Justice, and may it please the Court-- Kansas imposes a tax on the distributors of motor fuel. The legal incidence of that tax is explicitly, by statute, imposed on the distributor of the first receipt of the fuel. The tax is, thus, imposed and collected off reservation from non Indians. The who, when, and where of the tax is all off reservation and non Indian. David H. Souter: Mr. Olson, may I ask you to go one step beyond that on an issue of fact that I just don't understand from reading the briefs? Let me give you three quick quotations. First, the court of appeals opinion contains this statement, "An expert on behalf of the tribe reported that basic economic theory teaches that the nation's station cannot charge prices high enough to allow collection of both the Kansas and the nation's fuel taxes. " The red brief says, on page 8, "It is undisputed that enforcing the State tax on fuel sold and delivered to the station would effectively nullify the tribal fuel tax. " Finally, the yellow brief, on page 13, says, "By selling its fuel at market prices, respondent. " --the tribe... "is making both a profit and collecting a tax. " My question is, Do we know, from the record, whether the tax that is assessed on the distributor is, in fact, passed through to the tribe so that, in economic effect, the tribe is collecting, via pass through, the State tax and imposing its own tax and still selling at market prices? Theodore B. Olson: I had... I had the same question, Justice Souter, as I was looking at this yesterday. And I investigated it. And it is my understanding, but I did not find this completely in the record, that the distributor is, indeed, paying the tax, and that the tribe is also collecting a tax. Now, I don't quite understand how you reconcile those two points that you've just raised. If it's... if it's something that is economically not possible, how can it... how is it that it's being done. Despite the fact that the tenth circuit held the tax impermissible, it's my understanding that the distributor is still paying the tax. Now, I-- Antonin Scalia: Make it up on volume, I think. Theodore B. Olson: --Maybe they make it up on volume. Maybe people that are at the casino are willing to pay more of the tax. There is a differential between the amount of the State tax and the tribe tax. It's only a couple of cents, as I understand it. But I think the point-- David H. Souter: But if... if I may interrupt you... if it's getting passed through, and they're still selling their gas, then there's no... then the tribe cannot make an argument here that their sovereign taxing authority is being compromised or threatened. And the argument, basically, would boil down to the argument that they want to make a bigger profit. Theodore B. Olson: --Well, I agree with that. And I also would point out-- Antonin Scalia: Or want to impose a higher tax. Theodore B. Olson: --Pardon me? Antonin Scalia: Or want to impose a higher tax. David H. Souter: Yeah. Theodore B. Olson: Yes. David H. Souter: Yeah. Theodore B. Olson: Yeah. And what... I think that what... what this boils down to... and I'm skipping ahead of myself... is that the tribe would like to be able to market a product without having to pay the burdens of taxation all the way upstream. There are taxes on the distributors' property, there's taxes that are imposed when the fuel comes out of the ground and at the refinery stage. So, the tribe would like to market a product unburdened by any upstream taxation, the cost of doing business-- Anthony M. Kennedy: Well, but aren't they going to tell us that... as a practical matter, that the tax is really being collected for the retailers? It's just being passed on to the retailers, but paid by the... I take it that the distributor... the way this works... I, again, had problems with effect... I take it the distributor sends out a truck. And if he sends out the truck to the tribe, then the distributor just pays the tax, and the tribe would want that tax to be... that fuel to be distributed, less the cost of the tax. Theodore B. Olson: --Yes. Anthony M. Kennedy: And if the tribe view prevails, then the distributor still sends the truck to the stations that are in the State and passes on the tax for those-- Theodore B. Olson: It's-- Anthony M. Kennedy: --distributors only. I take it that's-- Theodore B. Olson: --It's my understanding... and this is explained... the details of this are explained in Section 3410... I can't give you a citation to the record, but the statutes, I'm presuming, are available... that the distributor pays a... pays a tax as a result of taking the fuel down from what they call the rack, and then taking it to various service stations-- Sandra Day O'Connor: Well, what event triggers, if you will, the incidence of the tax on the distributor? Theodore B. Olson: --It's-- Sandra Day O'Connor: Is it... is it the obligation... is it the minute the fuel is brought into Kansas? Is it when it is delivered to the distributor? Theodore B. Olson: --It's-- Sandra Day O'Connor: Or is it later? Theodore B. Olson: --The statute explicitly says, Justice O'Connor... this is on page 2 of the petition... the incidence of this tax is imposed on the distributor of the first receipt of the motor fuel. And then Section... that's Section 3408(c)... Section 3410 then describes, in a little bit more detail, the physical operation of the reports that the distributor has to make, and the distributor has to pay the tax. Sandra Day O'Connor: So, the distributor gets the fuel and incurs the obligation at that point, whether or not it's resold. Theodore B. Olson: That's correct. Ruth Bader Ginsburg: But doesn't incur it, or gets a credit or gets it back, if it sells to the United States or if it sells out of State. In other words, it's not just the receipt. Theodore B. Olson: It's... Justice Ginsburg, it is the receipt that triggers the liability for the tax. There is a... an exemption that may be taken in connection with sales to the United States, and that's a part of a massive quid pro quo operation, where fuel is sold to the United States, and the United States pays the State back substantially all of the tax that-- Ruth Bader Ginsburg: And out of State or abroad-- Theodore B. Olson: --And out of State, there is a deduction for fuel sold out of State. That's logical, because the purpose for the tax is to pay for the roads in Kansas, and it's-- Stephen G. Breyer: Then that's the problem, right there, because I thought... first, there is a tax... you get a credit if you don't sell the fuel to anybody. So, I don't think it's quite... if you just sit there with-- Theodore B. Olson: --I don't-- Stephen G. Breyer: --Maybe not-- Theodore B. Olson: --I think... I would disagree with you, Justice Breyer. Stephen G. Breyer: --You don't? All right. Theodore B. Olson: I think it's my understanding that if you sat on that fuel for the next year-- Stephen G. Breyer: You'd still have to pay tax. Theodore B. Olson: --you'd still have to pay-- Stephen G. Breyer: Okay. Theodore B. Olson: --the tax. Stephen G. Breyer: Now, on-- Theodore B. Olson: That's my understanding. Now-- Stephen G. Breyer: --All right. Theodore B. Olson: --with respect to the out of State distribution-- Stephen G. Breyer: Yes. Theodore B. Olson: --that's because-- Stephen G. Breyer: All right. Theodore B. Olson: --that fuel is not going to be used on-- Stephen G. Breyer: Fine. Theodore B. Olson: --Kansas highways, presumably. Stephen G. Breyer: You are Kansas. You sell... the retailer in Kansas sells it to Nebraska. Nebraska is, in a sense, a foreign and independent State. And I guess, at some level, the tribes are arguing, "Well, you sell to us, our local retailer. " "We, too, are a foreign and independent State, even more so. " "So, if you're going to treat them this way... give the people in Nebraska a credit so they don't have to pay... why don't you treat us that way? " "We drive on Kansas roads sometimes. " "So do the Nebraskans-- " Theodore B. Olson: Well, sometimes. Stephen G. Breyer: --"# sometimes". Theodore B. Olson: The vast-- Stephen G. Breyer: So, they say... get into interest balancing. Theodore B. Olson: --Well-- Stephen G. Breyer: Now, what... now you have the whole argument that I'm thinking of. What do you respond? Theodore B. Olson: --Well, one of my responses is that the tribe is located entirely within the State. The record is clear that most of the fuel purchased at that station is used on highways paid for by Kansas. An overwhelming majority of the fuel is not used on a reservation road; its used on the highways of the State of Kansas to get to the casino or to leave the casino. The road that's at issue in this case is 1.5 miles long. The rest of the driving, according to the record, is on the highways of Kansas. So, there's a clear difference there. When you sell... when the distributors market fuel in Nebraska-- John Paul Stevens: But, Mr. Olson, would it make any difference if all of the driving was inside the reservation? Would it-- Theodore B. Olson: --No, we would-- John Paul Stevens: --make any difference? Theodore B. Olson: --we would argue that it would not make any difference, Justice Stevens, because this is a tax on distributors. It is... the Legislature of Kansas followed the specific advice of this Court in its unanimous opinion in the Chickasaw Nation that if there is an issue with respect to the tax being imposed on... arguably burdening the tribe, the State can change the legal incidence of the tax. That's a-- Ruth Bader Ginsburg: --Well, that... that has been what's discussed in the brief, and I think that the court, in Chickasaw, was saying, If the State puts the incidence on the tribe itself, we don't have to look any further. That's what it said. When the State levies a tax directly on the tribe or members inside the reservation, no balancing. But then it also said that if the incidence rests on non Indians, as here, with the distributor here, then there is no categorical bar, than balancing kicks in. So, all Chickasaw dealt with, with the categorical rule, is when the State says the incidence of the tax is on the tribe. Theodore B. Olson: --I... that's correct, Justice Ginsburg. But the answer is that this is an entirely off reservation tax on non Indians. We're... we submit that there's no balancing necessary in this case unless you're going to involve an... require States to submit to litigation and engage in balancing every time an off reservation tax on non Indians has some downstream economic effect. But what about the tax on the car that brings the casino patron to the reservation? What about the tax on the cigarettes or the alcohol or the gambling machinery? John G. Roberts, Jr.: Well, Mr. Olson, the Solicitor General tells us that... and here we have... you have the statute, but they have the Kaul case that suggests that this tax is imposed on the reservation. Theodore B. Olson: But the Kaul case, in the context of deciding whether other retailers there had standing, basically said that there was an economic impact that affected the retailers. The Kaul case specifically referred, Mr. Chief Justice, to the fact that the legislature had... and this is on page 67 of the Pacific 2nd cite of the Kaul opinion... the legislature amended the statute... this is at the bottom of the second column... or the first column... to clarify the question where the incidence of taxation falls. The legislature provided that, unless otherwise specified, the incidence of the tax falls on the distributor. Then, Mr. Chief Justice, the court went on to evaluate the standing question and allowed the distributors the... to raise the issue, because the economic burden did come through the distributors. It's important, in that context, to note that the ultimate burden of any of these taxes is not falling on the retailer, it's falling on the consumer. It's falling on the consumer of the gasoline. The consumer puts the gasoline in the car, and then the car is driven overwhelmingly... the facts are unquestionable in this case... overwhelmingly on the highways of the State of Kansas. So that the burden... ultimately, the burden-- John Paul Stevens: Yes, but, again, that would still be true if the incidence... the tax was on the retailer rather than the wholesaler. Theodore B. Olson: --It still would be true. And... but the fact is, in this case you have a... off reservation tax, on the... all distributors-- John Paul Stevens: Which the statute contemplates will be collected when the gas is sold to the... by the retailer. Theodore B. Olson: --It... what the statute specifically says... this is Section 3409... it says that the distributor may pass on... "may"... it's a permissive provision... may pass on the cost of the taxation as a part of the cost of doing business. And, of course, the distributor does that with respect to the cost of its vehicles, the cost of other taxes it pays. It may include those provisions. Antonin Scalia: But what a strange provision. I mean, who would have thought that he couldn't? Why did-- Theodore B. Olson: I-- Antonin Scalia: --they ever put that provision in, unless it means something different from-- Theodore B. Olson: --I think what it means... I understand, Justice Scalia, and I... because I've had the same reaction, "Well, of course he could. " "Why does he need a statute to do that? " "It is a cost of doing business. " I think that provision is a part of the effort to make clear one of the factors that distinguishes this case from the Chickasaw Nation case, where the court found that it was significant that the distributor was required to pass on the tax, act as a collection agent for the retailer, and took a 1.5 percent commission. So, this court thought that might be significant. Kansas, in part, I think, want to make... wanted to make it very clear that the... what was happening in the economic chain is cost of production of gasoline, including tax paid by the distributor, could be passed on in the form of cost of business to the retailer. Now, of course its cost... it passed on, also, to the consumer. The question-- John G. Roberts, Jr.: Mr. Olson, what does it mean when they say, in law, the "incidence of the taxes on the distributor? " Does that mean anything other than that he has to pay it? Theodore B. Olson: --It is unclear from this court's decisions precisely what "legal incidence" means. At least it was unclear to me as I was looking through the court's decisions. But I think it's a combination of the liability for the tax, the responsibility to pay the tax, the fact that... in this case, the retailer has no liability for the tax. The only liability for the tax is on the distributor. The relationship is between the State of Kansas and the distributor. And all of those factors together make it clear to me, from this court's previous decisions, that "legal incidence" is a term of art, especially in the field of taxation. And, as the court pointed out in the Chickasaw Nation case, it's important to have a-- John G. Roberts, Jr.: Well, I guess the reason for my question is, they look back at the court's decisions and see that it turns on where the incidence of the tax is. And so, there's some bright lawyer in Kansas who said, "All we have to do is pass a law saying the incidence is... of the tax is on the distributor, and we're going to win. " Theodore B. Olson: --Well-- John G. Roberts, Jr.: So, it suggests that we shouldn't give too much weight to that. Theodore B. Olson: --Well, the bright lawyer in Kansas who may have done that was the Kansas Legislature, following the unanimous decision of this court in Chickasaw Nation, saying, "If you want to avoid the potential problems that would exist, change. " --and it's not just the incidence of the tax, it's the legal incidence of the tax, it's... of course, the economic burden of taxation is spread out throughout the chain of distribution. The legal incidence of the tax, as I read this court's opinions, are... is, it is exactly what it is here, the distributor must pay for the tax, the distributor must account for the tax, the distributor is liable and may be penalized if the tax is not paid. Nobody else is liable for it. The distributor has to pay the tax even if it doesn't sell the gasoline. Here, not only the language is as clear as it could be... I mean, the legislature specifically says it... but the operation of the statute... and the two... the... twice, the tenth circuit considered this... the tenth circuit decided the legal incidence of the tax was on the distributor. The two district courts that decided it before those two tenth circuit decisions, decided that the legal incidence was on the distributor. The facts support that the legal incidence is on the distributor. And respondents, on page 16 of the respondent's brief, it seems to me, acknowledge precisely that. They, in their effort to distinguish the Central Machinery case, which is the Indian taxation statutes... and we're not... specifically said there, referring to Central Machinery, "The State tax was imposed on the sale of merchandise. " The legal incidence of the tax there, as here, fell on the non Indian seller. "So, the respondents have even said that, on page 16 of their own brief. " David H. Souter: May I go back to one factual nuance on that? Apart from legal incidence, somebody mentioned earlier that the tax would not necessarily be payable until, in fact, the gasoline was distributed to the retailer. Is that correct? Theodore B. Olson: That's not my understanding. I may be wrong. But, as I read Section 3410, the distributor must file monthly reports with the State describing the amount of tax it's drawn down at the rack when it takes the... unloads fuel into its trucks. And it's responsible monthly-- David H. Souter: But isn't that a surrogate for sale to the... well, I guess what I'm getting at, the tax apparently is not payable when the distributor receives the fuel, but only when the distributor transfers the fuel to a retailer. Theodore B. Olson: --No. I-- David H. Souter: No? Theodore B. Olson: --That's not my understanding. The... it is not... the incidence... or the occasion for the payment of the tax isn't a sale to a retailer. You'd have... I can imagine the practicalities of that would drive everybody crazy. The distributor-- David H. Souter: Well, why would he be drawing it down, except to sell-- Theodore B. Olson: --Well, of course... of course, the distributor is drawing it down to sell fuel to gasoline stations. David H. Souter: --Yeah. Theodore B. Olson: It may... there may be some storage involved, there may be other occasions. But the fact is that the distributor files a monthly report describing how much fuel is... it receives. Ruth Bader Ginsburg: Mr. Olson, in terms of the text of the statute that is... the incidence is on the distributor of the first receipt, but then there's this language... and it appears in a few places... "the tax is hereby imposed on the use, sale, or delivery. " What does... what does that mean, that "the tax is imposed on the use, sale, or delivery? " Theodore B. Olson: Well, this is... this is an effort by the legislature to say that fuel, which is going to be used in Kansas, by and large... there's always going to be exceptions... fuel that is used, by and large, in Kansas on the roads of Kansas, shall be subject to a tax so that those roads can be built and maintained. Now, how shall we, mechanically, impose and collect that tax? We will do it on the first receipt by the distributor. John Paul Stevens: Does that mean, Mr. Olson, that the tax that the... the fuel, rather, that's sold to the United States Government, later, out of State, when is the credit for the sales out of State made? Is that made at the time of the initial delivery, or is... do they ask for a refund a month later? Theodore B. Olson: I don't know the answer. John Paul Stevens: I couldn't tell from the-- Theodore B. Olson: I don't know the answer to that, Justice-- John Paul Stevens: --It seems to me that might be a way of identifying whether the term "legal incidence" really has any significance. Theodore B. Olson: --Well, I would say that the... that if the... this Court's prior decisions have any consistent meaning, that the person who has the obligation to pay the tax, and who might claim some credits or deductions, like we all do when we file our tax returns, the legal incidence of the tax is on us, as taxpayers. The taxpayer here is the distributor. The statute says so. The way the statute works-- John Paul Stevens: I, sort of, take "legal incidence" to mean the duty to pay the tax. And I'm just wondering whether... when fuel is sold to a distributor that the... I mean, the distributor knows the fuel is going to be resold to the United States... does he have an exemption from the tax, because he knows what's going to happen to it, or does he have to pay the tax, or accept the obligation to pay the tax, and then-- Theodore B. Olson: --I think-- John Paul Stevens: --subtract, later on? Theodore B. Olson: --I think, but I can't represent to you know that I know for sure, that that is an accounting process that takes place. Because these are transactions... thousands of transactions that are taking place all of the time. Kansas also has a practical reason for imposing this tax on the distributors. There are X number of distributors. You can imagine how many times X there might be retailers and how many different disputes and so forth. The point... one of the points that this Court has repeated made in connection with tax cases, and intersovereign immunity issues with respect to tax cases, it is vitally important that there be certainty, predictability, and some understanding of fixed events with respect to taxation. States can't be engaged in litigation constantly, depending upon how many casino customers were here, how many people bought this gasoline, how many people bought that gasoline the next month, and how much did the tribe charge for the gasoline on its reservation. That kind of balancing process makes no sense whatsoever, and it... and it sentences the States to litigation, and this Court to repeated decisions, based upon specific facts. That's why, we submit, that although the balancing is overwhelmingly in favor of the State, because it's a tax for gas that will enable someone to drive on roads that the State has to pay for, that, in this situation, one balancing test makes little sense. It simply invites litigation-- Antonin Scalia: --Mr. Olson, you mentioned Section 3410. Where does that appear on-- Theodore B. Olson: --Well-- Antonin Scalia: --I can't find it in anybody's-- Theodore B. Olson: --I was not able to find it, either, in the briefs. It's... the Kansas... it's the... it's in the Kansas statutes, of course, but I couldn't find it set out verbatim in the... in the briefs. I suspect it's in there someplace, but I couldn't find it when I was looking. Ruth Bader Ginsburg: Mr. Olson-- John Paul Stevens: I couldn't either. Ruth Bader Ginsburg: --could we go back-- John Paul Stevens: May I ask... excuse me. Ruth Bader Ginsburg: --to the question that Justice Souter raised at the outset? Because I'm really puzzled. This is the picture I have of the case. And please tell me where it's wrong. Two jurisdictions, both with authority to impose a tax, the State and the tribe. So, if the other weren't taxing, there wouldn't be any question, that the tribe can tax and the State can tax. But the two can't coexist, because the consumer's not going to pay the price. So, only one can. And the issue is, which one dominates, and which is one is subordinate? But you have unquestionable authority to tax in both. And I thought it was clear that the two taxes did... this is not a case where the tribe can impose a tax, the State can im... oppose. I read the briefs to accept that the tribe tax... couldn't put its tax on top of the State tax. Theodore B. Olson: The... it's a matter of economics, Justice Ginsburg, just as your question suggests. The tribe would not... would like to be able to market tax free fuel at its nonregulated casino. It would... probably would like... and if this case is decided against the State, it would probably not like to pay the tax on the... on the car that brings the patron-- Ruth Bader Ginsburg: But not tax free. I mean, the... a big thing that was made in this case was that, unlike the cigarette sales in the smoke shops, the tribe is not trying to market a tax exemption. It is putting on its own tax, which will cost the customer, in the end, the same as if there had been a State tax. Theodore B. Olson: --Well, it wouldn't have to use a tax to do that. It owns the station. It would-- Antonin Scalia: --Who is it taxing? Is it taxing itself? Theodore B. Olson: --It's-- Antonin Scalia: I mean, the tribe sells the gas-- Theodore B. Olson: --That's-- Antonin Scalia: --doesn't it? Theodore B. Olson: --precisely the point, that the tribe would probably not like to pay the taxes that are paid by the distributor or the refiner or the person that brings the fuel... the petroleum product out of the ground. What it... what it simply means is, the margin between the cost and the sale, that's what the tribe would like. It's perfectly understandable. But it would like to have that and... that tax... and I'd like to save the balance of my time for rebuttal... but that tax is overwhelmingly used on the roads of Kansas... overwhelming used on the roads of Kansas... which are paid for, built, and maintained with the revenue produced by that taxation. That's what it's for. John G. Roberts, Jr.: Thank you, Mr. Olson. Mr. Gershengorn. Ian Heath Gershengorn: Mr. Chief Justice, and may it please the Court-- In the tribe's view, the State's defense of its tax today depends on a tax that does not exist. Two distinct sovereigns have imposed fuel taxes here. The Prairie Band Potawatomi Nation has imposed a tribal tax on a tribal station operating on tribal trust land. David H. Souter: Is it collecting that tax? Ian Heath Gershengorn: It is, Your Honor. The-- David H. Souter: Then what's its gripe? It wants a bigger profit? It wants to increase-- Ian Heath Gershengorn: --Your Honor-- David H. Souter: --the taxation? Ian Heath Gershengorn: --the record is clear that the two taxes cannot coexist in the long run, because it would price the-- David H. Souter: No, but if-- Ian Heath Gershengorn: --price the-- David H. Souter: --if the tribe is collecting... it's assuming that... if the tribe is collecting its tax, and it does not have a claim to greater taxation or greater profit, then how is its sovereign right as a taxing authority being interfered with? Ian Heath Gershengorn: --Your Honor, the tribe is being forced right now to subsidize the sales at the station at a loss, which it's doing for the balance of this litigation. David H. Souter: Loss of profit-- Ian Heath Gershengorn: But the-- David H. Souter: --as an entrepreneur. Ian Heath Gershengorn: --Your Honor, the tribe... the tribe is-- David H. Souter: Well, isn't... I mean, isn't that necessarily the case? If it's collecting all of its tax, then what it's complaining about is that it's getting less profit as the... as the retailer. Ian Heath Gershengorn: --Your Honor, that's correct, at the moment-- David H. Souter: All right. Then is that an issue that we should consider on a question of preemption which arises from the tribe's assertion of sovereignty? Ian Heath Gershengorn: --I think it is, Your Honor, because the tribe should not be put to the choice, as a sovereign, where it's running a tribal business, of choosing between... of generating revenues by the tax versus generating revenues by the profit. There is no-- David H. Souter: Well, in other words-- Ian Heath Gershengorn: --suggestion, Your Honor-- David H. Souter: --should we, in effect, say there is no distinction between the tribe's position as sovereign and the tribe's position as retail gasoline seller. Ian Heath Gershengorn: --Your Honor, I think, in that situation, that the two are very similar, in the same way when a State sells at a State liquor store-- David H. Souter: Well, they're similar, because it... ultimately, it's all going into the same pocket. We realize that. But, unless there is a claim that its taxing authority, as such, is being threatened or interfered with, I don't quite see why a preemption theory that rests upon tribal sovereignty has any place in the analysis. Ian Heath Gershengorn: --Because, Your Honor, the... it is exactly the tribal taxing authority that interfered. It's a... it's quite a strange form of taxing authority that says you can tax the... you can tax the station, but then... but then essentially have to operate the station at a loss. That's not-- David H. Souter: But it's not operating at a loss. Stephen G. Breyer: What's strange about it? I mean, every upstream tax, as Mr. Olson said, raises the price of goods and services. And it's harder to retail them, because they cost more. So, that's true of every single good sold on the reservation. So I take it your claim must... and, of course, it may or may not be true that the tribe can put a tax on that. It depends upon supply and demand-- Ian Heath Gershengorn: --That is not a-- Stephen G. Breyer: --But suppose they can't? Ian Heath Gershengorn: --That is not a-- Stephen G. Breyer: Well, my question is, If we hold for you here, and we don't take an absolute principle, well, I guess States are forbidden to put any upstream taxes on. Ian Heath Gershengorn: --Your Honor-- Stephen G. Breyer: Why isn't that so? Ian Heath Gershengorn: --Because that does not describe the tax that's at issue here. The tax at issue here is imposed on the sale or delivery of fuel to the tribe on the reservation, and that is plain-- Sandra Day O'Connor: Well, isn't it... but they say no, that it's imposed on the delivery to the distributor-- Ian Heath Gershengorn: --And-- Sandra Day O'Connor: --of fuel. Ian Heath Gershengorn: --and that, Your Honor, is not correct. What they have done is conflate two concepts, the incidence of the tax-- Sandra Day O'Connor: Well, it's what the-- Ian Heath Gershengorn: --and the-- Sandra Day O'Connor: --statute says. Ian Heath Gershengorn: --I... with respect, Your Honor, I don't think it is what the statute says. The statute says, in 3408, "a tax per gallon is hereby imposed on the use, sale, or delivery of fuel. " It does not say "the receipt of fuel". "The distributor" is defined as somebody who receives and uses, sells, or delivers fuel. All of the critical exemptions in the statutes are based on the distributor's subsequent sale or delivery of fuel to the United States, out of State, the Federal contract-- John G. Roberts, Jr.: But that's just a subsequent deduction. I mean, if we get income, we're taxed on it. If we make a charitable contribution, we get a deduction. But that doesn't mean we don't have to pay and are subject to the income tax. Ian Heath Gershengorn: --Your Honor, this would be a very different case if the State had... if the legislature had passed a tax that said, "This is a tax on receipt. " and we were trying to argue that these... that somehow these exemptions made it not a tax on receipt. But the legislature has said it is a tax on the "use, sale, or delivery. " And if I could point to two provisions that I think make this crystal clear, that it is not a tax on receipt, but on the subsequent use, sale, or delivery. The first is 3417, which provides-- John G. Roberts, Jr.: Where is-- Ian Heath Gershengorn: --and that is-- John G. Roberts, Jr.: --where is it? Ian Heath Gershengorn: --at 10(a) in the appendix your honor, that provides that a distributor after he has received the fuel, if he subsequently loses the fuel... has it lost or burned... gets a refund of the tax, if it's... if that happens before he uses, sells, or delivers. John G. Roberts, Jr.: But that-- Ian Heath Gershengorn: The other thing that-- John G. Roberts, Jr.: --works with the income tax, too. You have casualty losses and things like that. It turns out you were subject to the tax, but you don't have to pay it, because you get a deduction. But that doesn't mean you're not subject to it in the first place. Ian Heath Gershengorn: --Your Honor, there are... there is literally nothing in the statute except for the incidence provision, which is what the State relies on, that makes this a tax on receipt. And, if I could, in Central-- Stephen G. Breyer: Well, we ought to know, because they've been... haven't they had this for a while? So, there must be a dealer somewhere who's not on the reservation... he's a distributor... somebody delivered to him a thousand gallons, and it's sitting there in his tank. Doe he have to pay the tax, or doesn't he? Ian Heath Gershengorn: --Your Honor, I don't... I think that you're... that he would pay the tax in that instance-- Stephen G. Breyer: Well, if he would-- Ian Heath Gershengorn: --but I don't think-- Stephen G. Breyer: --pay the tax, then it is not-- Ian Heath Gershengorn: --I don't think so-- Stephen G. Breyer: --on his-- Ian Heath Gershengorn: --Your Honor. Stephen G. Breyer: --redistribution. Ian Heath Gershengorn: I don't think so, Your Honor. Stephen G. Breyer: He is... sorry... if... I'd like to ask the question. Ian Heath Gershengorn: I'm sorry, Your Honor. Stephen G. Breyer: If... and you can say why this is wrong... if he gets a thousand gallons from whoever... Exxon or somebody... and he puts it in the tank, and he hasn't sold it, and he has to pay the tax, then it would seem to me to be a sale on the distribution to him, not the sale on his distribution to somebody else. Now, why is that wrong? Ian Heath Gershengorn: Because... two reasons, Your Honor... in the real world, what happens is the distributor picks up the fuel at the rack and delivers it to the retailer. If the... if the distributor takes the fuel and holds it, he's not a distributor under the statute. A distributor is somebody who receives and uses, sells, or delivers. That's in... on page 2(a) of the red brief, Your Honor. So that-- Stephen G. Breyer: So, now you're telling me something different from what I understood. I thought you said it probably has happened in the history of this tax-- Ian Heath Gershengorn: --I-- Stephen G. Breyer: --that a distributor picked up a gallon of fuel, held it, and has not yet redistributed it. So, you're saying that's never happened. Ian Heath Gershengorn: --Your Honor, I'm not aware of that happening. But what I would say... the point that I would like to-- Stephen G. Breyer: If I'm certain about what the tax is on, what should we do? Dismiss the case or send it to the... ask a question, or what? Ian Heath Gershengorn: --Your Honor, I think that this Court can decide this question based on what the face of the statute is... itself says. Anthony M. Kennedy: I think we can-- Ian Heath Gershengorn: No court-- Anthony M. Kennedy: --I think we can decide it on the basis that we know that when the distributor puts... delivers gas to the gas station, it's not instantly sold. I mean, even we know that. Ian Heath Gershengorn: --No, Your Honor... that's correct, Your Honor. But the statute provides that the tax is on the sale by the distributor to the tribe on its reservation. It is exactly like what happened in Central Machinery. In Central Machinery, the incidence of the tax was indisputably on the off reservation seller. This Court, nevertheless, said, correctly, that the taxable event, the thing that was being taxed, was the sale of tractors to the tribe on the reservation-- John G. Roberts, Jr.: Well, the statute says-- Ian Heath Gershengorn: --that was, therefore, preempted. John G. Roberts, Jr.: --the statute says it's a tax on the sale, but then it goes on and says it's the first sale, and the first sale is to the distributor, and that's why the incidence of the tax is on him. Ian Heath Gershengorn: With respect, Your Honor, what part (c) says, which is what you're reading from, it says, "the incidence of the tax is imposed on the distributor of first receipt. " That is the "who". That is not the "what". The 79-3408(a), and it is clearly imposed on the use, sale, or delivery of the fuel. If I could, another provision of the statute that also-- John G. Roberts, Jr.: But nobody... but it's not sold... it's not taxed twice. If it's sold to a distributor, that distributor has to pay the tax. The distributor then sells it to someone else. That someone else doesn't have to pay the tax. Ian Heath Gershengorn: --That's right, Your Honor. But the question is, What exactly is the State purporting to tax? This is a situation in which the State is not being unambiguous... is being unambiguous about what it's taxing. Antonin Scalia: What if... what... perhaps the State expresses it that way just to cover some people who get their gas illegally, and they would say the tax is still due, even if you haven't gotten your gas from a distributor who has paid the State tax. Wouldn't that suffice for why the court imposes the tax on the use, sale, or delivery? Use, sale, or delivery. Ian Heath Gershengorn: Your Honor, I think the term "use" is the distributor's use. The scheme that Kansas has set up is a sensible one. It is, the distributor gets the tax and then has three choices. It can use it, sell it, or deliver it. And if the distributor... if the distributor is... hasn't done one of those things, then it's... then it... then the distributor can be made liable for any tax increases that have... that happen while the distributor is holding the tax. And so, in our view, and in every court that we're aware of's view... tenth circuit didn't decide this case on the assumption that this was a tax on receipt of fuel off the reservation. What the tenth circuit said was that Kansas is now attempting to collect its tax for the first time, a tax on motor fuel distributed to Indian lands. It is, again, the same thing-- Stephen G. Breyer: All right, suppose you're right. Can you answer my first question? Can you even remember it? I'll summarize. On your assumption. Look, the Indians, if there is a tax... they have a retail shop or they have things on the reservation, they go buy them... Kansas can't impose a tax on what goes on, on the reservation. We go through the balance. But they certainly could impose a tax on the department store in Kansas City, couldn't they? Ian Heath Gershengorn: --That's right. Stephen G. Breyer: And so, the Indian then goes to the department store and buys it. He has to pay the tax, doesn't he? Ian Heath Gershengorn: Yes. Stephen G. Breyer: Okay. Now what he does, he says, "Call up and"... he says, "Please deliver it". Now he doesn't have to pay the tax? Ian Heath Gershengorn: Your Honor, the answer is-- that's correct, and that's exactly what happens in the commerce clause when a person from Virginia buys something from Illinois and has it delivered to himself in Virginia. They don't pay the sales tax. Stephen G. Breyer: Is the commerce constitutionally-- Ian Heath Gershengorn: No, Your Honor, under interstate sales tax. Stephen G. Breyer: --All right. Well-- Ian Heath Gershengorn: It's the same situation-- Stephen G. Breyer: --we're now talking Federal rules. Go ahead. Ian Heath Gershengorn: --I'm sorry. It was... it's the same situation there. The question is, Where does the relevant sale take place? And it takes place... in the Virginia/Illinois situation, the sale takes place in Virginia, which is why you don't pay Illinois sales tax, though you may pay Virginia use tax. It would be the same thing in the tribal situation. The sale in that place, just like the sale in Central Machinery, takes place on the reservation. And what this Court said, in Central Machinery, is that a sale to a tribe of goods on the reservation is... cannot be taxed by the State. And, indeed, because this tax is on the sale on the reservation, the broader balancing principles apply. The tribe here has imposed the... its tax on a tribal station, on a tribal land, right where this Court has said its tribal taxing authority is strongest, and has dedicated those revenues to improving the miles of dirt and gravel road on the reservation. Anthony M. Kennedy: Is it relevant-- John Paul Stevens: May I ask you what the-- Anthony M. Kennedy: --to the balancing test-- John Paul Stevens: --may I ask you a question about the Federal exemption? In your view, is that made available at the time of the initial purchase by the distributor, or does he have to, in effect, claim a credit later on? Ian Heath Gershengorn: It... that way it works, in practice, Your Honor, is... and their form is in the back of the red brief... is that the distributor writes down the number of gallons received, and writes down the number of gallons sold to the United States, nets that out, and pays the tax on the net, so that it's... it's essentially done at the... at the same time. John Paul Stevens: So that he... his obligation to sell the gas is... arises at the same time as his purchase. Ian Heath Gershengorn: I'm not sure his obligation to do so, but the form is due on the 25th of the month... of the next month. And so-- John Paul Stevens: And it shows both what they resell to the United States and what they acquired. Ian Heath Gershengorn: --Correct, Your Honor. It shows gallons received, gallons exported, gallons sold to the United States. John Paul Stevens: And let me ask you this question, too, on that subject. Do you think that the exemption that the State allows for resales to the United States is constitutionally compelled? Ian Heath Gershengorn: Your Honor, I think the answer to that is yes, under our theory of the case, but no, under their theory of the case. The exemption to the United States-- John Paul Stevens: And it's no under our-- Ian Heath Gershengorn: --is constitutionally-- John Paul Stevens: --our precedent, I think, isn't it? Ian Heath Gershengorn: --I'm sorry? John Paul Stevens: It's no, under our precedent. Ian Heath Gershengorn: Well, it depends, Your Honor, on whether the legal incidence is on the United States or whether the incidence is on the seller. Under this-- Sandra Day O'Connor: Well, on that-- Ian Heath Gershengorn: --Court's precedence-- Sandra Day O'Connor: --on the legal incidence of the tax, we suggested, in the Chickasaw Nation case, that a tax statute's own declaration of the legal incidence would be dispositive. So, why don't we read the statute and say the incidence is on the distributor, and that's the end of it? Ian Heath Gershengorn: --Because, Your Honor, I don't think that's what this Court's cases say. I think what this Court's-- Sandra Day O'Connor: Well, I thought that's-- Ian Heath Gershengorn: --cases say-- Sandra Day O'Connor: --what we suggested in Chickasaw Nation. Ian Heath Gershengorn: --I think-- Ruth Bader Ginsburg: Chickasaw said when the tax was imposed on the tribe, we would take the State at its word. It said it's taxing the tribe. If the State put the tax on a nonIndian, then there would be balancing. And that's what Chickasaw-- Ian Heath Gershengorn: --That's my understanding, as well. And this Court has always held it's a Federal question where legal incidence lies, and has not deferred... has given-- Stephen G. Breyer: All right. So, if balancing-- Ian Heath Gershengorn: --But if I-- Stephen G. Breyer: --then how do you come out? Because what they're saying is, "Okay, balance. " "Fine. " "You want to balance? " "Here's how you balance. " Ian Heath Gershengorn: --Your Honor? Stephen G. Breyer: On the one hand, the Indians have to pay the tax. Okay, that's true. And it's harder for them to impose their own tax. That's true of every upstream tax. And it goes for roads that they use all the time. And they just have a one and a half mile... and why shouldn't they be treated every... like everybody else, when they're going to use the roads the tax pays for? So, the balancing works in their favor. Now, what's your response? Ian Heath Gershengorn: That the... Your Honor, we disagree with that at every level. This... the tribal tax is addressed to a specific road... road problem that the Federal Government has identified and addressed in the Reservation Road Program. The reservation roads are in abysmal shape, as the Federal Government has recognized. More than 70 percent are in poor shape, poor condition. The fatality rate is four times the national average. And the tribe is using those revenues to fix... advance that particular Federal interest, which is reflected in Federal statutes and in the Federal regulatory scheme. Anthony M. Kennedy: --Why should all of that make a difference? You make a big point in the briefing, "Well, you're not marketing the exemption, you're taxing, you're using. " --if the... if the tribe does have the sovereign right to tax or not to tax, why can't it use it not to tax at all and say, "We're giving"... why is there a presumption in favor of imposing taxes? Why can't the tribe say, "We're not going to tax you if you come to the reservation. " "Come on in and buy our gas. " "No tax? " Ian Heath Gershengorn: This-- Anthony M. Kennedy: Why isn't... why isn't that part of the tribal sovereign right? Ian Heath Gershengorn: --Because this Court has held, in Colville... and we don't dispute here... that when the tribe is marketing an exemption, it has no... it has no... there are no Federal and tribal interests implicated. And we're not challenging that here. What this Court has said is that when a tribe is generating real value on the reservation so that it has created a market, as this tribe has, to draw people onto the reservation and can sell its fuel at market value, it has a sovereign right and interest in taxing that... in imposing a tax that the State can't interfere with. And the State here has accommodated-- Antonin Scalia: Who is... who is the tribe taxing? Is the tribe taxing the purchaser of the gas? Is that-- Ian Heath Gershengorn: --No, it taxes-- Antonin Scalia: --Is that-- Ian Heath Gershengorn: --the retailer. It taxes the retailer, Your Honor. Antonin Scalia: --I thought the retailer was the tribe. Ian Heath Gershengorn: It is. It taxes the tribal station. Antonin Scalia: So, it's taxing itself. Ian Heath Gershengorn: It is, Your Honor, but that tax is-- Antonin Scalia: That's real neat. I have never heard of that before. [Laughter] Ian Heath Gershengorn: --Your Honor, actually, it happens all the time. Pennsylvania imposes a tax on State sold liquor. North Carolina does it. All the State run liquor stores are subject to a State imposed tax. But-- John G. Roberts, Jr.: Counsel, did I understand your earlier discussion, about the department store, to suggest that if the tribe had the tanker truck, and they picked up the fuel and then brought it back, that, in that case, you have no objection to the tax, even though the economic incidence and effect is going to be the same? Ian Heath Gershengorn: --Your Honor, at that point, Central Machinery wouldn't apply. I think that would be a closer case for the balancing, in that situation. The... so, we wouldn't... we wouldn't concede that. But, in this case, it's much stronger, because the tax is on the reservation. If I could also just point to one thing that Justice Breyer raised about the... about the exemptions for other States. What this... what Kansas has done is provide an exemption for every other sovereign that's implicated... for other States, for other countries, for-- John Paul Stevens: But is it-- Ian Heath Gershengorn: --the United States-- John Paul Stevens: --constitutionally compelled to do so? Ian Heath Gershengorn: --It's... it is, Your Honor, in this sense. It comes in, in two situations. First, it is... the Constitution and the Federal preemption doctrine prohibit discrimination. And so, it is, in that sense. But it also goes to the strength of the State interest here. The State has not only... has accommodated the out of State interest, it has also accommodated the in State Government interests, other than the tribe. It gives 30 to 40 percent of the fuel revenues to counties and to cities for roads. Every other sovereign is accommodated here except for the tribe, and we think that's exactly what Federal law prohibits and why the strength of the tribal interest here, and the tribe's interest in imposing the tax to fix reservation roads, to advance that Federal interest, is exactly what deserves protection. Antonin Scalia: Cities and counties-- John Paul Stevens: But your-- Antonin Scalia: --aren't sovereign. John Paul Stevens: --your claim wouldn't disappear if they decided to tax all these other sovereigns. Ian Heath Gershengorn: I'm sorry, Your Honor? John Paul Stevens: Your claim, as a tribe, would not disappear if they decided to become nondiscriminatory and tax all of the sales. Ian Heath Gershengorn: Your Honor, it wouldn't disappear, but it might alter the... it would alter the balance. If the... what is troubling here is that the State has asserted a right in predictability, but the State's right in predictability is only coming at the expense of a refusal to accommodate the tribal interests in the same way it accommodates every other sovereign. And so, we do think that that goes to the strength of the State's interest here, and to the State... the strength of the... of the State's assertion of its tax. David H. Souter: And your view generally was that it was... that it was indicative of discrimination. Ian Heath Gershengorn: I think it-- David H. Souter: And I thought that was the stronger argument, because the... you're saying, "Look, the State has only the most trivial interest in the amount of taxation it would get here. " That would be equally true whether it forgives taxes that... on fuel that goes to the United States or not. But the discrimination point, if it's a fair one, would be the same. Ian Heath Gershengorn: --Your Honor, I think... that's correct, and we've made both arguments, that it's a-- John Paul Stevens: Well, it would matter. Ian Heath Gershengorn: --that the discrimination is a freestanding reason that, even under an express preemption test like the State has articulated, we would prevail and that-- Antonin Scalia: All the other sovereigns you mentioned do not consume the gas... or the gas sold to them is not consumed primarily on the roads of this State, except for cities and counties, which aren't sovereigns. I mean, they simply aren't sovereign. That's the State, itself. They're subdivisions of the State. So, it's making exemptions for its own... its own State, plus exemptions for sovereigns, where the gas sold to those sovereigns probably will not be used primarily on the roads of this State. Ian Heath Gershengorn: --Your Honor, there is-- Antonin Scalia: It makes perfect sense. I don't see there's any discrimination. Ian Heath Gershengorn: --Mr. Chief Justice, thank you. John G. Roberts, Jr.: Thank you, Counsel. Mr. Kneedler. Edwin S. Kneedler: Mr. Chief Justice, and may it please the Court-- The tribe here has imposed a tribal tax on sales at a tribal business on the tribe's own reservation on tribal land. The exercise of that power of taxation is at the core of tribal sovereignty, as this Court has long recognized, and that power-- David H. Souter: Is it being interfered with? Edwin S. Kneedler: --Yes. And, as to that question, I would point the Court to page 142 of the joint appendix, or page 12 of the petition appendix, in which the Court discusses the expert opinion that the tribe introduced into the record. David H. Souter: Well, that expert opinion is that, as an economic matter, you can't collect both. Edwin S. Kneedler: Yes, he says-- David H. Souter: You can't impose both. But the tribe is still imposing its tax, and it's getting every penny that it... that it purports to impose. Edwin S. Kneedler: --But it is operating at a loss. As I understand it, the tribe has chosen to subsidize-- David H. Souter: Is-- Edwin S. Kneedler: --out of-- David H. Souter: --is that-- Edwin S. Kneedler: --revenues. David H. Souter: --in the record? Edwin S. Kneedler: That is my understanding of what's happening. That's not in the record. What is in the record-- David H. Souter: Let's assume... let's assume that is true. What difference does that make to an analysis based on a preemption theory which is supposed to take account of tribal sovereignty? The sovereign act is not selling gas, it's taxing. They are taxing. They're getting everything they want under their tax statute. Where, then, is there a basis for a preemption-- Edwin S. Kneedler: --I think, for example, in this Court's decision in Colville, where the Court stressed there that the Court was marketing an exemption from State taxation; that portion of the analysis of the Court there did not turn on whether the tribe was imposing its own tax. It turned-- David H. Souter: --No, I mean, it was-- Edwin S. Kneedler: --it turned on economic-- David H. Souter: --an entirely separate... an entirely separate rationale. It was saying the tribe is getting this tremendous advantage by... or wants this tremendous advantage... by marketing the exemption. Edwin S. Kneedler: --But the flip side of that in Colville was that if the... if the tribe, in that case, had been selling to people who would have been on the reservation anyway... in other words had not come onto the reservation to take... just to take advantage of an exemption from State taxation... but would have been on the reservation anyway, the Court specifically contemplated, in that situation, that the tax might well be preempted, because it would be interfering-- David H. Souter: Well, maybe... maybe it contemplated that, and maybe it simply contemplated that that particular... that particular argument against it... i.e., that it was simply selling a tax exemption... would not have been an argument against it. But it doesn't follow, from that, that the tribe would necessarily have had a winning argument on a preemption theory. Edwin S. Kneedler: --No, but we... but we believe it is a winning argument. I think the fair reading of Colville is that the Court would have seen that as quite different. Stephen G. Breyer: Well, if that's a winning... of course it is different, in the sense you say, but if, in fact, it's an interference... look, every upstream tax raises the price of goods and services. Every upstream tax... indeed, every tax in the world... makes it harder to sell the product. So, every tax makes it harder for the tribe to tax that item which was taxed by somebody else. Now, if that's the basis for saying it's an interference, then every tax is an interference. And I don't see how that could be. Edwin S. Kneedler: Right. This is... this is not just any upstream tax, and it... and the theory here is not based on economic impact. Stephen G. Breyer: But, so far, your theory is based on economics, as I've heard it. Edwin S. Kneedler: No-- Stephen G. Breyer: But if it isn't, I would like to know what it is. Edwin S. Kneedler: --Yes. Under the... first of all, in our... it is our position that, under the Kansas Supreme Court's decision in Kaul, which should get deference in terms of understanding operative incidence of the State tax. The incidence of the tax is, in fact, on the retailer. And the court there found it critical-- Stephen G. Breyer: The incidence of the tax-- Edwin S. Kneedler: --The legal incidence-- Stephen G. Breyer: --Oh. Edwin S. Kneedler: --was... is on the retail-- Stephen G. Breyer: That's very surprising. When I read the statute, it doesn't have one word about the retailer being obliged to pay-- Edwin S. Kneedler: --And-- Stephen G. Breyer: --anything. Edwin S. Kneedler: --As we read the Kansas Supreme Court's decision, it's not without ambiguity, but we believe the better reading of that... of that decision is that, as a matter of legislative intent, the incidence of the tax, who is ultimately going to pay the tax-- Stephen G. Breyer: All right, if that's-- Edwin S. Kneedler: --is on the retailer. Stephen G. Breyer: --the legal incidence of the tax, I would think their side would win, in my mind. Now suppose, actually, the legal incidence of the tax is not on that retailer, but, rather, is on the distributor. Edwin S. Kneedler: That would tell... that would tell you... I'm sorry-- Stephen G. Breyer: If that's so, and if we get into balancing, which I don't know, what is to be said in favor of the Indian side? It sounded to me as if it's harder for them to tax. So, I'm thinking, well, that's true of every tax. And then, put it on something else. Put it on the tires. Put it on anything else, if you can. It'll be harder for them to tax nonIndians. But I didn't know they had a Federal right to tax the nonIndians. Edwin S. Kneedler: --Yes, they do. And, again, this is the situation contemplated in Colville. It's analogous to what this Court said in Cabazon with respect to the gambling facility, where the tribe has introduced on reservation value. And in Colville, the court contemplated if the tribe puts a service station and sells to people who would be there anyway, that is on reservation value; they are not simply marketing a tax exemption and drawing people in by virtue of a tax exemption. But, beyond that, just because... if the Court concludes that the incidence of the tax is on the distributor, notwithstanding the Kansas Supreme Court's decision, the subject matter of the tax, the "what is being taxed", is the sale or distribution, and that is a sale between the distributor and the retailer. That is clearly-- John G. Roberts, Jr.: Well, why isn't it the sale between whoever is selling it to the distributor and the distributor? Edwin S. Kneedler: --I... because if you look in... it becomes particularly clear if you look at the form that is at the back of the respondent's brief, but we also believe it's clear from the... from the provisions of the statute that are on page 8(a) of the brief. One that hasn't been discussed, for example, is exemption D5... excuse me... the exception for deliveries to other distributors. In that... in that situation, there is no tax. And, in fact, the form, on page 19(a), makes it clear that any sales by one distributor to another are automatically exempted and not counted in the computation at all. So, distributor to distributor taxes are exempted. And this Court, in the Chickasaw case, said that's very instructive, that the incidence of the tax is on the retailer. Whether or not the incidence is there, the transaction-- John Paul Stevens: It would seem to me exempting distributor to distributor taxes just means that only one distributor has to pay. Edwin S. Kneedler: --Only one distributor has to pay, but it means that a sale between the first distributor and the second distributor, for example, is not taxed. John Paul Stevens: No, but that's because there was a tax on the first sale to the first distributor. And may I ask this? Supposing-- Edwin S. Kneedler: Actually, there is not. The tax is on the last distributor, with respect to his sale to the... to the retailer. Antonin Scalia: Yeah, but that's because when a distributor sells to another distributor, he is not acting, for purposes of that sale, as a distributor. Edwin S. Kneedler: I think that-- Antonin Scalia: If you sell to another distributor, you're not being-- Edwin S. Kneedler: --That makes... that makes my point, that the... that the statute, in applying to any use, delivery, or sale, the sale at issue is the sale that ultimately comes from a distributor to a retailer. And, under this Court's decisions in Central Arizona Machinery and the Bracker case, a sale by a... by someone residing off the reservation, but where the sale takes place on the reservation, as this one clearly does... the gasoline that's delivered there... that is absolutely preempted under Central Arizona Machinery and the Indian Trader Statutes, because you-- John G. Roberts, Jr.: But none of this... none of this mattered to the tenth circuit, though, did it? I mean, they didn't care where the incidence was. They just went right into the balancing, right? Edwin S. Kneedler: --Right, that's true. And if-- John G. Roberts, Jr.: And you think that was wrong. Edwin S. Kneedler: --We think the court was wrong to conclude that the incidence was on the... was on the distributor. And if the Court has a question about that, it could remand to certify that question to the Kansas Supreme Court to clear it up, any ambiguity after Kaul. But, even on the tenth circuit's own way of approaching it, we believe that it was then correct, because it properly applied this Court's approach of looking at the particular context of the Federal, State, and tribal interests. And here, there are very powerful tribal interests in maintaining-- Stephen G. Breyer: Is the one other... the interest other than the interest on being able to tax an item that an upstream tax prevents you from doing because of the economics? Edwin S. Kneedler: --It is the very same-- Stephen G. Breyer: Is that the only one, or are there other ones? Edwin S. Kneedler: --it's the very same interest that the State is asserting, which is the interest to impose a fuel tax in order to-- Stephen G. Breyer: I've got the-- Edwin S. Kneedler: --maintain the roads-- Stephen G. Breyer: --I-- Edwin S. Kneedler: --on the reservation. Stephen G. Breyer: --I want to hear you and know if there's an additional one. I'm not disputing that one. I just want to be sure I get them all. One is... one is that one. Edwin S. Kneedler: Is this-- Stephen G. Breyer: What else? Edwin S. Kneedler: --is the general... the general ability to impose a tax. But here, the interest is augmented by the fact that the tax is dedicated by tribal law to maintaining tribal roads, not just this one and a-- Anthony M. Kennedy: And I just don't-- Edwin S. Kneedler: --half mile-- Anthony M. Kennedy: --understand. Why doesn't the tribe have an incidence of not having any tax at all, helping-- Edwin S. Kneedler: --It-- Anthony M. Kennedy: --helping its members? Edwin S. Kneedler: --It-- Anthony M. Kennedy: Why does the balancing only work if it taxes? Edwin S. Kneedler: --We don't think it does. Under the Colville's decision, if the State is not just... or the tribe is not just marketing an exemption from State taxation, we think that the tribe... that the State tax is preempted there, as well. But here, where the tribe is asserting not simply a commercial interest, selling at market value and not marketing a tax exemption of States-- Anthony M. Kennedy: No, no, no. You say that it could-- Edwin S. Kneedler: --it's imposing a-- Anthony M. Kennedy: --market the exemption? Edwin S. Kneedler: --Pardon me? Anthony M. Kennedy: You say that a tribe can market its exemption? Edwin S. Kneedler: No, we do not. Under this... under this Court's decision in Colville, it can't... the tribe cannot market an exemption, at least to people who would not otherwise be on the reservation. But here, the tribe is asserting both a commercial interest... selling at profit; and also a sovereign interest... in taxing. And where you have a tribe asserting both-- Anthony M. Kennedy: Well, why isn't that sovereign interest in not taxing? Edwin S. Kneedler: --It could. But here, the tribe has asserted a sovereign interest in its tax, and that is what is being substantially interfered with. John G. Roberts, Jr.: Thank you, Mr. Kneedler. Mr. Olson, you have four and a half minutes left. Theodore B. Olson: Thank you, Mr. Chief Justice. Anthony M. Kennedy: What about the Supreme Court's characterization of this as being-- Theodore B. Olson: The Kaul-- Anthony M. Kennedy: --Yes. Theodore B. Olson: --Kaul case? I read... I don't think the Kansas Supreme Court could have been any more clear. It said the legislature amended the legislation to clarify where the incidence of taxation falls. It provided that the incidence of the tax falls on the distributor. Then, in Victa, in connection with the standing issue, because economic burden fell on the retailers, it found that the retailers and... those other retailers had standing. Kansas could not have been more clear. In Section 3401(f)(3), it defines a "distributor" as someone who receives the product. In 3408(c), it's... taxes the distributor on the first receipt of the tax. In 3410, it again says it's on the distributor. Two district courts and two courts of appeals found that the legal incidence of the tax was on the distributor. The Kansas Supreme Court said the same thing, the distributor is liable for the tax, pays the tax. The retailer has no liability for the tax. What in the world can Kansas do to make it clearer? Now, the Central Machinery case that's... that my opponents have been speaking about is a case that was decided under the Indian Trader Statutes with respect to the trading with the Indians, with respect to Central Machinery case, was... over tractors sold on the reservation for use on the reservation. It fell within the scope of the Indian Trader Statute. But this Court has made clear, in a number of cases, the Indian Trader Statutes would not remotely apply. David H. Souter: I take it Kansas has not indicted the distributor for failing to register under the Indian Trading Statute. Theodore B. Olson: No, they're... it hasn't really been mentioned until the... I mean, hardly mentioned at all, until the Government decided to... the United States Government decided to discuss that point. Antonin Scalia: Aren't there usually two incidents? You talk about the incident of the taxes on a person, but it's also on an event. And what event is... in your... in your judgment is-- Theodore B. Olson: Well, the statute could not be more clear, Justice Scalia. It is the receipt by the distributor of the fuel. That is what the statute says. It is as plain-- John Paul Stevens: But if the fuel-- Theodore B. Olson: --as it could be. John Paul Stevens: --were destroyed by flood or lightning or something like... before it was resold to the retailer, there would be no tax-- Theodore B. Olson: There's an exemption for losses like... one of the Court's questions with respect to a casualty loss or something that... but it's limited. The liability, nonetheless, exists on the distributor. John Paul Stevens: --Are there any incidents in which the distributor would pay the tax if he was not able to resell it to somebody else? Theodore B. Olson: I think that... I think the reading of the statute is plain. If the distributor took the fuel, kept it, decided to warehouse it because the costs are going up or something like that, it would still have to pay the tax, because the tax is on the receipt by the distributor. In answer to your question, Justice Stevens, Would those other exemptions, the United States Government be required by the Constitution, or the other States? No, not under this Court's decision in the Blaze case, which, as I understood it, was unanimous. The Fresno case, U.S. vs. New Mexico, it's not a tax on the United States. It's... or an agency of the United States. So they wouldn't be required. But they make sense, because the sales to other States are for people that drive on other States' highways. The sales to the United States Government is an exchange for almost the same amount of money that comes back. So, there's a rational purpose. It's not discrimination. The tribe makes the point that it's generating real value and reservation value. This is fuel that's used in cars that are... drive all over the State of Kansas. The casino is there, so people come to the casino. And, under Cabazon, there might be some value added by the casino, which, by the way, is an exempt value created by an exemption from regulation. But the value for someone who puts fuel in their car is so that that car will then drive. And that... cars that drive, in this case, drive on Kansas highways. This, ultimately is-- John G. Roberts, Jr.: Thank you, Mr. Olson. Theodore B. Olson: --Thank you. John G. Roberts, Jr.: The case is submitted.

John G. Roberts, Jr.: We will hear argument next in Case 10-114, Fox v. Vice. Mr. Rosenkranz. E. Joshua Rosenkranz: Thank you, Mr. Chief Justice, and may it please the Court: Mr. Fox has rock-solid legal claims against a police chief based upon facts that were strong enough to send that police chief to prison. Yet he's been ordered to pay all of the attorney's fees for an entire 2-year course of a litigation because his lawyers decided to plead and then drop a single Federal theory. That award is wrong and it's not what Congress intended. Congress wanted to protect defendants from the lying or the vexatious plaintiff who shouldn't be in court at all. Anthony M. Kennedy: Did we take the case on the assumption -- your -- your predecessor and you may disagree -- but did we take the case on the assumption that this was a frivolous cause of action? E. Joshua Rosenkranz: Your Honor, the Court took the case on the assumption that the legal theory was frivolous, but that the underlying cause of action, which is to say the operative facts, were meritorious; and in fact they are meritorious. They are going to trial in 2 weeks. And so this is a wrongdoing defendant against whom was pled a legal theory that we now assume was frivolous. Antonin Scalia: Well, wait. I mean, my goodness. You could say the same underlying facts justify, you know, a suit for -- for libel, and also justify a much -- a much greater suit. I'm not sure that we look to simply the underlying facts. We look to what kind of liability was sought to be imposed upon the defendant. That's what determines how much money the defendant is willing to pay for his lawyer, and how much he has to expend in defending. E. Joshua Rosenkranz: Your Honor, in this case the liability was far greater for the State court claims than for the 1983 claims. But Congress was concerned-- Anthony M. Kennedy: Well, that's not quite right. To the extent they overlapped, even on the theory the Federal claims were presented, the plaintiff below was seeking attorney's fees-- E. Joshua Rosenkranz: --Yes, Your Honor. Anthony M. Kennedy: --under 1983. E. Joshua Rosenkranz: That was-- Anthony M. Kennedy: So the city's liability would be greater. E. Joshua Rosenkranz: --That was one incremental increase. But the liability in this case on the constitutional claim was for, and the reason it was found to be frivolous, was that he was seeking liability on a constitutional claim for being deprived of his right to run for office when in fact he won the office. The intentional infliction of emotional distress, the reputational harm was far greater. Ruth Bader Ginsburg: Mr. Rosenkranz, you knew that, though, from day one. This case is brought in State court, it's removed to Federal court. Ultimately the plaintiff says: I recognize that as a matter of law my 1983 claim is no good. But the plaintiff didn't say that until 18 months after the -- the transfer. So doesn't the plaintiff have some responsibility for running up all these costs in the Federal -- burdening the Federal court, having discovery in Federal court, instead of saying when defendant removed the case -- either dropping the Federal claim or conceding at that point that it had no merit so it's only the State claims. I mean, doesn't -- doesn't the plaintiff bear responsibility for keeping that case in Federal court for 18 months? E. Joshua Rosenkranz: The answer is partial responsibility, yes, Your Honor. But let's -- and I think Your Honor is correct to be looking at the burdens. The burdens of the discovery were all the same. It was the same nucleus of operative facts. Now, if this was indeed frivolous from inception, the defendants could easily have filed a motion to dismiss. It should have taken no time at all. And if there was incremental increase in discovery with respect to the Federal claims, then the defendants have only themselves to blame for not having moved to dismiss early on. Samuel A. Alito, Jr.: What if Mr. Fox had filed two -- two actions, the Federal claim in Federal court, the State claims in State court? Now, the Federal claim is handled in the same way that it was here. It's found to be frivolous. Would not the defendants be entitled to all of the time that they spent preparing for the Federal court case? E. Joshua Rosenkranz: And they're simultaneous, simultaneous, Your Honor? I -- that's a much harder question. I think the answer would be yes, they would be entitled at least to those incremental increases in the burden, but if -- if they're doing discovery on both cases, they can't say: Oh, well this is the -- all of the discovery was Federal discovery, none of it was State discovery, when they were on the same facts. It's the incremental burden when you've got these, these intertwined-- Samuel A. Alito, Jr.: You're proceeding on the assumption which I -- I think is certainly, based on what I know of the record, true here, that the State claims are far from frivolous. But how is -- let's take another case, where it isn't clear whether the State claims are any more meritorious than the Federal claim. Then how is the Federal judge supposed to handle the -- the calculation of attorney's fees in the separate Federal suit? E. Joshua Rosenkranz: --So, your Honor, we're still operating on the hypothetical that they're separate cases-- Samuel A. Alito, Jr.: Yes. E. Joshua Rosenkranz: --not intertwined? Because my answer might be different. Samuel A. Alito, Jr.: Well, the facts are -- the facts are intertwined, but they're two separate cases. E. Joshua Rosenkranz: Yes. Samuel A. Alito, Jr.: You have claims of unknown merit in State court; you have a frivolous claim in Federal court. E. Joshua Rosenkranz: My answer to that hypothetical is the same as our point two, that if there is -- if there are fees to be awarded at all, they have to be fees that are tethered to the rationale for there being a right to attorney's fees in the first place, which is what was the incremental burden of the Federal, of the Federal lawsuit? And a judge would say-- Antonin Scalia: So how do you calculate that? I mean that -- that's what the question was. E. Joshua Rosenkranz: --Well, Your Honor, it would be very easy in this case. What you do is you look for entries or ask the defendant to come forward with entries that say this was specific to the Federal lawsuit; I had to -- I had to file a removal notice, I had to litigate over-- John G. Roberts, Jr.: That's an incredible burden to impose on the district court. It's hard enough for clients to read through these billing records and figure out what's valid and what's not, but to ask the district court to then go through and look at it, and see -- and maybe it doesn't say, you know, 1983 suit> ["], "State suit". Maybe it's just an entry. And then you've got to go through entry by entry and say well, now, was that for the 1983 action or was that for the State court action? E. Joshua Rosenkranz: --Your Honor-- John G. Roberts, Jr.: And that seems -- just -- sorry, I don't mean to drone on, but that seems to me to be an especially odd burden to impose when you're dealing with an area where there is a heavy dose of discretion to the district court in the first place. E. Joshua Rosenkranz: --So, Your Honor, let me then start -- move back to our overarching point, which is that these are the sorts of incremental burdens that are trivial, if they exist at all, and that shouldn't be awarded attorney's fees at all. John G. Roberts, Jr.: Well, maybe in your case, but there's no reason to suppose there won't be cases where the things are flipped, and the Federal claim, perhaps frivolous for a legal reason rather than a factual one, is the dominant driving force in the litigation and you've tagged on a few other State claims. E. Joshua Rosenkranz: Your Honor, that's a key point in our presentation. It actually doesn't matter whether it's flipped or not. The factual foundations are the same, by definition, for all of the legal theories, so the factual-- Ruth Bader Ginsburg: Mr. Rosenkranz, there -- there are distinct differences in the 1983 suit because, first, the plaintiff has to show defendant acted under cover of State law -- that's not going to be necessary in the suit for extortion or defamation -- has to show that Vice was an official policymaker for the city. Those are discrete issues that relate to the 1983 claim but have nothing to do with the extortion/defamation claim. E. Joshua Rosenkranz: --Indeed, Your Honor, and so let me answer that question in two ways. First is, if the defendants see a complaint, a 1983 theory, that is flawed at the inception, they have no business incurring costs with respect to color of State law or policymaker or not. They should move to dismiss on the theory that is presented on the face of the complaint. John G. Roberts, Jr.: But that's a pretty audacious claim, that you filed such a frivolous cause of action that they shouldn't have wasted so much time responding to it. E. Joshua Rosenkranz: No, no, Your Honor. My point is-- John G. Roberts, Jr.: That's a lot of chutzpah. E. Joshua Rosenkranz: --You Honor, that's their point. They're saying it was frivolous on the face of the complaint. Well, if it was frivolous on the face from inception, they should have moved to dismiss from inception. John G. Roberts, Jr.: And you shouldn't have filed it. [Laughter] E. Joshua Rosenkranz: I understand the argument, Your Honor, but the Seventh Circuit has a very good opinion that's cited in the brief that explains that when the defendants are just racking up fees on a claim that they claim is frivolous, that they could have filed a motion to dismiss on, they shouldn't be racking up fees on that claim. Sonia Sotomayor: Counsel, can I understand what legal analysis you're proposing? Your blue brief seems to suggest, as does your argument a few minutes ago, that you want the Sixth Circuit's rule, which is the only circuit that applies this rule, that says when the facts are identical and intertwined, the defendant gets no fees. E. Joshua Rosenkranz: Your Honor-- Sonia Sotomayor: All of the other circuits, as far as I can tell, don't go to that extreme. They say something closer to what you started with, and your yellow brief suggests, is a but-for cause: The defendant is entitled to those costs related to the defense of the frivolous claim. Which of the two theories are you advocating? And then a separate question, of what standard of review should be imposed in those situations in which the activities are so intertwined, but there is still a core essence of defense of the Federal claim, which is some of the hypotheticals my colleagues-- E. Joshua Rosenkranz: --Yes, Your Honor. Let me begin by-- Sonia Sotomayor: --assume. E. Joshua Rosenkranz: --correcting the premise, if I may, Your Honor. The Sixth Circuit is an outlier, but the Sixth Circuit is an outlier because it says if you have got a lawsuit with related and completely unrelated claims, no fees at all. The majority rule, the clear majority rule, is the rule that says no fees at all when you've got intertwined claims. That is the Sixth -- which also has that other piece -- the Second, the Ninth, and the Eleventh. And that is the rule -- that is the primary rule that we are advocating: No fees if they're intertwined, because the burdens of demonstrating that a legal theory is frivolous are minimal. But we have a backup-- Sonia Sotomayor: But there are difference -- are differences in how we read those other circuits, but I'll accept your proposition. E. Joshua Rosenkranz: --And, Your Honor, I would encourage the Court to look at the -- at the Schwartz treatise, which says what I've just articulated is the clear majority rule, not just among the circuits, but in the district courts, where circuits haven't weighed in. John G. Roberts, Jr.: Can I clarify what you mean by "completely intertwined"? You mean there is no incremental work just on the Federal action? E. Joshua Rosenkranz: No, Your Honor. What I mean by "completely intertwined" is that they arise from the same core of operative facts. John G. Roberts, Jr.: So you -- you're looking for fees -- your first argument -- even though they can identify fees that were incurred solely on defending the frivolous cause of action? E. Joshua Rosenkranz: I'm looking to block fees even though they can, and the reason is Congress was concerned about burdensome litigation, not about minor, trivial increases in litigation to utter three sentences about a legal claim and then say-- John G. Roberts, Jr.: All right. That's an easier case. What if it's 20 percent spent on the Federal action? Do you still completely intertwine? E. Joshua Rosenkranz: --Your Honor, the premise here is that the Federal action is completely frivolous. There shouldn't be 20 percent spent on the Federal action if they're all -- if they're all intertwined, if it's frivolous on its face. John G. Roberts, Jr.: What if it's not completely frivolous, but frivolous enough to satisfy a demand for fees? What if it does take them, you know, 40 hours to prepare the motion to dismiss it as frivolous? Do they get those 40 hours? E. Joshua Rosenkranz: Your Honor, I guess I'm having trouble accepting the premise. It shouldn't take 40 hours to tell a court, here's the claim and here's a string cite of 17 cases that say it's wrong. But let me then move to the-- John G. Roberts, Jr.: Well, you've got to find the 17 cases. E. Joshua Rosenkranz: --Sure, but if it takes 40 hours to do it, then it's probably not frivolous. But let me move into the-- John G. Roberts, Jr.: You've got to look carefully at the facts. They assume good faith on the part of their adversary that would not file a frivolous claim. The idea that it's going to be able to -- they're going to look at it and say, this is frivolous, file a motion in Federal court, I think that's a -- doesn't reflect an adequate -- doesn't reflect a realistic understanding of Federal litigation. E. Joshua Rosenkranz: --I understand, Your Honor. Let me just make one other point about our first rule, and then move to the second rule. The point that was made earlier, that Your Honor made, Mr. Chief Justice, earlier about the burden on the Court is yet another reason why we shouldn't open up this new avenue of ancillary fee litigation. When it's just that incremental burden, we now have not just the burden of a frivolous claim, but the burden of courts addressing attorney's fees applications and the -- on the frivolous claim, and the burden of the courts now of defendants playing the games of withholding motions to dismiss that should have been brought earlier-- Anthony M. Kennedy: And I don't want to have you adopt this phrase, but just to clarify, are you saying that it's a but-for test, that you get only those fees for time that was -- that would not have been incurred but for the frivolous claim? E. Joshua Rosenkranz: --So let me move now to the second argument, Your Honor, and the answer to that is yes. If there are going to be fees at all, the fees should be tied to the basis on which Congress is allowing defendants to get fees, and that is defendants are suffering extra burdens; we want to protect them from those burdens. If that is the rationale, as everyone agrees, then the only fees that should be covered are fees that would not have been incurred but for the existence of the Federal claim, and that is, to the Chief Justice's question, actually not that hard to demonstrate. If plaintiffs keep good, accurate records and they know that they're going to be seeking or may well be seeking fees on the Federal claim, identify the few documents that are really-- John G. Roberts, Jr.: No, that's not how it works. You say they know they're going to be seeking claims. They don't know in advance, this is going to be a frivolous claim, the discovery is going to be completely overlapping or it's not going to be overlapping. And most lawyers do not keep detailed accurate billing records. That's just an underlying reality. So I do think it's a significant burden on the district court to say, go back and read these -- read these billing sheets, figure out which is which, presumably have litigation over it. Someone is going to file a motion for these fees; the other person is going to say, no, no, it shouldn't be 20,000, it should be 15,000. And our precedent in this area gives a huge amount of discretion to the district courts, just reasonableness. And it seems to me you're buying into a lot of litigation to decide whether it's 20,000 or 15,000. E. Joshua Rosenkranz: --Which is one of my reasons for our underlying-- John G. Roberts, Jr.: I understand you go back to the first point. E. Joshua Rosenkranz: --But, Your Honor, let me -- let me just explain how I think this works. First of all, a lawyer who is -- who has a Federal claim against him is duty-bound to start keeping track of the Federal issues early, just like the plaintiff who is going to seek fees is as well. But it isn't that hard, because the vast majority -- in an intertwined case like this, the vast majority of expenditures will be overlapping expenditures. All of the discovery, or most of it, will be overlapping. And the lawyer does have the obligation, then, to say if there are separate things, it's the burden on them -- that is, the defense lawyer -- to point out those incremental burdens that would not have been incurred but for-- Ruth Bader Ginsburg: In other words, you're saying that the lawyer has to keep account of -- now, if I'm going to spend time on "under color of State law", I have to label that and figure the hours for that separately; similarly for whether Vice was an official policymaker, those hours that you are requiring that -- instead of saying X number of hours for deposition of witness A, you are requiring particularizing the issue? E. Joshua Rosenkranz: --Yes, Your Honor, and that's what Hensley says. Hensley says general litigation is general litigation, and you don't try to parse it out, but if there are -- in the case of plaintiffs, that redounds to the benefit of plaintiffs, because the entire case, all the general litigation, could have contributed to the ultimate success. When it comes to the defendants, though, the general litigation costs could easily or almost certainly were incurred in connection with the overall defense, and so it makes perfect sense to say to them, break out the pieces, the documents that were really just about the Federal lawsuit. Elena Kagan: And Mr. Rosenkranz, in this case what's your understanding of the approximate percentage of time that was spent on the Federal issues that Justice Ginsburg was talking about? E. Joshua Rosenkranz: Minuscule, Your Honor, and let me refer the Court to the supplemental appendix. If you look, for example, on page 30, that's where Vice's expenditures begin. It goes for 37 pages. There is but one reference to Federal law. It's like looking for Waldo, trying to find the theme that they claim was dominating this case, which is on page 38, one reference. And so I would say it's trivial. And particularly, then, if we layer over this the proposition that the district court-- Elena Kagan: So there was no significant motions practice on these issues? There was no particular discovery on issues of State action and so forth? E. Joshua Rosenkranz: --There was, and there was -- and that was done mostly by the city. So the city was focused on -- there was motions practice about some of the legal theories, very little about the one that was purported to be frivolous. There was quite a bit about color of State law, policymaker, which, as I said earlier, certainly the district court should be -- should be encouraged to ask whether those should have been incurred or whether there should have been a motion first, and then there was the removal petition, and then there were the arguments about whether it was frivolous on the basis on which it was removed. Samuel A. Alito, Jr.: What if the potential liability on the frivolous claim is much greater than the potential liability on the factually interrelated nonfrivolous claims, and the defense argues that we spent a lot of time on -- a lot more time on these interrelated factual issues because of our fear of the greater liability on them than the frivolous claim? E. Joshua Rosenkranz: All right. Not this case, of course, and you know this is a hypothetical. The answer to that would be, I can imagine a district court being allowed to carve out an exception where they can say, well, we hired much more high-powered lawyers than we would have otherwise, and that was the -- responsible for an incremental increase. Sonia Sotomayor: Counsel, did the -- the district court here said they're intertwined claims, they all relate to the frivolous claim, they're entitled to full fees. The Fifth Circuit seemed to do the but-for test. Are you agreeing with that? It's -- the language it uses sounds like a but-for test: "A defendant is only entitled to attorney's fees for work which can be distinctly traced to frivolous claims. " "We are confident that the district court can assess the amount of attorney's fees attributable exclusively to a plaintiff's frivolous claims. " Is that correct? E. Joshua Rosenkranz: That is a correct quote, of course, Your Honor. Sonia Sotomayor: You think they misapplied that? E. Joshua Rosenkranz: What I would say, Your Honor, is not that they misapplied it. They uttered one sentence that was correct. And then-- Sonia Sotomayor: Two. E. Joshua Rosenkranz: --then-- Sonia Sotomayor: And they joined the Ninth and the -- and the other circuits that have the but-for. So it's three places. They said we're not joining an exclusive fees entitlement either way, we're joining what the majority of the circuits are doing. E. Joshua Rosenkranz: --Yes, correct. So -- so they uttered those sentences, those are correct. The -- the Fifth Circuit then applied a series of standards that bear no relation to the but-for test. The Fifth Circuit-- Antonin Scalia: But that's not why we took the case, to correct the factual application. E. Joshua Rosenkranz: --Agreed, Your Honor. I'm not saying it was a factual misapplication. I'm saying every sentence after that is a direct contradiction of the but-for test. I mean, for one thing, it cannot possibly be true that you can apply a but-for test when no one has ever looked at the underlying records. The district court said it didn't have to. The Fifth Circuit said that the reason the district court was correct was because the main focus of the parties, what they had in their heads, was the Federal case. Under a but-for test it doesn't matter what they had in their heads. It matters whether the work is wasted, whether it's transferrable-- Antonin Scalia: So they messed up the application of the but-for test. I thought the issue before us whether -- was going to be whether the but-for test is a proper test, not whether this particular court, having expressed a proper rule, misapplied it. don't care about that. E. Joshua Rosenkranz: --Your Honor, I -- I understand your point. We're disagreeing about whether this is simply a factual misapplication, which I believe it was not, or a statement of a series of standards that when district courts in the Fifth Circuit now apply those standards we'll never get to the but-for test, because they will always ask, well, what was on their minds or what forum -- was the next sentence -- what forum was this litigation in? Well, it was in the Federal forum, therefore, they are just Federal fees. John G. Roberts, Jr.: Mr. Rosenkranz, I'm looking at the billing sheet, August 14, 2007, 32 hours, miscellaneous cost, online research. Is that for Federal or State? E. Joshua Rosenkranz: Your Honor, it's general research that I would say if the lawyers did not specify that this was for specifically incremental increase in the cost of the lawsuit on the Federal theory, then they've lost the opportunity to try to make that case. This is not a unique observation in civil rights litigation. Plaintiffs lawyers have to do that all the time. They-- Antonin Scalia: I don't -- you -- you -- you've done this several times in the course of your argument, sort of equating, you know, the attorney's fees for frivolous suits with the normal attorney's fees that the plaintiff gets when the plaintiff is victorious. I'm not sure that we should treat the two situations about the same, because the plaintiff gets his attorney's fees whenever the plaintiff wins, whenever the plaintiff wins, whereas the defendant gets those fees only when the plaintiff has brought a frivolous suit, which should not have been done, which is wrongful, which is perhaps sanctionable under Rule 11. I'm not sure that we have to evenhandedly apply the same kind of rules. E. Joshua Rosenkranz: --Your Honor, I actually believe that the Court should not be evenhandedly applying the same set of rules, but we reached the opposite conclusion about which side gets the benefit of the burden. It is for plaintiff's benefit, for the most part, that this fee shifting provision was in the statute. Now, this Court has so drastically narrowed the range of cases within which a defendant is entitled to fees, that all we're talking about now is whether the Court is going to open up a new avenue of fee litigation, and that is not for the frivolous lawsuits but for the frivolous theory layered onto an otherwise meritorious lawsuit. If I-- Ruth Bader Ginsburg: Mr. Rosenkranz, one -- one piece of this you must know the answer, under the Louisiana law we have the extortion, defamation, and emotional distress going forward in Louisiana courts. Does Louisiana follow the American rule so that plaintiff even -- if the plaintiff prevails, there would be no award of fees? E. Joshua Rosenkranz: --My time is reserved for rebuttal, but I will answer the question, Louisiana follows the American rules, so no fees on the State court claims. Thank you, Your Honor. John G. Roberts, Jr.: Thank you, counsel. Mr. Stancil. Mark T. Stancil: Mr. Chief Justice, and may it please the Court: I would like to focus first on the question of eligibility, but I do want to return later to why Hensley supplies the correct analysis for calculating fee awards. Much of Petitioner's eligibility argument rests on the notion that frivolous section 1983 claims imposed only modest or as he described them today, trivial burdens on defendants. And that's simply not the case. As amici who deal with these cases on a daily basis have confirmed, inclusion of even a frivolous section 1983 claim imposes significant additional burdens as part of the litigation. Sonia Sotomayor: So why can't you prove that? Mark T. Stancil: I'm sorry, Your Honor? Sonia Sotomayor: Why can't you prove that in a but-for situation? Why don't you tell me what you -- your proposed standard is. As I understand it, you would say if the Federal claim is frivolous, then you're entitled to all fees, even if the State law claims overlap and have merit or potential merit. I think -- is that your position? Mark T. Stancil: No, Your Honor. I would like to clarify it. We are talking now about calculation of the award, assuming eligibility aside for the moment. And I'll come back-- Sonia Sotomayor: Eligibility, it has to be a frivolous claim, that's-- Mark T. Stancil: --Where eligible, the standard is, as under Hensley, what is the degree of overall success in proving that these claims are frivolous? Simply put, how much of the action or proceeding to enforce section 1983 was frivolous? And that's the standard set forth in section 1988. Section 1988 does not reference State law claims that may be factually overlapping. John G. Roberts, Jr.: If the liability under the State law claims is $100,000 and the liability under the Federal claims is the same, and you win on the Federal claim and you lose on the State law claim, if I were the client, I would say your degree of success was zero. I still have to pay $100,000. The fact that you won on one claim but then lost the whole issue -- the whole value on another, I wouldn't call that a degree of success. Mark T. Stancil: Well, that would be something that a district court would take into account as part of its discretion, and that's exactly the point of Hensley. Hensley says it's hard to pull some of these hours apart in the ordinary case. Now, this is not the ordinary case. I think that's clear. Here the plaintiff did not even press his State law claims in Federal court. Those claims, the district court found, were so deeply buried in the complaint that the plaintiffs were not even on notice that a defense to them was required. Ruth Bader Ginsburg: I don't see how that -- one can say that looking at the complaint. It said extortion, emotional distress -- where is the complaint? Let's look at it. Mark T. Stancil: It's at pages 37 to 43 of the joint appendix, Your Honor. And I would -- I direct the Court to page -- specifically to pages 41 and 42 of the joint appendix. The only cause of action actually set out here with any specificity is section 1983. If you look at page 41, it says the rights, privileges and immunities afforded by petitioner -- afforded petitioner by our Constitution and laws that were violated included -- include but are not limited to the following, and then he lists the right to seek public office, the right to be free from extortion, the right to be protected-- Ruth Bader Ginsburg: Right to be free from extortion. Mark T. Stancil: --Yes, Your Honor. And then-- Ruth Bader Ginsburg: Is-- Mark T. Stancil: --Yes -- no, Your Honor. That's -- that is what he said his right was denied as part of his rights, privileges and immunities afforded Petitioner by our Constitution and laws. He says on the next page, on page 42, and this is a critical distinction, and I think this was the premise of the district court's finding: He says Petitioner has suffered and is entitled to recover reasonable sums for the following items of damage as a direct result of actions of defendants; and that's where he lists past and present -- past, present, and future emotional distress, embarrassment, humiliation, reputation, punitive damages, and other relief, and other damages to be proven at the trial of this matter. Anthony M. Kennedy: Well, I'm -- I'm not familiar with Louisiana standards of pleading. Afforded -- under 16 at page 41, the rights, privileges and immunities afforded Petitioner by our Constitution, Federal, and laws, State and Federal. Mark T. Stancil: Well, Your Honor-- Anthony M. Kennedy: It would seem to me reading the complaint would permit that. Mark T. Stancil: --I think that would be-- Anthony M. Kennedy: I -- I don't know what degree of specificity is required. Mark T. Stancil: --Well, I think that would be more than generous under the -- in the context, and then you would do what the district court said and look how the parties acted from this point forward. And the district court found that the defendants, that these claims were not sufficient reply pled -- this is on pages, I believe, 20 -- pardon me, 32 and 33 of the petition appendix: "Plaintiff made certain allegations" -- this is the district court -- "that could be characterized as State law tort law claims, but Plaintiff did not plead -- did not make these allegations separate from the section 1983-- " Ruth Bader Ginsburg: --I thought that the Louisiana pleading rule were -- was that you state the basis of your claim, and you do not have to plead legal theories; and if that's so, then if this -- defendant removed this case to Federal court; the plaintiff wanted to keep it in State court; and in Louisiana, under the Louisiana pleading rules, it would have been perfectly appropriate. The -- the claim alleged gave rise to extortion claim, the defamation claim; so this complaint was filed in Louisiana court that has a rule that says tell us what happened, and then you can have whatever legal theory you're entitled to. Mark T. Stancil: --Yes, Your Honor, but it included a Federal cause of action that allowed removal to Federal court, and once it's in Federal court, it's subject to the Federal rules for pleading a claim adequately and in specificity, and here the district court found these State law claims, there was not a whiff of them until the very tail end, 18 months later, when it was actually in response to the town of Vinton saying, by the way, just to be clear, there are no State law claims here. Ruth Bader Ginsburg: Isn't that implausible, Mr. Stancil, when we consider that of all the claims here, the one that would seem easiest to prove is extortion, because Vice was convicted of extortion in a criminal proceeding? So if you're looking look and you say what is the outstanding claim here, I would assume that it was the extortion. Mark T. Stancil: Well, Your Honor, again, look at how the plaintiff used the fact of extortion. If you go -- this is the correspondents -- pardon me, the pleadings on summary judgment when plaintiff filed a motion for summary judgment. The defendant said you've said nothing about under color of law; this is an anonymous claim. He says he -- he didn't say this was a State law claim for extortion. He said, and this is a quote, he says: "It is not necessary to show that Vice was acting under color of law. " "The simple act of extortion is sufficient. " He picked the section 1983 horse. He rode it as far as he possibly could, and only at the 11th hour, when the district court finally called him on to the carpet, did he say, okay, I concede these claims have no merit, and then he backed off and then he wanted to go-- Ruth Bader Ginsburg: The district court was prompted to do that by your motion for summary judgment. Mark T. Stancil: --Correct, Your Honor, and that -- that's how-- Ruth Bader Ginsburg: And you could have brought that motion very early on. If this is a frivolous claim on its face, then why didn't you move to have it dismissed immediately? Mark T. Stancil: --Well, that's a very important point, Your Honor. It I think is a false assumption that every claim or this claim or pieces of this claim are frivolous on their face such that you can look at the complaint and have it thrown out of court. I would like to point, Your Honor, specifically to the allegation -- this is on page 39 I believe of the appendix -- in which -- this is an allegation of the complaint where plaintiff says that Vice printed the extortion letter at the police station. Presumably this is in support of his under color of law theory. He's deposed -- this is on page 330 and 332 of the joint appendix -- and Fox admits he had no basis for that claim. We can't walk into Federal court and say we know this is false, we know he didn't print this at the -- at the police station, he didn't use police resources to do it. We have to depose him, we have to marshal the facts, and then we have to go in on summary judgment and prove that. Elena Kagan: Mr. Stancil, can I get you to just think about a hypothetical with me? There's a plaintiff and he files a suit and it has a State claim and a Federal claim; and the Federal claim is a really bad claim, it's frivolous; and it eventually gets tossed out, and it's -- it's labeled frivolous. But the State claim is a really good claim and it wins, all right? The plaintiff has requested $100,000 and the plaintiff gets $100,000 because he's won on the State claim. Now, here are the legal fees. The legal fees are 20 percent was incurred solely for the State claim, 20 percent was incurred solely for the Federal claim, and 60 percent was incurred in both because there were overlapping issues and it's just impossible to tear them apart. Mark T. Stancil: Okay. Elena Kagan: What are the fees in that case according to you? Mark T. Stancil: It would be within the district court's discretion. I think it's going to be closer to 20 percent than to 80 percent. But again, this is the central message of Hensley, and I think it's-- Elena Kagan: Okay. So -- but -- so in other words, you're saying he gets all the work, the defendant gets the work done on the Federal claim notwithstanding that the plaintiff has gotten his entire relief; is that right? Mark T. Stancil: --He gets -- yes. Elena Kagan: All the work that is-- Mark T. Stancil: At a -- at a minimum. Elena Kagan: --Even though the plaintiff has, from the plaintiff's view has completely won the lawsuit. Mark T. Stancil: Correct, he has -- yes. Elena Kagan: Go-- Mark T. Stancil: Is there a follow-up? I don't want to interrupt the follow-up. Elena Kagan: --No. Go ahead. Mark T. Stancil: Okay. Yes, he gets the 20 percent at a minimum that are but-for attributable, but it is within the district court's discretion to award more, and here's why. Elena Kagan: And -- and -- okay, go ahead, I'm sorry. Mark T. Stancil: The burden -- the question is what is -- what does section 1983 authorize? It authorizes fees if you're a prevailing party entitled to fees in an action or proceeding to enforce section 1983. In Your Honor's hypothetical and in this case, there was only frivolous section 1983 claims. So in terms of fulfilling the -- the mission, the statutory purpose underlying section 1988, I think it would be incumbent upon the district court to say, you know what, this entire -- you -- you triggered a fee-shifting statute, the entire section 1983 action was frivolous. And so I think it's within the district court's discretion to give them something more, between 20 and 80 percent under those -- under the hypothetical. Elena Kagan: So but on that theory, the -- the plaintiff would be paying the defendant's fees for work done where the plaintiff won. Mark T. Stancil: Because the plaintiff levied a frivolous -- not just a faulty or unsuccessful, a frivolous cause of action under section 1983, and this is the point of -- of why 1988 is different from, say, rule 11 and other provisions that limit bad faith actions. It's a policy choice by Congress. There are burdens allocated to both sides, and there are consequences or may be consequences within a district court's discretion. Sonia Sotomayor: --But I thought what Congress said and what we've said in Hensley, that the only thing that the defendant is entitled to fees for is the burden of the frivolous Federal claim. Your -- your answer to Justice Kagan is suggesting that even if the plaintiff wins, wins everything they were seeking, you're still entitled to 80 percent of your fees, even though the Federal claim didn't add anything to your work -- to your work, except 20 percent? Mark T. Stancil: To be clear, Your Honor, I'm not saying we would be automatically entitled to 80 percent. I'm saying Hensley, under the principles of Hensley, the district court would have discretion to award more than 20 percent. Sonia Sotomayor: But tell me why we would, given the differences that we've announced in Hensley between prevailing plaintiffs and prevailing defendants -- because you can only prevail as to a frivolous fee. Why do we start with your entitlement to your entire fee and deduct from it, instead of starting the other way, which seems more logical, which is you're entitled to the fees related to your frivolous claim, so why don't you have to prove that first? Mark T. Stancil: Well, I don't think it would matter to the outcome of this case, and I would like to come back to that. But the reason for starting at what does -- what is the 1983 fee in total, and working backwards from there, is based on-- Sonia Sotomayor: No. No, no, no. We're assuming a lawsuit that has -- as this one, that has both Federal and State claims and only one -- whether it's one frivolous Federal claim or multiple Federal claims and two are frivolous, one is not, and there is a bunch of State court claims. Mark T. Stancil: --Well-- Sonia Sotomayor: So why do we start with your total fee and deduct down, rather than start where all the circuits are starting, which is to say, what can be attributed to that frivolous claim, which is the only thing you're entitled to fees from? Mark T. Stancil: --Well, section 1988 is the answer, Your Honor. It says you get your fees, and -- if you're a defendant and if it's frivolous. With respect to an action or proceeding to enforce section 1983, I think the but-for rule would make more sense if we were talking about non-frivolous section 1983 claims alongside frivolous section 1983 claims, because there the pie that section 1988 is concerned about, the 1983 pie, is chopped up, but here we have a State law pie and we have a 1983 pie, and all of this pie, if you'll pardon the tortured metaphor, is frivolous. So you look at the terms of the statute. What has Congress authorized? Your fee for a frivolous section 1988 claim. We say, and for, I think, good reason, that it's consistent with the congressional purpose to consider whether to reduce that award. You do not have to award them the entire pie, but I think it is a faulty assumption. It doesn't fulfill the purposes of section 1988 to say, well, if you invoke this frivolous claim and you put this fee shifting on the table, that you're immune from fee shifting as long as these claims are -- certain fees are relevant to both. But I do want to come back to why this makes no difference to the outcome of this case. Not only is that the standard that the Fifth Circuit announced and applied, but it is also the case that the only claims prosecuted in Federal Court were section 1983 claims. And here, we have to come back to-- Ruth Bader Ginsburg: Mr. Stancil, the first magistrate to get this case said explicitly that the discovery materials, the discovery in the Federal Court, would be usable in State court proceedings where those materials might aid in obtaining a judgment. So doesn't that have to be taken into account, that the discovery materials developed in Federal Court will now be used in the State court proceeding? Mark T. Stancil: --Well, Your Honor, there's a difference between saying these depositions may be used and saying they will be useful or finding that they would be significant to the disposition of the State law claims. The District Court said only -- the first magistrate judge's opinion said only that these depositions may be used. This is a simple way of telling the parties, you know, don't come back to me and argue about whether this deposition was properly noticed and, you know, these questions and answers have been asked. But I think there's a more fundamental point, Your Honor, which is the District Court, in awarding fees, found there was no whiff of State law claims until the very -- very much the 11th hour in this claim. And this is precisely why, Justice Sotomayor, back to your question, we really need district courts to have discretion. If, as in this case -- we'll assume there are State claims and Federal claims, but as the District Court found, those State claims are deeply, deeply buried in the weeds. That's precisely the case in once -- in which the District Court needs to have discretion to say-- John G. Roberts, Jr.: And I assume you agree that discretion can end up going either way? You could submit time sheets that show 35 percent of our time was spent on the Federal case, and the district judge can say, you know, time sheets are subject to -- manipulation is too strong a word, but I'm just not going to give you 35 percent; I'm going to give you 10 percent. That's a reasonable exercise of discretion. The judge doesn't have to say a whole lot about it and it's certainly going to be upheld on -- on appeal, right? Mark T. Stancil: --Correct, Your Honor, and this goes to the question of whether these standards are administrable. The abuse of discretion standard in fee awards has worked and worked fairly well for the better part of three decades. The surest way to invite satellite litigation over fees is to -- is to announce a rule in which you have to say, well, does it meet the but-for test or does it not meet the but-for test? Or with respect to even eligibility, to say, well, are they related or are they unrelated? Sonia Sotomayor: Counsel, every other circuit except for the Sixth has dealt with the but-for test or some variant of it. Even the Fifth did it in this case and ruled in your favor. What you're asking for is, I think, very akin to the opposite rule of saying if we dismiss the Federal litigation, you're not entitled to any fees, because this case was about -- is in Federal Court, so that's the only thing that matters. That seems to be your rule. Every other circuit has some variant of but-for, and they seem to manage it just fine. Nobody likes attorney's fees. Mark T. Stancil: Well, Your Honor, I think the -- I think the statement of the but-for test in application will become very -- will be very close to the test that we're espousing here, and here's why. Sonia Sotomayor: Espouse your test for me, because I still don't understand it except for flipping through Hensley, but Hensley has a different predicate, which is that plaintiffs are -- if they win, they're entitled to fees. Mark T. Stancil: The district court has discretion to award fees fairly attribute to the portion of the lawsuit that is declared frivolous. That's the test. And here's why, in many cases, that's going to be similar to -- not identical, but similar to a but-for test. Usually, you will push these claims simultaneously, Federal claims and State claims simultaneously, and so there will be a lot of things that are -- that go in both directions. But in this case, a special case where you have -- Federal, Federal, Federal, that's all they said in District Court, this is -- and this is all over the record, where every time the case is described back and forth between counsel, after the moment of filing of the complaint until we get to the summary judgment proceeding 18 months later, everybody calls this a section 1983 suit. And then at the last second, there is, oh, we have State law claims; let's go back to State court and litigate those. And where the District Court grants the Petitioner's -- the plaintiff's request to go back to State court, that's the right time when you need discretion to be able to award what just happened. Samuel A. Alito, Jr.: How do you reconcile the test that the Fifth Circuit said it was applying, which is -- seems to be a but-for test, with the fees that were actually awarded here? Mark T. Stancil: Because the only work done at the time of the fee request was on a section 1983 claim, because the State law claims were not pursued. And that was the finding of the District Court that says, these claims were so deeply buried, you weren't even on notice. Now, there's a difference. Ruth Bader Ginsburg: Well, that certainly conflicts with the first magistrate. The first magistrate said use the material in the State for the State court proceeding. Mark T. Stancil: Your Honor, I don't disagree that there are questions and answers in these depositions that will be used in State court, absolutely. But there's a difference. What matters when a District Court is assessing fees and evaluating a fee request is, how was the case litigated while it was an action or proceeding to enforce section 1983? Not how could the case have been litigated; not how if you had also pursued State law claims, would these things have been relevant. And once these section 1983 claims, all of them, are out and declared frivolous, section 1988 ceases to operate in the sense that it's no longer an action or proceeding to enforce section 1983. Samuel A. Alito, Jr.: Can I ask you a question I asked Mr. Rosenkranz? Here, the argument seems to proceed on the assumption that the State law claims are not frivolous and may well be meritorious, but suppose that the Federal Court was in no position to make that determination at the time of the remand. What is the Federal Court to do then? Mark T. Stancil: Well, there are several options, and I would be remiss if I didn't specify that those State law claims will be hotly contested when they go to trial next month, and I don't want to leave any misimpression on that. But the District Court has a series of options. First of all, if the cases -- if the claims are going back to State court, the party does have to file the motion for attorney's fees under rule 54. You have -- you have to go in and say, if you're -- if there's a judgment being entered, we want our fees. The District Court could stay the request, defer it until the State court rules on the State law claims. Those requests were not made here. So the District Court has lots of options. But where -- particularly where the plaintiff desires to go back to State court and the Federal case is coming to an end, the District Court must have the discretion to enter a fee award at that time. And in fact, that has been the case, and it's specifically mentioned in the House report to section 1988. The interim fee awards, where there's an order that disposes of substantial rights, are permitted. And again, this is why you want discretion in the hands of the District Court. Antonin Scalia: You want to us decide this case on the basis that it was only -- it was only a 1983 claim for the entire time it was in Federal Court until the -- until the very end, right? Mark T. Stancil: Correct, Your Honor, and that it was not-- Antonin Scalia: What -- what good does that do? I mean, is that why we took this case? Mark T. Stancil: --Well, Your Honor, we-- Antonin Scalia: What principle of law that's going to help the lower Federal courts would come out of that holding? Mark T. Stancil: --Well, I think-- Antonin Scalia: Whenever you have nothing but a 1983 case, you can give -- and it's frivolous, you can give attorney's fees right up to the limit of the fees expended, right? Mark T. Stancil: --I think the Court could announce the principle, that would helpful, which is, if the fees are fairly attributable, within the District Court's discretion, to the frivolous claim, they may be awarded, and then say 1983-- Antonin Scalia: Well, I think nobody doubts that, do they? Mark T. Stancil: --Well, Your Honor, the fees fairly attributable to a 1983 claim, Petitioner says they have to be only attributable to a 1983 claim. That's very much in dispute. Antonin Scalia: Oh, no, but you're saying they were only attributable to a 1983 claim during all of this litigation except the very end. Mark T. Stancil: Correct, Your Honor, and we would be happy to win on that basis. The Fifth Circuit said it and there was a reason that it was not an abuse of discretion, an abuse of discretion for the District Court to award them under these circumstances. John G. Roberts, Jr.: So you disagree with the statement in the -- in the Court of Appeals opinion about, only for fees that can be distinctly traced? Mark T. Stancil: Yes, Your Honor. We think-- John G. Roberts, Jr.: I understood your adversary to agree with that position. You'll need to switch sides, right? Mark T. Stancil: --We almost did, Your Honor. It would be -- it would be -- we win under either test, Your Honor, but I don't think that section 1988 is fully served by litigation over whether something is in the but-for clause-- John G. Roberts, Jr.: But your argument has focused, in reference to the complaint and all that, on the legal theories. Your friend has focused on the underlying factual basis, and all the litigation -- all the background work on the underlying factual basis, I don't know why that can be fairly attributed only to the 1983 claim. Mark T. Stancil: --Well, because only the 1983 claims were pressed. But -- but there's a -- I think, a faulty premise in his position, which is that there are facts over here and law over here. Questions that are specific to section 1983, such as under color of law, municipal policy or custom are highly specialized, fact bound, mixed questions of law and fact. The idea that when we're deposing somebody on, say, Sheriff Vice or Chief Vice on his conduct in office that we're just looking at what happened, and that this is just a factual question, I think that's inaccurate. Elena Kagan: Well, what percentage of the work done has actually been useful to you in defending the State court claims, approximate? Mark T. Stancil: I'm not in a position to answer that, Your Honor, because I'm not representing these parties in the State court, but I'll concede for purposes of today that some significant portion. I wouldn't put a number on it, but certainly the who, I -- who, what, when, where, why is relevant to both, but it's relevant to how it was prosecuted in front of the district court. And again, I think we have to put ourselves back in the chair of the district court on the bench when that fee request comes in. Under Petitioner's rule if these claims had not been pressed in Federal court and they're going to be remanded at the plaintiff's request, the district court has to speculate, well, how is this all going to go in State court, how is this going to play out in practice? Are these claims going to be meritorious? Are they not going to be meritorious? Are they -- how much of this is going to go to that, and I think that's, frankly, not the burden-- Ruth Bader Ginsburg: That's disembodying what -- we have a factual scenario here. Some of the discovery was spent in determining what happened with the alleged racial slur. Investigating the facts of that claim are certainly relevant to the State court proceeding. Mark T. Stancil: --Yes, Your Honor, and we don't -- we don't contest that investigating the facts are relevant to both, but it has to be pressed in Federal court. It has to be during the action or proceeding to enforce section 1983. Sonia Sotomayor: I'm not sure what that means, because if you're taking discovery on the State law issues, defamation, extortion, et cetera, you're pressing it. At the point that the Federal action is dismissed you no longer can pursue that in Federal court to its conclusion. Mark T. Stancil: Well, again, Your Honor-- Sonia Sotomayor: Then why would -- if you have a bunch of different claims and the facts support some of the State court actions, why should you be entitled to fees that you would have incurred in State court no matter what? Mark T. Stancil: --Because the district court here, and in this case, and it may not be in many cases, but in this case the district court found the complaint did not sufficiently allege these State law causes of action to put the defendants on notice that a defense would be required. Sonia Sotomayor: Did you -- are you seriously contending that the lawyer below didn't understand that the defamation and the extortion claims were part of this case? I'm hard pressed to believe that reading that complaint would not doubt that-- Mark T. Stancil: Your -- Your Honor, that is precisely what the district court said. Sonia Sotomayor: --Found? Mark T. Stancil: And again, it says, the court finds that plaintiff failed to allege State tort law violations in the complaint such that defendants were adequately noticed, that a separate defense as to these claims would need to be prepared at the beginning of the litigation. The record -- this is on -- that's on 32A of the petition appendix. It goes on to say, the record reflects that throughout the litigation the focus of both plaintiff and defendant was plaintiff's section 1983 claim. And if you look at the -- the correspondence between the parties, the summary judgment papers, it is 1983 from start to finish, until -- well, until the 11th hour. And in fact there's even a specific statement in which the city, in an abundance of caution says, just to be clear, there are no State law claims here; and I think the district court is within its discretion. I would point the Court to the cases in which this Court has examined the standard of review for rule 11 decisions, and the Court has held in Cooter & Gell and in Pierce that we give district courts very, very wide berth on these questions, precisely because they're on the ground, they recognize what the -- what the standards are for pleading who is going to be on notice as to what, and this is a funny case in that regard. It's unusual in that these things were really put to the side and parked until the 11th hour. Sonia Sotomayor: In answer to Justice Scalia's question, basically the only difference you have with the -- with the Fifth Circuit is that you would say fees fairly attributable to Federal claims as opposed to fees exclusively attributable to Federal claims; is that correct? Mark T. Stancil: Yes, Your Honor. Sonia Sotomayor: So your presumption would be that if the fees are -- support both State and Federal claims, you're still entitled to fees? Mark T. Stancil: But they have to be judged, and this is under the eighth of these Johnson factors, they have to be judged in the context of the overall suit or the overall action to enforce section 1983. Sonia Sotomayor: I still -- I don't understand what that means. Mark T. Stancil: Well, if we were -- if we had -- if as Petitioner suggests, this really was just an add-on claim, that it was a section 1983 claim, and by the way, you know, here are my breach of contract claims, and, you know, it may also be a taking; and nobody spent any time doing it and nobody spent a whole of lot of -- you know, worried about the taking claim. Sonia Sotomayor: You want district courts to determine how important the 1983 claim was in relationship to the State claim? Mark T. Stancil: Correct, Your Honor; I think -- I think that's correct. And I think that's precisely the point of Hensley; and again as this case comes before this Court, whether the district court abused its discretion in calculating its fee award, I frankly -- we submit that this -- the judgment should affirmed under any of these tests. If the Court has no more questions. Thank you. John G. Roberts, Jr.: Thank you, counsel. Mr. Rosenkranz, you have 4 minutes remaining. E. Joshua Rosenkranz: Thank you, Your Honor. I actually like Mr. Stancil's cake metaphor. What matters is not how big -- how much of the cake was devoted to one claim versus another. What matters is how much more energy it takes to bake this particular sliver of the cake. It is all the same energy. The central piece of Mr. Stancil's argument is that the district court found that the focus was only on the Federal claims. That is a misreading of that one sentence, and Mr. Stancil keeps eliding the one critical word of that sentence, which was the district court said that they were not on notice that they needed to separately defend the State law claims. Our whole point is they did not need to separately defend the State law claims. The district court was all turned around about the need to do something separate. And the reason we can be sure that Justice Sotomayor's reading of the complaint is the same as everyone else's is because the lawyers in this case, the defense counsel, did realize that there were State law claims. Their answers are rife with State law defenses, and I refer the Court to pages 50, 56, and 66 of the joint appendix. Each one of them has three separate reference to -- references to, if we are found liable under State law. The summary judgment motion to which Mr. Stancil refers has a response, an opposition by the -- by the defendants, in which they caption -- this is on page 122B -- the caption is "State Law Claims Against the Town of Vinton. " Now, that's that earlier summary judgment motion, that wasn't the 11th hour. Samuel A. Alito, Jr.: If the Fifth's Circuit's statement -- if the Fifth Circuit's statement of the test it was applying is correct, would you say that that is a discretionary determination? The district court should have discretion in making the -- an apportionment? E. Joshua Rosenkranz: Yes, Your Honor, absolutely. There's a huge amount of discretion. Once we set the rule, then the hours expended, were they reasonable, the rates, were they reasonable. At what point does the -- does the -- do the fees trigger, because it was unreasonable to delay, all of that is-- Samuel A. Alito, Jr.: Would you agree an assessment of the relative significance of the frivolous and nonfrivolous claims would also be a factor that would go into that? E. Joshua Rosenkranz: --I do not agree, Your Honor, because if you are -- if the defendant is properly in court and properly being forced to do discovery, the relative importance -- what was in their heads, what was motivating them is irrelevant, unless of course apropos of the earlier question, what was going on was they really ratcheted up because they lose sleep over Federal claims more than over State claims. But, you know, a slip and fall, if you layer on top of it a 1983 claim, no one's losing more sleep over it. Samuel A. Alito, Jr.: What if there's a cap on the liability for the nonfrivolous claim but not -- maybe treble damages on the frivolous claim? E. Joshua Rosenkranz: I think that would be exceptional circumstance under which the district court would be entitled to take into consideration something that's quite a bit more extraordinary. And so I'm not advocating an -- you know, hard and fast absolute rule, just a guideline of the sort that this Court routinely adopts. I mean, the notion that-- John G. Roberts, Jr.: I was wondering kind of as a starting point, and I don't know why you would fight so vigorously against the verbal formulation "fairly attributable". I assume most district courts, when they get it, they're going to start by looking at whatever his affidavit, this is how much our fees were, and then if there's some reason, perhaps Mr. Stancil's case, where everybody thinks it's a Federal that's all, or maybe not, then they can just go "fairly attributable" rather than but-for, which gives the district court a lot more leeway and the sort of leeway we have always held in this area they should have. E. Joshua Rosenkranz: --Well, Your Honor, I -- I actually believe -- if I may answer the question, it is quite a bit easier to apply a but-for test and review it on appeal than it is to apply a test that is just a mishmash of factors over, if which the stakes are high enough, and they will be under Mr. Stancil's rule, there is an enormous incentive to litigate to death. If there are no further questions -- I thank the Court for its attention. John G. Roberts, Jr.: Thank you, counsel. The case is submitted.

William H. Rehnquist: We will hear arguments next in No. 85-656, Ralph Munro, Secretary of State of Washington, versus Socialist Workers Party. Mr. Johnson, you may proceed whenever you are ready. James M. Johnson: Mr. Chief Justice, and may it please the Court, the State of Washington has a uniquely open election system, a system unusually hospitable to new and minor parties and independents and their candidates. Washington voters wishing to exercise their right to politically associate through these vehicles easily organize and choose their candidates. Those candidates have long been automatically placed on the Washington elections ballot. After a 1976 election, with the most crowded ballot in Washington's history, the Washington legislature decided to exercise what this Court has called a state's undoubted right to require candidates to make a showing of substantial support in order to qualify for a place on the ballot. The Washington legislature, by statute, placed all candidates on the primary ballot and added a requirement that any candidate not able to attract the votes of 1 percent of the voters would not remain on the ballot a second time. It is that 1 percent requirement to remain on the ballot a second time that is challenged here by a candidate placed on the Washington primary ballot who got fewer than 600 votes, less than one-tenth of the 1 percent, and thus was not remained on the... did not remain on the Washington ballot a second time in the general election. I shall explain first the Washington experience and the election with its crowded ballot in 1976 leading to this change, then telling you why the 1 percent is consistent with this Court's numerical definitions of substantial support and argue under this Court's decision the Washington requirement is neither unconstitutional per se and is less than the numerical test that this Court has approved, such as the Jenness v. Fortson, a 5 percent of voters test, arguing that it is less burdensome on minor parties and serves to improve the political debate which is the constitutional issue before the Court; finally... and also that the Washington statute by cutting off some few candidates avoids subsidizing hopeless candidates, as this Court recognized in the different case of Buckley v. Valeo was appropriate. Finally, I can show-- William H. Rehnquist: Subsidizing meaning printing, including their name on the ballot? James M. Johnson: --There's more than that in the State of Washington, Chief Justice Rehnquist. The printing on the ballot and the counting of votes is one issue. Washington is also unique in the states that we print and distribute to every residence in Washington a voter's pamphlet and candidates' pamphlet for publicizing the election and the candidates, at considerable expense. In that additional regard, I think, we are subsidizing hopeless candidates by placing on the ballot those candidates that have not and will not receive any substantial support. John Paul Stevens: Is that kind of information disseminated in connection with the primary as well as the general election? James M. Johnson: It is not, Justice Stevens. It is only disseminated in conjunction with the general, and may have been one factor in the legislature determination to move this substantial support determination to the primary. I referred to Washington's uniquely open system. I shortly explain, and explain the relevance of this system. In Washington there is no party registration. There is no identification of voters by party in the State of Washington at all. The voting is a blanket primary, we have referred to it, and the general is the same. Under a blanket voting system each Washington voter may vote for any candidate for any position irregardless of party affiliation. One vote per race, of course. In a case tomorrow arising from Connecticut you will hear debated the merits of open versus closed primaries and restrictions on voters, how they vote by party. In Washington we have no such system. The Washington system is more open than the open primary. This has direct relevance, of course, to using a primary vote requirement for determining substantial support, since any Washington voter attracted to the votes can vote for any and all candidates. For example, a Washington voter may choose to vote for a Socialist Worker candidate for governor, a Republican candidate for U.S. Senate, a Democrat candidate for their local legislatures, et cetera, down the ballot. Thus again the primary test is much easier than it would be in most states with either a closed or open primary in which party affiliation is somehow tested first before the voters can exercise their option. Finally, in Washington if any candidate is not on the ballot a Washington voter can write in any candidate with the sole exception of a sore loser of a major party primary. The Court of Appeals decision in this regard is just confused. The District Court finding of fact and conclusion of law at JSC 5 is accurate. The Washington statute allows write-ins with the sole exception I have mentioned. If not on the ballot, of course, in the Washington system the voters have made that decision. In 1976 the voters had lots of options to choose from, culminating the preceding four elections' increase in the number of independent and minor candidates. The 1976 election had 12 parties, one of which, the OWL, Out with Logic, On with Lunacy, Party, was avowedly frivolous and ran a statewide slate. There were numerous candidates, however, as noted in our brief, 65 of them on that ballot. Important to note, though, is that of these-- William H. Rehnquist: Sixty-five candidates for what, Mr. Johnson? James M. Johnson: --Sixty-five candidates for statewide and Congressional races, Your Honor, Mr. Chief Justice. William H. Rehnquist: So those were not just local races. James M. Johnson: That does not include local races, no. That is summarized in the appendix. It is a confusing number, confusing in this particular regard. It includes all the Congressional candidates, and every Washington voter did not have access to those, so each voter would have faced probably 12 fewer, and then added to the... at the end of the ballot would have been the local races together with such issues as constitutional and levy elections. It was a long-- William H. Rehnquist: How many candidates were there for Governor? James M. Johnson: --There were eight candidates for Governor, Your Honor, Mr. Chief Justice, and a good example of showing that the candidates, the non... the minor party independents did not attract any substantial support. Of those six independent and minor party candidates, none of them got 1 percent in the general election. Four of them, including the Socialist Workers Party candidate, got less than.3 percent of the ballot. This, by the way, was also consistent with the preceding history in Washington of minor parties and independents. As noted in our reply brief, since the Depression, only two such candidates for statewide office had ever received even 1 percent of the vote. The Washington legislature reasonably then saw this unduly lengthy ballot, and as we have discussed, Mr. Chief Justice, with regards to the voters' pamphlet, I think reasonably concluded that in some regard the ballot placement and the voters' pamphlet were subsidizing hopeless candidates, and the "subsidizing hopeless candidates" is your language-- Thurgood Marshall: Well, of course, that could be remedied by not printing them. James M. Johnson: --Yes, but much to the detriment of the voting system, at least in the judgment of the legislature and the citizens of Washington, Justice Marshall. The voters' pamphlet serves to publicize all the election as well as helping-- Thurgood Marshall: I don't think it is something to keep emphasizing. You mention it every other minute. James M. Johnson: --Justice Marshall, as in Buckley v. Valeo, I think the public is not obligated to undertake public financing of elections. That quote was extracted because I think the concepts are similar in that one regard. The encumbering of the ballot, however, remains irregardless of whether a voters' pamphlet is chosen. William H. Rehnquist: Mr. Johnson, I feel bound to inform you that there is no word in the English language "irregardless". The word is "regardless". James M. Johnson: Thank you, Chief Justice. Thank you. And regardless, the problem of an encumbered ballot as existed in 1976 remains. The Washington legislative solution to that problem and to this Court's then recent decisions in Jenness and American Party of Texas, recognizing that the state had the authority to remove frivolous candidates or remove those that had no public support, the legislature reacted in these ways. All candidates were placed on the primary with an essentially concurrent filing for minor party and independents and the major parties. That is, the convention for minors and independents is a Saturday, Monday the filing begins, and on the Friday of the same week the convention certificate together with the major party are closed. One percent requirement was imposed. Any candidate not getting 1 percent would not remain on the ballot. Important to note, this was down from the preceding 5 percent requirement. The preceding 5 percent, of course, applied only to major parties who in the earlier system were the only ones on the primary ballot. John Paul Stevens: And of course it is 5 percent of something different, isn't it? James M. Johnson: No, the 5 percent before, Justice Stevens, was also applied to the primary vote. John Paul Stevens: I thought it was... oh, I see. James M. Johnson: This was in the Washington system before the legislative change. John Paul Stevens: The 5 percent was required for the major party candidate to got on the ballot? James M. Johnson: It was. A major party candidate not getting even 5 percent would not remain on-- John Paul Stevens: Of course, that would never happen, I don't suppose. James M. Johnson: --The record here does not show that. John Paul Stevens: Does the record contain examples of this pamphlet you describe as being sent out to the voters? James M. Johnson: I don't believe there is such in the record, Your Honor. John Paul Stevens: Is there any reference to it at all in the record? James M. Johnson: There is reference in the legislative history. John Paul Stevens: No, I mean in the record before us. James M. Johnson: I think there is not. John Paul Stevens: So you have just told us about it for the first time? James M. Johnson: Pardon? It is, however-- John Paul Stevens: Yet this was one of the major things they were saving in enacting this statute? James M. Johnson: --I think it is in the legislative history, A, Justice Stevens, and it is a statutory requirement of which I think the Court can take judicial knowledge. In Washington Code 2981 140, which as I noted requires its preparation and distribution to all residences. Antonin Scalia: Could you tell me why it is that in running in this primary the independent and small party candidates are not really running in the primary? The system is set up so that they have to be nominated by some sort of a convention system previously. And that is one of the complaints here, that it is a primary that... for them it's a primary that really isn't a primary. James M. Johnson: Justice Scalia, I do not understand... first, the nominating convention requirement was not challenged below, nor do I understand the party here to object or to prefer primary nomination for its candidates. In this regard, the minor parties have an advantage over major parties, and it makes some sense for minor or new parties. They can control their own candidate rather than going through the blanket primary system to allow all Washington voters to choose their candidates. Antonin Scalia: I see. James M. Johnson: I think, but Mr. Smith may best address whether this is preferred by the party. Antonin Scalia: I am still curious as to the reason for it. Is that... was that the reason, to prevent party cross-overs from destroying small and independent parties? James M. Johnson: The legislative record does not show that. Antonin Scalia: You don't have any guess as to what it was-- James M. Johnson: Printed as A1 in our reply brief, in that appendix the legislative memorandum mentions the question of minor parties being allowed to not control their own candidates and convention, which suggests to me the argument I have just advanced, that what was intended was to let them at the smaller stage not have the general election... the major parties in Washington sometimes object to the primary system we have, which allows all voters to determine a party's nominees. And I think the analysis is more likely to be applied in a small and growing party that would like to control its own candidates. Antonin Scalia: --But you understand that one of the arguments being made here is that since there are not two candidates competing, why would you expect voters to come out to vote for their-- James M. Johnson: I do understand that, and I think, Justice Scalia, the answer in part is the Washington system. The primary serves... on the primary ballot in Washington are not just candidate nominations but local races, nonpartisan races, together with local issues such as levies and those kinds of things. The burden imposed on a minor party candidate is exactly the same as any candidate. They have to bring out voters and get them to vote for them. In the Washington system the beauty for a minor party is that every voter that comes to the polls can vote for the minor party candidate, as I mentioned. In a blanket primary they don't have to just attract... any voter that walks into that poll can vote for one of the candidates. Typically, by the way, the minor party doesn't run a whole slate of candidates. In this regard it also has two advantages over the prior system. First, the old system had the convention the same day as the primary, and so you had... a minor party adherent had to give up their primary right to go to the convention. In this regard it is a direct benefit. Secondly-- John Paul Stevens: --What did they give up? I don't understand. James M. Johnson: --In the old system, Justice Stevens, you had to go to the convention the same day as the primary and could not vote in the primary. John Paul Stevens: You mean the person who was a delegate to the convention couldn't vote? James M. Johnson: Yes. John Paul Stevens: Why couldn't he? If the convention was held in his home town, couldn't he do both? James M. Johnson: The statute prohibited it. John Paul Stevens: Oh, I see. But why would he want to vote in a primary if... I don't understand-- James M. Johnson: There are lots of other issues on the primary, Justice Stevens, than this nomination. John Paul Stevens: --Oh, I see. James M. Johnson: Typically a small party, and this case has several examples, only nominates for a couple of races. Under the old system-- John Paul Stevens: But you have other issues like bond issues and things like that on your primary ballot? James M. Johnson: --And you can go to the primary and vote for the Socialist Workers' candidate for Governor or legislator and also vote for the other party-- John Paul Stevens: It occurs to me that the 1 percent requirement could be quite different in an election which had, say there was no contest for the Democratic nomination and no contest for the Republican nomination. It might be rather easy to get a 1 percent then, but if you have a big party fight going on and a lot of other issues, the 1 percent would then be ten or fifteen times as hard to get. James M. Johnson: --Justice Stevens, it depends on the position. In our most recent race-- John Paul Stevens: It depends on what the issues are at the primary election. James M. Johnson: --And the position. In our most recent primary, the hotly contested race for U.S. Senator, but if the Socialist Workers had a candidate for a legislative race any place down the ballot, all the voters that are attracted to that hot race, as you called it, could vote for that position also. It has... the system has another advantage over either the petition or the prior system in that it added the minor parties and independents into the political debate. That is what we are talking about here, is broadening the political debate, and under the prior system or any other system the minor parties and independents have no role in the period of debate in Washington leading up to the primary because they are not on the ballot. In that regard the primary is actually monopolized by the major parties if they are the only ones on the ballot. By adding them into the ballot there is at least this advantage, if not to the party, and I think it is to the party, there is the advantage to the voters in the political debate that they are allowed in. The primary system that it is not per se unconstitutional, we can say at least from this Court's summary affirmance in Allen v. Austin in 1977 of such a system. Indeed, since that was summary affirmance, I suppose that is the most I can say, that it is not unconstitutional per se. That it is numerically consistent with the then recent cases of Jenness v. Fortson and American Party of Texas we have pointed out in the table in the brief, the example being the Jenness system, in which this Court approved a petition requirement of 5 percent of the registered voters in Georgia. Such a requirement imposed in the State of Washington would mean 122,000 signatures to get the statewide gubernatorial candidate of a minor party on the ballot in Washington, as contrasted with the 9,100 required as 1 percent of the primary vote in 1984. Now, it may be more difficult to get one voter out to vote in a primary, but I submit it is not 13 times more difficult to get a voter than it is to get a petition. I further argue that the political debate benefits by the choice. In this regard the primary system is better than a petition. After all, the petition, once filled in, the petitions are discarded. The buttonholing of candidates, which one of the amicus... excuse me, the buttonholing of voters, which one of the amicus briefs suggest is a real easy way to get petitions that is probably true, but it adds little to the political debate, as contrasted with the Washington system, as I have noted, which encourages the same time and money and effort to be expended instead in attracting voters to the primary and getting them there to vote for their candidates. The limited resources of a minor party, I suggest, are better expended in getting voters out and getting them to the primary than they are through this, to us, to Washington, basically meaningless petition-gathering proposition, meaningless in the sense it doesn't really add to the political debate, which is the issue, the interest that we are trying to protect. I also-- Byron R. White: Why, then, do you suppose the minor parties have had such bad luck under this new law? James M. Johnson: --There are three reasons, and by the way-- Byron R. White: That is true, isn't it? Weren't they more frequently on the ballot before this law was changed? James M. Johnson: --Justice White, I think the Ninth Circuit says that, and I think they are applying the wrong historical analysis. They improperly limited their consideration to only statewide offices and only minor parties, implicitly assuming that the right involved is a right of candidacy. Byron R. White: To the extent their analysis... they should have looked more broadly, but their narrow look was correct? James M. Johnson: The statistics were correct, with the exception that they were numerically wrong about independents. Independents statewide have actually placed four out of five candidates on the general election. Byron R. White: You mean since the law was changed? James M. Johnson: Since the law was changed. What we are looking for, though, is not... we are not trying to accommodate rights of candidates, because most recently in Clements v. Fashion, this Court said there is no right of candidacy, and surely not a right to have your name placed on the general election ballot. Byron R. White: I wasn't suggesting that the experience of the... that the state had to allow the same access to the general ballot as they had had before this new law. James M. Johnson: Then it is a slight reduction. Byron R. White: The question is whether this new law is constitutional. James M. Johnson: Yes, Justice Stevens, but I think what we are looking for in the historical material is... we are analyzing for the rights of the voters so we are-- Byron R. White: I feel obligated to tell you that my name is White. James M. Johnson: --I am sorry. 0 [Generallaughter.] Thank you again for the correction. Justice White, what we are seeking here, though, is an index to the health of the political system, aren't we? We look at the historical information to see whether Washington's system allows major parties to monopolize the debate, or do we have a healthy system which allows and even encourages dissent. Put another way, again, do the major parties monopolize debate in Washington? The answer is clear from the record. The wide-ranging debate is alive and well in Washington. In 1984 the-- William H. Rehnquist: Maybe the Socialist Workers Party position would be that the issues that are alive and well and being debated in Washington aren't the ones we want to debate. We have got some other things that may seem odd to a lot of people, but we still would like to mount our little campaign. James M. Johnson: --And we think that is very important. Washington thinks that is very important, Chief Justice Rehnquist, and protects it, first through allowing the party nearly automatic access to the primary, and secondly, the figures will show that even this party has consistently placed candidates. It is true that they have not been successful in attracting votes in the statewide races. In the '84 election their Governor candidate did not qualify, but their candidate for U.S. Representative did qualify. William H. Rehnquist: Where did they get their votes from in King County and Takoma? James M. Johnson: I think they have conceded in their brief this party has its major... if there is a base of adherence, is in Seattle-Takoma metropolitan area. I am sorry about the name error. To answer you first question, why they don't qualify, I think there are three reasons. The Court has said we are entitled, the state is, to ask for reasonably diligent candidates. Two, they may have a message the voters just do not like. Or, three, they may have unattractive candidates, and on this record we don't know exactly why Mr. Peoples didn't qualify, but the record does show they expended $1,900 on a statewide Senate race in the State of Washington, an insignificant amount, and if it reflects the support that they could draw, a financial support, the effort, I say, was insignificant. As you have noted, their support is concededly in the Seattle-Takoma area, where all that effort was expended, instead of broadening their base to the whole of the state. Finally, the record also shows the affidavit at C13 was their affidavit setting forth all the electoral efforts. Four out of five news releases they put out, four out of five were about this case. Sandra Day O'Connor: Mr. Johnson, what is the state interest you rely on? James M. Johnson: Primarily what this state, this Court has conceded the state's interest in requiring a showing of substantial support before a candidate appears on the ballot. However, Justice O'Connor, we allow the candidate on the ballot the first time, the primary, without such a requirement. In that regard I believe the Washington system treats them better, them being minor parties, better than most systems. Sandra Day O'Connor: So you rely only on a purpose of the state of requiring substantial support. James M. Johnson: And that purpose serves two-- Sandra Day O'Connor: And what underlies that? James M. Johnson: --That purpose serves two interests. First, avoiding the unduly lengthy laundry list ballot that this Court has referred to with the possible effect of confusing voters and allowing frivolous candidates-- Sandra Day O'Connor: Well, under your system the ballot is so long and complicated already that that might not be a very persuasive argument. What else-- James M. Johnson: --It was a persuasive argument to the Washington legislature, Justice O'Connor, and I think they have a right under this Court's decision to respond to that. Secondly, as I have discussed with Justice Marshall, in some regard placing candidates that history shows have never attracted substantial support, works to be subsidizing hopeless candidates, nor is the state or the government obligated to subsidize these hopeless candidates. We can require them to exercise some reasonable diligence and expend some effort. Ultimately, then, to the extent that a few of these candidates do not remain on the ballot, and as we note in our reply brief, the summary numbers are that of 48 candidates, independent and minor party, since the '76 election, since the '76 changes, I believe the number was 37 of them have remained on the general election ballot, and again, they are already on the ballot in the primary and thus afforded the opportunity to participate in political debate through that part, and most of them, albeit usually for the U.S. Representative and local races, including Washington State legislative, most of those candidates have remained on the ballot. The voters determine who stays on the ballot, and that is an important part of the democratic system. The constitutional objective or test was differently stated by the majority and the dissent in this Court in your 1983 Anderson v. Celebrezze case, the majority saying the primary values protected by the First Amendment here are a commitment to debate on public issues, uninhibited, robust, and wide open, not monopolized by the existing political parties. The dissent differently stated that a court's job is to ensure that the state in no way freezes the status quo but implicitly recognizes the potential fluidity of American political life. Under either formulation of the constitutional issues here, the Washington statute and Washington election system meets the test and protects the constitutional rights of its voters. The decision below should be reversed. William H. Rehnquist: Thank you, Mr. Johnson. Mr. Smith, we will hear from you now. Daniel Hoyt Smith: Mr. Chief Justice, and may it please the Court, when we analyzed state restrictions on political expression and association relating to minor parties with dissident views, we are operating in the core of the First Amendment. Since there is no litmus test for ballot access restrictions, the numbers game is not useful. The cases do not say 1 percent is constitutional or an early deadline is unconstitutional, so to decide this case it is necessary to look at three questions. First, did the 1977 additional restrictions have a substantial impact on expression and association of minor parties and voters? Two, is there a governmental interest in these additional restrictions so compelling that it outweighs the burden on fundamental First Amendment rights? And three, are the new restrictions precisely drawn so that First Amendment rights are not necessarily... unnecessarily burdened, or could the legitimate state interest be achieved by less drastic means? I would like to address these in order, but first I must touch on the most crucial aspect of Washington's ballot access amendments of 1977. This was the conversion of the traditional one-step barrier as it applies in every other state in which qualifying candidates participate in the general election whether they are a minor party or major party nominees to a two-step exclusionary process. Now, as to the first step, as Mr. Johnson has discussed, Washington's nomination process, by convention, is different from a door-to-door petition signature requirement, so it is not automatic qualification. Far from it. The mounting of convention does require substantial effort, and in 1977 the legislature doubled the number of participants required with the result that the nominees that have been able to... the minor parties that have been able to qualify as shown by the table on Page 5 and 6 of our brief has been extremely limited-- William H. Rehnquist: You are referring now, Mr. Smith, to the statutory requirements for the convention? Daniel Hoyt Smith: --Correct. William H. Rehnquist: What are those? Daniel Hoyt Smith: The convention requires that on the Saturday before the major parties even have to declare their candidacy, the minor party has to gather supporters on one day in one places nominate its candidates, and have a nominating petition signed by a number, which is now on a sliding scaler according to population, approximately 200 at this time, registered voters who give their names and voting addresses attesting to the nomination of that candidate. William H. Rehnquist: That means that 200 registered voters would have to attend the convention? Daniel Hoyt Smith: That's correct. And that restriction had been somewhat, I guess, degenerating by the increase of population, and the legislature remedied that problem. Previously it had been 25. It had been raised to 100. In 1977 the legislature about doubled it, and now it is tied to population. Since that change, the number of nominees has been one, two, or in one case three, and so we are talking about a very small and identifiable group of dissident parties who like the Socialist Workers Party and the Libertarian Party who filed the amicus brief here, who consistently over the years have put forth substantial effort into the electoral system to introduce their new ideas to the voters and have continued to be able to qualify candidates in very small numbers by convention. Antonin Scalia: You are saying what it now takes is 200 people in a convention. Daniel Hoyt Smith: In a convention. Antonin Scalia: That is for a party. Daniel Hoyt Smith: That's correct. Antonin Scalia: What if you want to run without party support? Daniel Hoyt Smith: As an independent it is the same requirement for a similar convention. You have to organize a convention to support your independent candidacy and get the signatures of the same number of voters. William H. Rehnquist: Well, now, if this were the only requirement to get on the general election ballot you wouldn't be challenging it, would you? Daniel Hoyt Smith: That's correct, and we believe that the record shows that historically a reasonable but small number of serious minor parties have been able to qualify, and since this has been adopted have still been able to nominate candidates. Our objection is that these nominees who have qualified are then universally eliminated by the primary requirement, and as Mr. Johnson... or as Mr. Justice Stevens brought out, it is a different situation for the minor parties than for the major parties, and it depends not primarily on the level of support, which is admittedly small because by definition these minor parties are small parties, and their contribution to our electoral politics does not depend on mass support, but the single example of any minor party candidate that has been able to meet the requirement since 1977 has been one race where there was only a single Democrat and a single Republican on the primary ballot, and so there was no contest, and it resembled a party versus party choice, and in that situation the Libertarian Party candidate for treasurer, a relatively low profile race, but was able to get the 1 percent. With that exception, when there was no contest, every time there has been a contest for the Republican or Democratic nomination, no minor party candidate has ever been able to qualify for statewide office. It has been a blanket exclusion, as the Ninth Circuit correctly found the record indicates. So that is the first question that the Court needs to address: Has there been a substantial impact on the participation of minor parties and the Interest that that affects of both the minor parties and the voters in injecting their ideas into the electoral system. Antonin Scalia: Mr. Smith, is that relevant? I mean, all that it would prove... it would prove either, either that the new law is excessively restrictive or that the old law was excessively latitudinarian. It could prove either one. It depends entirely on whether there were too many parties before, whether the parties beforehand did not have a significant amount of popular support, significant enough under our laws to justify putting them on the ballot. Now, how do we know that the preexisting situation was a good situation? I tend to think that the OWL Party is not something that we needed on the ballot in Washington. Daniel Hoyt Smith: Well, with regard to the first question you ask, Justice Scalla, whether it is too latitudinarian, this Court has said that one of the first things we can look at is whether in practice as applied minor parties are able to qualify, and the Court has said it is one thing if minor parties are regularly able to qualify for the ballot, and it is quite another thing if only rarely can any minor party get on. And this case definitely presents the situation of that other thing where minor parties are systematically barred. With regard to the OWL Party, the record indicates that the legislature was reacting to a situation where they were offended by the insufficient reverence that the OWL Party paid to the major parties, and particularly and ironically to the level of public support that the OWL Party was able to get, and-- Thurgood Marshall: Mr. Smith, would you accept any number? Suppose the state said you have to have at least 100 votes. Daniel Hoyt Smith: --Yes, we believe that the fact that serious minor parties have been regularly able to meet the nominating convention requirement would be adequate support for that requirement to withstand any attack by somebody else who was not able to meet it to say the fact that these small but serious minor parties are able to meet this requirement indicates it is fair. Thurgood Marshall: So if somebody has a convention of 200 relatives they can get on the ballot? Daniel Hoyt Smith: The historical record indicates that that is not a problem, that has never happened in the State of Washington, and that there is no support on the record for the fear that that might happen, especially not if the remedy for such a hypothetical fear should be such areal and drastic and devastating impact on the few minor parties who need this route to the ballot. Thurgood Marshall: Well, do you think a person could during 20 years of his life run every two years and get less than ten votes? Daniel Hoyt Smith: Pardon me? Thurgood Marshall: You don't understand the question? John Dokes runs for Congressman ten elections in a row and never got more than ten votes. The state has to consider him as a serious candidate. Daniel Hoyt Smith: Well, I believe if the state wants to let people on without mounting the substantial effort that the convention requires, that the state may make that choice to open its ballot to those kinds of candidates, but-- Thurgood Marshall: Is it obliged to? Daniel Hoyt Smith: --We are not suggesting that it is obliged to. We are suggesting that when it has got this first stage requirement which already limits the ballot to a small number of serious parties, to add the second stage, which totally wipes them off the ballot, is not... first of all, has a drastic impact, and second, is not necessary. William H. Rehnquist: Well, Mr. Smith, in your definition of serious minor party when you were replying to Justice Marshall's question, I gather there is a numerical component to seriousness. The party which can muster only ten votes at its convention, it may have ten of the best debaters and the best philosophers in the State of Washington but the state can say that just isn't enough. Is that correct? Daniel Hoyt Smith: Well, the hypothetical question is not posed in this case because we have a real situation in which there is a real and substantial requirement to qualify. If we didn't have this historical experience and we had to hypothesize in the dark, the state could test out a requirement and see if serious parties could qualify. William H. Rehnquist: But it seems to me part of your argument is that our cases have said that there must be a way for serious minor parties to get on the ballot. Daniel Hoyt Smith: That's correct. William H. Rehnquist: And I am curious to know whether the way you use that term the term "serious" can at least be construed by the state to have a numerical component. That is, serious minor parties who can muster one-half percent of the turnout at the last election for that office at some stage in the campaign, just take hypothetically. Daniel Hoyt Smith: Well, it depends on what the requirement is, because the numerical requirements for petition signatures, which are the only requirements that have been upheld by this Court, do represent some level of organizational ability and diligence that the party itself can control and go out and get signatures on the petitions, in Jenness, for example. We are not saying we will vote for this candidate, but we think that this candidate should be allowed on the ballot, and because of the traditional American openness to hearing different points of view, it is very easy to get people to go out and say, yes, we believe you should be allowed to be heard, and in American Party versus Texas, the Socialist Workers Party went out and got 22,000 plus signatures on their petition to get on the ballot without a serious problem but by their diligence and by their effort. And the vote, on the other hand, as the record indicates, reflects the primary contest by the major parties and not the diligence or the efforts put out by the minor party within their limited capabilities, but that is more related to the contribution a party can make to the debate that they are capable of organizing and organizational effort like that to gather petition signatures than to make it rely on having some certain level of support in the primary election for a number of reasons. Number One is that the primary is not an adequate forum as a substitute for the general election. First of all, the timing is prior to the identification of the candidates by the nominating process of the major parties. Second, as in this race, there are numerous, often dozens of major party candidates that still have to be selected by the party for who is going to represent them, and so that if there is any confusion, which Mr. Johnson identified as the interest the state is concerned about, it takes place at the primary, as in this case with 32 Democrats and Republicans on the ballot along with a single Socialist Workers Party candidate. The voting machine has no instruction on that of what even the purpose of the minor party candidate is on the ballot, and if the minor parties are going to make a contribution to the election process, it is not because they are likely to win, but because in the debate between the representatives of the parties they have some new ideas and they have a differing point of view. That is really not relevant. Antonin Scalia: Excuse me. Your brief has a good deal of that in it. If that is really the criterion, then your answer to the Chief Justice earlier should have been different. Then there really would be no reason to exclude anybody from the ballot. If Socrates is running alone, without any support whatever, he should be on the ballot. Daniel Hoyt Smith: I think that is probably correct if the state's interest that it is asserting against Socrates is that the voters would be confused and the ballot would be crowded, and the Democrats and Republicans say you cannot be the third candidate on our ballot because that would confuse the voters and crowd the ballot, I think Socrates should win in that case. Antonin Scalia: Even if he has no support whatever. It is just, he is a wise man, he can contribute to the discussion. Daniel Hoyt Smith: That's correct. Antonin Scalia: What about the many expressions in our cases that in fact the state can require that the people it puts on its ballots have substantial support? Not that they be wise. Not that they have good ideas to contribute. But they have substantial support. Daniel Hoyt Smith: That is because of the experience that with no requirement whatsoever substantial... some modicum of support is a fair requirement to avoid the problems of ballot crowding and voter confusion, and in this case we have such a legitimate interest being taken care of by one mechanism. The question is whether... how far beyond that, to get the OWL Party, whether you can employ your shotgun that wipes out every other party totally off the ballot. Antonin Scalia: That can't be the explanation of our cases because a much more... much less restrictive means of preventing confusion is to have a sliding scale of the degree of support you need. That is, there will be 15 slots on the ballot. We will let every party get on the ballot up to 15. Past 15 it is confusing, but up to 15 it is not confusing. So I don't care if you get 30 votes. We will still put you on so long as there is a 15th slot available. Now, we have never required anything like that, so there must be something underlying this beyond merely confusing the voters. We do require substantial support. Daniel Hoyt Smith: Substantial support is not required as an end in itself, Number One, but Number Two, if it is of a reasonably low level that it allows, consistently allows serious minor party candidates to qualify, then the cases say you haven't met the threshold of showing... the first step is showing a substantial impact on diversity. Antonin Scalia: But I note you have slipped in the word "serious", "serious minor party". What do you mean by serious? When you say serious, I immediately think substantial popular support. Now, what do you mean by serious? They are Socratic? They are wise people? Or they have substantial support? Daniel Hoyt Smith: The record in the State of Washington is that there are a small number of minor parties that have regularly qualified candidates for the ballot, like the Socialist Workers Party, like the Libertarian Party, and what the legislative history indicates is that the frivolous parties that were allegedly targeted were ones with no serious program and no solutions to offer the people, and the record indicates that they were specifically irritated by the OWL Party, and unfortunately used an ax when they should have used a scalpel. William H. Rehnquist: Mr. Smith, let me get back again to something I think I asked you previously. Do I get from your answers to my questions and some other questions that a numerical requirement to get on the ballot, a numerical requirement of support would fail of constitutional muster, would fall to pass constitutional muster if parties such as the Socialist Workers Party, as it has been in Washington, couldn't meet that requirement, no matter what the requirement was? If it doesn't let a party like the Socialist Workers Party In Washington on, it is unconstitutional? Daniel Hoyt Smith: I would say if it doesn't let any party... if, like this case, it lets no party outside the Democratic and Republican Party qualify for the ballot, it is clearly unconstitutional if-- William H. Rehnquist: What if it let the Socialist Workers Party on but not the Libertarians? They couldn't quite make the numbers. Daniel Hoyt Smith: --Well, then it would be a harder case than this one is. Whatever the-- William H. Rehnquist: How would it come out? Daniel Hoyt Smith: --Well, whatever the number is, it cannot be zero as a reasonable number. William H. Rehnquist: How would that case come, out? Might it be constitutional, a system which allowed the Socialist Workers Party but not the Libertarian Party through the use of numbers? Daniel Hoyt Smith: I'd say if another small party could meet a, for example, a petition signature requirement which could be met through reasonable diligence, then it would be constitutional to say your failure to exercise that diligence to gather the relatively reasonable number of signatures that other small parties are able to gathers then you are responsible for your own fate. That is not the case we have here today. John Paul Stevens: May I ask you another question? You have placed quite a bit of emphasis on the fact there are two stages that have to be met by your party, one, a convention, which is rather modest, and then the I percent primary requirement. Supposing the state said, as they do with Democrats and Republicans, anyone may get on the primary ballot, just eliminate the first stage, and then your candidate could run simply on that and have to meet a I percent. Would that be permissible, do you think? Daniel Hoyt Smith: We suggest that it would not for the reasons that I mentioned earlier why the primary election is not an adequate forum for minor parties. John Paul Stevens: So your position really is that no requirement that depends on an Independent candidacy getting a certain number of votes in the primary would be permissible because the function of a primary is really to sort out the major party candidates? Daniel Hoyt Smith: Well, if it was a requirement that was not so high that it-- John Paul Stevens: Well, take Justice Marshall's example. Say it said 100 votes. You have to get 100 votes in the primary. Or the 200 that you have now for your convention. Would that be permissible? Daniel Hoyt Smith: --Well, for example, If-- John Paul Stevens: I have given you the example. Daniel Hoyt Smith: --Okay. John Paul Stevens: Would that be permissible? Daniel Hoyt Smith: If it had no substantial exclusionary effect on all minor parties, that would be permissible. John Paul Stevens: Well, it would exclude all those that couldn't get 200 votes. Daniel Hoyt Smith: Well, as a practical matter I think that this is a hypothetical question which does not require answering to decide this case, and it is unlikely to-- John Paul Stevens: It does for me, because I am wondering whether you are assuming there is some minimum threshold that could be imposed in a primary. It may be different in petitions. I understand your argument about that. Or are you saying that the primary is not the appropriate vehicle to test the minimum threshold support, and can never be used? I am just not sure what your position is. Daniel Hoyt Smith: --I suggest that the primary should never be-- John Paul Stevens: Well, should never. I know it is not the best. It is constitutionally Impermissible to use a primary which is primarily designed for another purpose to satisfy this threshold test. Daniel Hoyt Smith: --I'd say it is analogous to the cases of the Court on filing fees, that there is a less restrictive alternative of the petition signatures, and therefore if it has a-- John Paul Stevens: Well, there is always going to be a less restrictive alternative. If you put it at 200, it could have been 100. Daniel Hoyt Smith: --Well, if the state aims that are being accomplished are preserving the integrity of the ballot, then you cannot use a system that heavily burdens the First Amendment. If a reasonable number of serious minor parties are able to meet the requirement, then you are not causing the harm of wiping the slate clean of all but the two major parties and creating a monopoly. John Paul Stevens: If I understand you correctly, the constitutional outcome depends on the empirical results. In other words, the non-statewide candidates who could get the 1 percent, it is perfectly constitutional as to them, but it is unconstitutional as to those who can't pass the threshold. Daniel Hoyt Smith: That's correct, you have to show the-- John Paul Stevens: So you could have... this same provision might have... it didn't work in Michigan, I know, but in another state the 1 percent might be okay if three or four parties could meet the requirement. Daniel Hoyt Smith: --That's correct. You have to show the harm as applied, and this Court has always sale you have to look at the impact, you can't look at the abstract. You have to look at the impact, which depends on the historical record, and so has universally rejected-- John Paul Stevens: Kind of local community standards for elections. Daniel Hoyt Smith: --Well, this Court has rejected facial challenges and said, you have to look at the impact on the actual community, and that if a monopoly is the result, that is impermissible. Harry A. Blackmun: Mr. Smith, what is the Washington system as to write-in votes? Suppose your candidate doesn't make it to the general ballot. I get some confusion in the briefs as to whether write-in votes are permissible. Daniel Hoyt Smith: The Court of Appeals decision interpreted the Washington statute, which says that an unsuccessful minor party... or an unsuccessful primary participant cannot be a write-in candidate to say that the write-in was not available and the Court of Appeals also followed the decisions of this case saying that a write-in vote is not a constitutionally accepted alternative to general election ballot placement. The state has argued that this only applies to major parties, even though there is no specific limitation in the statutory language, and also the record indicates that the election results reported by the Secretary of State show no write-in votes for any of the offices that they have ever reported the election results in on the record, and so the inference that can be drawn from that is either that nobody ever exercises a write-in vote or the Secretary of State doesn't keep track of them, but in either case they are not a sufficient substitute for the participation in the campaign, the debate, and the presentation of their ideas, in the same way this voters' pamphlet that was brought up by Mr. Johnson for the first time, there is no showing of any financial burden on the record here that to add an extra paragraph to a 30-page pamphlet would put some burden on the state or would unfairly or unreasonably subsidize the minor parties by broadening the choices available to the voters. We suggest that that is exactly the kind of contribution that minor parties should be playing in this election campaign. Byron R. White: Tell me again, you probably stated it before, but tell me why the Socialist Workers Party isn't able to get the requisite votes at the primary. Daniel Hoyt Smith: Well, historically the record as pointed out by Mr. Johnson indicates that choosing the 1 percent level, the state has chosen a level that is higher than 90 percent of the minor parties have ever been able to get, even in the general election, so they have chosen a level that is up at the 90th percentile instead of choosing a level from the record that was down at the 50th or-- Byron R. White: That is... what you say may be correct, but what I asked you is, why haven't the Socialist Party or the other minor parties been able to get the requisite votes at the primary? Daniel Hoyt Smith: --Well, first of all, only one-third of the voters even are interested in enough in the primary to participate, and those are typically partisans of one of the major party candidates who care about what the primary is about, namely, which major party candidate will get the nomination. Antonin Scalia: Well, that's fine, 1 percent of a smaller number is a smaller number. I mean, that doesn't prove anything. Daniel Hoyt Smith: This is not a randomly selected smaller number. It is a number selected from partisans of the major parties. Byron R. White: But it is... the one-third are the ones that the major parties make an effort to get out. Daniel Hoyt Smith: That's correct. William H. Rehnquist: But the Socialist Workers Party surely make an effort to get their partisans out, don't they? Daniel Hoyt Smith: That's correct, and we are saying that this is not only unfair in its mode but also that it should not be required that voters make a commitment at that primary stage to the Socialist Workers Party candidate to allow a small number of candidates to participate in the general election, and that-- Byron R. White: Why shouldn't you be... why isn't it fair to say if you... why don't you just get out your supporters and hope that they will add up to 1 percent? Daniel Hoyt Smith: --Well, the Socialist Workers Party has made that effort, and $1,900 may not be very much, as Mr. Johnson says, but it is a lot of leaflets, and it is certainly not a prime time television ad that goes statewide the way the major parties can put on. Byron R. White: And what is wrong with saying if you can't get your people out you don't get on the ballot? Daniel Hoyt Smith: Well, because the first amendment and the recognized role of minor parties in the election process does not depend on a large measure of support, and the abolitionists, the prohibitionists-- Byron R. White: I know, but the question is whether the First Amendment requires... forbids a state to require a showing of 1 percent. Daniel Hoyt Smith: --And we suggest that if the interest they assert of confusing the voters and having ballot crowding is the justification for a monopoly by the minor parties, then the Court of Appeals was correct in returning Washington to the system that had worked so well for 70 years and saying that monopoly is not justified on the record here by any demonstrated history of ballot crowding and voter confusion, which is the burden of the state to establish. Byron R. White: I suppose you would also say if Washington said the only minor parties who can get on the next general election is one that got 1 percent of the vote at the last general election, that would be unconstitutional, too. Daniel Hoyt Smith: That would perpetuate the monopoly, especially when there is the reasonable alternative in the convention and petitions. Byron R. White: Even though there's a lot of people out at the general election. Daniel Hoyt Smith: Well, because they have been excluded from the general election, there is no way they can get the 1 percent at the general election and it is a closed door for the minor parties. William H. Rehnquist: Thank you, Mr. Smith. Mr. Johnson, did you have something more to say? You have four minutes remaining. James M. Johnson: Just a moment, please, to correct an answer I gave Justice Stevens, that consideration of the number of candidates printed in the voters' pamphlet was discussed in the Washington legislature, Justice Stevens, and is reprinted at Page A2 of our reply brief, the note that this effect retroactively analyzed would have been to cut down the number of candidates from 65 to 50 in that printing. The argument here appears to want to escalate the Washington convent ion requirement to another "barrier"-- John Paul Stevens: May I just ask, 65 to 50, are these all statewide candidates? James M. Johnson: --No, they are not, as I responded to the first question. John Paul Stevens: So there is a different pamphlet for each election district? James M. Johnson: There is a different pamphlet by each Congressional District. John Paul Stevens: By each Congressional District. James M. Johnson: Yes, Justice Stevens. John Paul Stevens: I see. James M. Johnson: In fact, the convention requirement in Washington is the equivalent of a petition. First, the convention requirement was not challenged below at all, as you can see from the complaint. Secondly, the District Court found that this party's convention was a "street corner convention". The attachments to C13, an affidavit of the party, show the candidates standing on a street corner in Seattle conducting their convention, and the point is, that is all right with Washington. We do not have any separate barrier through convention at the de minimis 200 voter requirement. Finally, I think we should consider the alternatives that are clearly and constitutionally available to Washington. The Jenness versus 5 percent requirement would work an obligation to get 122,000 signatures to qualify for the Washington ballot as contrasted with the 9,000 for a Governor' race in Washington and a sliding scale actually which we impose. The 1 percent is applied to each office, working your way down the ballot, and is much less, of course, for local offices, and this is why Washington legislative positions and local offices, the minor parties have always been successful in qualifying for the general election. One percent is not a large requirement to dictate substantial support. Any other kind of method, Mr. Smith suggests we use a scalpel, but any content control requirement to discern frivolous parties would, I submit, be unconstitutional, so a numerical requirement is required constitutionally, The 1 percent imposed by the Washington statute is reasonable and easily reached by a diligent party. Therefore we conclude the Washington statute is constitutional and ought to be upheld. William H. Rehnquist: Thank you, Mr. Johnson. The case is submitted. We will resume there at 1:00 o'clock.

Warren E. Burger: We will hear arguments next in number 5021, Townsend against The Illinois Department of Public Aid. Mr. Lefkow, you may proceed whenever you are ready. Michael F. Lefkow: Mr. Chief Justice and may it please the Court. The State of Illinois makes payments under its federally subsidized program of Aid to Families with Dependent Children, to needy dependent children between the ages of 18 to 21 years old, attending a vocational or technical training school, but denies payments to children attending a junior college, a college or a university. The issue in this case, is whether the discrimination is inconsistent with the requirements and the purposes of the Social Security Act and the Equal Protection Clause of the Fourteenth Amendment of the United States Constitution. Mrs. Georgia Townsend and her daughter Omega were a family within the meaning of the Act and Omega was a dependent child, but they were cut-off and denied any aid under the AFDC program while they met all the requirements, specified by Congress. Appellant's rely on this Court's decision in King versus Smith which invalidated Alabama scheme of absolute disqualification of eligible children on the fiction that they had a substitute father. There, Alabama defined parent in a manner inconsistent with the Act and with its purposes. Illinois likewise, has defined dependent children in a manner inconsistent with the Act and its purposes, by totally excluding from AFDC benefits, children attending a college or university. We believe that King clearly prohibits the Illinois' absolute disqualification. A reading of King requires an interpretation of the definitional section for Section 406 (a) that it is mandatory upon the State of Illinois to provide some aid to all those defined by Congress as dependent children. This requirement on the States was affirmed by this Court in Dandridge versus Williams. That in order to avoid violating the statute itself, a state must provide some aid to all eligible families and all eligible children. Now, we submit that in addition to these two cases, there are a number of other important reasons why this statute is mandatory. One is the plain meaning of the statute. Another, is necessary to make a mandatory to avoid frustrating the purposes of the Act. It is necessary for harmonious construction of the Federal Statutory Scheme. It is necessary because of the legislative history. It is necessary to avoid an Equal Protection violation and it is necessary to prevent Illinois from withdrawing from this part of the AFDC program. I will return to the plain meaning of the statute. The state has asserted that it had discretion whether it wants to adopt the definitional Section of 406 (a). We submit that there is -- the plain wording of the statute grants the state no discretion. A similar section, Section 407, would on its face grant the state discretion to participate in the unemployed or underemployed program which was added to the Act in 1961. And this Court has stated in King versus Smith that that particular Section 407 is optional with the state, but there is nothing on the face of the statute in 406 (a) to indicate that the state has discretion to pick and choose among the children made eligible by Congress. We submit that the legal standard for testing a state’s compliance is the Act itself. Next, it is necessary to make it mandatory to avoid frustrating the purposes of the Act. The purpose of the Act is interpreted by this Court in King, is for the protection of dependent children. That is the paramount goal and Congress in 1964, in amending the Social Security Act, stated that the assumption that children are no longer dependent, is not valid as applied to children still attending school. Further, by denying these children -- Warren E. Burger: What if they were 25 years old and attending graduate school, would the argument be the same? Michael F. Lefkow: They will not be eligible, Your Honor, because Congress did not make them eligible. Warren E. Burger: That is my point, is that a denial of Equal Protection? Michael F. Lefkow: I do not believe that it would be, Your Honor. Warren E. Burger: Why did -- but it is if you are dealing up to 21, is that it? Michael F. Lefkow: In terms of the Equal Protection, it is if you distinguish between children attending a vocational or technical school and those attending a college or university up to the age 21. In determining violation of the Equal Protection, you have to take into consideration the purposes of the Act and the purpose of this Act is to provide AFDC sustenance benefits up to age 21. So measured in terms of purpose of the Act, a denial to college and university students would be a denial of Equal Protection because we submit that there is simply no rational basis for what the state has done by saying that if much it says over the door of the school to technical or vocational school, we are not going to grant these children aid in spite of the fact, that much technical or vocational education is provided in junior colleges, colleges and universities. In fact, the State of Illinois and the Federal Government fund junior colleges in Illinois to the tune of $ 6.5 million a year to provide technical or vocational education and these children are excluded from participating in that because they do not have the money to have the food and the clothing and the shelter they need, so they can attend these schools. We would further point out -- Harry A. Blackmun: Mr. Lefkow, is it your position that the difference in receiving the aid under AFDC and not receiving it makes the difference between going to school or not? Michael F. Lefkow: Yes, Your Honor that would be our position. Because all AFDC does, Your Honor, is provide, bring a person up to a minimal living level so that they have enough money to subsist on for food, for clothing and for shelter. It does not provide any additional benefits. Although I will point out that in this case, the child that has been in a technical or vocational school, the State of Illinois will pay a substantial tuition to these private schools. But, and this education, same education is available in a junior college. In effect the taxpayer is paying twice by Illinois' arbitrary distinction between by having the over the door requirement, so that is -- Harry A. Blackmun: Is your position here that Omega would have gone to school had she been able to obtain the AFDC benefits? Michael F. Lefkow: She did go to school, Your Honor and she is in school today. Harry A. Blackmun: Well then, conceding that is not your lawsuit merely one for a certain amount of money? Michael F. Lefkow: Yes, Your Honor that is what AFDC eligibility is. It provides money for sustenance benefits. We pointed out in our brief that she and her mother had been forced to live at an intolerable level of existence. Her mother is a very sick woman, suffering from systemic erythematosus. They live on about 15 cents a meal. They have no -- hardly any furniture in their house. They are suffering terribly and no child should have to go through that in order to obtain an education and that is what Congress meant by making sure that the sustenance benefits would be available for them. And I would further like to point out that what Illinois has done is pause on this allocation of Federal Resources, Congress has determined that Federal funds should not flow to these children. But Illinois has prohibited that and has unduly limited the welfare rules in Illinois by approximately a thousand children a year, who may want take advantage of this provision. I further like to point out that the legislative history of the Act shows that Congress has continually expanded eligibility to meet rising educational requirements and opportunity as they become available in our society. In 1935, the child had to be under age of 16. In 1939, Congress amended it to under 16 or under age 18, if the state determines the child is in school. In 1956, Congress lifted the school age requirement. In 1964, they reinforced the school age requirement and in 1965, they added the college and university so that the child could be attending in effect any school. As long as he is attending any type of school in pursuit of an education between 18 and 21, he would be eligible for these benefits. We would further like to point out that it is necessary for this Court to hold that this Section 406 (a) is mandatory because the section itself says, when used in this part, part (a) which is Title IV of the Social Security Act, these definitions are used throughout the whole Title of the Act and Section 402 (a) (10) which requires the aid to be furnished with reasonable promptness combined with Section 406 (a) clearly mandates this child should receive some aid. In King versus Smith, the Court said in combination of these two sections clearly require that some aid be furnished. In Dandridge versus Williams, this Court held that a state may allocate among those who are already on the rolls, but it must provide some aid to all eligible families and all eligible individuals. I think it is clear from the Court’s opinion, Dandridge, both the majority and the dissent that the one thing everybody has agreed on, is that Congress fixes the federal eligibility requirements. That it was Congress to determine who is dependent and the states are allowed to determine who is needy. The states have ample opportunity to protect themselves from adverse fiscal impact under this Court’s decision in Rosado, allowing percentage reductions and in Dandridge allowing the imposition of maximum grants. So there is no -- the State of Illinois need to suffer no harm by a reversal of this opinion. In an effect, as I pointed out in my reply brief, the fiscal effect on the State of Illinois would be minimal. It would be approximately $500,000.00 a year and the Federal Government would point, put up the $500,000.00 a year making a total of approximately $1 million. We would also like to point out to the Court that the state’s purpose of encouraging employability which the state and the Court below has a whole purpose of the state statute denying assistance to college and university children, was to encourage employability. But we will submit that rationale under this Court’s decision in Shapiro is not permissible or not logical. In Shapiro, the court said that, encouraging employability was no justification for imposing one year residency requirement. That if you are going to impose that type of requirement, you would have to impose that not just on the ones who moved to new residence, moving into the state, but all the residence and we submit the same type of logic applies in this case. That if you are going to require a child to go to work just because he is in college and university, it is only fair then for technical or vocational schools, that same standard to be applied. However, I want to point out that HEW has clearly prohibited working requirements while the children are attending school between the ages of 18 and 21. Byron R. White: While your statutory argument was brought out I suppose if -- no, it would be the same if Illinois did not give grants to the children over 18, who are attending vocational school? Michael F. Lefkow: That is correct, Your Honor, that is still mandatory. Byron R. White: Yes, it still be mandatory but your Equal Protection argument would not obtain? Michael F. Lefkow: That is correct, Your Honor. That is exactly right. Byron R. White: So you think that both the Federal Government and the state may fail to give grants to students over 16? Michael F. Lefkow: No, I do not believe that the state -- Byron R. White: Entirely? Michael F. Lefkow: No, I do not believe -- Byron R. White: Let us assume the Federal Government though said that the Act did not require or did not even contribute to grants for children over 16? Michael F. Lefkow: Alright, what is your question then, Your Honor? Byron R. White: Well, would there be any denial of the Equal Protection of the law in such a law? Michael F. Lefkow: I do not know, if I understand your question correctly -- Byron R. White: I will put it the other way. Suppose the Federal Government, and suppose the Section 406 went up to age 18, but went no further? Michael F. Lefkow: Yes. Byron R. White: And the state, went up to 18 and went no further, any denial of Equal Protection? Michael F. Lefkow: Not in terms of this case, Your Honor. In another words, the college and university students with children over age 18, there would not be a denial. Byron R. White: Even though, most of the children over 18 would be in college and most them under 18 would be in high school? Michael F. Lefkow: That is right! But you see, in this case Congress has made a determination. Byron R. White: I understand that, I was just trying to find out your Equal Protection Argument? Michael F. Lefkow: I see. My time has expired. Byron R. White: I am sorry. Michael F. Lefkow: I would like to reserve two minutes for rebuttal. M. James Spitzer, Jr.: Mr. Chief Justice and may it please the Court. I should like to begin with the statutory argument and I should like to address initially. I should submit that in viewing the statutory argument, one has to look at it in the framework of the AFDC program. That Illinois, in excluding college children from the definition of dependent children, but including other forms of post-secondary education, that is post-secondary vocational education, has done something which has the unfortunate effect of perpetuating poverty which is clearly contrary to the purposes of the Act. Warren E. Burger: Is the vocational education uniformly post-secondary as you have described in -- M. James Spitzer, Jr.: Uniformly, no sir. But it is both post-secondary and not post-secondary. They do -- Illinois definitely does provide post-secondary vocational training. In those instances where children did not attend college, however, I am including here the junior colleges, public community colleges, because both of the named appellants here did attend public community colleges. These colleges are the only free schools that I know of in the State of Illinois. The vocational institutes, the technical institutes that are included in the appendix to the appellee’s brief, are all tuition paying Institutions with the tuition payments of up to $3,800.00. I should emphasize here, that we do not suggest or intimate that there is a requirement to pay tuition. Though in fact, Illinois does under some circumstances. In this case, the children involved, the appellants, the named appellants were attending free schools supported by state and federal moneys. All that is involved here is their basic subsistence grant. I say all that is involved here, but obviously that grant covers their food, which they need to eat, shelter and clothing, the real essentials of life. It should not be against it. We differ slightly with the position of the other appellants in this case on the statutorily argument. It is not our position that the definition is mandatory in every instance. We recognize that Congress has in certain instances, indicated very clearly and unmistakably, at least in my judgment, that the program was intended to be optional and the states were to have a choice of either going into it or not going into it. An example of this is involved in this case, and that is the extension of the 18 to 21-year-old group, was in my judgment clearly optional that the senate report stated under existing law, states at their option may continue payments to needy children up to age 21 in the Aid to Families with Dependent Children program. Then it goes on, however, providing they are regularly attending a high school in pursuance of a course of study, leading to a high school diploma or its equivalent. The committee added an amendment extending this provision, referring to the Educational requirement provision, so as to include needy children under 21 who are regularly attending a school, college or university. In other words, the program which is optional is the extension of AFDC to the age 18 to 21-year-old group, but the educational requirement provision is different and that was instituted according to the report which was deleted from the references by the Solicitor General and the appellees in their brief. It is included in our original brief in our reply brief on page 9 that the educational requirement provision and the extension of college students was to bring the educational requirements more nearly in line with the provision of the bill relating to the continuation of a child's benefits under the OASDI System which is mandatory. Then it goes on; the objective of the provision, that is the educational requirement provision and the amendment to include colleges is to assure as far as possible that children will not be prevented from going to school or college because they are deprived of parental support. In the Solicitor General’s brief, the Solicitor General states, that the department referring to the Department of Health Education and Welfare, believes that the omission of college children from AFDC may have the unfortunate effect of perpetuating poverty. That in viewing the statute, one must be view it, in terms of its purposes and in terms of its structure and we submit that under both standards, it requires reading this provision as being mandatory. Potter Stewart: Mr. Spitzer, what is OASDI? M. James Spitzer, Jr.: This is the Old Age Survivor’s Benefits and Social Security Act also. These are the payments where -- Potter Stewart: It is not involved in this case? M. James Spitzer, Jr.: No, it is not, but the reason why I mentioned and it is included in the committee report and these provisions were done in tandem, that Congress evinced a clear purpose to make the provisions as nearly alike as possible. That the college requirement’s provision was added to AFDC because it was done in OASDI and they wanted to make the two as nearly as like as possible and that is the only reason why I mention that. No, it is not directly involved in this case though. As soon as the bill was passed and completely in line with the Solicitor General statement that it will have the unfortunate effect of perpetuating poverty and in line with the senate report, the Department of Health Education and Welfare in its handbook interpreted this and they state that within the age limit set by the state; this is at page 5 of our brief, within the age limit set by the state, there should be a choice of attending a school, college or university or taking a course of vocational or technical training for gainful employment. I think, it is very, very important to recognize here, the educational structure in Illinois as such that vocational training and one of the chief weapons used in order to obtain vocational training for people are public community colleges. We have submitted as an appendix to our brief, the college catalog for these junior colleges. There are courses such as air conditioning, inhalation therapy. These children are being denied the right to attend these courses. The entire role of vocational education in a state is being moved into this area. In terms of the question earlier, if Congress had decided to cut it off at age 16, there clearly is no Equal Protection violation involved. If they had cut it off at age 18, there would not (Inaudible), but Congress has not done that here. Congress has identified a group of people whom it considered needy and in need of federal protection, it defined them and call them dependent children, and provided financial aid to them. Illinois participates in the program, receives huge amounts of federal money and still attempts to exclude some of those people that Congress wanted to provide benefits to. We submit that this is wrong. We submit that this frustrates the purpose of Congress. Byron R. White: You are saying that if the state wants to move in to that 18 to 21 category at all, it must support all those children in that age group? M. James Spitzer, Jr.: That is correct. Byron R. White: If they are going to any kind of the school? M. James Spitzer, Jr.: That is -- Byron R. White: Although they could exclude them wholly? M. James Spitzer, Jr.: They could exclude the 18 to 21-year-old group wholly. That within the standards established by the department of HEW, they must take everyone within that group. Byron R. White: It is an all or none thing? M. James Spitzer, Jr.: That is correct. I think that is the only possible reading of the Act. Indeed when you look at the Legislative History of the Act -- Potter Stewart: That they must and also that they have, that Congress has? M. James Spitzer, Jr.: That is right. Potter Stewart: They use that too? M. James Spitzer, Jr.: That is right. Potter Stewart: And I think, I am not sure, if (Inaudible) would address himself to the constitutional issue and that would be that the state must do it, but certainly your statutory argument is that Congress has done it? M. James Spitzer, Jr.: That is right. Our statutory argument is that Congress has done it and our argument in terms of the Equal Protection Clause, is that in view of what Congress is done in the AFDC program. Potter Stewart: The state violates the Equal Protection Clause by discriminating difference as among 18 to 21-year-old -- M. James Spitzer, Jr.: That is correct. Potter Stewart: Well, I thought you were arguing that the state by supporting only prior of the 18 to 21-year-old group in school, is going contrary to the Social Security Act? M. James Spitzer, Jr.: I am arguing both positions here, Mr. Justice White. Byron R. White: A supremacy argument and (Voice Overlap) M. James Spitzer, Jr.: That is absolutely correct. As I read the Equal Protection Clause and as I read Dandridge, when one views classifications made within the state, they must be rational, but they must also be rational within the framework of the program in which the classification is made. This is particularly true in this case, where you have a total exclusion of some children from a federally defined class. We do not have a kind of case as in Dandridge where everyone received some benefits. And the Court went out of its way to point that out, it seems to me. Whereas here, we do have this total exclusion; there is no doubt that the state has a justifiable interest in protecting its fiscal integrity and in conserving its AFDC resources. We do not challenge that here. What we do challenge is whether they have chosen the appropriate vehicle for so doing. That is whether they can do this by excluding children from the class or whether they must provide at least some benefits to everyone and simply reduce if they must, the level of benefits. The Department of Health Education and Welfare has taken -- argues that King does not require that the definition of dependent children be read as a Federal definition requiring the states to participate wholly. They argue that the term parent in King was is some way essential to the purposes of the Act and that there was a clear congressional intent to include all those children with an absent parent and the state could not define parents in a way contrary to the Social Security Act which in its legislative history meant legally obligated to support. And in Lewis against Martin, there was a man assuming the role of a spouse who was actually living in the house, there was none of the fiction involved in King of a casual sexual liaison or whatever. Here, we actually have a man in the house, living their and assumed the role of a spouse, but the Court said that children where a man lives there cannot be totally excluded from this program. It seems to me that that requires this Court to say, that the definition was mandatory, that it has been held to be mandatory. In Dandridge, the Court suggested that the definition was fixed by Federal Law and if it is fixed by Federal Law, then the state can have absolutely no right whatsoever to exclude some of those needy children from the program. The Doctrine of Equitable Treatment which is advanced by the Department of Health Education and Welfare to explain King creates a total anomaly. They have devised a doctrine without standard. The cases which they have taken positions on cannot be squared in my judgment. King was required, Lewis was required in Arizona where otherwise eligible children living with relatives not having legal custody over the child and where the child had a sibling living with his natural parents were excluded from the Act. In these cases, the Department of Health Education Welfare concedes that the states went to stray and they have violated the federal definition and improperly excluded needy children from that definition. But in the educational requirement which the senate report indicates clearly in my judgment, was intended to provide benefits to college children, to make sure that needy children, deprived of a parent were not denied the right to an education in college, at least where the state goes into the 18 to 21-year-old program. And it emphasizes that by saying as far as possible that those children can be excluded, that in Carter against Stanton which will be heard next by this Court, they interpret continued absence of being optional with the states and that where the parents have deserted or have been separated from the house for less than six months, the state is free to exclude needy children. There is no standard here we would submit. In sum, that when one takes a look at the purposes of this Act, and when one takes a look at the classification that is involved here whether one looks at it in terms of the definition of dependent children under the Supremacy Clause or that when one looks at the difference between vocational training which is post-secondary and college training which is post-secondary, all of which end at the age of 21, neither of which involved tuition payments. We can see no rational difference whatsoever. What we do find is we find a concerted effort to keep certain poor people from attending free public and publicly supported institutions. We find that an intrusion into the family and its right to determine the child’s education which has an effect on the child’s entire future. We think that this is tragic and wrong. We think does the Solicitor General that this tends to perpetuate poverty. We ask for this case to be reversed. Potter Stewart: How many others states Mr. Spitzer, in addition to Illinois have done this, any other state? M. James Spitzer, Jr.: Nine other states. Potter Stewart: Nine other states and how and the other 40 states have done this? M. James Spitzer, Jr.: There is a wide variety of programs. Some states do not enter into the 18 to 21-year-old category at all. Potter Stewart: At all. M. James Spitzer, Jr.: Some have gone into age limit. Some only extend up to the age of it of 19 rather than to 18. Byron R. White: Today -- would you think that would be proper? M. James Spitzer, Jr.: I do not think that that is proper, no sir. Byron R. White: Not under your definition? M. James Spitzer, Jr.: That is right. I believe that once they go into the 18 to 21-year-old category, they are in it. Byron R. White: Well, I thought your position was that, your statutory argument was that they had to go in it and go all out into it? M. James Spitzer, Jr.: Now on my statute argument they do not have to go into the 18 to 21-year-old group. Potter Stewart: But if they do? M. James Spitzer, Jr.: They have to go all the way out. That is correct. It is my position and to answer that question also however, under the Equal Protection Clause, I have no doubt that cutting off 19 does satisfy. William O. Douglas: May I ask, looking at 606 (2) (a) (10), why is it you say that you do not have to go into that statute under the 18 to 21? M. James Spitzer, Jr.: Under the term law is that 606 (2) (a) (10) requires all eligible individuals to be given aid and dependent children is included under 606 (a) (2) (B) includes the 18 to 21-year-old group. The only reason why I say that they do not have to be included, and I read it from a plain reading of the statute, they should be. When one looks at the senate reports and the house reports, committee reports, there is a clear legislative intent it seems to me. Potter Stewart: That is about an option? M. James Spitzer, Jr.: That is right. It said that there is an option. William J. Brennan, Jr.: There is, I see that an option to go in or not but -- M. James Spitzer, Jr.: That is right. William J. Brennan, Jr.: But does the legislative history supports the position that if they go in at all, they must go about -- M. James Spitzer, Jr.: They refer to the 18 to 21-year-old extension as a program. They say that the program is optional. They say that the provision is designed to bring into line with OASDI and that the provision, that is the Educational Requirement Provision, is to make certain that states who implement such a program for payments, will extend it to school or college and that children will not be prevented from going to school or college because they are deprived of parental support. That is the reason why I take that position is one of the only exceptions in the Act that I can find in which there is any kind of clear legislative intent to make the program optional. Warren E. Burger: Thank you, Mr. Spitzer. Mr. Veverka, you may proceed. Donald J. Veverka: Mr. Chief Justice and may it please the Court. I would like to first point out that although AFDC benefits were cut-off at the time that these children attended a college or university that they were provided with general assistance funds. I believe the issue before this Court -- Potter Stewart: That was wholly a state program? Donald J. Veverka: That is true, Your Honor. Potter Stewart: The general assistance funds? Donald J. Veverka: I believe the issue before this Court is whether the Equal Protection Clause or the Supremacy Clause requires the states to participate fully in the federal AFDC program regardless of their financial condition. I think this is contrary to the congressional intent which provided that the programs would be implemented or that financial assistance would be provided, as far as practicable under the conditions in each state. I think it is somewhat important to know that Illinois' involvement in this case is not because that it has cut grants, as a matter of fact, Illinois provides a 100% of need or not because that it has established any strange eligibility requirements, but simply because it adopted a classification which was originally established by Congress in 1964. Now, prior to 1964, the federal definition of a dependent child was a child under 18. Then in 1964, Congress amended the definition and it defined a dependent child as someone under the age of 18 or someone under the age of 21 who is attending a high school which would lead -- a high school course of study which would lead to the diploma or vocational training school which would lead to gainful employment. At the time that Congress amended its definition of a dependent child, Illinois similarly amended its Public Aid Code to provide essentially the same definition. And in 1965, one year later, Congress again expanded the definition but unfortunately, the financial conditions in State of Illinois and the nine others states have not allowed it to expand the definition. Although Congress has consistently, since 1940, recognized that the state does not have to expand its benefits every time that Congress expands its definition of a dependent child. For example, in 1940, the age limit was 16 and Congress raised the age limit of a dependent child from 16 to 18, and at that time the House Report stated, it is estimated that about a 100,000 additional children may obtain the aid by virtue of this change provided all states amend their laws accordingly. This is set forth in our brief on page 36. Byron R. White: Well, you would not think that Congress could or that the state could say give support payments to just half of the children under 16? You would not take just in terms of being able to limit the state's investment that will take every other child and give him support? Donald J. Veverka: No, that is true, Your Honor. Byron R. White: Well, if Congress says that here are matching funds to provide education for students over 18 in vocational schools or colleges and the state says well we will -- you would not think they could just say half of the students in those categories we will support and the other half we will not? Donald J. Veverka: I think, Your Honor that if the state adopts a classification established by Congress that here is the right and Congress, I think has expressly recognized the fact that it has the right to take the same steps as are established by Congress. I think that if it adopts the same requirements that Congress require, the same requirements that Congress adopts, it is acting rationally. And again, I think that the test is rationality held from time to time when Congress has expanded the definition of what it is a dependent child. For example, my recollection is that when they expanded it from 16 to 18, there was a requirement that they would be in school. So the point is, is that Congress is taken this step, has taken this approach throughout the time that it is expanded the definition from time to time as it expanded. Byron R. White: Well, I understand, I understand that, but when they expanded it up to the 18-21-year-old category, they said that 18-21-year-old students who are attending vocational school or college? Donald J. Veverka: No, at the time that they first made the classification, it was vocational and technical school. Byron R. White: Yes. Donald J. Veverka: And then a year later, it was expanded to include kids who are in colleges or university. Byron R. White: So as it now stands, the definitions is students in vocational schools or in colleges? Donald J. Veverka: That is true, Your Honor. Byron R. White: And that is the congressional category that the Act defines? Donald J. Veverka: That is true, Your Honor but at the same time that they did that and at all times that they have expanded that definition, they have made it clear that the state can expand it if the financial conditions are as far as is practical under the laws of the state. I believe that a state can take that approach as long as there is a rational distinction and I believe that there is a rational distinction here between the classification which Congress originally set up in 1964 and classification which is later adopted in 1965. I was referring to the time that -- Thurgood Marshall: (Inaudible) why you draw this line? Donald J. Veverka: Pardon me? Thurgood Marshall: Between the vocational, you said a minute ago that you go to high school, then you come out with a diploma and you go to vocation school, you come out with a job, what do you mean by that? Donald J. Veverka: Your Honor, I think that under the history of Social Security Act, Congress has recognized the fact that not all -- Thurgood Marshall: Well, number one, do you get a diploma out of vocational high school or not or Illinois is different? Donald J. Veverka: I believe you do get a diploma, Your Honor. Thurgood Marshall: But why do you draw the difference? You say one, you get a diploma and the other you get a job? Donald J. Veverka: Well, I draw that distinction because of the fact that normally, you speak of the diploma in terms of a formal type educational as opposed to vocational or technical type. You do get a diploma of some kind. Thurgood Marshall: But you think there is a deputy in MIT and all that? Donald J. Veverka: No, I do not believe so, Your Honor. Thurgood Marshall: Is it just true that you want these poor people just to be limited to jobs that are trained skills, is that what you want? Donald J. Veverka: No, Your Honor. Thurgood Marshall: And you want to preclude liberal arts people? Donald J. Veverka: No, Your Honor. Thurgood Marshall: To get money? Donald J. Veverka: No, Your Honor. I think that it is recognition. I think that the fact that Congress picked up this category in the first place in 1964 and the way in which they did it. I think that it was a realization that there are some who are not interested in a high school course of the action in formal education as we know it. Thurgood Marshall: Well, let me ask this? Does a child in vocational school eat less food than a child in a high school? Do they not eat the same food? Donald J. Veverka: That is true, Your Honor. Thurgood Marshall: Do they not wear the same clothes? Donald J. Veverka: That is true Your Honor. Thurgood Marshall: And do they not have the same needs, exact same needs? Donald J. Veverka: That is true, Your Honor. A child in vocational and technical school and a child in high school and that is exactly my point. Thurgood Marshall: Or the child in college has the same problem? Where do they changes so suddenly? Donald J. Veverka: Your Honor, it changes because -- Thurgood Marshall: Is your theory that a poor child does not need a college education? Donald J. Veverka: No, that is not true, Your Honor. The point that I am make is that if the State of Illinois had a $100 to give to someone and it had to take its choice between a child who is say 8-years-old and a 20-year-old child, that is true that under the definition of what is needy and I might point out that someone who is needy may be a 22-year-old or 23-year-old, it may involve -- Thurgood Marshall: We are not dealing with that? Donald J. Veverka: -- any particular age. Thurgood Marshall: We are dealing with two children that are eighteen-and-a-half-years-old. One of them is in a vocational school and the other is in first year college. One of them needs to eat and the other one does not? Donald J. Veverka: That is right, Your Honor. Thurgood Marshall: Thank you. Donald J. Veverka: Your Honor, but the difference is they have the same needs but the State of Illinois is filled in a different way. The fact is, that when somebody graduates from high school and gets a high school diploma and enters the junior college or a college, he then is eligible as opposed to a child in vocational or technical school, he is then eligible to get tuition and grants. A child who in technical or vocational school, has the same needs but he is not eligible because in most cases, he does not have a high school diploma and that is the key. The difference between -- Thurgood Marshall: You have to add another one, they are both eighteen-and-a-half, and one of them is in technical school and the other has graduated from high school but he just barely made it, and he is not capable of any scholarship aid. What happens there? Donald J. Veverka: Under the Illinois scheme of providing grants, he does not have had to show the superior capacity. The requirements for a tuition require that he be on the upper half of his class and that he -- Thurgood Marshall: Well, are the children here get any tuition? Donald J. Veverka: Pardon me, Your Honor. Thurgood Marshall: Are the named appellants in this case are getting tuition? Donald J. Veverka: Neither one ever applied for a scholarship or a grant. Thurgood Marshall: They did not? Donald J. Veverka: No, they did not, Your Honor. Speaker: But they would get one automatically if they did? Donald J. Veverka: Your Honor, the grants are based solely -- Thurgood Marshall: I thought you said they got it automatically. Donald J. Veverka: If they applied for it, Your Honor. Thurgood Marshall: They would automatically get scholarship aid? Donald J. Veverka: Based on financial needs, grants are based solely on financial needs. Thurgood Marshall: There is no question here, they need financing. They meet the requirements. So you say all they have to do is right now for a grant, to apply for the scholarship aid and they will get it? Donald J. Veverka: If they are a high school graduate, which they are. Thurgood Marshall: But I understand that this school here, they do not require it, they do not pay tuition? Donald J. Veverka: That is true, Your Honor. Thurgood Marshall: But how does that tuition help them? How does scholarship help them in a school that does not have tuition? Donald J. Veverka: In addition of the scholarships, there are also grants under the -- Thurgood Marshall: What grant? Donald J. Veverka: -- the Illinois States Scholarship Commission, this was established in 1957. Now, under that commission, the legislature set up a whole series of scholarships, grants and guaranteed loans which were designed solely for financially needy. Now, a child -- Thurgood Marshall: Was that for the course of schooling or course at home? Donald J. Veverka: That is for schooling. Thurgood Marshall: Well, I understand they do not need and they do not need to pay for their school? Donald J. Veverka: That is true, Your Honor, but in addition of the scholarship, they can also get grants. Thurgood Marshall: What is the grant? You mean, they need grant for clothes? Donald J. Veverka: Your Honor the statute is silent on that. I attempted to find out. I do not know. Thurgood Marshall: Right. Donald J. Veverka: I understand that as a practical matter if the child is in a technical or vocational school and he is expected to pay tuition for example, which may be $850 or $900, as a practical matter, he is in approximately the same position as somebody who is attending a college, who is getting a grant to cover expenses at a college, but is not getting the living expenses. We have provided -- State of Illinois has provided aid in two different areas, but essentially, they have equalized the conditions. The point that I am attempting to make is that if the State of Illinois had a $100 to give and it had a choice between an 8-year-old child and a 20-year-old child, now both of them could fall within the technical definition of what is a needy child in the sense that they are making less than the standard of need. But the fact remains that if we assume that Illinois has $100 and it chooses to give it to the 8-year-old, I do not think it could be said to be arbitrary that it chose to give that $100.00 to the 8-year-old as opposed to 20-year-old. The point being that even among those who are technically classified as needy, there are some who are more in the need of help than others. The point is that here, those who are in technical or vocational school, although, they are technically as needy as somebody who is in a college or university, those children are still less in need of number one because it is more likely than not the kid in the technical or vocational school does not have a high school degree which means that he has no choice, he cannot get into a college or university. He can only get into a technical school. Secondly, he is not in as much need because of the fact that when he gets that high school degree, when he gets into a college or university, he is then available for this tuition which of course, would not apply in the case of a junior college and the grants in the guaranteed loans and especially the grant. So as a matter of fact, the child who is in a technical or vocational school, educationally under most state is at a distinct disadvantage because of the fact that he cannot get the same assistance. And again the point is, that a child, their high school degree does mark the difference between a child who is more in need of help than the other child. And again, I would like to get back to the fact that in 1965, now when Congress established and expanded the definition, at that time, it pointed out and this is contained on pages 36 and 37 of our brief that under existing laws, states at their option may continue payments and then the Senatorial Committee Report went on to say federal sharing for this purpose would thus be available to states who implement such a program, for payments to children regularly attending a college or university as well as those attending high school or vocational school. But Congress has made it clear that the states can as finances allow develop the program as long as there is a rational choice and again, I believe that there is a rational choice. Counsel was candid enough to admit that we are talking about not only post-education, post-high school education but also the equivalent and for time that Congress originally established this classification, if you examine the classification as they set up, they spoke in terms of someone who is attending a high school and the course of study which would lead to a degree or vocational or technical school which would lead the gainful employment. I think the point is that Congress at this time realized the fact that not everyone that the state was concerned with that not everyone that Congress was concerned about was somebody who would want to go back in high school and get a degree. I think it was concerned about the kid who drops out of high school and finds that he has no aptitude for it and desires instead to go to a vocational or technical school. But I think that we are not talking about the same class of kids. I think that the principles of this Court has enunciated on a number of occasions that the state can attack as much of a problem as its finances allow. Now, no discussion would be complete without a picture of the situation in Illinois that exists now because of a substantial increase, applied full increase in the AFDC cases, Governor Ogilvie announced that there is a $108 million overall deficit in the welfare programs and specifically $107 million deficit in state funds. Now, the Governor was faced with either cutting grants and in the report which he submit in October 1971, he spoke in terms of one-third cut in the standard of need as opposed to a 100%, giving a 100% standard of need they would mean roughly 67 or 70% standard of need. In an attempt to alleviate this problem, what he did was he transferred funds from the General Assistance Funds, General Assistance Fund which is truly a state program into AFDC, he transferred $21 million and this is then met the AFDC budget. Now, litigation resulted and as of this time, the governor has been enjoined from carrying out this program. But the point is that at this time, there is a possibility of cutting the standard of need in AFDC cases. We do not believe that the constitution requires the State of Illinois to take the money, assuming that this is the condition, we do not believe that the constitution requires the State of Illinois to take money from the 8-year-old and the 9-year-old and the 10-year-old and give it to a 20-year-old basketball player. We believe that we have helped those who are most in need under Illinois law, namely those without the high school degree, those who say in a period of a short time could become employable within one employable report, we believe that the State of Illinois has acted rationally. We believe that Congress has realized every time that it has expanded the definition. From 1940 on they have expressed the opinion that the states were free to either adopt the amendments to expand the programs or not to. HEW, the administrative body which administers the Act is here before this Court. They filed an amicus curiae brief. They have taken the position that the states are free to implement a program as its finances allow. In light of the views that Congress has expressed, the states are free to either expand their programs or not expand their programs and again as was pointed out, there are substantial number of states which do not comply 100% with the federal program which have not expanded the federal program. Warren E. Burger: How long are these vocational -- is there a fixed period of the vocational training in Illinois under this program? Donald J. Veverka: It depends on the course and the appendix which I had support in my brief. I took the Chicago area of vocational schools and I listed the course and their lengths of time. In addition to that, I have cited in my brief that the report of the -- it was by House Committee on Education and they found that, it was a Republican Task Force on Education and they found that the average length of a vocational school was with approximately four months to a year which is another point. If somebody attends a junior college, we are talking essentially about a two-year program and again one thing I would like to mention is that the classification which plaintiffs sought to, -- which the plaintiffs represent is not the two-year college student but rather a four-year college student. This is the classification which they established in their pleadings and this I believe is the issue before this Court. Also, the plaintiffs indicated the course of study which would have required a period of time far in excess of the two years. Omega Minor will finish in about five-and-a-half years and the other plaintiff indicated that he intended to go on for a period of four years. So again, the point is here that in a technical or vocational school, not only is it more likely than not that you have someone who does not have a high school degree, and therefore, is more in need of help but you also have a situation where the state can provide AFDC benefits for a period of perhaps four months to a year and be assured that at the end of that time that there is some chance that the recipient will no longer need the help of the state. But going at to the point again, Congress has said every time that has amended the Act, the states are free to either expand the definition or not expand the definition. HEW has defined or has made similar statements, they have set forth their views in the regulation which is cited in our brief and in that regulation, they have said that a state is free to -- they have said specifically in their brief on page 39 that although the public assistance titles to find the coverage in which the Federal Government will participate financially, a state may provide coverage on a broader or more limited basis. And in later views expressed by HEW and by Congress, we believe that the plaintiffs are asking for relief which both Congress and HEW has thus far refused to grant. For this Court to grant this extended coverage would be contrary to the principles that is enunciated on a number of occasions that in the statutory construction case, its function is not to implement its own views, but rather to carry out the will of Congress and Congress has manifested its will that the states are free to do this. Furthermore, I would point out that Congress can grant the relief which the plaintiffs are seeking, by passing the timely Assistance Act. Now, the difference between this Court granting the relief sought by the plaintiffs and Congress achieving the same result, that under the family assistance plan, if this is done, if aid is extended to those in colleges or universities as well as those in technical or vocational schools, under the Act as it stands now, the Federal Government would provide additional funds other than what it now provides. Of course, it now provides funds on a 50-50 basis under a portion of that the Family Assistance Act, it would fund 100% as opposed to 50%. I believe that this is a realization by Congress that not all of the states can fully implement the Act and that if Congress wants the uniform system of welfare across the entire nation that it will have to provide additional benefits. In conclusion, I would like to say that this Court recognized in Dandridge that eroding employability and saving funds were legitimate state ends. The appellee submits to the Court that the course of the action which they have taken is rationally related to each of these two ends. The state, we believe has made a reasonable choice. We do not believe that the constitution requires the state to take money from the 8-year-old, the 9-year-old and the 10-year-old to take part of those benefits and share those benefits for the 20-year-old basketball player. We believe that the other class is more needy. The state has helped those and we believe that the state has acted constitutionally. For these reasons, we ask that the decision of the Court below be affirmed. Thank you, Your Honors. Warren E. Burger: Thank you. You have consumed all your time, I think. Let me see. Yes your time is all consumed counsel. The case is submitted.

Earl Warren: Goldberg, you may proceed. Jack Greenberg: May it please -- Earl Warren: Greenberg, excuse me. Jack Greenberg: As I stated before lunch, the only evidence against the petitioner to establish that he had committed this crime was his confession. The prosecutrix had testified that she had awakened to find a man sitting on her chest and he's had a towel draped over his head and they've had a lengthy struggle throughout this apartment that traveled over a distance more than 40 feet and she grabbed the knife from him and (Inaudible) from the apartment but she was never able to identify him. And consequently, the only -- and she so testified at the trial. The only evidence against the petitioner was his confession with this exception. As I stated, petitioner was indicted for at least six crimes and he had been tried for another one prior to this. The one which he had been tried was an actual case of rape, not attempted rape, but this one was. And he had been convicted but he was sentenced merely to 99 years and not to death. In this case, the prosecutrix who had testified in the first case testified in this case to the effect that she has been raped as evidence of the fact that this was a kind of man who would commit rapes and therefore, the burglary was with intent to rape. The petitioner in this case is a Negro, 27 years of age. He was a service station attendant. He had entered the first grade when he was eight years of age and had graduated from the third grade when he was 16. There was testimony, if I may quote, that he was "thickheaded" and three psychiatrists testified that he was severely, mentally ill and had been for some time and they diagnosed the illness as something in the nature of schizophrenia. He was arrested by a civilian, not a police officer, while walking in an alley in a so-called White section of Selma which in fact is about a block or so from the so-called Negro section. And while, apparently doing nothing illegal whatsoever, a civilian grabbed him and with three other White men stuck him in an automobile to awake the police whom they -- whom they called. The police took him, arrested him on suspicion, and they did not as is required by Alabama law for the extraordinary case of a civilian arrest, they did not take him before a magistrate and indeed, this is not only required by the Alabama law, but this is the custom, the record shows, of the City of Selma when a man is arrested within the city. There are some evidence that if a man is arrested outside of a city, a different type of warrant is used and he is not necessarily taken for magistrate. But for someone in the shoes of petitioner, not only the law but the custom was to take him immediately before the recorder. He was arrested on a few minutes after midnight on a Sunday and although shortly after his arrest, the day after, he saw the Sheriff of another County and his employer, for what purpose is not stated. He was -- the following day, taken to Kilby state prison, a distance of 50 miles from Selma where he was kept as the Warden of Kilby testified a “safe keeper.” And as a “safe keeper,” the warden testified, he is not our prisoner, so we never feel like we can let anyone see him without getting an okay from the man who was charged of him. If a man does identify himself as a lawyer, we will do it. We will go that far. But the record shows that when a lawyer came to see the petitioner during the period he was at Kilby, he was not permitted to see him. The lawyer came there, there's no evidence that he's been retained. He said he'd heard of the case and he wanted to see petitioner because he didn't believe he was guilty. The warden testified at first that he didn't know he was a lawyer and then he admitted that he did know he was a lawyer. Then he said, “Well, he hadn't given me his address.” And then when finally asked -- Speaker: He hadn't what? Jack Greenberg: Given me his address. The lawyer hadn't given his address. He did testify that he did know him and know of him. And then finally, he said that -- when asked why after the confession a lawyer was admitted without anymore identification or anymore question and during this period of time, he said that -- that -- he was our prisoner then and we can let him see anybody we like. The reason for taking him to Kilby was allegedly for protection, for safe keeping. But the record shows that there were other people in the Selma Jail who were suspected of similar crimes and there were no more reason for the public to be incensed against one prisoner than against another. There were -- and in fact, there was a -- there were no threats. There was no basis for believing that either anybody outside of the jail or anyone inside the jail was going to do any harm to the petitioner. When he was taken to Kilby, he was kept in solitary. The word was "segregation" but at any rate, he was kept in solitude and he was kept there for at least a period of 10 days during which 10 days he rendered the two confessions that are at issue here. During the first five days, he was questioned intermittently, some of the periods of questioning, being as long as three and a half hours. On one of the days, he was not questioned. He was just permitted to be by himself in his solitary cell. At the end of five days, by the States' own testimony and its own admission, he was questioned a minimum of 20 hours. Speaker: Is there any evidence of brutality? Jack Greenberg: There is no evidence of brutality, Your Honor, and in fact, the Police Chief who questioned him stated that prior to commencing each question in session, he advised the prisoner of his constitutional rights and so forth. The -- when I say a minimum of 20 hours, the States' testimony is in such term, well we questioned him for several hours. I have interpreted several as two. It could -- certainly more than one and it could readily be in -- well, in excess of two, certainly three or four, but I have made the minimum interpretation of the word "several." The -- this is the uncontradicted testimony. In addition, there is some conflicting testimony that one questioning session was at least nine hours. This testimony was in a newspaper story in the Selma newspaper. And when the newspaper left and took the stand, he testified that he got the information from the police officers. However, later on in the trial when he was interrogated by the State on this, he testified that he had just made the figure of nine hours up out of the year. But the non-conflicting testimony is at least 20 hours during this period of time. The end of 10 days -- at the end of five days, one confession was obtained and it was tape-recorded. At the end of 10 days, another confession was obtained and this second confession was obtained again on the basis of the States' testimony following at least 27 hours. That is not 27 hours since the fifth day, but from the first day. A minimum, at least 27 hours of interrogation, he was in the state prison at that point, 10 days. On Thursday, the day he rendered the tape-recorded confession, his father drove 50 miles to Kilby to see him, but his father was unable to see him on Thursday and finally did get in to see him on Sunday after the first confession but before the second confession. The State appears to find some significance in the fact that he was told of his rights before each session or at least so the -- so the police officer testified. Petitioner's position that a mere pro forma recitation of constitutional rights to a petitioner such as this is not the adequate procedural protection that the constitution requires. I believe it was in Haley versus Ohio that the opinion of the Court referred to such a merely pro forma recitations of your right to counsel and your right to remain silent and so forth, and noting that in the absence of some more tangible evidence of actual protection of petitioner's right, such as taking him before a magistrate and so forth as required by law. Well, that was -- did not remove the evidence, the conclusion of coercion. In addition to which, this petitioner, a graduate of the third grade at age 16 and at least severely mentally ill, is not a person who could be deemed to be adequately protected by a recitation to him by a police officer what his constitutional rights were. In summary, on this particular point of the confession issue, we have a case in which the prosecutrix was the daughter of a very important person in the community, the mayor's daughter. The police testified that they were under unusual pressure to solve the crimes. The petitioner is a Negro. He was obviously terrified by the civilian arrest. If one is frightened by an arrest by the police, at least there is the thought that perhaps he'll be brought to a police station and things will then start running there in normal and proper course but I -- a civilian arrest that petitioner submits is a far more terrifying experience. He was arrested originally on suspicion. Either there was no compliance with the Alabama law or in indeed the custom of the City of Selma. He was driven out to the state penitentiary, where -- were not being interrogated. He was kept in solitary and he was questioned from 20 to 27 hours prior to the first and second confessions respect -- respectively. And as -- not mute, but really articulate evidence of the -- the nature of this confession, we can really turn to the confession itself. And on page 233 of the record, there is -- commencing on 232, there is the tape-recorded confession taken at Kilby, the first one after the fifth day. And there's the captain of the police force interrogating the petitioner. And at about the eighth or ninth line down, the captain says, “Now, how did you get into that house, William?” And William says, “Er, I went around to the side window and took a piece of wire and open the screen and come through that. And the captain says, “In what kind of room were you in then?” And he hesitates and says, “I was in a -- er. “At this point, if I may interpolate, it's essential to the State's case to show he came into the bedroom window because the bedroom window is the window through which the prosecutrix testified the entry was made. And so he says -- repeats again after the petitioner hesitates, “What kind of room was it, William? Do you remember?” And he begins to say, “I was in the kitchen.” He says a part of the word kitchen, but he doesn't get the word out entirely. And the police officer says, “In a bedroom with a child?” And the petitioner queries bedroom and then the captain of police goes on as if it were a bedroom saying, “Now, who was in that bedroom, William?” And then William repeats, “The baby,” and so forth and the confession goes on. Petitioner submits that in the light of all the circumstances that have been related that is persuasive evidence of the coerciveness of the confession. Speaker: What was the -- what was the differences between the two confessions? Why was the -- why -- why was there a second confession? Jack Greenberg: Well -- Speaker: Do you mean -- Jack Greenberg: -- they were -- he was asked this -- police officer was asked that and he just said he thought he'd better get another confession. The second confession, just merely assumes bedroom. He doesn't ask him where he went into. The second confession is on page 259 -- on 261, about halfway down the page. Page -- on folio, towards this folio 612, there's some ambiguity as to how he got into the house but it appears that he's trying to say he went in through a kitchen and about two lines beneath the numeral 612, he says, “Now Williams, the window you went into the house, was it a bedroom?” And he said, “Yes, sir.” And I might add that the entire confessions in both cases, this is only some evidence, coerced, and consist of answers to leading questions, yes or no sir, yes or no sir. Apart from, I'd say, about a fifth of them consist of -- of just recitations. Now, I told you your rights and I haven't been questioning you for very long and you've been treated nicely and so forth. But the first confession of course is quite explicit. It's the way the words were literally put in the man's mouth. Now, respondent cites a number of cases in its brief in an effort to distinguish this case from the rules that had been laid down by this Court and I believe we have shown in our reply brief that those cases really are in apposite. I may mention them just briefly. There's the Gallegos case in which the Nebraska confession was given instantaneously upon coming into the custody of Nebraska and the Texas confession, which some members of this Court thought wasn't inapplicable was rendered after, I think, four days of questioning. After four days of imprisonment, there was questioning on two days of an hour to each. Stein case, there was a questioning span, 32 hours. In the Stein case, the defendants were -- this Court held hardened criminals who during the give and take of the confession gave very adequate evidence of their ability to take care of their rights as a reference to the -- the bargain they were driving to -- before they agree to confess. Speaker: Do this man had a previous record? Jack Greenberg: He has a previous record. I think he was picked up for stealing some automobile tires although he was allegedly -- Speaker: No major -- Jack Greenberg: No. Speaker: This was -- Jack Greenberg: No major violations, larceny of some tire. Is that, right? Mr. Attorney General: Yes. Jack Greenberg: This-- in Stroble against California, the confession also was given in stentor. In Brown versus Allen, there was no evidence of prolonged interrogation. And in the Lisenba case, it was noted that the defendant was a man of business experience. Again, these people are -- who are either not questioned to a great an extent or certainly not as terrified and incapable of taking care of their rights as you would assume this petitioner here would be. Petitioner recognizes that in these cases, this Court does not add up a calculation of days and hours or -- and qualifications and so forth. It's not merely quantitative but it's a qualitative evaluation. But there is a case which just so happens involves a -- a similar defendant and a similar number of hours and similar number of days and that's cited in our brief, it's Turner versus Pennsylvania. There was five days in about 20 some odd hours. In the companion case of Johnson, which this Court reversed the next term, summarily involved, I think only six hours during that same period of five days. Speaker: Could I -- you said something earlier in the -- in your argument that I may have gotten completely wrong that -- I thought you said something about this prosecutrix having testified that this man raped her, it's an attempt -- or attempted to rape her pro forma? Jack Greenberg: Well, I -- I perhaps wasn't clear. He was picked up on where -- at least six different crimes. He was tried for one of them before he was tried for this case. In that first case, the prosecutrix testified that she had been raped and he was convicted and he was sentenced not to death as had been requested by the State but to 99 years. Now in this case, which involves burglary with attempt to rape, there's no charge of rape in this case. The only other testimony apart from the confession is the testimony of the prosecutrix in the first case, now being used here to get the death penalty they couldn't get in the first case. To the effect that this is the kind of man who commits rapes and therefore, when he invaded the house then he did it with intent to rape and therefore, it's burglary in the first degree. That's what I -- just trying to place the case in its setting. Now, petitioner submits that the confession in this case is a confession that on the States' own uncontradicted testimony. It's a matter of law has -- has been and should be held coerced by this Court. But we have more in this case. There, the petitioner offered to take the stand on page 230 of the record to testify as to the admissibility, the admissibility of the confession into evidence and his counsel said, "We would like to make an offer to put this defendant on the stand for the purpose of refuting certain allegations by the State with reference to the voluntary nature of what purports to be certain extrajudicial admissions and for no other purpose.” Earl Warren: What was that page? Jack Greenberg: 230, Your Honor. Earl Warren: 230. Jack Greenberg: To which the States -- to which the solicitor say, if the defendant takes the stand, I insist that he be subject to cross-examination on any and every item that is in evidence. I am not willing to make any agreement of limitation. And the Court asked a question as to the purpose of the offer and the Court then said, "I sustain the State if the State is not willing to reach a stipulation or agreement on that.But insist that you open defendant for cross-examination of any and every nature, I overrule the motion." Now, the Supreme Court of Alabama on this point held on page 350 of the record. If he proposed to testify to facts showing that the confession was unduly influenced, he certainly ought to respond to questions as to his guilt in fact and to any matter relevant thereto. Two judges of the Supreme Court of Alabama disagreed on this point. They stated that I cannot agree with that part of the opinion holding that the defendant was not entitled to testify as to the facts and circumstances concerning an alleged confession without thereby subjecting himself to cross-examination as to matters pertaining to his guilt or innocence, sanity or insanity. And there is -- therefore, no question as to what the offer was and to what the ruling of the trial court was and to what the interpretation of it was in the Supreme Court of Alabama as there has been in some other cases in which this issue has arisen but has been held not to have been sufficiently mature to be decided. The Alabama Supreme Court also pointed out that notwithstanding a state statute which relieves counsel of the necessity of informing the Court in detail of what testimony would be. In addition to the reason for this not being error was that counsel did not inform the Court in detail of what the testimony would be. Of course there was no doubt in the mind of the solicitor when he objected as to what its nature would be and there was no doubt in the mind of the trial judge or the Supreme Court of the State and there was no objection on this ground. And in fact, the Supreme Court of Alabama went on to adjudicate the merits of the point. But petitioner submits that if this procedure should be held to prevail that is if when petitioner takes the stand to testify as to the admissibility and I emphasize admissibility as distinguished from -- in another portion of the case as to perhaps the credibility of the confession. The petitioner takes the stand to testify as to the admissibility of a confession. He must then open himself up to as the Supreme Court said, as to his questions, as to his guilt in fact or as the concurrent justices said, "Matters pertaining to his guilt or innocence, sanity or insanity." William J. Brennan, Jr.: Only on admissibility taken in the presence to the jury in Alabama? Jack Greenberg: Well, Your Honor, the usual practice is to take it out of the presence of the jury. In this case, it was in -- and it's an acceptable practice in Alabama. In this case, it was taken in the presence of the jury and that -- William J. Brennan, Jr.: That objection on the part of it? Jack Greenberg: Well, that takes a little explanation. There was an objection to the presence of the jury. At that point, the judge called a recess and asked the jury to leave and there was a conference between counsel and the Court. Then the conference -- recess ended, and the jury came back in and there is no further discussion as to why or how or for what reason the jury came back in at that point. However, it's clear that counsel wanted the jury excluded because on two subsequent occasions during the trial, not at this point but during testimony of other witnesses on the voir dire or the preliminary hearing. There was motion for the jury to be excluded and the jury was not excluded, an objection was taken thereto. But it's petitioner's position in this case that as to this point, it doesn't matter whether jury was in or the jury was out. Because if the jury's in as it was here, it's, of course, highly prejudicial for them to get this evidence as to his guilt or innocence when he's taken the stand for the purpose of protecting himself from the introduction in evidence of -- the only evidence that could convict him and it was unconstitutionally obtained. But even if the jury were out, then the State could obtain evidence from petitioner's lips at that point which it could introduce later in its case. William J. Brennan, Jr.: Well, do I gather from what you said that Alabama practice does not permit the defendant as of right to insist upon the exclusion of the jury when evidence was taken to -- on the question of admissibility? Jack Greenberg: I don't know that there's a ruling in Alabama that talks about it as of right. But the Alabama case that I have read occasionally refer to the fact that the jury was out and I'm familiar with at least one other Alabama case since the jury was out. It's the -- petitioner submits that if this practice were permitted to -- were -- were upheld, then especially in this case where there's no other evidence against the petitioner, he is trapped into having to take the stand to keep out of evidence. The only thing that can convict him, that was unconstitutionally obtained, then by this, the State can obtain the only evidence which -- by which they can later convict him and even if the confession is admitted into evidence and later, the Court would hold that it were erroneously admitted into evidence. Under the ruling of Stein versus New York, the State could then come here and say that sure there was an illegal confession admitted into evidence but we have other evidence whereby we can convict him, and consequently, the decision below should not be reversed. A number of state courts have considered this question. It hasn't been canvassed through any tremendous extent, but it has been considered by a number of state courts and the Supreme Court of Louisiana has expressed itself most clearly on it and the -- the reason for the rule on -- quoted on page 17 of our brief. Louisiana has held that it would be a simple matter for an unconscionable person to extort from the accused while alone, a confession. And thereafter falsely testify that it was given freely and voluntarily, whereupon the accused would be compelled to take the stand to contradict the witness thereby subjecting himself to cross-examination on the whole case. Or he would have to let the extorted confession go unchallenged. Either of these alternatives would do violence, at least the spirit of the Louisiana Constitution.And petitioner submits that that is the consideration that should govern here. Now there are some cases -- this case Wheat against United States, I believe in the Ninth Circuit cited by the respondent. But that case really points up petitioner's contention in this case because in the Wheat case, the petitioner sought to take the stand on -- after the confession was admitted into evidence. And on the issue of -- to the weight that should be given to it. And of course when he takes the stand as to a matter of weight and credibility, it could be argued that -- then he's testifying as to the merits of the case, not in the preliminary hearing addressed only to the Court. And then he should be subject to general rules of cross-examination. And then of course, in Stein versus New York where the Court held that the question was not reached because it was not sufficiently definite as it is here that he would be subjected to such general cross-examination. In the Stein case, the respondent's quotation from the Stein case in its brief is, again, makes the very point that we insist upon here. On page 22, the quotation from the Stein case was, "In trial of a coercion issue as of every other issue when the prosecution has made a case to go to the jury." It's not this case because there was no case to go to the jury until that confession got into evidence in this case. An accused must choose between the disadvantage from silence and that from testifying. Of course as I said, it doesn't apply here. There is an additional point in this case and that of the jury exclusion and I shall address myself with -- only for a moment. In this case until the time of petitioner's indictment, there had never been any grow -- any grand jury in Dallas County, Alabama. When petitioner was first indicted, there was a motion to quash made on that ground. And the motion to quash was granted although it is not clear whether it was granted on that ground or not whereupon the jury commissioners went about selecting a new jury list. They -- in using this list and in selecting this list, they selected from among persons whom they knew or from persons -- they asked persons whom they knew to give them names. And they also consulted a number of what might be called "impersonal" sources such as the telephone book and the city directory, and I don't recall whether it was the voting list or the tax list but it might have been something of that sort. But they used this only in a sense to refresh their recollection. They went down and they -- they saw someone whom they knew on the list then they might have put him into the jury box. They also made a practice which is not required by Alabama Law of excluding exempt persons. That is a -- like for example, a lawyer or a doctor or a teacher or a railroad engineer might be called for jury service and under the statute, would be given an exemption. He could get out of it if he wanted to, but he was not excluded from jury service. They also made a practice of excluding exempt persons. At least so they stated because the record did show that whereas there was no evidence of any exempt Negroes in the box. There was evidence of a small but substantial number of exempt White persons and -- well, at any rate, they ended up with about the names of about 300 Negroes in the box. Now, that may sound like a very large number but in view of the fact that it was 300 out of in excess of 1700, and a view of the fact that there are more Negroes than Whites in this particular county. The number of Negroes in the box really was not in excess of those found in the Cassell case, for example, where 1 out of 12 was held to be token representation. This case, that comes out to be somewhat more than I believe 1 out of 7. They attempt to justify the small number of Negroes on the box -- in the box in their brief by stating that -- page 13 in their brief, that it was also shown that approximately 90% of the criminal cases in the courts of Dallas Country involved Negroes. Of course that's meaningless because that 20 Negroes in Dallas County can constitute 90% of all the crimes. That does not mean that any substantial number of Negroes in Dallas County are criminals and that a great many of them live in adultery. There's no evidence of a systematic application of this standard to the selection of jurors. But at any rate, the evidence to which it refers indicates that a very large number of Negroes in Dallas County were married by common law marriage, which as I understand it, a perfectly legal and valid form of marriage in the State of Alabama. Petitioner submits that this built-in factor into the jury selection system that of selecting people whom you know and the fact of putting Negroes or knowing they're Negroes for the purpose of getting some Negroes into the jury box when, as in this case, it turns out to be under all the circumstance and really a token, violates the standards of this Court it set down in a number of cases and more exhaustively canvassed in the case of Cassell versus Texas. Speaker: Were any colored jurymen called to the box, excused or challenged peremptory? Jack Greenberg: The box consists of 72 names from which the first 18 are selected for the grand jury and the remainder are selected for the petit juries. None of the first 18 were Negro and in fact, during past years when there had been a smaller number of Negroes on the -- in the box, six or eight or a dozen or 20 during years past, none of the first 18 names that ever came out of the hat were colored. Name 19 and beyond did contain some Negroes in other cases in the past and did contain some in this case, but they were struck, so they didn't -- Speaker: Struck -- Jack Greenberg: -- by both sides. Speaker: By both sides? Jack Greenberg: Yes, Your Honor. Felix Frankfurter: The Court? Jack Greenberg: It was by agreement, agreement by counsel. Felix Frankfurter: Now, what is the (Inaudible) I suppose you can say that, what is the exact basis on which you then that this constitutes a purposeful discrimination? Jack Greenberg: Two things, Your Honor. First of all, the jury selection system was based upon selecting people whom the commissioners knew or people whom they knew. Felix Frankfurter: (Inaudible) Jack Greenberg: Yes, and it cannot be expected as was pointed out, I believe Mr. Justice Reed's opinion in the Cassell case that conditions being what they are and there was a Dallas County in Texas and a Dallas County here. In Dallas County, that a jury commissioner would have as wide a representation of Negroes in his acquaintanceship as he would have of White. Felix Frankfurter: Is that case ruled -- is that case ruled that it must be by some lottery, some mechanical non-pressure or lottery. Jack Greenberg: I don't believe that was the -- that was the holding -- Felix Frankfurter: So, that selection involving an element of judgment does not necessarily violate the constitution. Jack Greenberg: No, but it would be our contention that the judgment should be -- the question is at what point should the judgment be exercised. You can select -- Felix Frankfurter: Before you go into it, why they have allowed you to go -- Jack Greenberg: Yes. Felix Frankfurter: -- that by itself couldn't be announced, and it may not on the basis of people they know to the jury commissioner (Inaudible) Jack Greenberg: No, not -- not that itself, but you see the point at which the judgment is exercised is the point to which the Negroes are excluded. If they were selected by some arbitrary objective method -- Felix Frankfurter: (Inaudible) -- you said in one case, it -- out of -- how many there was in -- what's the number? A little while ago in answer to Justice Harlan. Jack Greenberg: They were about 300, about 300, which is a large absolute number but in terms of the population in the county is really not such a large number at all. Felix Frankfurter: But -- but you also said they don't have to -- this isn't a merely arithmetic problem. Jack Greenberg: No, it's not, Your Honor, no. Felix Frankfurter: Then where is the -- what -- in this case was purposeful discrimination. Jack Greenberg: The purposeful -- Felix Frankfurter: As shown by the record. Jack Greenberg: The purposeful discrimination was using this method of selection at the point at which the personal knowledge was used, that's the -- personal knowledge was used at the point of initial selection, not at a -- see, the Alabama statute proscribes a perfectly -- a good method of selecting jurors. It says you shall place in the box name of every person in the county with the following qualifications, and these are unexceptionable qualifications. Felix Frankfurter: And that the -- whether or not the qualifications were revealed in a particular potential juror, that was left to the judgment, wasn't it? Jack Greenberg: That was left to judgment. Felix Frankfurter: You don't complain of that as an abstract system. Jack Greenberg: No, I don't. No, I don't complain of that as an abstract system. Felix Frankfurter: Now, if -- if the system is all -- is not in -- in and of itself discriminatory, and then it was drawn into place, again to be applied of a jury commission, what's the name? The official -- Jack Greenberg: Commissioners, yes. Felix Frankfurter: Commissioners. Now, what is it that he did on which you rely to establish a purposeful discrimination? Jack Greenberg: Well, if he saw the name of -- someone suggested the name of a Negro to him or if he saw the name of a Negro in the city directory, and the race is placed after your name in a city directory as to whether you're Negro or White, he would say, “Well, I don't know him,” and therefore, he didn't even consider him. Whereas if he saw a White person whom he knew or a Negro whom he knew, he would say, “Well, I know him and he has good moral character," or "he has bad moral character.” Now, he did not say, “Let's take the name of every White person over 21 years of age and then -- or every person over 21 years of age and then find out whether he has good moral character or not. We'll make some investigations no matter how cursory. If he didn't know a Negro, he didn't consider him any further to find out whether he had it or not, and of course, he can't be expected to know many Negroes under those -- under the circumstance. Felix Frankfurter: The record show how irrelevant almost, nonexistent in the (Inaudible) of -- how big is this City of Selma? Jack Greenberg: Well, there were -- included Selma and the counties, there were -- I would say in total about 13,000 persons who contain prima facie evidence of jury service, at least over 21 -- Felix Frankfurter: Of that 13,000, how many were Negroes? Jack Greenberg: Somewhat in excess of 7000. Felix Frankfurter: How many? Jack Greenberg: In excess of 7000. Felix Frankfurter: 7000. How many in fact are the -- take on the -- both the grand and petit jury? Jack Greenberg: Between 250 and 300. Felix Frankfurter: Of those 250 and 300, did the record show how many was Negroes? Jack Greenberg: Well, he picked 250-300 Negroes. Felix Frankfurter: So 250. Jack Greenberg: Out of -- out of 1750. Felix Frankfurter: How many did he put in -- how -- how many name did he put in the box -- Jack Greenberg: Seven -- Felix Frankfurter: -- altogether under which he knew to the grand jury and then the petit jury. Jack Greenberg: Well, 1750 names were initially put in the box. Felix Frankfurter: 1750, how many were respectively going to be colored? Jack Greenberg: Between 250 and 300 were colored. Felix Frankfurter: 250 were colored. Jack Greenberg: Yes. Felix Frankfurter: And you -- what you say is that if he had examined the people, the colored people whom he didn't know or haven't informed himself on, there would have been more than that, is that what -- Jack Greenberg: Yes, Your Honor. Felix Frankfurter: But you're not saying that out of the total from which selection was made, there was a disproportionate number of colored, the accepted proportion because of the exclusionary principle, is that right? Jack Greenberg: Yes, because of that exclusionary principle, yes. Felix Frankfurter: Not that out of how many were (Inaudible) the final block out of the -- Jack Greenberg: 1750. Felix Frankfurter: No, no, no, the lot out of which he finally selected the grand and petit jury. Jack Greenberg: 72. Felix Frankfurter: 72. Out of those, how many were colored? Jack Greenberg: I think there were about four or five. Felix Frankfurter: Four or five. Speaker: Twelve. Jack Greenberg: Pardon me? Speaker: Twelve. Jack Greenberg: I may be wrong. I thought there were about four or five in -- in them of the 72, and maybe more. Felix Frankfurter: And -- and so far as the system goes, this is a fair example of how they're being operated, one in the six, or one in the ten, which is colored. Jack Greenberg: You mean this -- the proportion of Negroes in the 72 was approximately the same -- Felix Frankfurter: No, I mean, there was -- there were Negroes on the jury. Jack Greenberg: Yes, there were always some, yes. Felix Frankfurter: And so it finally gets down to the fact that honestly (Inaudible) so far as the largest necessarily of -- proportionately or (Inaudible) because there the -- wasn't precluded by saying I don't know and thereby (Inaudible). Jack Greenberg: That's true. Felix Frankfurter: That's what the case get started. Jack Greenberg: That's what -- that issue (Inaudible) anything else. Speaker: Mr. Greenberg, a little while ago when you -- when they finally got down to the jury, you said both sides struck the Negroes off the list and you said that was by agreement of counsel. What does that mean? Jack Greenberg: Well, except -- apparently, the counsel on both sides agree that these few Negroes who were in the petit jury should be (Inaudible) what the record says on it, it says, the judge will be -- recites this -- Speaker: Did the petitioner agree that the -- that the Negroes could be or should be excluded? Jack Greenberg: This is to the petit jury, Your Honor -- Speaker: Yes, but (Voice Overlap) -- Jack Greenberg: -- not the grand jury. Speaker: (Inaudible) the petit jury, but the -- I'm questioning whether the petitioner agreed to there not being -- they're not serving on the jury. Jack Greenberg: I believe he agreed to that, yes, on the petit jury, yes. Earl Warren: Wasn't there something in the record to show that that was a custom in the community? Jack Greenberg: Yes, it had been cut. Earl Warren: What -- what was that? Did you know if you don't why the -- Jack Greenberg: The record -- the record indicates that -- you see, there had never been a Negro in a grand jury, but there had been always been maybe a dozen or two dozen in this box of about 1500, and some of them had been -- some of them had been pulled out of the hat after number 18. They never came up before number 18 which would have put them on the grand jury, and they got on to the petit jury. Felix Frankfurter: The 18 was selected by way of a lottery. They were -- Jack Greenberg: Yes, they were pulled out of -- well, there was a -- Felix Frankfurter: How -- how did it turn out to be if they were all White? Jack Greenberg: I don't know. Felix Frankfurter: Are you complaining of that? Jack Greenberg: Yes, Your Honor, I'm complaining of it, but frankly, I have no explanation for it. It -- it may have been to me, entirely candid about it. There were only maybe a dozen or so Negroes in the box of 1700 until recently, and so it's not too farfetched to say that such a small number out of well over a thousand could always come out after number 18. The experience of this one case, if -- if this case -- this had happened in a number of occasions and we have no evidence as to whether it's happened subsequent to the trial of this case. This had happened in a number of occasions. I think that we would quite probably complain, but I don't believe there is sufficient experience at this point to raise a suspicion in my mind, surely. Felix Frankfurter: But -- but you - you can't (Inaudible) -- but you don't raise that point in this case. Jack Greenberg: No. No, not as such. It's a -- I think it's -- Felix Frankfurter: (Inaudible) conscious selection of White out of the group that contains those Whites and Negroes for -- if there's a grand jury, you don't complain of that? Jack Greenberg: I -- I don't -- Felix Frankfurter: Don't complain that -- that with eyes wide open, they saw to it that no Negro got on the grand jury. Jack Greenberg: No, I -- no, it's the method of selection. Felix Frankfurter: Then you should have just to the fact that -- Jack Greenberg: No. Felix Frankfurter: -- through this record. Jack Greenberg: No, it's -- it's -- I would say it's this built-in factor in the jury system that if they don't know a Negro, they don't consider whether he has good moral character or not. Felix Frankfurter: That wouldn't -- no, that's a different story. That wouldn't explain why 18 Whites (Inaudible) Jack Greenberg: No, it wouldn't, Your Honor. Felix Frankfurter: Yet, the law of probability might explain that. Jack Greenberg: Well, probability might explain it when you had maybe six or eight Negroes in the box. I don't think probability explains it when you have 300 though probability might explain it on one experience. If this was a third case after the system and -- Felix Frankfurter: And if -- Jack Greenberg: No, it isn't. This is the first -- Felix Frankfurter: You haven't -- you haven't thought a recurrence of inexplicable phenomena always going the same way. Jack Greenberg: I'll be frank with Your Honor, I have attempted to obtain evidence of what the experience has been subsequent to this case and I have been unable to obtain it. Felix Frankfurter: All right. I understand. Therefore, what that means to me you can't -- therefore, there is no purposeful discrimination observed from the Fourteenth Amendment as to that. Jack Greenberg: As to that. That's right. William J. Brennan, Jr.: Are there any minimum of qualifications to the jury service? Jack Greenberg: Yes, there are, Your Honor, and the statute is in the respondent's brief. It's -- I would say probably a typical type of statute. William J. Brennan, Jr.: Is there any -- any evidence on whether inability to qualify may have resulted in reducing the number, the 250, whatever the number you gave us? Jack Greenberg: Well, the State refers -- may have brought it down to that small number you mean? William J. Brennan, Jr.: Yes. Jack Greenberg: The State would -- William J. Brennan, Jr.: I heard you have said earlier, didn't you that the number of Negroes in this county is greater than -- Jack Greenberg: Yes, Mr. -- William J. Brennan, Jr.: (Inaudible) the number of Whites. Jack Greenberg: Yes, it is. The State makes a point in explaining this that many Negroes lived in adultery and 90% of the crimes were committed by Negroes but I submit that's not a sufficient explanation because even though 90% of the crimes were submitted by Negroes, this could be five Negroes who were committing this 90% of the crimes. William J. Brennan, Jr.: I was -- I -- that is -- Jack Greenberg: Well, that's their explanation of it in this -- I don't think that -- William J. Brennan, Jr.: I wasn't getting at the -- I gather that's a moral qualification. I was getting at whether there was -- or any other minimum qualifications. Jack Greenberg: I believe there is this sort of a -- William J. Brennan, Jr.: (Inaudible) Jack Greenberg: There is an education qualification but there's also another provision for waiving it in some cases, I think. I should like to reserve the rest of my time for rebuttal, if I may. Earl Warren: You may. Mr. Straub. Robert Straub: If it please the Court, the record here before us deals with a great number of facts which we think are pertinent to an understanding of the applicable rules of law and I would like briefly to go through the facts first of all leading up to the confessions which were before the Court and which deal directly with whether or not the confessions were coerced and the question, whether or not he was denied his rights and not being able to testify as to the voluntariness of those confessions without further cross-examination. Now, as has been stated, the petitioner was picked up wondering around an alley about -- about midnight of Saturday night or early Sunday morning. And he was taken to the police station were he was booked on an open charge of investigation. Now, the next morning -- he wasn't questioned any that night, it doesn't appear. The next morning, beginning about 10 o'clock, he was questioned for about two hours by the captain of police. Now, the captain testified that that was intermittent questioning. It -- the routine business of the police station was being carried on at the same time and they would stop and see these folks and those folks and get a drink of water and so on and so forth for about two hours. It wasn't a constant grueling questioning according to the testimony. Felix Frankfurter: What hour of the morning? Robert Straub: Began at 10 o'clock, Your Honor, 10 o'clock to 12 approximately, the testimony shows it. Felix Frankfurter: (Inaudible) getting the rule, to segregate the environment in which this -- Robert Straub: In the police captain's office as I recall. It was in the station itself, somewhere there. Now, in the afternoon or some time during this questioning period, the petitioner apparently asked to have the sheriff of his home county. Now, he was not a native of that particular county. He was from a neighboring country some 28 miles away. Hugo L. Black: What county? Robert Straub: Marion County -- Perry County, excuse me, Marion, Alabama in Perry County. And he requested to that sheriff to be notified of his predicament and he also requested the people to notify his employer over in Marion and the police officers did so. And the sheriff of Marion County whom he had requested to see came to see him at Perry County, came to see him that Sunday afternoon to see what was -- what was wrong. And during the course of the questioning in the afternoon, the sheriff of Perry County together with police officers and the petitioner rode around town for about 20 minutes, I think, in between the questioning periods of that afternoon. Now, on Monday -- Felix Frankfurter: How long was that questioning period according to your accounting? Robert Straub: According to my accounting and to the testimony, Your Honor, for two and one-half or three hours on Sunday afternoon. Felix Frankfurter: Including this ride around? Robert Straub: Including this -- and during that two and a half or three hours, they took 20 or so minutes out. Felix Frankfurter: Well, this -- but the drive -- did the driver have any -- had any particular objective, visit the houses where the -- Robert Straub: They visited -- they drove around some of the houses. They did not stop apparently and then go in or go around back or anything like that, but they did drive around town during this time. Now, on Monday morning -- Felix Frankfurter: (Inaudible) or not? Robert Straub: It does not appear. On Monday, the petitioner's employer then, also in response to his request, came to see him. And at that time, a warrant was made out against the petitioner and served on him. Now, they questioned him on Monday for about one and a half or two hours in the morning beginning about 9 o'clock. Now, he had been permitted to sleep, eat during Sunday evening then about 9 o'clock in the morning, they -- they questioned him again. Now in the afternoon, about 3 o'clock, they took him to Kilby Prison. Now, Kilby Prison is about 50 or 55, perhaps 60 miles. It's distance from Selma to Montgomery. Now, this testimony is that they took him there for his own protection and has been brought out that there was no threat and violence, nobody had actually attacked the petitioner and no demonstrations had come about. Felix Frankfurter: Was there any suggestion of an inflamed public opinion to the press in this case? Robert Straub: The only press articles in the record before us is the one spoken about by counsel for petitioner regarding the confession. There is no evidence of inflamed public opinion. Felix Frankfurter: Sunday and Monday and the day -- Robert Straub: No, sir. Felix Frankfurter: -- to Kilby, that was not related to any. Robert Straub: No, sir. But we take this position on that Your Honor, that although no violence appeared, the crime was of such a nature and the circumstances such that we see nothing wrong with the police officers protecting their prisoner and themselves for that matter by taking him away from where -- why wait until something breaks out and then try to stop it? Go ahead. Felix Frankfurter: Up to this time when he was taken, had he been charged with anything? Robert Straub: On Monday, he was charged with burglary in the second -- in the first degree. Felix Frankfurter: (Inaudible) before he was taken. Robert Straub: Yes, sir. Before he was taken to Kilby. Earl Warren: Was he taken to a magistrate before he -- Robert Straub: No sir, he was not. Earl Warren: -- before they went to the penitentiary? Robert Straub: He was not. Earl Warren: Why? Robert Straub: It doesn't appear why, other than this that he would have ordinarily been taken to the city recorder since he was picked up by the city police -- I mean, turned over to the city police. But in cases where they don't request a preliminary hearing or they're not going to appear before the city recorder, they're not put on the docket, not taken. If they request just preliminary hearing, they are taken before the city recorder when they're picked up by the city police. Earl Warren: Was he told before that time that he had a right to -- Robert Straub: Testimony of Captain Baker, I believe, or perhaps the chief of police, one of those two officers is to the effect that he was told of his rights but did not request a preliminary hearing. Earl Warren: When was he told? Robert Straub: Shortly after he was picked up or at least on Sunday during the questioning. In fact, the police officers testified that before every period of questioning, they told him of his rights. They did enumerate them, but in response to -- when they were dealing with -- in the questioning in the case with whether or not he was taken to a magistrate, one of the police officers, or perhaps both of them testified that they did explain his rights to him, but he did not ask for a preliminary hearing. Earl Warren: I understand from you then that it is the custom not to take them before a magistrate, unless, they demand a preliminary hearing. Robert Straub: If they demand a preliminary hearing as my understanding of the practice, it's usually the custom not to take them. If they want a preliminary hearing, they go to a magistrate. If they want bond of course the judge have to set a bond. Earl Warren: How long would you hold him in jail without taking him before a magistrate under those circumstances in accordance with your practices? Robert Straub: Well sir, I -- I can't answer that question. I don't know. Earl Warren: Could it be weeks? Could it be months? Robert Straub: Oh no, sir. I would not think so, no. Earl Warren: Well, what would you -- how would you accomplish it and when would you accomplish it and according to your custom, let's say how did the grand jury didn't meet to indict this man for a month or so when -- what would you do? Would you just leave him in jail there all that time without taking him to a magistrate? Robert Straub: If he requested to be taken before a magistrate or requested a bond or requested a preliminary hearing, we would take him immediately. Earl Warren: What is the law -- what is the law of Alabama say as to whether he shall be taken to a magistrate? Robert Straub: The law on -- and rest under these circumstances where a civilian arrests and turns him over to the police, he shall be taken forthwith to a magistrate. That is law. Now -- Earl Warren: You mean then that they -- they go absolutely contrary to the law in your practice in Alabama? Robert Straub: I'm speaking, sir, of when he is arrested by a civilian and turned over to the police then the police must forthwith take him to a magistrate. Earl Warren: Isn't that what happened here? Robert Straub: Yes, sir. However -- Earl Warren: Well, you don't -- you don't say then that this was in accordance with customer practice. Robert Straub: No, sir. Earl Warren: This was contrary. Robert Straub: I do not -- I say that this is not according to the law, to the statute. It is not according to the statute. We -- we are afraid to admit that because it just appears that. Earl Warren: Yes. Robert Straub: However, the Alabama cases as I would deal later have held and has -- that the failure to comply with that statute does not of itself render a statement or a confession taken under those circumstances involuntary. Now, during the trip to Kilby Prison, there was only general conversation as the record states. He was taken there and entered under the order of a circuit judge of the Selma Circuit. He was questioned some that afternoon and for a little while after supper. Now, it doesn't appear how much. It says he was questioned for several hours that afternoon while he left Selma at 3 o'clock and so it was a matter of driving 50 to 60 miles before they could question him again and then it said we didn't question him too late in the evening and it doesn't appear how much at that time. Felix Frankfurter: Mr. Attorney General. Robert Straub: Yes, sir. Felix Frankfurter: I heard you say a minute ago that when he was taken to Kilby Prison, he was taken there by -- on the basis of an order of a Circuit judge. Robert Straub: Yes, sir. That is right. Felix Frankfurter: Then there is some judicial act, who -- who was the Circuit judge who -- Robert Straub: That does not appear, Your Honor. Felix Frankfurter: Well, somebody must have asked -- Robert Straub: Somebody asked or obtained. Felix Frankfurter: You've been (Inaudible) the circumstance. Robert Straub: I beg your pardon. Felix Frankfurter: Somebody must have asked the judge that -- Robert Straub: Yes, sir. Felix Frankfurter: -- we've got this fellow and for these and these reasons, do you think he ought to be taken to prison? Robert Straub: Yes, sir, somebody, and it doesn't appear. Felix Frankfurter: And there was some kind of judicial -- there was some kind of judicial intervention at that point. Robert Straub: Yes, sir. It does not appear -- Felix Frankfurter: I'm not suggesting that was an arraignment. But there was some -- Robert Straub: No. Felix Frankfurter: -- some judicial -- Robert Straub: We do not contend it was an arraignment because it does -- we -- we don't know. But we do know that either ex parte or bringing him up there somehow or rather a circuit judge knew that he was in this -- that he was -- had been arrested and that they wanted to take him over to Kilby Prison and so -- Felix Frankfurter: Which I infer that the police couldn't do this on their own say so. Robert Straub: I doubt very much, Your Honor, if the prison officials would accept a prisoner without some order. I'm pretty sure that they would not. Earl Warren: There was no affidavit as a prerequisite to this order and no -- Robert Straub: No, sir. Earl Warren: -- testimony taken. Robert Straub: No, sir. Earl Warren: No evidence of the defendant being taken before the judge? Robert Straub: No sir. Earl Warren: No consent of the defendant. Robert Straub: No, sir. Earl Warren: Nothing then? Robert Straub: Nothing. Just the fact testimony in one or two places that there was an order of a Circuit judge and the order itself by the way does not appear in the record. We don't know what kind of an order it was. There was some sort of judicial intervention there to that extent, that limited extent. Now, he was placed in what the prison officials at Kilby Prison called segregation during his stay. Now, this is not solitary confinement in the sense that he is placed in a dark cell and not allowed to see anybody or talk or anything else. It's customary with prisoners who are being held for other authorities to segregate them from the general run of prisoners there at Kilby Prison and excel itself according to the testimony has a comfortable bed and all of the conveniences. He's just not allowed to mingle with the prisoners who are there serving a term. That apparently is customary not only in case of prisoners held or other authorities but in new prisoners coming in for a short period of time. Now, he got there on Monday and he was not questioned again until Wednesday. It doesn't appear how long he was questioned on Wednesday except for the fact they had several conservations with him. Then on Thursday, no questioning in the morning but in the afternoon, they had two conversations with him, one lasting two hours and one, one and a half hours. Now -- Felix Frankfurter: You used the word -- you said "they" throughout, could you indicate whether how many constituted “they” -- Robert Straub: Yes, sir. Felix Frankfurter: -- that relayed the questioning? Robert Straub: No sir. The relay questioning was not used. Apparently, Captain Baker was the chief interrogator and he came -- he was present at all of the sessions, I believe. A Lieutenant Ware came at sometimes and one or two of the prison officials at sometimes were in and out but apparently took no part in the questioning and no appreciable amount of questioning. Hugo L. Black: Captain of what? Robert Straub: Captain of police, police captain in Selma. Felix Frankfurter: But it wasn't the case, it's the insertion of -- interrogated until themselves got tired but continued -- Robert Straub: No. Felix Frankfurter: -- to sweat the (Inaudible) Robert Straub: No, sir. Felix Frankfurter: That's clear in the case. Robert Straub: That to me is clear in this case. I believe, Your Honor, will find it so by reading the record. Felix Frankfurter: If it was -- Robert Straub: Yes. At this Thursday afternoon question, he was advised that anything he said would be recorded and they showed him the recording apparatus and took a recording of his confession. Thereafter, they -- they left him rest until Saturday. They didn't -- apparently he went back to his cell and stayed until Saturday. And then they talked to him for 15 or 20 more minutes in the morning and about three and a half hours in the afternoon. On Sunday, his father came to see him. Sunday is visiting day at -- at Kilby and his father came to see him. No questioning on Monday. On Tuesday, the officers drove back again to Selma -- from Selma. Earl Warren: Did his father see him on Sunday? Robert Straub: Yes, sir. While he was -- Earl Warren: When was it -- I understood counsel to say that his father had tried to see him before the confessions were taken and refused admission. Robert Straub: There is testimony that his father came on a Thursday before and was denied admission but was permitted to see him on Sunday, the regular visiting day at Kilby. Earl Warren: What -- what reason was assigned for not letting the father see him? Robert Straub: No reason was assigned in the testimony and it's not in the record but from personal knowledge, I do know that Sunday is visiting day out there. Now, whether that -- I mean, that was probably the reason that the -- the prison officials would give, but it doesn't appear in the records. Earl Warren: When did the lawyer try to see him first? Robert Straub: The lawyer, according to testimony in the record, came on a Saturday. Now, Warren Burford said he didn't know what Saturday it was -- Earl Warren: Didn't know what? Robert Straub: It could -- didn't know what Saturday it was. It could have been the Saturday before the -- the confession. I mean, the Saturday between the confessions. You see, one was made on Thursday and one the following Tuesday. So the lawyer didn't come before the first confession if he came on the Saturday between. It isn't quite clear when he did come, but Warren Burford says it could have been at one right between confessions. You see, the -- the prisoner stayed at Kilby after both confessions for some length of time. Hugo L. Black: What was the other testimony on that point? Robert Straub: I think that's about -- Hugo L. Black: When he came? Robert Straub: That's about the only testimony on it that it was -- Hugo L. Black: There was no lawyer, he testified himself. Robert Straub: The lawyer did not come and testify, no sir. And it was shown that when he did come, he said he wasn't retained in the case and there's testimony that lawyers are not committed to solicit business in -- in Kilby Prison and of course, we don't (Inaudible) their solicity anywhere but lawyers are not permitted to roam about Kilby Prison to solicit business. And this particular attorney stated that he didn't represent the petitioner when he came out. As I said, his father visited him on Sunday and then on Tuesday after lunch during about an hour's conversation, he confessed again. Now, this time -- I don't believe it was taken down on a recorder. That might have been adjacent to it, but it was taped, dictated to a stenographer, took it down in shorthand and transcribed it. One of Your Honors asked what the difference in the two confessions. Well, there is one difference and maybe the reason for getting the second one was that the first was taken on a tape recorder. They decided they wanted something in writing signed by the petitioner so they got the second confession. Now, at no time, and this appears in the record, both by just reading it and by actual testimony that no time during his stay was he denied food or water or rest or abused in any way. There's absolutely no question, no testimony concerning any physical abuse. And the longest period of questioning was not more than three and half hours. Unless, you take a newspaper article, which says it was nine hours and then on cross-examination or during testimony by the newspaper reporter, he said that he assumed that number, made an assumption of nine. Speaker: Was it precedent? Is this tape recorded, the questioning? Robert Straub: Yes, sir. He testified on the trial. Earl Warren: Did they let the newspapers in? Felix Frankfurter: I mean, (Voice Overlap) -- I mean, was he present at -- in the -- Robert Straub: Oh, at the questioning, no, sir. No, no. No, he was not present. No. William J. Brennan, Jr.: Mr. Attorney General, am I correct -- Robert Straub: Yes, sir. William J. Brennan, Jr.: -- in my impression that's there's no testimony supporting any version of these events from the part of the defendant, all of the testimony is the version of the officer, is that correct? Robert Straub: Yes. Yes, sir. William J. Brennan, Jr.: And I gather that the reason there's no version from the defendant, there was this insistence that if he took the stand to tell his side of what happened he'd have to expose himself to examination -- Robert Straub: In cross-examination. William J. Brennan, Jr.: -- all of the details of the crime of which he was charged. Robert Straub: And to the further circumstance that he apparently had no witness present at that -- that he wanted to call and prove by others. William J. Brennan, Jr.: Well, I suppose the nature of things he wouldn't have -- Robert Straub: That's true. William J. Brennan, Jr.: -- had a witness present (Inaudible) of the case. He was in custody (Inaudible) He -- in any event, there's nothing except what the officer say happened -- Robert Straub: That's true. William J. Brennan, Jr.: -- to tell us what -- Robert Straub: The officers and in the case of the second confession, the woman stenographer who was employed by the prison department in its stenographic capacity, I think. Speaker: Does it appear -- going back in your chronology, does it appear why -- what the circumstance -- what these -- why the civilians arrested him in the first instance, what was he doing? Was he -- Robert Straub: He was, according to the testimony, wandering around at midnight in an alley in a White neighborhood. That is all it appears in the testimony. Whether there was more to it or not, it doesn't appear. That's -- that's it. He was picked up by one man and taken to a filling station where they called the police. Now, we contend, first of all, that under Alabama statutes -- on Alabama cases exemplified by Ingram against the State which we've cited in our brief that the failure of an officer to comply with our statute that requires him to take to a magistrate immediately or forthwith, does not render involuntary a confession obtained under those circumstances. And we call the Court's attention first of all to Stein against New York where admittedly the questioning was not as long as here. But in Stein, he was not taken. The -- the prisoner was not taken before a magistrate forthwith as is required by New York law and this Court in considering the overall picture of the voluntariness of the confession held that that of itself didn't require the exclusion even though they went contra to a New York statute. Turning then -- Earl Warren: Can I ask you this -- Robert Straub: Yes, sir. Earl Warren: Does -- does a private citizen have the right to arrest another one on suspicion in your State? Robert Straub: If I recall the statutes correctly, a private citizen may arrest for a felony committed in his presence or when he has reasonable grounds to believe a felony has been committed and that the person he arrest has committed it or is connected with it. I believe that's it. He may arrest for a misdemeanor committed in his presence, I believe. I -- I'm not too clear on that but there is a distinction between felony and misdemeanor. I think that it is. In Brown against Allen, the accused was illiterate. He was held for five days before being charged and he was given no preliminary hearing for 18 days. After his arrest -- and no counsel was provided either. The confession in that case was obtained prior to the appointment of counsel and prior to any preliminary hearing. Now, the Court in that case, you -- you all did point out that there was no evidence of physical coercion which we have no evidence here and there was no evidence of prolonged questioning. Now, we have questioning here of only at the most three and half hours. And I think this Court, as many other courts have recognized that interrogation is one way to get information and the interrogation itself is not prohibited. And we feel that three and a half hours at a time with ample time in between for rest include sleep is not prolonged questioning. Now also, you've pointed out in Brown and Allen -- against Allen, there were no promises of reward and he was not denied counsel of his choice, the same applies here, we believe, where testimony before each confession that they didn't promise him anything, didn't offer any reward so forth and that he apparently didn't ask the counsel because none was denied and he wasn't, if he did, he didn't appear. The Court held in Brown against Allen of course that the mere detention by police officers, which we have here, didn't render the statement that he made involuntary. Turning then to Gallegos against Nebraska, there we had a -- a 38-year-old Mexican -- Earl Warren: To return to Brown versus Allen -- Robert Straub: Yes. Earl Warren: -- did you -- did you have a question of retarded mentality in that case? Robert Straub: He was illiterate, yes. I don't recall whether -- Earl Warren: Wasn't there more -- there's more than that in this case, isn't it? Robert Straub: Yes, sir, but I'd like to call the Court's attention to this feature of -- of our case. He had his mother testify that he was thickheaded or -- perhaps it was his father. You have the fact that he was somewhere around 16 when he left the third grade.You have a testimony by three psychiatrists that he is a schizophrenic or some sort of -- of character. However, those three psychiatrists examined him for two hours. They had no background from which to draw the conclusions other than what they asked the petitioner himself and what he told them and as one of them said a brief conversation with the father. You get the background. Now, it may be that a person could be so insane that a psychiatrist can look at him and talk to him for two hours and definitely make up his mind, but this man was holding a job in the service station and worked there for a number of years, worked there all day, servicing cars, greasing and cleaning oil and so forth. And further as evidence we think of -- or perhaps the cursory nature of their investigation of the defendant or petitioner, it was brought out that he had stolen some automobile tires a year or so or several years ago shortly after the war. The psychiatrist rather than even apparently considering the fact that that might be some indication of criminal bent on the part of the petitioner, just assumed that that was the time he broke this behavior pattern and that he was crazy from that time on. And so, we think that the -- although the state put on no countering testimony as to whether or not he was sane or insane, that the evidence doesn't show that he was completely insane as is alleged and assumed here. Earl Warren: Did the State have any psychiatrist examine him? Robert Straub: No, sir. I don't believe they did. It doesn't appear in the record and to my personal knowledge, I'm just not sure. Felix Frankfurter: Was insanity made a defense? Robert Straub: Yes, sir. Not guilty and not -- not guilty by reason of insanity, both. Felix Frankfurter: And the verdict of course went to that defendant? Robert Straub: The verdict in Alabama does not specify. It just says guilty or not guilty. Now, this of course came in the verdict of guilt. Earl Warren: Did the -- Felix Frankfurter: Well, is there a finding of any kind? Earl Warren: You don't (Inaudible) Felix Frankfurter: They find -- what did the jury do (Inaudible) by insanity. Robert Straub: They find him, as I recall, guilty by a reason of insanity and therefore he is placed not guilty -- excuse me, by reason of sanity and therefore, he is then committed to an institution. Felix Frankfurter: So that if -- if insanity is found then he's not guilty. Robert Straub: Yes. Felix Frankfurter: (Inaudible) of an insane mind couldn't have -- Robert Straub: Well -- Felix Frankfurter: Both insanity -- suppose insanity supervening the claim that insanity is subsequent to the commission of the act. Robert Straub: We recognize the different types, Your Honor either -- Felix Frankfurter: (Voice Overlap) -- Robert Straub: I beg your pardon. Felix Frankfurter: Is that by (Inaudible) Robert Straub: It can be upon motion, yes, sir. It can -- the pretrial motion can be and it -- or can come up at the trial. Felix Frankfurter: All right, (Voice Overlap) the jury verdict impliedly rejected the defense of insanity -- Robert Straub: It did. Yes, sir. Felix Frankfurter: Because it didn't say not guilty because of insanity. Robert Straub: That's correct. Hugo L. Black: That settles it, doesn't it? Suffice that case is the jury's concern, that settles it. Robert Straub: Yes, sir. Earl Warren: Did the State put on any testimony at all directed toward the insanity defense? Robert Straub: No, sir. I don't believe they did. There's none in the printed record and I -- I've forgotten whether there's any in the -- it was not any professional, if there was any, there were no professional -- Felix Frankfurter: The cross-examination, (Inaudible) witnesses on that point? Robert Straub: Yes, sir. They cross-examined to the extent, how long did you -- Felix Frankfurter: (Inaudible) Robert Straub: Yes, sir. Felix Frankfurter: (Inaudible) Robert Straub: Mostly was rested on that. In Gallegos against Nebraska, we have the 38-year-old Mexican farm man who can't read or write English. Now, he was picked up in Texas of course. And he was held for a number of days with questioning until he finally confessed. He was held from September 19th until the 23rd in fact. And during this time, he was not brought before a magistrate and in fact, he was held in under much more severe circumstances than our petitioner here. There was testimony that one of the cells he was kept in had no bed, another one had no light, and he was given maybe one meal a day and also that he was threatened with violence. And then after he had confessed in Texas, he was sent to Nebraska and where he confessed shortly, a day or two after he arrived and then about 12 or 13 days later, was finally taken before a magistrate after he had confessed twice on each state. Felix Frankfurter: I noticed the trial began on the 30th, is that right, November 30th, on page 25, and by that time he had two lawyers, he had counsel. Robert Straub: Yes, sir, he had -- Felix Frankfurter: He -- he already first had acquired counsel? Robert Straub: No, sir. There were some questioning -- Felix Frankfurter: A maintained counsel, are they not? They're not court assigned counsel (Inaudible) Robert Straub: I can't answer that question, Your Honor. I'd have to ask counsel. It doesn't appear in the record. Mr. Attorney General: Well, these are not but the first counsel was appointed in (Inaudible) Robert Straub: I understand that his first counsel were appointed at arraignment under the circumstances that Alabama's court does appoint counsel and will appoint him throughout an appeal if -- in capital cases under our automatic appeal statute. Apparently he later retained counsel. Felix Frankfurter: But to (Inaudible) a trial as quickly as this (Inaudible) a case like this in Alabama? I need to commend you. Robert Straub: Well, sir, it -- he was picked up on September. Felix Frankfurter: (Inaudible) -- the twelfth of -- given the 12, the indictment required another 12th. Robert Straub: Yes. Felix Frankfurter: Not shortly after the alleged act? Robert Straub: No, sir. The act occurred in April. Felix Frankfurter: Anyhow, but -- Robert Straub: Yes, sir. Felix Frankfurter: (Inaudible) of the indictment? (Inaudible) Robert Straub: It all depends in Alabama, Your Honor, on where the Circuit is sitting at a particular time. Now, the Selma Circuit -- I've forgotten how many counties are in there, but it is a -- several counties. If it happens to be that it's sitting in that county at that time then it's quick. If it's not, it waits until it gets around until the proper time. Also in Lisenba against California, there of course we had the businessman who attempted or who did or hired of some sort the procured murder of his wife. Now there, he wasn't questioned for many -- very many days at the time, but he was questioned beginning one day and questioned all that day, all that night, and all the following day and the following night until 3 o'clock in the morning when he either fainted or fell asleep and they dropped him for a while. And after an accomplice had confessed, they took him back again and questioned him all day and into about the middle of the night, in fact, took him away from the -- from the jail, took him away from prison back to his home to question him. And then in the middle of the night, he said if they'd give him something to eat, he would talk and he was provided with food and he did talk. Now we contend that in Turner against Commonwealth, which is relied upon by the petitioners here to a great extent that the differentiating quality here is that in Turner, you had the relay technique employed. They kept the man right there where the officers were working and every time anyone of them had any free time, he called in the petitioner, the defendant in that case in question, and they kept that up. Now here, the officers had to drive about 50 miles to go -- to see the petitioner, to question him. Now, turning now to the question of his testimony whether or not he should have been permitted to testify on voir dire without submitting himself to cross-examination. Now, first of all, as Your Honors know, this Court has often held that the first eight amendments are not to be protect -- are not protected by the Fourteenth in the -- in the action by the State, unless, you get to that lack of fundamental justice. In fact, in Twining against New Jersey which went into the -- the question of the right to remain silent or the right to testify, the Court held that the inference is irresistible that it has been the opinion of Constitution makers that the privilege if fundamental in any sense is not fundamental in due process of law nor essential part of it. William J. Brennan, Jr.: Mr. Attorney General, before you get on -- Robert Straub: Yes, sir. William J. Brennan, Jr.: -- after this right to take the stand to limited purpose of testifying on the matter of admissibility of the question was denied, is there any offer of proof or what the defendant would have testified to? Robert Straub: No, sir. No. The objection was to the effect that they wanted to show, they wanted to put him on for the purpose of refuting certain allegations. William J. Brennan, Jr.: They didn't identify those -- Robert Straub: No, sir. William J. Brennan, Jr.: I gather allegations, you mean, testimony, certain testimony? Robert Straub: Certain testimony regarding the voluntary character of the -- of the confessions. I did not say in what manner they wanted to attack it. Felix Frankfurter: I want to be sure that I got it right. This voir -- this question was put in (Inaudible) admissibility preceding that action outside the hearing (Inaudible) Robert Straub: No, sir. Felix Frankfurter: Within that -- Robert Straub: And that question was raised as to the practice of Alabama. There's no statute on it. It's more or less a matter of discretion. I guess it's often heard in the presence of the jury and sometimes without the presence of the jury. Felix Frankfurter: Did this came up or not? Robert Straub: It was in the presence of the jury. Felix Frankfurter: But right after it was heard, the judge ruled on admissibility? Robert Straub: The judge rules on admissibility and the jury takes the same or they repeat the testimony or put other testimony on for the purpose of credibility and weight to be given. William J. Brennan, Jr.: Well, do you know whether if on part of the defendant gets asked that the judge excludes the jury, whether the practice is construed or not? Robert Straub: I don't know what -- whether there is any -- as you say, practice. I -- I think it's discretionary to the judge whether they do it as a matter of course all the time or not, I -- I'm just not in position to answer that question. William J. Brennan, Jr.: On this case in any event, there was no request to exclude the jury? Robert Straub: As was stated by counsel for petitioner, there was a request that the jury be excluded. William J. Brennan, Jr.: There was? Robert Straub: And the jury was excluded. And then they had a -- a conference of some sort which is not reported in the record. I don't know what it was about, but they had a conference right before that. Then the jury came back in. The State made its offer of the confession and without any further objection to the jury being there, the objection was raised, the offer was made to put the defendant on. The jury was excluded and then came back in and there wasn't any objection at that point of getting him back out again or any request putting them back. Felix Frankfurter: There maybe a little (Inaudible) When the jury was sent out, had the -- had the preliminary -- had there been preliminary testimony on admissibility? Robert Straub: To this extent, Your Honor, the officers had -- had testified that they had offered him no -- Felix Frankfurter: Yes. Was that in the presence of the jury? Robert Straub: Yes. Felix Frankfurter: And then something happened, you don't know what -- we don't know what -- the jury was sent out. Robert Straub: It -- it took place in this manner, Your Honor. I have it here, 230. I think we can explain it, page 230 of the -- of the printed record. Attorney Hall on cross-examination says, “That is all.” He's cross-examining one of the police officers about to introduce the confession and the -- the Court solicitor here says the State offers an evidence, a recording. And if the Court please, the defendant objects to what purpose to be the recording made by this witness on the ground that sufficient predicate had not been laid and they overrule the objection. And then they -- they go through this colloquy which we testified about it. Apparently, it doesn't appear here that the -- the jury did go out at one time but I think it appears in the -- on 190 as counsel has so helpfully provided here. I knew it was either here or in the preliminary or the full record, which is not before this Court. When was that particular recording made? Talking about the one which was subsequently introduced. If Your Honor please, we're going to ask the Court to exclude the jury at this time. And that's on 190, and they did excuse the jury at that time. Felix Frankfurter: I understand 10 minutes, so this was a short intermission. Robert Straub: Yes. Felix Frankfurter: But the testimony involved had been in the pertinent -- in the jury's hearing and the testimony following had been in the jury's hearing -- Robert Straub: Yes, sir. Felix Frankfurter: -- and they offered of the defendant to take the stand for -- for limited purpose of controverting some of the testimony on the admissibility would presumably have been in the jury's hearing. Robert Straub: Yes, it was in the jury, sir, the offer was in the jury's hearing. Felix Frankfurter: And presumably, testimony has been allowed to be made could have been in the jury's hearing. Robert Straub: Yes, sir. Now in Alabama and a few -- Earl Warren: Mr. -- Robert Straub: Yes, sir. Earl Warren: May I just ask a question as I -- I haven't quite got this clear in my mind but the way I -- I read it here -- Robert Straub: Page what? Earl Warren: Page -- at page 190, that's almost the beginning of this particular -- the testimony on this particular instance, isn't it? Robert Straub: Yes, sir. Earl Warren: Now, at that time, referring to page 140, about two-thirds down the page, the -- Attorney Hall says, "If Your Honor please, we are going to ask the Court to exclude the jury at this time." That's before there -- there were any testimony given by the officers as to how it was obtained. The defendant would like to take an objection to this particular line of questioning and objected to the manner in which the witness is being questioned. We feel that the jury's presence in this Court would be prejudicial to the defendant's interest. So he objected to this evidence being given in the presence of the jury and then the Court declared a recess. Robert Straub: Yes. Earl Warren: And then when they came back, they started right in without anything being said about this objection that the defendant made. Robert Straub: Well, sir, Your Honor -- Earl Warren: Yes. Robert Straub: Jury retired from the jury room, near the bottom, Attorney Hall and Solicitor Hare confer with the Court. Earl Warren: Yes. Robert Straub: Then take a 10-minute recess, stand in recess, Captain Baker returns to the witness stand and they go on. Earl Warren: Well, that's tantamount to the Court overruling the objection, isn't it? Robert Straub: Yes, sir. During the -- the conference that they had -- Earl Warren: Yes. But you're not inferring that the defendant consented to do this (Voice Overlap) -- Robert Straub: Well, we don't know. Earl Warren: Well no, but -- Robert Straub: There's no further -- there's no -- no exception or exception to the Court's ruling, it appears. Earl Warren: Do you have to take an exception to the Court's ruling in your State? You don't -- in my State that (Voice Overlap) -- Robert Straub: Under a very recent statute, and I'm sorry I can't tell you whether it's before or after this case was tried, you do not, and I believe frankly that it was after this case was tried that that came in. I -- I can't be certain on that. Earl Warren: Yes. Robert Straub: But you do not anymore have to take an exemption. In Alabama of course, a -- under our constitutional provisions, an accused may remain silent or even elect to testify. And if he remained silent, you can't make any reference to it in the argument and it's not supposed to be the basis for any inference of guilt. We've held in the long number of cases that in Alabama that if he does elect to testify that he takes the stand as any other defendant does and that he thereby opens himself up -- William J. Brennan, Jr.: Had we had a precedent for this in this situation? Robert Straub: No, sir. Not where he has requested a limited to -- limited to the extent of -- of this particular question. Now, we've had where he's asked to testify only on certain phases of his case -- William J. Brennan, Jr.: But, I -- Robert Straub: -- the alibi or something -- William J. Brennan, Jr.: And that's it, dealing with either a defense or the murder, (Inaudible) Robert Straub: Yes. But never to where he has asked in this particular instant. But we have the line of cases and I think this Court has also laid down such a line of cases that when a defendant takes the stand, even though he has a constitutional right not to be called upon to testify against himself, that once he takes the stand, he does so as any other defendant. William J. Brennan, Jr.: Well, but that -- is that -- that's -- that's a long standing rule of evidence, isn't it? Robert Straub: Yes. William J. Brennan, Jr.: Both in civil and criminal clauses -- Robert Straub: Yes. William J. Brennan, Jr.: -- which relates to the right to have the testimony of a party when party takes the stand on a matter bearing a -- going to the merits. Robert Straub: Yes. William J. Brennan, Jr.: But do you know of any authority for extending that rule to what's involved here? Robert Straub: I should like, Your Honor, to present some what we consider authority on that point at least. Turning first to Adamson against California, now there, you had the California statute involved which permitted a comment on the failure to testify. And the Court brought up this -- this particular statement. We're talking about the -- the choice that any defendant has to make between testifying and remaining silent. And they say that it's a dilemma which any defendant might be faced with. If facts adversed to the defendant are proven by the prosecution, there may be -- don't know a way to explain them favorably to the accused except by a witness who may be vulnerable to impeachment on cross-examination. The defendant must then decide whether or not to use such as a witness. The fact that the witness may also be the defendant makes the choice more difficult, but a denial of due process does not emerge from the circumstances. Now there, we are talking about perhaps merits, probably merits, but turning to Witt against United States, a Circuit Court of Appeals case, there, the trial judge heard evidence concerning admissibility in the absence of the -- of the jury and they came back in and they had the same testimony over again. And a -- at the -- after the second attempt of his testimony, the -- the judge at first of course had ruled his confession was voluntary then they came back in and the witness for the government testified again. On appeal, the defendant claimed that he wasn't permitted to testify to the voluntary aspect of his conversation. That was his basis of appeal. He said, “I wasn't allowed to testify.” And the Court after reading the record said this, “We don't read it that way.” He was permitted to testify all right if he wanted to, but the Court went no further than to suggest that if appellant testified, he would have subject himself to cross-examination. And the Court goes further to say that the appellant was obviously afraid to take the stand and speak concerning anything material matter inquired of him by his counsel. He could not well ask that the Court guarantee him in advance that he would be asked no embarrassing questions on cross-examination if he did do -- did so. If he had taken the stand and the Court had permitted undue latitude in his cross examination, he would have had something to complain about and that's what we -- position we take here, that he can't -- Felix Frankfurter: What did it say about the raffle? Robert Straub: The raffle? Well there, the federal agent testified to certain admissions of the defendant on a trial and the defendant didn't testify at all, and the trial resulted in a hung jury. There was no verdict. So they go into trial again and the agent gave the same testimony and the defendant in that trial took the stand and denied the statements. And so they began to cross-examine him and Court itself just asking why he -- why he didn't testify on the trial before. And then the Court and -- came to this Court and you -- this -- this Court stated the question as follow. Was it error to require the defendant wrap it, offering himself as a witness upon the second trial to dispose that he had not testified as a witness in his own behalf upon the first trial. And you, Your Honors came to this conclusion that a waiver of his right not to testify is not partial. Having once cast aside the cloak of immunity, he may not resume it at will whenever cross-examination may be inconvenient or embarrassed. We may not -- we need not close our eyes to the fact that every person accused of crime is under some pressure to testify less the jury despite his carefully framed instructions drawn on favorable inference and so forth. When he does take the stand, he is under the same pressure to testify fully rather than avail himself on a partial immunity. And goes on to state that the protection is not to be now and then drop and then pick up again throughout the trial. This was a trial of course in the federal court involving the federal constitution and the right not to be required to testify against yourself. Earl Warren: Suppose during a middle of a trial a defendant claims that he's ill and asked for a continuance and the officers take the stand and testify this man isn't ill, he's a malingerer. And the witness say -- the defendant says, "Well, I want to take the stand and testify that I'm not malingering, that I'm -- I'm a sick man, that I'm in great pain and I can't continue with the trial." The judge should say to him, "Well, now if you take the stand, testify to that and throw yourself wide open to -- to cross-examination on your guilt or innocence." Robert Straub: No sir. Earl Warren: What's the difference between that and this collateral matter as to whether these men unduly -- illegally obtain this confession? Robert Straub: Sir, I think the difference is this. In the question that you put has nothing to do with anything that has been placed in evidence. Now here we have testimony. We don't have the confession placed in evidence yet. Earl Warren: Not yet. Robert Straub: No, sir. But you have testimony that during his incarceration, a tape recording was obtained. Now, he wants to come in and say, "Wait a minute. This was obtained under such and such circumstances." Now in a trial of a coercion issue, even though it's the judge who has to make the determination, we contend that the credibility if nothing else of the petitioner is something that the judge wants to know about. It's going to be his word against the officer's word and as this Court in some case rather said that coercion is as often falsely asserted as it is falsely denied. Now we feel that -- let's -- let him get at the credibility at least then if they step outside the bounds of something that hasn't been put in evidence yet. And there was some of the main case which wasn't put in evidence yet this time. You had the testimony of the prosecutrix. He did not have the testimony of the other two women who testified they found him in their apartment those other times, so they couldn't question him on that. But what I'm saying is certainly the judge himself should be permitted to get at least the testimony concerning the credibility of the defendant. Earl Warren: The judge said open it to for all purposes. Robert Straub: Yes. Earl Warren: Shouldn't that -- and that (Voice Overlap) -- Robert Straub: That's right. He didn't -- Earl Warren: (Voice Overlap) at all, as I understood it. Robert Straub: That's right. That's -- that's correct. But we're saying he should at least have that aspect of it then if he goes beyond what this Court may subsequently determine is legal or proper then there is something to complain about. William J. Brennan, Jr.: Do you mean he should have an aspect of at least that is a judge out of the presence to the jury? Robert Straub: Under Alabama law, it apparently wouldn't make any difference, no, sir. William J. Brennan, Jr.: I should think it make a great difference. Robert Straub: Well, sir, now, the defendant -- the jury is called upon to determine or weigh the credibility then to be given. William J. Brennan, Jr.: Well, credibility, yes, but at this point, we're only dealing with the matter of admissibility, aren't we? Robert Straub: That's true, yes, sir. William J. Brennan, Jr.: I -- I could understand the force of your argument better if we're limited to a situation in which the judge alone was hearing it out of the presence of the jury in order to have everything upon which the basic determination of admissibility or not. Robert Straub: Yes, sir, but let's assume that the judge hears testimony in the presence of the jury concerning -- concerning admissibility where the defendant testifies to acts of coercions, supposed acts of coercion and the jury hears it. They can use that same testimony in their deliberations as to -- and the judge says it wasn't. So let's assume that the judge says it wasn't coerced and we let it in. William J. Brennan, Jr.: Well, apparently (Voice Overlap) -- Robert Straub: The jury can still use -- William J. Brennan, Jr.: -- in this case anyway so far as out of the presence of the jury is concerned because the very outset the judge decided -- Robert Straub: That they were not -- William J. Brennan, Jr.: -- they're going to take everything that was to be heard (Inaudible) Robert Straub: Yes, sir. Felix Frankfurter: I don't think that's quite so if I may say so. Because it may be incumbent now the petitioner to say, I would like to have -- if this goes on the preliminary question of admissibility and since if Your Honor rules this was not voluntarily made, that's an end of the matter. Robert Straub: That's true. Felix Frankfurter: In other words, the judge rules the confession out. Robert Straub: Then there is no further recourse. Felix Frankfurter: (Voice Overlap) to jury on its finding that it ought to be in. Robert Straub: No, sir. Felix Frankfurter: Therefore, on this preliminary question, that was a leading -- is a stupid nor a good way I put to the original in my inquiry as to how this would be and conducted because certainly, (Inaudible) how can the objective to have this ruling restricted if it's heard before the judge? Robert Straub: It could be heard before the judge and often is when it's requested but is -- doesn't -- there's no statute that says it has to be before the judge or anything of that sort. If Your Honors will permit, I would like now to briefly state the -- our provision -- our quotation of the Stein case and then jump toward the -- in the few remaining minutes to the question of the Negroes on the jury. Felix Frankfurter: It would be good enough having an answer to the -- Robert Straub: Yes, sir. Felix Frankfurter: -- question apparently explore you or looked into your direction. Are there any rulings on these particular question that are against you? Robert Straub: Your Honor, I know of none. Felix Frankfurter: (Voice Overlap) to know about it. Robert Straub: No, sir. There are none in Alabama. They point actually except for Witt in the Circuit Court and Stein -- Felix Frankfurter: (Inaudible) is that it? Isn't that your review? Robert Straub: It has -- it is arisen, but is -- has never -- except for Witt and Stein actually been determined as I can see it. Felix Frankfurter: That's what I mean by -- Robert Straub: There may -- there may be, Your Honor, and there is I'm sure in Louisiana and maybe some state adjudications on it, but federal to my knowledge has not directly decided the point. Felix Frankfurter: (Inaudible) Robert Straub: Sir, I don't know. Stein against New York, the defendants complain that they weren't allowed to take the stand and to testify the coercion because they would submit themselves to cross-examination. Now, this Court in discussing the Stein case said we're not -- it didn't properly preserve. It didn't -- they didn't make any offer to testify, but went on further to discuss the matter. You thought enough of it to discuss it in this light that if they had given such testimony, it would have been in direct conflict with that of the police and the decision would depend on which was believable. Certainly, the Constitution does not prohibit test of credibility which American law uniformly applies to witnesses. If an open court, free from violence or threat of it, defendants who'd been obliged to admit incriminating facts, it might bear on the credibility of their claim that the same facts were admitted to the police only in response to a beating. In the trial and skipping then on down, in trial of a coercion issue as of every other issue on the prosecution has made a case to go to the jury, an accused must choose between the disadvantage from silence and that to testify. The Constitution safeguards the right of the defendant to remain silent. It does not assure in the -- may remain silent and still enjoy the advantages that might result of them testifying and that's what we're saying here, Your Honors, that he's trying -- trying to take advantage of two constitutional safeguards. He's trying to take advantage of the right to remain silent so he won't be cross examined. At the same time, he's trying to take advantage of the right to be heard and we feel that this Court in the cases which it has decided and the Constitution itself does not guarantee to any individual those two safeguards at the same time. Earl Warren: But isn't there a third one there too that he -- that he's trying to preserve? Isn't he trying to preserve his right not to have a coerced confession introduced against him, which has been determined by this Court to be a constitutional right? Robert Straub: Yes, sir. That is -- Earl Warren: So there's a -- there's a third (Inaudible) Robert Straub: There's a third. Earl Warren: So isn't just as reasonable that he is trying to maintain his right not to be a witness against himself and at the same time, protect himself against other people giving illegal testimony against him. Robert Straub: By using, Your Honor, a third guarantee of remaining silent. Earl Warren: All right. I'll -- I'll accept that. Robert Straub: Turning now to the -- shortly to the motion to quash, it's true and it's recognized in the opinion of the Supreme Court of Alabama that for many years there were no Negroes that ever served on a grand jury or a petit jury in Alabama. But we have the proposition where in response to a motion to quash, an indictment was quashed and the entire jury box thrown out and the jury commissioners instructed to refill the box, which they did. The testimony shows that prior to this time, it might have been 30 names and it goes in the box in about 1200 or so White people. Now we have testimony concerning that it contains about 250 to 300 names of Negroes and about 1500 -- excuse me -- White people. Now, I'd like to call the Court's attention to the fact that in drawing the grand jury for this particular case, it's the first time that we have drawn a grand jury or petit jury in Dallas County, Alabama, where they had 250 or 300 names in the box. So you don't have a pattern to go by with this box and this jury and this indictment. The other testimony we feel should -- to be disregarded other than to shed light on what used to be the practice down there. I bring that out because in Akins against Texas, one of the cases upon which we rely where this Court held, again that numerical and mathematical precision is not necessary. The Court remarked several times that after this Court and the Supreme Court of Texas had reversed a number of cases because of the exclusion -- systematic exclusion of Negroes that the commissioners were obviously trying to follow the mandate of this Court and the Supreme Court of Texas in refilling the box and trying to do what the law of the United States and that the State required. Now, we don't contend that mere trying is enough. But we do say this that this effort being made and shown to have been made by the jury commissioners of Dallas County certainly shows that now, there is no planned and systematic exclusion of Negroes on the jury -- in the jury box of Dallas County. Now, this Court has held that in examining the record that you're going to give some great weight or some respect to the findings of the lower court in respect to issues such as this unless there's no evidence to support the findings of the lower court and we submit that when our Supreme Court of Alabama states that there is no evidence of systematic exclusion apparent in the record, that there is ample evidence to back that statement up. Now, in Thomas against Texas, we find the same reflection by this Court that it may be that they don't have the full pro rata with the White race in the selection of grand and petit juries in this case. Still it wouldn't be evidence of discrimination if they fairly and honestly endeavored to discharge their duty and did not in fact discriminate then no right has been denied. And we feel that by looking at the testimony of all the jury commissioners and the clerk of the jury commission that were before the trial court, the Court can't help but see that there is no discrimination being practiced now. Now, something was said about whether or not the qualifications of the Negroes would explain the disproportionate -- proportion in the jury box. Well now, we feel that under Fay against New York, that burden rests upon the petitioner to show when he realized on figures showing that there are so many Negroes and so many Whites and then tries to say that because of that, you -- Earl Warren: (Inaudible) Robert Straub: Excuse me, Your Honors. Earl Warren: Finish your thought. Robert Straub: If -- if your -- because of that, you don't have enough numerically in the box then he has to turn around and show that numerically they are qualified in such a position and we think Fay against New York is adequate -- William J. Brennan, Jr.: Well, if I get that then you mean at least the burdens upon them that they contend that this disproportion of colors to White, and Whites to colored. Robert Straub: Yes. William J. Brennan, Jr.: Was not in part the consequence at least of the inability of more colors to qualify within the eligibility standards. Robert Straub: Yes. William J. Brennan, Jr.: Is that what you mean? Robert Straub: Yes. Then they should come in and show that there are so many people who do not fall within our statutory exemption. Thank you. Earl Warren: Thank you. Mr. Greenberg. Jack Greenberg: May it please the Court. As to the question of the request to exclude the jury from the courtroom during the preliminary hearing on admissibility, there was the request on page 190, which was followed by a recess and the jury came in with no elucidation of that. But to make clear that it was petitioner's obvious, quite clear desire to have the jury out during this on page 254 of the record as the voir dire proceeds there's another demand that the jury be excluded, and to the middle of the page, the Court overrules it. And then during another witness on page 312 of the record, there was another demand that the jury be excluded and that was denied and overruled. Well, it's petitioner's position that whether the jury was in or the jury was out, makes no difference in this aspect of the case because when the jury was in, it's clear that there would be prejudice and that the jury could hear from the petitioner's own lips facts that he would otherwise be privileged to be silent about. But even if the jury were out and the State could obtain from the petitioner's own lips evidence that it could introduce later in the trial and the -- just the same amount of harm could be -- would be done under the circumstance. Felix Frankfurter: The State -- the State may completely deny the privilege against self-incrimination without violating the proper clause. Jack Greenberg: Well, Your Honor, of course I don't believe this case calls for the decision of that question. I don't believe that that has been so held. Felix Frankfurter: It's been held that he could come without him taking -- taking the stand. Jack Greenberg: Yes. It's been held you can come don't even take the stand, but I -- I don't believe that it has been -- the other has been held nor do I believe that any state has so denied that. Felix Frankfurter: I heard you to say that it has been held that you can compel him -- to put him on the witness stand and (Inaudible) the jury may take it to account that an innocent man who'd rather keep quiet has been held? Jack Greenberg: Yes. Well, the comment on failure to testify of course that this Court has ruled upon and has also noted that this is something the jury would almost naturally consider anyway. That's quite different than holding over -- Felix Frankfurter: If -- if that has been held, we held the contrary because we have this area not to charge him. They -- they must now take that into account on the assumption that juries will obey the (Inaudible) So we haven't held the contrary. We held just the opposite. William J. Brennan, Jr.: Mr. Greenberg, may I ask this. Suppose this was a case involving a shooting, the State might offer as in evidence of the gun allegedly used by the accused to kill the deceased and evidence was offered but this was the gun. Could the defendant be able to take the stand and insist on the right delimiting his testimony on the question whether or not the gun was his? Jack Greenberg: I wouldn't think so. No, Your Honor. William J. Brennan, Jr.: Well now, that's just a bit of evidence that's offered, isn't it? Jack Greenberg: And it is not tied up with the constitutional right. That's how I -- William J. Brennan, Jr.: I'll accept that. It's an offer in evidence and his effort is to keep it out of evidence on the ground that there ought to be a determination that it doesn't belong to him. What I'm trying to get at is the confession after all is a piece of State's evidence, isn't it? Jack Greenberg: Yes it is, Your Honor. William J. Brennan, Jr.: Well, if it's not -- if the defendant can't resist in the right to limit his testimony in the hypothetical case I put to you that it's not his gun, why is he in a different position here as you suggest that he ought to be able to limit his testimony to the question whether in fact it was his voluntary confession. Jack Greenberg: Because the question of the admissibility of the confession is the question of whether or not it has been obtained in violation of the United States Constitution. If there was such a question tied up with the admissibility of the gun, my answer would be the same. Admittedly, in some cases, there might be a line to draw but I don't believe this case calls for the drawing of such a line, but clearly, where the only way that a constitutional right can be preserved is by such testimony then its petition is -- contention that the integrity of the whole constitutional defense depends upon this preliminary determination. Earl Warren: Well, to raise Justice Brennan's question to a constitutional level, suppose this revolver that he's speaking about was -- was to be introduced in evidence and the claim was by the defense that the home had been burglarized, suppose this was a federal case and defendant claim that his home had been burglarized by a federal officer and this -- this gun had been -- been taken and that preliminary -- preliminary question was being tried by the Court. I presume the defendant could take the stand and testify that -- that he saw the federal officer come -- come in there and burglarize his home without -- without subjecting himself to cross-examination on -- on the guilt or innocence on the charge against him, couldn't he? Jack Greenberg: I would say that yes, Your Honor, because his defense against being convicted by means of an unreasonable search and seizure -- Earl Warren: Yes. Jack Greenberg: -- is a -- is a cognate to related defense. Earl Warren: It -- yes. So, that isn't -- that is different from the one Justice Brennan made -- Jack Greenberg: Yes, Your Honor. Earl Warren: -- it seemed to me. Jack Greenberg: Yes. I would like to stress that on this confession point, again, there have been many cases cited in both briefs and in the argument in terms of how many hours this petitioner was interrogated and how many hours that petitioner was interrogated. It's not merely a quantitative but a qualitative determination that the Court must make. And I think the key thing in this case is just who this petitioner is. Now, there has been some attempt to discredit the testimony of the psychiatrist who were on the staff of the Veteran's administration on the basis that they didn't examine him sufficiently. And that at any rate, the jury found he was not insane but the jury determination of course though it may indicate he was not legally insane, that he did not know the difference between right and wrong, still does not indicate that he was a person capable of understanding his rights and adequately defending himself before these police officers who interrogated him, at least it must be admitted 20 hours during this period of time during which a person in such circumstances obviously must have been terrified. In fact, at the outset of this case, the typewritten record indicates there was a request for sanity, a lunacy board to be convened and test his insanity and the State denied this. There were some questions as to when he was denied the right to see the lawyer who came to see him on a Saturday as to this as pointed out in our reply brief, the warden testifies, and this is the States' witness, this is the warden who has possession of all the records of the prison. It was on one Saturday but I don't remember the date. Question:"Was that before the confession?" Answer:"Yes. I believe it was. I couldn't say that for sure." Well, this is a matter upon which the State had -- was attempting to sustain the burden. It was -- it was its own witness and it was in possession of all the facts. And I don't think the State can rely upon the possibility of a conflicting inference in its own testimony to deprive petitioner of something that's reasonably clear on the record. There was another question by the Court as to just what kind of an order this was by which he was transmitted from the local jail to the state prison on page 201 of the record. It is indicated by a police officer. I just don't know he was committed to Kilby Prison on an order or request or something of the Circuit judge. That's what it -- apparently was administered of order for some sort of a transfer. I had earlier stated that the Negroes on the panel, petit jury were excluded by agreement of counsel. I was somewhat in error in that. Counsel agreed that both sides had struck some Negroes on the petit jury panel but there was no agreement of counsel to strike them. Speaker: (Inaudible) Jack Greenberg: I gather they would. It doesn't indicate but on page 180 of the record, the Court says it is further stipulated by and between counsel for the defendant and the solicitors that the members of the colored race who were on the venire were stricken by counsel to both sides. That's not an exact quote. William J. Brennan, Jr.: You're trying to answer the Attorney General's suggestion that neither has practiced -- that it has practiced -- in any event. Now, wait you in this circumstance where this time there were 250 to 300. Jack Greenberg: Well, my answer to that would be that 250 sounds like a lot but when looked at in terms of the population in the county, you would -- it does come out to something like 1 in 7 and in Cassell 1 in 12 was held a token. William J. Brennan, Jr.: Now, what about this other point then that you had the burden to show that the disproportion is not the consequence of the application of eligibility standard. Jack Greenberg: We are the -- this is quite a lengthy record and it's only part of the typewritten record. There was a tremendous amount of testimony in the qualification of jurors and I would say that at least 50 Negroes were put on the stand, graduates of Brown University and there were some Phi Beta Kappas and university presidents and doctors and dentists and so forth who had never been called for jury service. There are a tremendous number of them and I think the -- there are citations to the record, in the original record in our brief. Of course, we couldn't show out of the population of 6000 or 7000 that -- how many hundreds, but certainly, there was a very substantial number. Now, a partial answer to that was that they were exempt but exempt is not excluded. The exemption was for them to claim, not for the State to assume that they would claim and if they -- but there was no evidence that they would call, even given the opportunity to claim their exemption. Earl Warren: It is not a disqualification, it was an exemption. Jack Greenberg: That's right. There's a distinction and there's certainly a substantial number of Negroes there. I'd say 20 or 30 or 50. It is the -- the record is tremendous on this that were able to serve but were not called and given the opportunity to claim an exemption if they so desired. Earl Warren: Thank you, Mr. Greenberg.

William H. Rehnquist: We'll hear argument next in number 87-998, the city of Richmond v. the J. A. Croson Company. Mr. Payton, you may proceed whenever you're ready. John A. Payton: Mr. Chief Justice, and may it please the Court, the sole issue in this case is the constitutionality of the ordinance enacted by the Appellant, the city of Richmond, to remedy the effects of racial discrimination in its construction industry. That ordinance, the Minority Business Utilization Plan, provided that with respect to construction contracts with the city, at least 30 percent of the dollar amount of the contract must go to minority business enterprises. The ordinance was designed to last five years, and contained an appropriate waiver provision. By enacting this ordinance, Richmond was attempting to address one of the most difficult problems confronting our nation and its cities and States. Identified racial discrimination is a scourge of our society. Richmond focused on discrimination in the construction industry, and proceeded to try to remedy that discrimination. Aware of findings of the Congress regarding discrimination nationwide in the construction industry, and of this Court's decision in Fullilove, upholding Federal legislation remedying that discrimination, Richmond examined its own construction industry. It learned that from 1978 to 1983, two-thirds of one percent of its construction dollars went to minority businesses... this in a city that was 50 percent Black. That was not all that Richmond knew-- John Paul Stevens: Mr. Payton, can I interrupt you there? Is that a correct statement that only two-thirds of one percent went to minority business enterprises? What about the subcontractors? John A. Payton: --There is no evidence in the record with regard to how subcontracting was divided up, but as the District Court found, there is no reason at all to expect that the subcontracting would have gone another way. In fact, when Congress made its findings with respect to the construction industry, it found that the construction industry is an industry which is a business system which has precluded measurable minority participation. And the way that occurred, as the Congress identified it, was by first of all having formidable racial barriers to racial entry and advancement. The barrier to entry has to do with how you get to be a contractor. The barrier to advancement has to do with what the Congress found, and what this Court also noted in Fullilove, is the problem of racial discrimination in the relationship between prime construction contractors and their subcontractors. And they found that this business system operates in the following way: that a prime contractor often does business over and over again with the same group of subcontractors. And in one of the items that we cite in our brief, Glover, minority business... minority enterprise in construction, that is a study which noted that often in that relationship, prime construction contractors and their subcontractors, often it's impossible to break in by minority contractors, even when they have the low bid. That's one of the problems that arises. So, there is nothing in the record that says exactly what the racial breakup of subcontracting is, but the evidence with regard to prime contracting is stark and dramatic, and there is no reason, as the trial court found, to expect it to be any different. Byron R. White: But the ordinance purport to remedy that disparity, did it? John A. Payton: The ordinance purported to remedy the fact that there were very few minority contractors in the construction industry. Byron R. White: It just required subs to get to a-- John A. Payton: Yes. The means that Richmond chose to try to remedy the discrimination that it identified was to focus on a remedy that was both modest and narrow. And The narrow focus of the remedy was to look at subcontracting. And the reason for that, is that I think that everyone would agree, that it is easier to break into the business as a subcontractor, and break into this, what I would call a closed business system, by doing work with prime contractors. And the design of this program was that by doing it that way, by having a remedy that focuses on subcontractors, that will establish relationships between majority prime contractors and minority subcontractors. It will establish some trust, relationships, experiences, and thereby allow an expansion of the list of subs that prime contractors would be doing business with. Sandra Day O'Connor: --Mr. Payton, some of the cities concerned seem to be with impediments to minority participation, such as complicated bidding procedures and lack of capital and bonding requirements and so forth. Is there any indication that the city considered any race-neutral alternatives before enacting a percentage set-aside requirement? John A. Payton: Well, the city was well aware of other efforts, especially efforts by the United States Congress, to deal with this problem. The problem that the city was faced with wasn't that there was a group of minority contractors out there who were simply having trouble with bonding requirements or bidding requirements... not to say that those aren't problems, but they are, I think, secondary problems. The problem was that we had a business system that had precluded measurable minority participation. The number two-thirds of one percent is insignificant. It's close to zero. Sandra Day O'Connor: But we don't know what the figures were on subcontractors, as your response to Justice Stevens pointed out. John A. Payton: Yes, that's correct. And what the city was doing was to address the problem of the two-thirds of one percent selecting a remedy which is probably the best remedy to address that problem. Sandra Day O'Connor: Did the... now, the ordinance supplied also, in addition to Blacks, to Orientals, Indians and Aleut persons? John A. Payton: Yes. Sandra Day O'Connor: And was there evidence before the city that they had been subject to discrimination in the Richmond construction industry, do you know? John A. Payton: There is no evidence in the record with regard to that. Sandra Day O'Connor: And you think with the absence of all such evidence that the ordinance is valid as to those groups? John A. Payton: The reason the description of minorities that exists in this ordinance is there is that it is the same description of minorities the exists in the Federal program in Fullilove, and in fact, it's the same description of minorities that exists in the Virginia code that defines what a minority business enterprise is. I don't think that it really matters that much. There's no showing that Aleuts or some of the other groups are present in any significant numbers in Richmond, and there's certainly no claim here that someone lost some contract because of an Aleut getting a contract. Let me go back to your first question, though, Justice O'Connor, with regard to what the City Council looked at when it was considering this. This is not a problem that is brand new on the stage of racial problems. It's one that has been studied and studied, and there have been a lot of different remedies out there. And I guess it's important to realize that when Congress looked at this, when it enacted the 1977 legislation that was the subject of Fullilove, Congress went through a lot of other remedies that had been designed to try and deal with this problem, including laws that made underlying discrimination unlawful, including executive orders like Executive Order 11246, including executive orders like Executive Order 11246, including special efforts by various departments of the Federal Government to try to assist minority contractors... and in the face of all these things, Richmond also had its own anti-discrimination city code. It had experience with these Federal programs, including some Federal programs that set goals that applied to minority contractors. In the face of all this, when they looked at this in 1983, the number still is two-thirds of one percent of its construction business. So, those other alternatives, which are the ones that are normally set forth, simply weren't working. It was faced with a problem that required a different solution. Sandra Day O'Connor: Although Richmond had not tried any of those other race-neutral alternatives, I take it? John A. Payton: Well, that's not exactly right. Sandra Day O'Connor: You're saying Congress had not, or... but I guess Richmond-- John A. Payton: That's part of the Congressional remedy. In fact, the design of the statute in the Fullilove case, it's designed to administer funds through the State's two localities. Richmond was familiar with how these programs had worked. It's a beneficiary of a lot of these National programs, and in the face of that, it knows that those programs certainly didn't affect this problem that it saw, and that it sought to remedy. Sandra Day O'Connor: --Do you think that State and local government have as much authority and power to act in this area as Congress does, with its express grant of authority under the Fourteenth Amendment? John A. Payton: I think that State and local governments have greater responsibility... I'll come to power in just a second. I think they have a greater responsibility. These are problems that are very difficult to solve. We haven't come up with magic bullets for racism, or vaccinations to prevent it, and localities have to deal with these problems that they see every day in their contracting dollars, for example. And I think that it's not possible for Congress to come up with remedies that affect various localities in ways that will actually deal with these problems. With regard to power, I think that when this Court in Fullilove made reference to Section Five of the Fourteenth Amendment, that really was to find a basis for the Congress being able to impose a program on the States. And when it looked to whether or not it could do this for itself, it didn't have to look there. So I think Section-- Antonin Scalia: Do you mean the commerce power wouldn't have handled it? I would have thought you could do almost anything under the commerce clause. We had to mention the Fourteenth Amendment or we would have thought, "My goodness, this is not one of those areas that the Federal Government can get into. " John A. Payton: --Well, you may be right, Justice Scalia, but in then Chief Justice Burger's opinion, he made explicit reference to Section Five when he wanted to find a basis for power for the Congress imposing the requirements of the Public Works Employment Act on the States and, through the States, on their subdivisions. Now, that's the way he analyzed it. He also looked at the commerce power for other parts of the Act. That may or may not... you may or may not agree with him, but that is the way he walked through the analysis in Fullilove. And I would say that there is no reason to believe that States and cities and any other subdivision... as long as they make appropriate findings and have the authority under State law to do what they do-- Sandra Day O'Connor: Although in a sense, the Fourteenth Amendment was precisely designed to prohibit States from taking action on the basis of race, wasn't it? John A. Payton: --I think the Fourteenth Amendment was designed in a way to require States to treat people fairly. And I think this Court has dealt in the past, on several occasions, with whether or not States can take action that would be characterized as affirmative action, and I think the analysis is, there are disagreements on the edges, but the analysis is, if there is a sufficient on compelling State interest, and the means are sufficiently related or narrowly tailored, that it is authorized for a State to do that, and for the State's political subdivisions to do it as well. Richmond satisfied those criteria. Byron R. White: Well, it didn't copy... it didn't follow the Fullilove scheme entirely, did it? On Fullilove, didn't the regulations require that before any entity could take advantage of the preference, that it prove that it itself had been discriminated against? John A. Payton: There are... there is something to that effect in the Fullilove. Byron R. White: It's an expressed provision of the regulation. John A. Payton: Yes. There are later Congressional actions, including the Surface Transportation Act of 1988, which don't have such explicit requirements. Byron R. White: Well, that means that we... you're talking about Fullilove. In Fullilove, the opinion of the Court itself indicated that the only people who could take advantage of the preference were people who themselves could prove they had been discriminated against. There's nothing like that it-- John A. Payton: There's nothing like that. Byron R. White: --There's nothing like that in Richmond. People get this preference whether or not they've ever suffered discrimination. Isn't that right? John A. Payton: Yes, that is right. I think there are two responses, though. The first response is that I believe the jurisprudence on this is that it is not necessary, or is not a fatal defect, if a plan such as this plan is overinclusive. Second, given what we learned about the construction industry, the number of contractors that you are talking about that would not be the victims of the past discrimination is very small, if at all, and I should also say that just because a Black person manages to be a contractor in the face of this system doesn't mean that he is not a victim. That there are clear findings that there are other obstacles to his advancement, and that in some sense, because of how stark these numbers are, I would say it is fair to have a presumption that all the minority contractors were in some sense-- Byron R. White: Was it... this isn't exactly like Fullilove? John A. Payton: --It is not exactly like Fullilove. Byron R. White: So you have to mix. Was this ordinance, Mr. Payton, reenacted in 1988? John A. Payton: No, it was not. William H. Rehnquist: So it's expired? John A. Payton: It was not reenacted. William H. Rehnquist: Well, then, its prescribed duration was five years from June? John A. Payton: That's correct. William H. Rehnquist: So it expired on June 30, 1988? John A. Payton: Yes. William H. Rehnquist: Does that raise a mootness problem? John A. Payton: The 30 percent figure... let me describe the reach of the remedy, here, and I will get to your question right away, Justice Blackmun. Richmond's share of the construction business, the city's share of the construction business in Richmond, is only about 10 percent. Therefore, even if the 30 percent figure is a complete success, that would only have an impact on some three percent of the construction business. Where did the 30 percent figure come from? Because there is a virtual preclusion of minority contractors from the construction industry, it isn't possible to look at that set of numbers and use it. Therefore, the 30 percent figure is a figure that is simply roughly between the two-thirds of one percent and fifty percent. That's where it comes from. There is no magic formula or any more precise way of coming up with the 30 percent, and I guess in looking at it, it is fair to look at its impact on the entire construction industry, which I represent is very modest. Anthony M. Kennedy: In this case, the old from the minority subcontractor was some $7,000 over the quotes that the prime had received from other suppliers. Is it the most narrowly tailored remedy for correcting past discrimination? John A. Payton: Well, let me-- Anthony M. Kennedy: To permit an increased price, and require that the increased price be paid, without a waiver? John A. Payton: --There are two points to this, as well. I think that the record does not support the proposition that the minority contractor's bid was going to... would have been higher or lower or the same as the majority subcontractors's bid. This is what is in the record. Croson, when it went to put in its bid, contacted two majority subs and received bids back from them. When it received those bids back, it had the two majority subcontractors engage on a little price war back and forth among themselves, and they adjusted their bids down, down, down, until they got the lowest bid, and then they put in that lowest bid. When Croson received the bid from the minority subcontractor, after the bid had been submitted, it received that bid. It was higher as you just explained, but Croson never sought to negotiate with the minority subcontractor to take that price down, as it had with the majority subcontractors. So, on this record, we don't know what the minority price would have been, if Croson had engaged in the negotiation that it did with the majority. In a larger sense, though, I think that whether the price is higher or not raises no real Constitutional question here. It is... Richmond can decide if it wants to pay more money in order to achieve a remedy for this past discrimination. And as between various contractors for the city's business, there is no discrimination at all. They all get judged by the same rules. Anthony M. Kennedy: Well, is it a requirement then for the validity of an ordinance with such an escalation mechanism that the city absorb the excess? John A. Payton: It would have. Anthony M. Kennedy: Is that a requirement for the validity of the ordinance? John A. Payton: No. Anthony M. Kennedy: So that the costs of during past discrimination can rest on a third party? John A. Payton: Well, construction is competitively bid, and if the city attaches requirements to the bids, people can choose not to bid. They can bid, they can eat some of their own profits, they can shop around and make the minority contractors take their price down... this would be a competitive market. And it is a competitive market, also, for the minority subcontractors. That is, if Croson identifies one, two, three subcontractors, he can negotiate with them, and take their price down. And in the end, we fully expect competitive forces to operate here, to create thriving, competitive minority contractors who begin as subs and will graduate to be-- Anthony M. Kennedy: But if the competitive forces were not operating, and minority subcontracting was at a premium borne by the prime contractor, that would still not impair the validity of the ordinance? John A. Payton: --I think not, but that is not the case we have here. The case we have here is that the prime negotiates with the sub, and he puts in a bid, and the city... the lowest bid wins. And it's just like the market operated before. The primes have to negotiate with their subs to get their prices. In order to put in a price here, to be responsive you have to find a minority contractor. And you put in your price in the kitty, and the city takes the lowest bidder and pays the price. Clearly, this way, the... any increase would be borne by the city. The design of the program is in fact to increase the number of minority contractors. Byron R. White: There was a minority contractor, a sub, who bid here? John A. Payton: Yes. Byron R. White: And the only reason he didn't get it, you suggest, is that the prime really discriminated against him? John A. Payton: No, I'm not suggesting that. The prime-- Speaker: Well, you say you didn't have an opportunity to lower his bid, and meet some lower bids. John A. Payton: --No, Croson took the position that the requirements imposed by this program have violated its rights, and rather than rebid this contract once the minority subcontractor had been identified, Croson chose to file this lawsuit, which is an appropriate way to proceed. And-- Byron R. White: Why wouldn't the city really attain its objective in this particular case if it had just had an ordinance that forbade discrimination by prime contractors against minority subs? John A. Payton: --There is such an ordinance, 1981, I think, would forbid discrimination between primes and subs. I think there are a lot of other statutes out there that affect in one way or another a lot of the underlying actions in this case. The problem that you face in the construction industry... it is not that easy to get at this. And just to say that all those things are now unlawful... they have been unlawful. It doesn't affect the fact that we have a closed business system. It is to affect the ramifications of this closed business system that this ordinance is necessary. Byron R. White: Well, if there had been 100, say 100 minority subs had bid this job, and all of them had been above the... all had been high bids, shouldn't the low bid prevail? John A. Payton: Well, the question is, I guess that question is whether or not under Virginia law, I don't think that's a Constitutional question, under Virginia law, it's authorized for Richmond to have an ordinance where it has an exception to taking the low bid, because it wants to remedy this discrimination in this way. And that was litigated, and it's clear that Richmond has the authority to do that. But I don't think it raises a Constitutional question. All the primes are treated the same. Anthony M. Kennedy: As I understand your answers, you want us to consider this case as if the minority contractor did not make a higher bid? John A. Payton: I think-- Anthony M. Kennedy: And that's how we evaluate this record, and this case, and this ordinance? John A. Payton: --Yes, I think you can consider this as though it's a facial challenge. And I think that it's clear that the minority contractor did make a higher bid, but I think you can't draw the significance from it that you started off with... which is that if there had been negotiations, it would have remained a higher bid. That may be, but we don't know on this record. I think this case should be analyzed by looking at it as a facial challenge to this ordinance. With regard to whether or not Croson-- Anthony M. Kennedy: Well, Croson's damages aren't... I take it are based on the loss of the contract. John A. Payton: --Yes. But I was going to go to... the only way the other part of this comes into it, the $7,000 and the higher bid... is if there is something to whether or not Croson was improperly denied its waiver. And I think there is a finding by the District Court, which heard witnesses on this, there's a finding that the city acted absolutely reasonably. That's the District Court's description, absolutely reasonably, in denying the waiver. Byron R. White: But you say it's a facial challenge. That means that the ordinance couldn't be applied constitutionally in any conceivable circumstance. Suppose there's... suppose the minority contractor was asked to lower his bid, and he said, "NO, I'm not going to lower my bid, that's a low as I can go. " Now, could the ordinance be constitutionally... could the ordinance constitutionally require Croson to re-bid? John A. Payton: Yes. All that would happen in that circumstance is that Croson would take the minority bid, which for the purposes of this I will concede is higher, put it in... Croson was the only bidder on this... Croson would have got the contract, the city would have paid the difference. That's exactly what would have happened, and I think that raises no constitutional question at all. Byron R. White: But could he... could... well, so the question of re-bidding would never come up? John A. Payton: That's correct. I'd like to reserve the rest of my time. John Paul Stevens: May I just clear up one thing, though? The ordinance does not require that the sub be a Richmond concern, does it? John A. Payton: No, it does not. John Paul Stevens: It does not. John A. Payton: Let me just clarify that. Under Virginia law, it is not possible for the city of Richmond, except in very, very narrow circumstances, to discriminate on the basis of where a sub or a prime comes from. And the narrow circumstance is if the bids are exactly the same. Also, I think it is the case... and there is no evidence to the contrary... that the substantial portion of all the construction work done in Richmond for Richmond is by Richmond contractors and subcontractors. Construction is by its very nature a local-- John Paul Stevens: But if out-of-State materials, the items involved here could have been purchased out of State, presumably, from a minority business enterprise in Baltimore, or North Dakota, or some place. John A. Payton: --Yes, they could have. William H. Rehnquist: Thank you, Mr. Payton. We'll hear now from you, Mr. Ryland. Walter H. Ryland: Mr. Chief Justice, and may it please the Court, responding to the last question which was asked of Mr. Payton, on the question of whether the city would absorb the higher bid by the minority supplier in this case, the record is quite explicit that J. A. Croson Company asked the city to do just that, and was refused by the city, on grounds that the bid could not be increased. The price could not be increased after the bids were in. Byron R. White: And so what happened? The city said re-bid? Walter H. Ryland: The city then announced that because of Croson's noncompliance with the ordinance, the contract would be re-bid. Byron R. White: So the real... so the question is, was this ordinance constitutionally applied in this case? Walter H. Ryland: I think the threshold question which we attack is whether the council had a proper basis for adopting the ordinance in the first place. We did argue that-- Byron R. White: So you say it's a facial challenge? Walter H. Ryland: --It's facial in the sense that we attack the authority to adopt the ordinance. It's not a facial challenge in that it's-- Speaker: You're saying it couldn't be constitutionally applied in any circumstance? Walter H. Ryland: --We're not contending that the ordinance could not be constitutionally applied in some circumstance. William H. Rehnquist: But you're contending that it couldn't be applied in this circumstance? Walter H. Ryland: We're contending that in this particular case, the city had no authority to adopt it. It had no-- William H. Rehnquist: Well, but... suppose the city, did have authority to adopt an ordinance that might do some of these things. It's your contention, isn't it, that that ordinance cannot constitutionally be applied to your situation here, where Croson was bidding on this contract? Walter H. Ryland: --Yes. Anthony M. Kennedy: We must infer from what you have told us, I take it, that if the... if Croson had absorbed the $7,000 himself, he would have received the contract? Walter H. Ryland: Yes. Anthony M. Kennedy: And that because of his refusal to absorb it, he did not get the contract. Walter H. Ryland: It's only because of his refusal to absorb it that he did not get the contract. Speaker: xxx-- Walter H. Ryland: Essentially, what we have here is a conclusion by the city that because prime contracts were being awarded to minority businesses in a low number, that this justified the adoption of a race-conscious legal remedy to correct the situation. In effect, it was determined that because of the low percentage of awards to minority firms, the construction industry would be required to remedy the situation by having those contractors who were owned by non-minorities contract 30 percent of their contracts to minority firms. There was no finding by the city, no evidence before City Council which would entitle City Council to infer that this societal discrimination should be remedied by the adoption of such a racial classification. Our position is that if City Council wanted to attack societal discrimination, they could do it by adopting various means, race-neutral means on their face. The City Council had an ordinance which prohibited discrimination in the award of public contracts. It could have exercised its authority under that ordinance, and put the effort into enforcing that ordinance, that it put into administering this one, and achieved a constitutional result. William H. Rehnquist: --Did the city make any finding that it had previously discriminated against minority contractors? Walter H. Ryland: No, the transcript of the hearing before City Council was quite explicit in rejecting any contention that the city had discriminated in any way. Clearly, no court could force the adoption of a law like Richmond's, unless the city itself had been guilty of discrimination against the groups identified in the ordinance. When a city voluntarily adopts a racial preference, it should be looked at very carefully. The city is more likely to... more likely than a court to be acting for a purpose not permitted by the Constitution. This is different from the situation in Fullilove, where this Court gave proper deference to the findings of Congress that it was acting for remedial purposes. Here we have an action by a locality, and the record before the Court shows quite clearly that the reason they were adopting the ordinance was that other cities had it. That was the testimony at the hearing before City Council. William H. Rehnquist: Well, why should we give a different presumption as to a remedial purpose for what Congress did than for what the city of Richmond did? Wouldn't they both be doing it for pretty much the same purpose? Walter H. Ryland: Not necessarily. I think that if the Congress says it's acting for remedial purpose, because of the breadth of the national government and the breadth of national problems that it's seeking to deal with, that finding inherently has more credibility than the unsupported action of a local government in adopting what would be a mere pork barrel political dispensation of public money. William H. Rehnquist: But what Congress adopted might be just a pork barrel thing, too, but we do give it a presumption. Walter H. Ryland: It might be, but it's less likely to be. Antonin Scalia: Well, I don't know what you're driving at. Is it clear from the record in this case that we are dealing with the majority favoring the minority in the particular political unit? We've been talking about minority contractors. Walter H. Ryland: You mean whether-- Antonin Scalia: Are these people... do we know from the record that they are in fact a minority of the political unit that adopted this race-based law? Walter H. Ryland: --I don't think that there is anything in the record per se which talks about the minority percentage in the area. It was assumed for purposes of discussion that it was approximately 50 percent. Is-- Antonin Scalia: Do you think that we might take a different view of race-based matters where the political unit is favoring a race that's the minority, as opposed to what is the case, where a political unit favors a race that is the majority? Walter H. Ryland: --Yes, one of the amicus briefs filed some Census data which showed that the actual minority percentage in Richmond was more than 50 percent. It was known that a majority of the people on City Council were Black. We have not chosen to make an issue of that because of one of those decisions that lawyers make in representing a case. Essentially, it seemed to us that the tendency to adopt an ordinance for the wrong reason would be there any time you were dealing with a significant political interest group, without regard to whether it was in the majority or not. So we decided not to attach legal significance to the fact that they had a majority vote or council and perhaps had a majority in the population. John Paul Stevens: The transcript of the hearing before the City Council does show that the city is approximately 50 percent Black and 50 percent white. Walter H. Ryland: Yes, that's in the transcript. The fact that the population was approximately 50 percent Black was used in the explanation of why the city chose the 30 percent number. And I submit that that's no justification for choosing that number, but that was the explanation given for why it was chosen. Sandra Day O'Connor: Mr. Ryland, are you... do you think that the city can only act affirmatively on the basis of remedying its own prior discrimination? Walter H. Ryland: Yes. Sandra Day O'Connor: So that if the city had evidence that in fact private construction contractors were indeed discriminating against minorities, that the city would be powerless to take action to remedy that private discrimination? Walter H. Ryland: No, I would not take that position. I would think that's a different situation, when there is, where there is known discrimination, as opposed to the unidentified, amorphous concept that there is discrimination out there somewhere by somebody. In a specific case of known discrimination, I would-- Sandra Day O'Connor: By private-- Walter H. Ryland: --By a private party. Sandra Day O'Connor: --Parties, against others. Walter H. Ryland: Yes, I would not-- Sandra Day O'Connor: So you do concede that the city would then have the power to try to remedy that? Walter H. Ryland: --In proper circumstances, yes. Sandra Day O'Connor: Now, that was not the view taken by the court below, was it? Walter H. Ryland: Well, in... before the court below, there was no identified discrimination for the court to address. The court was only addressing-- Sandra Day O'Connor: By either the city or private parties, is that your position? Walter H. Ryland: --That's correct. That's correct. Sandra Day O'Connor: But there certainly was language in the opinion to the effect that the city would be powerless to remedy private discrimination. And where did he get that language, do you know? What's the root of it? Walter H. Ryland: Well, I think the root of that language comes from the reference in Mygant, in the plurality opinion to remedying discrimination by the governing body. Harry A. Blackmun: But it's a plurality opinion. Walter H. Ryland: It's a plurality opinion. And the reference is in the context of this Court never having approved a race-conscious legal remedy by a state actor in the absence of discrimination by that actor. Byron R. White: The city certainly would have authority to remedy private discrimination. It's a question of what would be... how would it remedy it? It could certainly have an ordinance forbidding private discrimination. Walter H. Ryland: Yes. Byron R. White: And then give appropriate remedies against those who are discriminating. Walter H. Ryland: Yes. If it identified-- Byron R. White: But the issue is whether it itself could use its own authority to enact a set aside to remedy somebody else's discrimination. Walter H. Ryland: --Precisely. Precisely. We don't take issue with the city's authority to act affirmatively in an identified case. Anthony M. Kennedy: If the city's aware that a private contractor is discriminating, may it continue to deal with that contractor? Walter H. Ryland: If it were aware of the discrimination, and were aware that its continuing to deal with the contractor would further that discrimination, I think the city would be exposing itself to liability. I think it could continue to deal with the contractor, but at its peril. Harry A. Blackmun: But surely Richmond has done that in the years prior to the distant past? Walter H. Ryland: I don't believe so. I don't think that we have any identified instances of discrimination by any entity against minority firms. I think that the accusation that there is discrimination in the construction industry does not extend to the award of relief against the industry or any particular firms because of that general finding. Anthony M. Kennedy: Well, if this ordinance had been enacted in the year 1870, would the chances for its being sustained be any greater than now? That's two years after the enactment of the Fourteenth Amendment. Walter H. Ryland: I understand. I don't feel competent to answer that, Justice Kennedy, because I don't know the context of the time and what the courts would have done. Anthony M. Kennedy: Well, we know about our history, we know about the context of the time, we know about slavery, we know about the necessity for the Fourteenth Amendment, and we know about the existence (a), of slavery, and (b), of discrimination after slavery ended. Walter H. Ryland: Yes. You had the Freedman's Bureau, which was established at that time specifically to provide aid to former slaves. Nobody has ever suggested that that was unconstitutional or some sort of unlawful preference. Congress was struggling with the powers of the Fourteenth Amendment. I think that under the line of cases since Brown v. Board of Education, we do not find this Court approving race-conscious legal remedies in the absence of a shown violation. So, I would have to answer that based on recent constitutional history, the rule should have been the same in 1870. Anthony M. Kennedy: And you think it's unlikely that this ordinance could have been sustained in 1870, when Blacks had been emancipated for simply, approximately six years? Walter H. Ryland: Well, you would have had a different factual situation in that regard. Certainly the Government would have been entitled to provide aid to former slaves to help them become skilled tradesmen, craftsmen, contractors able to stand on their own in the business world. There's no question about that. For the Government to have said to white businessmen who were not former slaveowners that they had to provide the remedy to slavery, I think, raises a very different constitutional question. I'm uncomfortable dealing with this in the abstract, because there are so many variables in there. But I don't think we had any remedies in the post-Civil War period that imposed affirmative duty on non-violators, so that's the distinction we make in this case. A second aspect of our position is that this ordinance was not narrowly tailored to achieve a proper remedial objection. We've mentioned the fact that the 30 percent quota was pulled out of the air. The fact that it's over inclusive and that it grants preferential rights to groups that are not resident in the Richmond area, and which have never been subject to discrimination in the Richmond area, would automatically give rise to a constitutional violation as soon as one of these minority group members exercised its right to preferential treatment under the Richmond ordinance. It's not enough to dismiss the seriousness of the problem by saying none of these groups have participated yet. Under this law, there's nothing to prevent qualified and competent minority firms from areas of the country which have not experienced discrimination to come into the Richmond area and participate under the ordinance. There's no real supervision of the administration of the ordinance to assure that it achieves a business purpose. The 30 percent quota requirement has a problem in it, in that it's so high that it can force the award of a much higher proportion of the contract to minority firms. This has a serious impact on non-minority subcontractors who are in the same trades where there are qualified minority firms already participating. The impact on those people can be exclusion from the marketplace, and the impact on them is as great as the impact on Croson, with the loss of its contract in this case. Harry A. Blackmun: If the figure were five percent, would you be making the same argument? Walter H. Ryland: I could not make the argument that it would force the award of a much larger percentage. Harry A. Blackmun: No, but would you be making the same basic argument? Walter H. Ryland: Yes, yes, a constitutional violation is a constitutional violation, whether it's a little one or a big one. Harry A. Blackmun: And if it were two percent, you would still be making the same argument? Walter H. Ryland: Yes. Harry A. Blackmun: So the figure, really, is meaningless? Walter H. Ryland: The figure is meaningless on the down side. The higher it gets, the more practical problems result. John Paul Stevens: You said exclusion from the marketplace. But even the 30 percent figure, according to your opponent, really is only three percent of the market. Walter H. Ryland: It's three percent of the market, by that computation, but for the individual subcontractor who is in competition with one eligible for the minority preference, on him that three percent is a much larger proportion of his business. And let us not forget that the subcontractors who are competing for these jobs are not all large, wealthy firms. The subcontractors struggle without regard to race. There are many tradesmen out there who would like to be a prime contractor with a governmental entity but don't have the expertise or the skill and never will. And that's without regard to race. There are a lot of struggling business cut there, so any time you adopt a law which has the effect of denying a substantial part of the market... of their market... to them, the impact is quite severe. Thank you. William H. Rehnquist: Thank you, Mr. Ryland. Mr. Payton, you have four minutes remaining. John A. Payton: Thank you, Mr. Chief Justice. Let me respond to four points. With regard to the question you raised, Justice Scalia, about isn't there a problem because Croson wasn't allowed to raise their bid at the end, the reason... or maybe Mr. Ryland raised it... the reason Croson wasn't allowed to raise their bid once it got the bid from its minority contractor is, under the city's procurement policies, you out in a bid, and that's it. And when he asked permission to raise his bid in light of this, it was denied, and he was asked to re-bid. And instead of re-bidding, he filed this lawsuit. There's just no issue that raises any constitutional question out of that. The District Court, in ruling on this waiver issue... if I can just read what the District Court said at note 20, supplemental appendix 231... "Croson has not persuaded this court that any of the additional evidence it has adduced, after full discovery, that Continental. " --that's the minority sub... "was in fact unavailable or was taking advantage of the plan to charge excessive prices. " "The city's decision was not only reasonable, but appears to have been absolutely correct. " --that is, in having the contract re-bid. With regard to what was actually before the Richmond City Council, and what it was trying to address, it was not societal discrimination. The City Council was aware of what Congress had found, in the construction industry, and how it had described that industry, and what Congress had tried to do to remedy that. But it was also aware of what had happened in its own industry, and at the City Council hearing, it heard evidence from various of the construction trace associations, and from that it learned that there were virtually no minority members of any of the construction trade associations. It also heard testimony from a former mayor that there was a widespread discrimination in Richmond's own construction industry. And that testimony was concurred in by the City Manager. So, what Richmond had was a very full set of findings and understandings. There was no question that this was a remedial statute. It said so on its face, and when the issue of its remedial nature came up, it came up before all of the trace association representatives testified, and none of them took issue with that. In the District Court, where there was fully opportunity to litigate this, the issue of whether or not there was sufficient factual predicate of discrimination was not joined by Croson. There is no rebutting testimony about the factual predicate of discrimination in this case. With regard to whether or not there should be a different standard of proof, or scrutiny, that attaches to a Governmental body that depends on its racial composition, I guess I can only say it's the same Fourteenth Amendment and I think it's the same standards, and it applies whatever the racial composition of Richmond, whatever the racial composition of Richmond's City Council, whatever the racial composition of-- William H. Rehnquist: But at some point, don't you reach a situation... supposing a State had 60 percent Black people in it. Would that State still be able to allow a set-aside for what they would call i.e. Black businesses? John A. Payton: --Well, I can remove the word "minority" if it helps the analysis. If the State determined that in fact its construction industry was characterized by past racial discrimination which had locked out of that business system minority contractors, I would say it's irrelevant what the minority population of that State is, as long as it makes the appropriate findings in its own locality and then goes about trying to remedy that in a way consistent with the jurisprudence of this Court. William H. Rehnquist: But you surely wouldn't call them minority contracts? John A. Payton: I will remove the word. As long as it defines that Black contractors have been locked out, it can seek that remedy. And the Constitutionality of that remedy can be litigated in District Court. But certainly there is a sufficient basis in evidence for Richmond to do exactly what it did, and in the District Court where this was litigated, nothing was presented to rebut any of that factual finding of past discrimination... nothing at all. I think that this is not societal discrimination-- Byron R. White: The discrimination was practiced by... who discriminated against the minority contractors? John A. Payton: --I think it was a closed business system, as described by-- Byron R. White: Well, that doesn't help me very much. Who? Who did the discriminating? The city? John A. Payton: --No, it's not the city. It's not the city. It is all aspects of the construction industry itself, from the trades... one of the ways you become a construction contractor is to enter as a member of a trade and then leave that and become a small construction contractor. That's blocked for Black members. Byron R. White: well, I suppose you could say that about any industry. John A. Payton: No, you can't. Byron R. White: In the past? Way back in the past? John A. Payton: No, you can't. With the construction industry, we know a lot about what we speak here, and there have been studies and studies and judicial findings that establish that there is a closed business system in the construction industry that was being remedied by Richmond, here. William H. Rehnquist: Thank you, Mr. Payton. The case is submitted.

Earl Warren: Mr. Carriger, you may continue. John S. Carriger: Mr. Chief Justice and Members of the Court. Mr. Chief Justice was asking at the noon recess, as to why this matter would not be determined by the arbitrators rather than being submitted through the court procedure. And we believe that under Section 301 of the Labor Management Act, that -- and Congress had in mind that the courts, they're not the arbitrators based on contracts. And that the courts determined the arbitrability. Now, I don't have the say in his reply brief has -- Earl Warren: But the arbitrability isn't in question in these cases, it -- it's a -- I thought it was -- isn't it conceded in this case that -- that, if there were substance to this particular claim, that it would be arbitrable, because it does affect conditions, isn't so -- John S. Carriger: Yes. Earl Warren: -- working conditions (Voice Overlap) -- John S. Carriger: For the determining whether or not arbitration is to be ordered by the court. Earl Warren: Yes. But the Court just held that it was frivolous and therefore -- therefore, it shouldn't go before an arbitrator. John S. Carriger: That was -- I like the work baseless, that although in phrase, they've copied -- Earl Warren: Well -- John S. Carriger: -- the Court has used these -- the combination of terms that has been used in other courts and decisions. But here what both Judge Darr, the district judge, and the Court of Appeals held in substance was that there was no evidence on which the arbitrators -- in other words, it was nothing for the arbitrators to arbitrate. That it was so baseless and so clearly so. And that in this case, where the burden was on the complainant to show some basis, some grounds for arbitration and where the complainant had failed to do so, although calling for the court to use the summary judgment procedure. And yet then, simply bringing in a statement from a doctor, Dr. Kinsey, this man was able to go back to a job without injury to himself or others. Now, as the Court of Appeals said, “That is not evidence, when you have in the record there on the summary judgment procedure.” The statements of that same doctor may just, a week or -- or two weeks before, that this man is permanently disabled. I'd like to read to the Court, very briefly, that statement from Dr. Kinsey, which appears in the record at page 54 and 55. And this was is August of 1957. “I believe his disability was 55% or 60% before surgery. They -- the back operation moved a disc. And I believe, it is approximately 25% of the present time. I also believe that his partial permanent disability will remain at about 25%. And it was on 25% that on September 9th, he received this and claimed this award for disability.” Then a week later, he comes back and applies under the provision for reinstatement as employee and is turned down. He does not avail himself. He knows that he could not get back in on any protest. They -- does not avail himself for the three day requirement, of filing a written protest. He accepts that discharge. Then trying to do indirectly, it please the Court, what he could not do directly, we submit, he -- through the union, undertakes to be reemployed under the seniorioy provisions. Now, both under the seniority provision and under this matter which management in this plant had and the union agreed to it, sold a necessity for them. This type of operations, a small plant with wax and the various types of chemicals and liquids about a department where a man had to be men and had do to the work and had to be able and efficient. In both of those requirements, the contract provided and recognized that ability to do the work, able-bodiedness and equal efficiency must be considered. Now, the provision in the seniority definitely -- and provision of the contract definitely recognizes that the man seeking to be reemployed and that's what this was and that's the word, reemployment in that seniority provision contract, that he must have efficiency and ability equal to others. Now, we submit, if the Court please, that it was definitely shown before the trial court and never has any claim been made by this man, nothing in the complaint. The complainant, the plaintiff, and the court below knew this contention. They agreed that Dr. Shelton might examine him after this matter of grievance had been claimed and they've attempted an arbitration arrangement. They agree that he might go back to Dr. Shelton. And if the Court please, what does Dr. Shelton say in his report there? On November 14th, Dr. Shelton -- of 1957, Dr. Shelton had been ill in the meantime. There was delay of getting his examination, “I see no reason to change my opinion as stated on the examination of August the 28th, 1957.” And then skipping down, “At that time, I estimated his permanent partial disability to be 25%, for the body as a whole, for his particular type of work, I see no change in the physical findings, so I no see reason to change my opinion as expressed on that examination. It is my opinion that he should not be placed at work requiring heavy lifting or prolonged stooping or bending”. And the whole evidence and his -- the whole evidence before the Court in the preceding, was that in this department, where he sought to be reemployed. A man could not do the work without getting into awkward positions and stoop and bend. And Dr. Kinsey on whom he relied in obtaining the disability award and who later examined him and found that he -- in his opinion, although he had been 50 or more percent disabled before the operation. In he's opinion, this man was never to be more than 25% and that is never for more than 75% able and efficient as compared with the ordinary able-bodied man. This department needed, this plant did have a place for disabled men. And that was shown in the record by the plant manager. We submit, if the Court please, that on all of that record, the Court could only say, if this man's claim under these circumstances, was baseless. That he did not have something that the time with the arbitrators, the time the parties should be determined by arbitration. Earl Warren: Well, wouldn't the question as to whether there was any work that he was fitted for, be a question for the arbitrator? John S. Carriger: The Court please, and I'm somewhat at lost to know how we can -- can meet the requirements of the summary judgment provisions rules. The -- the plaintiff -- the complainant, nowhere claimed that he was able to do the work.As to these defenses were made and his affidavits went in -- in compliance for the summary judgment procedure, he did not attempt to amend his complaint. He did not come in by any affidavit that he was. And although the attorney who had represented the insurance carrier on workman's compensation matter, wrote to him and to his attorneys and said, “If there's been a change, we need to know about it”. Why was it that you -- that you claimed and obtained there an award on a basis to 25% and now, claimed that you're able to do the work in that department, that you're not disabled? He did not answer it, his attorneys did not answer it. And that, again, is shown in the record. Now, if the Court please, we submit that under the provisions that the union, the complainant sought to the -- invoked when the asked for a summary judgment and then the defendant asked for summary judgment. That that placed before the trial court, the obligation to treat it on the record as it was. And had this man conscientiously believed that he could do the work, that he was not disabled, that he was of equal efficiency and ability to the other men and hold on to do that type of work, he could've amended his complaint. He never in his complaint said he was able. He never came in himself and said he was able. He never brought in Dr. Kinsey to show why Dr. Kinsey a few -- a short time before he had said he was permanently disabled and why, if he could, and he couldn't. It stands for reason that they could've produced that evidence, that they would have done so. Then, if Court please, we submit that under the -- in decisions and under Professor Cox's statement. And there our adversary has mentioned Professor Cox in a number of places in that brief and -- and actually this brief is found was against or in connection with three cases. I'm only familiar with this one. I can only speak in connection with this one case. But as we have shown in our brief and reply quoting also from Professor Cox, who has been relied on extensively by our adversary, in the same article in 1959 in the Harvard Law Review, reflections on labor arbitration. “Arbitration should be ordered in an action under Section 301. Whenever that claim might be fairly be said to fall within the scope of the collective bargaining agreement. If the latter contention be made, but appears patiently frivolous, arbitration should be denied.” Now, our adversary in the reply brief filed, Mr. Feller says, that he agrees that arbitration of these matters should be only at the order of the court. That the court determines arbitrability. He says we have not indicated how arbitrability would be determined by the court. Now, we submit if Court please, that determination of arbitrability and this is the word -- wording in Judge (Inaudible) in the (Inaudible) case cited in our brief, 251 F.2nd. Determination of arbitrability only requires that the moving party could evidence which tends to establish his claim. We submit that -- if the Court please, that in this case, the complainant, the moving party did not establish any evidence. Did not introduce any evidence, either in his pleadings, did not even make the claim in the complaint. But simply said, here is something it must be arbitrated and as the court passes on for arbitration. Now, we submit, if the Court please, that question here is we believe, boiled down to this. Is the District Court powerless to hold an alleged grievance, not arbitrable, where the complaining union moves for a summary judgment, but fails to make any showing of a real arbitrable issue. And we feel that the Court does have the right and that the trial court and the Court of Appeals, both, although they reached the conclusion by different channels. Both found that in this case, the plaintiff had not carried out that minimum requirement. I'm showing that there were some basis, some grounds on which arbitration -- for which arbitration should be awarded. Earl Warren: Thank you. Mr. Feller. David E. Feller: I think I can just to add one word. I think the issue is now been posed very clearly by Mr. Carriger. The issue is whether the plaintiffs who comes in and ask that the court enforce the agreement to arbitrator, has to introduce evidence in the court dealing not with the promise to arbitrate, but with the substantive provision which he wants determined in arbitration. Has to make a kind of prima facie case, as it were which in (Inaudible) the Second Circuit did indicate citing some admiralty arbitrations. The case whose name always remembers (Inaudible) because his name, that's citing a whole bunch of commercial arbitration precedents saying you have to go in and show some evidence of your claim on the merits. And we think plainly that that's wrong, let's cut their hammer. We think that's wrong. The Court is enforcing the agreement to arbitrate not the seniority provision, not the discharge provisions. We have to bring in and show that there is an agreement to arbitrate and that the agreement hasn't been complied with, that we did show and that's all I think we are required to show. Thank (Voice Overlap) -- Earl Warren: Thank you.

John G. Roberts, Jr.: We'll hear argument next today in Case 08-1394, Skilling v. United States. Mr. Srinivasan. Sri Srinivasan: Thank you, Mr. Chief Justice, and may it please the Court: The dramatic collapse of Enron had profound reverberations experienced throughout the Houston economy and citizenry. Countless individuals in the Houston area were affected, as the court of appeals explicitly recognized, so much so that 60 percent of the jury venire affirmatively acknowledged in the responses to questionnaires that they would be unable to set aside their deep-seated biases or doubted their ability to do so, or that they were angry about Enron's collapse, an anger that was manifested in the vitriolic terms in which Petitioner Jeff Skilling was referred to repeatedly both in the questionnaires and in the community more generally. The passions about this case were so intense and the connections to Enron ran so deep that the entire United States Attorney's Office, all 150 or so attorneys, recused themselves from the investigation that culminated in this prosecution. In those conditions, the court of appeals was correct in unanimously concluding that this was one of the very rare cases in which, because of the degree of passion and prejudice in the community, the process of voir dire cannot be relied upon to adequately ferret out and identify unduly biased jurors. And-- Sonia Sotomayor: What do we take from trial counsel at the end of the voir dire process announcing that if he had had extra preemptory challenges, he would have used them only against 6 of the 12 people that were finally selected? If that's all he would have ejected, why couldn't a fair jury have been found? Sri Srinivasan: --Well, Your Honor, to be clear even one juror who should have been excluded and wasn't would have been enough, but-- Sonia Sotomayor: That's a different -- that's a different question. Sri Srinivasan: --Sure. Sonia Sotomayor: You are taking a broader proposition and saying that the presumption could not under any set of circumstances be overcome, and that's what I'm trying to probe. Sri Srinivasan: Yes, Justice Sotomayor. The reason that trial counsel objected to six specific jurors at the juncture that Your Honor's referring to is that that corresponded to six cause objections that had been, in our view, erroneously denied. Now, that in no way suggests that we were satisfied with the remainder of the jury. We had made an objection-- Sonia Sotomayor: I'm sorry. There was only one juror that had been challenged for cause against -- for which a preemptory challenge wasn't used. I thought that every other for-cause challenge ended up being excused on the basis of a preemptory challenge. Sri Srinivasan: --That's right, and that's what I was trying to say, Your Honor, that the reason why trial counsel identified six specific jurors was that there were six other jurors who would have been on the venire as to whom we had applied -- as to whom we had asserted a cause challenge that was denied, and because of that we had to use a preemptory to strike those jurors, which left us without-- Sonia Sotomayor: But that means that there were six that were okay. Sri Srinivasan: --Well, no. There were six as -- there were six remaining as to which we didn't have a corresponding for-cause objection that had been denied. But in no way indicates that we were satisfied with the other six. From the very outset, we complained about this process. We said at the outset before trial that no juror could be seated in this case because the process of voir dire couldn't adequately be relied upon in these conditions. Sonia Sotomayor: Tell me what in the process itself, outside of your general proposition that no process could find fair jurors? What else in the process was deficient? Sri Srinivasan: The process was deficient in a couple of respects, Your Honor: First, with respect to time and scope. The voir dire that the trial judge conducted was essentially an ordinary voir dire for ordinary circumstances. He announced before the fact that the voir dire would be conducted in a period of 1 day, and we objected to that. He also announced that he would have limited questioning and that counsel would have very limited opportunity to follow up with additional questions. We also objected clearly and repeatedly to that. And that was manifested in the voir dire that occurred, because what the trial judge did is made two fundamental, we think, mistakes in the way he conducted the voir dire. One occurs with respect to those jurors as to whom they had laid bare their biases, and another occurs with respect to those jurors as to whom they didn't affirmatively acknowledge their biases, but, given the conditions that prevailed in the community, they might well have had biases that they didn't affirmatively acknowledge. Now, with respect to the first, the mistake that, in our view, the trial judge made was to accept a simple assurance of fairness in the face of overt statements of bias and in conditions that confronted this community, where there was deep-seated community prejudice and animus that permeated the Houston -- that permeated the city of Houston, that kind of acceptance of a simple assurance of fairness in the face of repeated overt statements of bias shouldn't be countenanced. And we think what the trial court should have done in that situation is to move to an additional juror. But instead of doing that, the trial court interviewed 46 jurors, nearly 8 more than the minimum that was necessary to constitute a jury in this case. And just to give this a frame of reference, the entire voir dire process in this case took 5 hours, and the trial judge interviewed each juror for approximately 4 and a half minutes. By way of comparison-- Ruth Bader Ginsburg: But he did -- he did give time for counsel to ask additional questions, trial counsel. Sri Srinivasan: --He -- he did. Ruth Bader Ginsburg: He asked both sides if they had additional questions. Sri Srinivasan: He gave some time, Justice Ginsburg, but he made clear before the voir dire began that that opportunity was going to be limited both in time and scope. With respect to scope -- and this is at page 11805 of the record -- what he said was that follow-up questioning would be permitted if it was reasonable and if it was related to the purposes for which the juror was brought before the bench. And just to paint the picture a little bit, the -- the potential jurors were brought before the bench, and they were left standing, which I think reinforced the conception that this was going to be a rather quick affair and it was not going to allow the kind of extensive, meaningful follow-up that we thought was required. And to give it a frame of reference, in the Oklahoma City bombing case, the prosecution of Timothy McVeigh, that proceeding was transferred from the city of Oklahoma City to Denver, but even after the transfer, the trial judge conducted an 18-day voir dire with an average of 1 hour of interviews per juror; 18 days and 1 hour as compared with 5 hours and 4 and a half minutes. And we think the Oklahoma City experience is much more befitting of the kind of voir dire that's necessary in circumstances of community prejudice and passion of the kind that existed here. Ruth Bader Ginsburg: You made a change of venue motion at the outset, right? Sri Srinivasan: We did. We-- Ruth Bader Ginsburg: And I'm unaware of any case in which we have said a change is mandatory when what's involved is money rather than life or limb. Life or limb obviously was involved in the McVeigh case. Sri Srinivasan: --Sure, it was, Your Honor, and by no means would we in any way diminish the -- the profound human tragedy that accompanied the Oklahoma City case, but I think the reality of the sentiment on the ground in Houston was that Houston citizens, as we pointed out in our brief, in fact referred to the -- to what happened in the wake of the collapse of Enron in terms that were similar to the way they referred to terrorist attacks. They -- they in fact talked about it in terms of the 9/11 attack. Ruth Bader Ginsburg: Well, what was remarkable about some of those questionnaires, there were a lot of people didn't read the newspapers. There were a lot of people who indicated they really didn't know anything about this case. Sri Srinivasan: That's true, Justice Ginsburg, but I'd like to clarify one aspect of that, if I could, and that's that our argument is not -- and it hasn't been at any point in this proceeding -- that pretrial publicity caused the passion and prejudice in the community. This is -- is very much a case in which pretrial publicity was a symptom rather than the cause. Now, pretrial publicity, to be sure, stoked the passions that -- that already lay within the community, but really this was a case in which the passions existed regardless of pretrial publicity. And I think the juror questionnaires and the surveys and all the other evidence that we put before the district court manifests that. If you look at the juror questionnaires -- and they are -- there are several examples of situations in which particular jurors said that they were unaware of any of the pretrial publicity, they did not watch the news, they didn't read the newspapers, they hadn't seen the movies about Enron, but yet they still said they had feelings about Jeff Skilling and Ken Lay. Juror 63, a person who wound up on the panel, is a good example of that. She answered "no" to all the questions concerning her exposure to pretrial publicity, but then when she was asked whether she had views about the guilt or innocence of Jeff Skilling, she said yes, she did; and she elaborated on that by explaining that I think he probably knew he was breaking the law. So this is a person who, notwithstanding a lack of exposure to pretrial publicity-- Ruth Bader Ginsburg: But there was some follow-up to that. Sri Srinivasan: --There -- there was a bit of follow-up to that, Your Honor, but I think the nature of the follow-up is -- is quite illuminating on what we think are some of the fatal flaws in this voir dire process. The follow-up-- Samuel A. Alito, Jr.: Do you really think that if -- if there had been a much more lengthy voir dire and if the trial judge had been more willing to -- to grant motions to dismiss for cause, that it would have -- that it would not have been possible to find a fair and impartial jury in the district? Sri Srinivasan: --Well, our first -- certainly, there should have been a more intensive voir dire, Justice Alito. Now, our first order of submission is that the proceedings should have been transferred, not necessarily because there don't in fact exist or there didn't in fact exist 12 unbiased jurors in the city of Houston. Our point is a different one, and that is that in conditions where you have the level of passion and prejudice that permeated the Houston community, there's too great a risk that the process of voir dire and particularly the ordinary process of voir dire wouldn't be successful in identifying those 12 people. That's the danger. And the other problem with the argument that the government makes with respect to the fact that there are 4 and a half million citizens in Houston, which I think is part of Your Honor's question, is that that would mean more if the trial judge had gone deeper into the jury pool than the mere 46 jurors he did interview. Because when he interviewed those 46 and stopped at that point, what we were left with was a jury panel as to which there was too great a danger of bias, too great a danger that they would bring their biases to bear with them in adjudicating Petitioner's guilt. Samuel A. Alito, Jr.: Well, rule 21 says that the judge must grant a transfer if the judge is satisfied that a prejudice against -- that so great a prejudice against the defendant exists in the transferring district that the defendant cannot obtain a fair and impartial trial there. Sri Srinivasan: Correct. Samuel A. Alito, Jr.: Well, doesn't that suggest that if you could find a fair and impartial jury with an adequate voir dire, then the transfer need not be granted? Sri Srinivasan: Well, I think it has to be read against the context of whether we can be confident that you can find that fair and impartial jury. I think in any -- I think we would say that in any community in which there is 4 and a half million people, there may, in fact, be 12 individuals who aren't so biased that they can't sit. The real danger, though, is that the ordinary process of voir dire, as this Court's decisions repeatedly recognize, in Mu'Min, in Patton, and Murphy and others, the ordinary process of voir dire in that situation can't be trusted to identify those people. John G. Roberts, Jr.: Because you think-- Sri Srinivasan: And that's the danger here. John G. Roberts, Jr.: --they're going to lie, right? Sri Srinivasan: I'm sorry. John G. Roberts, Jr.: Because you think they're going to lie? Sri Srinivasan: No, that's-- John G. Roberts, Jr.: When they fill out the form and say this is what I've heard, and this -- I can fairly evaluate the law and the arguments? Sri Srinivasan: --No, no. No, Mr. Chief Justice. With respect, that's not -- that's not the only danger. I mean, that's -- that's part of it, but I think there's -- there's other ones that we would put forward before that one. There's two in particular: First, in a community like Houston, in the state of the -- the passion and prejudice that existed in Houston at the time of this trial, there's a real concern that jurors will not feel fully free to return to that community delivering anything other than the conviction for which the -- the community desires. And that, I think, is an important concern that this Court's decisions identify. And the other one, and this is in Murphy in particular, where there's a substantial share of the community that's impassioned and prejudiced, as this one was, there's a concern that even jurors who don't lay bare -- who don't affirmatively acknowledge their biases -- are unwittingly subject to the same biases that permeate the community. And that sort of danger is -- is the reason that in these situations, we think transfer is required. But even if transfer wasn't required, what needed to happen was a more extensive and intensive voir dire than happened here. The voir dire was deficient -- and Justice Ginsburg, this gets back to your question about juror 63. The voir dire was deficient in at least this respect. In conditions like those that permeated Houston, we think it's error to accept the assurance of fairness of a juror who has already laid bare their biases. Now, juror 63, for example, she said she thinks she knew that Jeff Skilling -- she thinks that Jeff Skilling knew he was breaking the law. This is someone as to whom we ought to be very concerned. In our view, that person shouldn't get-- Ruth Bader Ginsburg: Was there a challenge for cause against her? Sri Srinivasan: --There -- there wasn't a specific challenge for cause against her, Your Honor, but -- but again, we challenged everybody on the basis that voir dire wouldn't adequately ferret out biases in this case. And then we did challenge -- as Justice Sotomayor's question about the six specific challenges that we lodged at the close of the voir dire, but before the jurors were sworn -- juror 63 was one of those jurors. And so I think it was evident that juror 63 was not at all somebody who we were satisfied with. And the reason is, if you look at the nature of -- at the voir dire colloquy with her, the trial court asked her about that statement and asked her: You remember making this statement? Do you still feel that way? And her response was: I don't know. And then she acknowledged: I have no further information to bring to bear on that question than I did then. And at that point, she has only fortified the bias that she brought with her, but the trial court was unsatisfied, and he continued to press. And then he asked her at some point: Can you apply the presumption of innocence? And she said yes. And then that was it. But in our view, a -- a search for a -- what I think can fairly be described as a rote assurance of fairness can't be sufficient, given the very evident danger that someone like juror 63, who has already laid bare her biases, would bring her biases with her to the panel when she adjudicated Petitioner's guilt or innocence. Stephen G. Breyer: How do you say we -- in your opinion, if we agreed with your basic idea -- if, which is totally hypothetical. Sri Srinivasan: Sure. Stephen G. Breyer: If we agreed with that, how would we sketch the lines? That is, when does the jury -- does the judge have to do more than is ordinary, and what counts as more than ordinary? I mean, I -- what I have fear of, to put it out for you, is that jury selection can go on a very long time. Sri Srinivasan: Right. Stephen G. Breyer: And judges have to -- have to run their trials. And if we tell the judges that they have got to do more, that will become exaggerated, and they'll administer it in a way that will make it hard to select juries. That's the harm I'm worried about. So I'm asking you, how would you sketch a line that prevents that harm? Sri Srinivasan: Justice Breyer, it is by nature a contextual inquiry. The standard that this Court has articulated to identify the circumstances in which this sort of extra -- I think -- precaution is necessary is that there has to be, a quote, "wave of public passion", close quote, and that's the language that the Court has used in a number of its decisions. Now, that may-- Sonia Sotomayor: See, the problem with-- Sri Srinivasan: --I'm sorry. Go ahead, Justice Sotomayor. Sonia Sotomayor: --No. Finish Justice Breyer-- Sri Srinivasan: I -- I -- anticipating what you might feel, which is that that language may not be self-evident as to the circumstances in which a deeper inquiry is-- Stephen G. Breyer: I didn't ask you -- I just asked you to do your best. Sri Srinivasan: --Yes, and that-- Stephen G. Breyer: So we've got the wave of public passion-- Sri Srinivasan: --Wave-- Stephen G. Breyer: --And what about the second half? Sri Srinivasan: --Wave of public passion, and I guess the substrata that I would put beneath that, especially for this category of cases, is pervasive animus directed towards the defendant as responsible for a harm felt by the entire community. Stephen G. Breyer: All right. Now, what's the second half? The second half, which I'm really worried about, is that we get into the business of running the trial court's trials. So I want to know what it is that the trial court at that stage, in your opinion, other than transfer, has to do? Sri Srinivasan: I think what the trial court has to do is two things, Your Honor: First, for a juror who has laid bare his or her biases, that juror should not be allowed on the panel, and an assurance of fairness from that sort of juror isn't enough. At the very least, Your Honor, on this category -- and then I'll go to my second point -- in a situation in which a juror has laid bare his or her biases, we think that juror shouldn't be seated. But if you're going to entertain the thought of seating that person, at the very least this has to happen: They have to be forced to confront their assurance of fairness as against the many statements of bias that they may have uttered. Stephen G. Breyer: What happens if -- I gather -- that a -- that a trial judge has a panel in front of him and people say, yes, I think he is guilty? And -- and the trial judge says, now, if you listen to the presumption, can you be fair? You look him in the eye, and if he says, yes, I can put this aside, trial judges do accept those jurors. Now, if that is the practice, and others would know more than me, then our -- our -- I'm worried about changing that ordinary practice. Sri Srinivasan: To be clear, Justice Breyer, that ordinary practice would only be altered in the very rare category of cases that involve a wave of public passion. And -- and they would be altered in the following respect: That if somebody had laid bare their biases, the -- in our view, what should happen is that you should move to the next juror. But even if you didn't do that, at least the following should happen, Justice Breyer, and that is that when somebody utters an assurance of fairness, that itself shouldn't be enough when the community is permeated with the sorts of biases that attended this proceeding. The jurors should at least be forced to reconcile their previous statements of bias with their utterance of fairness. The other point I would make is this: That the danger that this Court has identified in conditions like those that pervaded the Houston community is that even with prospective jurors who don't affirmatively acknowledge their biases, there's a danger that they may have biases they haven't brought to the fore. And we think what can't happen is what the trial judge did in this case, which is to refuse to question any of the jurors on the basis of any response they gave in the questionnaire, other than responses that raised a red flag. And we think if you curtail the inquiry in that regard, it doesn't allow for the sort of voir dire that's necessary to in order to be-- Sonia Sotomayor: --Can I look at-- Sri Srinivasan: --in order to ferret out biases that may be latent. Sonia Sotomayor: --Is there any place in the record I could look to see questions that you would have posed absent the judge's limitations? Sri Srinivasan: There are, Justice Sotomayor. There's at R 12036, I think, is an-- Sonia Sotomayor: I'm sorry. Repeat that. Sri Srinivasan: --I'm sorry. R 12036 is an important document, which is our renewed motion for change of venue and related relief. And that was after the questionnaire responses had been received. And the point we made in that document is that as a consequence of the questionnaire responses, we already knew that a great deal of bias permeated the venire. And we proposed not only that the proceedings should be transferred, but also that a different sort of voir dire should be conducted than the one that the trial court envisioned. And we laid out in that motion the sorts of things that we thought should be done. And we did that in other places as well, Your Honor, but I think that would be a good place to look. But-- John G. Roberts, Jr.: Counsel, can I -- perhaps it's time for you to shift gears, if I could-- Sri Srinivasan: --Sure. John G. Roberts, Jr.: --and move to the statutory question. Sri Srinivasan: Sure. John G. Roberts, Jr.: I don't understand why it's difficult. The statute prohibits "scheme to deprive another of the intangible right of honest services. " Skilling owed the Enron shareholders honest services. He acted dishonestly in a way that harmed them. But I don't understand the difficulty. Sri Srinivasan: Well, Mr. Chief Justice, I think part of the problem with that sort of rendition is that that -- I think nobody suggests that any dishonest conduct falls within the compass of this law, that no pre-McNally case suggests that. And I think the government doesn't takes that position, either. If it did-- John G. Roberts, Jr.: No, there has to be -- there has to be a right to honesty. In other words, it's not just in the abstract. And the shareholders had a right to his honest services. Sri Srinivasan: --But I don't think that you've advanced the ball, with all due respect, that much by saying there has a right to honest services, because I think what -- at the end of the day, what that would mean is that any situation in which there's a fiduciary duty or even if there's not a fiduciary duty, but at least any situation in which there is a fiduciary duty, a nondisclosure of deception would give rise to a Federal felony prosecution. And that has never been the understanding under pre-McNally case law, and that shouldn't be the understanding now, because its sweep is breathtaking, and it's not something that we would ordinarily construe Congress to have intended. Now, I think in -- in this case, there's several objections we have to the application of the honest services fraud statute to this case. We think the statute is unconstitutionally vague. We think it's particularly vague as applies to -- as applied to anything beyond the narrow category of bribes and kickbacks. But I think in some ways the most straightforward way to understand why the honest services fraud statute can't be applied validly in this case is to appreciate what I think is an evolution in the government's theory. And -- and at the time of Weyhrauch -- and this is at page 48 of the government's brief in Weyhrauch, just a few months ago. The government said that the honest services fraud statute, quote, "Nor does it cover an official whose interest is public knowledge. " So, at that point, I think we -- we would have believed that the honest services fraud statute can't be applied to Jeff Skilling, because his interest, as the government acknowledges, was public knowledge. But the position that the government has taken now is that even though his interest was disclosed, he didn't disclose that he was acting in pursuit of that interest at the expense of the employer's interests, which I read to be contrary to the position that they took in the Weyhrauch case and, I think, which is problematic in two respects. First, there is no pre-McNally understanding, none, that a disclosed interest can give rise to honest services liability. And, second, and maybe more importantly-- John G. Roberts, Jr.: I'm sorry. A disclosed interest? Sri Srinivasan: --A disclosed interest, where the interest is disclosed. All the cases dealt with situations in which the interest is undisclosed, as the government suggested would be the case in the Weyhrauch brief. But -- but perhaps even more importantly, there is no pre-McNally understanding to the effect that acting in pursuit of an interest in compensation can give rise to honest services liability. And, in fact, in a post-McNally case, the Thompson case out of the -- out of the Seventh Circuit, Judge Easterbrook, we think, explained persuasively why pursuit of an interest in personal compensation shouldn't afford the gravamen of-- Ruth Bader Ginsburg: And I thought part of the government's theory was not-- Sri Srinivasan: --an honest services prosecution. Ruth Bader Ginsburg: --wasn't limited to the compensation. It was essentially Skilling owned shares, and he had information that those shares were inflated. Shareholders owned shares. They didn't have that information. Skilling then sold those shares at a great profit to himself. And the shareholders were left without that information. And then when the stock price plummeted, they all lost out. I thought that the government was not limiting the -- its position to the compensation, but was also dealing with the share price. Sri Srinivasan: I think, Justice Ginsburg, the government's theory on how the honest services fraud statute applies in this case is laid out at page 49 and 50. And the interest that the government identifies that was furthered by Petitioner Skilling's action is his interest in compensation. That's -- that's how the government, I think, describes it. And the -- it's true, Your Honor-- Antonin Scalia: What 49 and 50? Of the government's brief? Sri Srinivasan: --Of the government's brief. And it's true, Your Honor, that the deception that they identify has to do with securities fraud. And I'll bracket for the moment that we think that the honest services fraud theory that was put before the jury is not at all commensurate with the one that's being asserted now. But even if you take as a given that it's the theory now, the elements of honest services fraud under the government's theory are that the individual would act in pursuit of his interest in his own compensation at the expense of the employer's interests in acquiring better information with which to make an informed decision. And one of the fundamental problems we see with that approach is that it would threaten to convert almost any lie in the workplace into an honest services fraud prosecution for the following-- Ruth Bader Ginsburg: May I -- I just don't -- because I'm looking at page 50. I thought this discussion goes from 50 to 52, and that the part on 52 certainly homes in on the share -- the shares. Sri Srinivasan: --It -- it does, Your Honor, but the interest at issue -- and I'm reading from page 50. This is in the middle of the first full paragraph on page 50. The government says, "That constitute" -- "That conduct constituted fraud". The only question here is whether the public nature of petitioner's compensation scheme prevents his conduct from constituting honest services fraud. "And then they go on": Although the "--" Although petitioner's basic compensation scheme was public, his scheme to artificially inflate the company's stock price by misrepresenting its financial condition, in order to derive additional personal benefits "-- i.e., his compensation --. " at the expense of shareholders, was not "disclosed. " "So I think the theory of application here is that because he was acting allegedly-- " Ruth Bader Ginsburg: Why -- why do you put in the i.e.> ["]? Additional personal benefits could be both. Sri Srinivasan: --Because the stock is the compensation, Your Honor. There's -- there's no -- I think, in this sort of situation, there's not a disaggregation between the stock and the compensation. The stock was intimately tied to his compensation, and the personal benefit that, I think, was being received was that compensation interest. I mean, the government can clarify that, but that's my understanding of the government's view. Ruth Bader Ginsburg: I think we'll ask the government to do that. Sri Srinivasan: And the danger with that theory is that it would have the capacity to convert almost any workplace lie into a Federal felony, for the following reason: That, in a variety of situations, an employee might -- might engage in an act of deception to his employer with respect to a work-related matter. For example, suppose that there is an employer policy that says you can only use workplace computers for business purposes, and when asked, the employee says that he is only using it for business purposes, but he is in fact using it for personal reasons. Well, at that point he will have made a deception to the employer. Arguably, it would be material, particularly given that it acts in the face of an employer policy, and it arguably was made in furtherance of the employer's personal interest in maximizing his compensation at the expense of the -- at the expense of the employer's interests in having better information with which to make an informed decision about the employee's future. So for that reason as well, we think that the application of the honest services fraud-- John G. Roberts, Jr.: What you've just explained is why you think the statute is very broad. You haven't explained why it's vague. Sri Srinivasan: --Well, there are two different arguments, Your Honor. Our threshold submission is the statute is unconstitutionally vague, and we believe that it's particularly vague as applied to a category that extends beyond bribes and kickbacks. And I haven't been through those arguments, but they're -- they're spelled out in our briefs. Now, with respect to the remaining category, which is undisclosed self-dealing, even that category we think is a problem in and of itself. But it's particularly problematic when it's applied to the realm of compensation for the reasons that I have outlined. If the Court has no further questions, I'd like to reserve the balance of my time for rebuttal. John G. Roberts, Jr.: Thank you, counsel. Mr. Dreeben. Michael R. Dreeben: Thank you, Mr. Chief Justice, and may it please the Court: When Judge Lake approached this case with the question of how to select a jury, he had 15 years of experience in selecting juries, and he informed the parties that it was his experience that voir dire conducted by the trial judge is more effective at eliciting the potential biases of a juror than the oftentimes tendentious voir dire that's conducted by the parties. He did not ignore the fact that the Enron collapse had a significant impact on the Houston community. He worked with the parties to develop a 14 -- page questionnaire, which I encourage the Court to look at, if the Court has not already done so. It's extraordinarily detailed. It has more than 70 questions designed to ferret out any possible connections between the individual jurors and the Enron collapse. It asked for their views about the Enron collapse. It asked for whether-- Sonia Sotomayor: Can you tell me of any other high-profile case comparable to this in which the voir dire lasted only 5 hours? Michael R. Dreeben: --Judge -- Justice Sotomayor, I'm not familiar with the length of voir dire in particular cases. But I think that there is no-- Sonia Sotomayor: Are you aware of any that's been reported where the selection was 5 hours only? Michael R. Dreeben: --No, I'm not aware of any, but I don't think that there is any problem with this voir dire, and I think there is really-- Stephen G. Breyer: There's no problem? I went through the 200 pages, and I counted -- this is only my own subjective recounting of it, but I counted six of whom only one lasted, but I counted five others that they had to use peremptories on that include one juror, 29, who herself was a victim of this offense to the tune of $50,000 or $60,000. The judge said: I will not challenge her for cause. I counted another, juror -- what's this one -- juror number -- number's 74, who when he looked her square in the eye and said, "Can you be fair"? She said, "I can't say yes for sure. " "No. " Okay? So, in my own subjective account, there were five here, maybe six, certainly three, that perhaps if they'd had an appeal on peremptories, which apparently they don't, they might have said these should have been challenged for cause. So I'm concerned about the 5 hours, about the lack of excusal for cause, about the very, very brief questions that he provided to people who had said on the questionnaire they could be -- they could be biased. They said we think he's guilty, for example. And all those are cause for concern. At the same time, I'm worried about controlling too much a trial judge. I've expressed those concerns. I know this is a special case. Half, almost, of the jury questionnaires they just threw out. And the community -- you know all the arguments there. You see what's worrying me. And I'm worried about a fair trial in this instance and to say -- and I'm genuinely worried, and -- and I'd like to hear your response to the kind of thing I'm bringing up. Michael R. Dreeben: --Well, Justice Breyer, I think that there was a fair trial in this case, and I think that a full reading of the voir dire reveals that individuals sitting from this vantage point with a cold record who were not there may have different viewpoints about-- Stephen G. Breyer: I'd never heard of an instance where a trial judge would not challenge for cause -- but I'm not saying it doesn't happen -- where the juror herself is a victim of the offense to the tune of $50,000 to $60,000. See, we are getting into an area that I'm not familiar with, but I think that that's not supposed to be. Michael R. Dreeben: --I don't think that there's any per se disqualification. But even if there was, that juror did not sit, and this Court held in United States v. Martinez-Salazar that one of the purposes of peremptories is to protect against the occasional accidental error. Sonia Sotomayor: How -- but is it occasional or accidental? I think that's what Justice Breyer is getting at. With such a truncated voir dire and one in which the judge basically said to the lawyers, I'm not giving you much leeway at all, how can we be satisfied that there was a fair and impartial jury picked when the judge doesn't follow up on a witness who says, I'm a victim of this fraud? I don't know -- I would find it strange that we would permit jurors who are victims of the crime to serve as jurors. Michael R. Dreeben: Well, none sat in this case. I don't think there is any claim that they did. Sonia Sotomayor: Well, but -- but the judge didn't strike her for cause. So isn't that symptomatic of not following through adequately? Michael R. Dreeben: I don't think that a -- what this Court may perceive as an error in the denial of one for-cause challenge-- Stephen G. Breyer: No, but it's not just one. There were like five, of which I have given you the worst, and they had to use up all their peremptories. And they can't appeal this. And it's that taken together, plus the one who sat, juror 11, provides, as they point out for the reasons they say, some cause for concern. And that's what I'm trying to get at. Michael R. Dreeben: --Well, Justice Breyer, I think that reading the entire voir dire reflects that the judge was interested in determining whether these jurors were qualified to sit. He was not interested in having the voir dire used as a lobbying or a argumentative exercise by the lawyers. And as a result, he relied on the very extensive questionnaires to pinpoint the examples of areas in which further questioning was necessary. And then he went and he, I think, did fairly allow sufficient inquiry into whether these jurors could sit. And I think one of the best examples of that is actually juror number 63, who Petitioner says was not properly voir-dired. And I think what juror number 63 illustrates -- and this is in the Joint Appendix at page 935a and then following -- is that, as this Court has remarked many times, the question of-- Anthony M. Kennedy: Excuse me. What was the page? Nine-- Michael R. Dreeben: --935a. This is in volume 2 of the Joint Appendix. Stephen G. Breyer: Go ahead with it, but they didn't challenge 63 for cause, so I guess they waived it. Michael R. Dreeben: They did not challenge 63 for cause, but they -- but they came to this Court today and tried to use 63 as an object lesson of what was wrong with the voir dire. I actually think juror 63 illustrates not only what was right with the voir dire, but the immense distortion that Petitioners have attempted to perpetrate by putting together effectively a highlight reel of every bad headline in every Houston publication and claiming that the entire jurisdiction, all 4.5 million people virtually, were infected with some sort of a pervasive prejudice that could not be ferreted out in voir dire. If you look at what happened in juror number 63, she happens to be a 24-year-old who comes to court. She filled out a questionnaire that she said: I can be impartial. She did have the statement: I -- I think that probably Skilling is guilty of some crime. When the voir dire proceeds, it turns out that she's not one of these jurors who has been in the Houston culture pervasively exposed to what Petitioner says is prejudicial publicity. She was living in Austin at the time, going to school. Then she's asked, "Are you watching major networks"? And she says, "No, I don't really watch the news at all. " "I'm a turtle person. " "Do you recall anything that may have -- you've seen -- that you may have seen or heard on television about this case? " "No". And then the judge, after some more questioning about her that reveals that, among other things, Ken Lay is a member of the country club that her parents belong to, he asks her about the very question that Petitioners focus on as problematic: "Do you have any opinion about the guilt or innocence -- and you say, I think they probably were breaking the law? " And her answer is: "I don't know. " "The only thing I can say is, anything I've ever heard even peripherally has not been, you know -- but that's what people say and, I mean, it's hard to know. " "People don't know what they are talking about. " And the judge says, "Well, I'm just trying to find out what you think. " She says, "I don't have an opinion either way. " Stephen G. Breyer: Let's try juror number -- let's try 76: Judge: "Here's the detail that really concerns me. " "You said, 'I think they're all guilty. " "'. " "Right". "Now, there's nothing wrong with thinking that, if that's what you really think. " "You just need to tell us that. " "Okay". "That's what you think, isn't it? " "It's been a long time since I answered that questionnaire. " "Right. " "Now, as you-- " Okay? Now, that's -- that, as far as I could tell, is as close as I can get to a recantation of what she thought originally. Michael R. Dreeben: Well, Justice Breyer, this Court has recognized -- and it has recognized this as long ago as Chief Justice Marshall in the Burr case -- that people come to court with opinions in highly publicized cases. We expect our jurors to be somewhat informed of civic affairs. They receive information through the media or through their friends, and they have light opinions. And they come to court, and the trial judge instructs them: This is a legal proceeding; you're going to hear evidence in court. What happened outside of the courtroom no longer matters. What matters is what has been presented in here. I'm going to instruct you that defendants have a presumption of innocence. Can you follow that? And then the judge is the only person on the scene. We're not there, the court of appeals is not there; the judge is the only person on the scene to judge the jurors' inflection, the jurors' demeanor, the jurors' apprehension of the seriousness of the duty. And this Court has held that the standard for review of a determination of no removable bias for cause is manifest error. Anthony M. Kennedy: --Were -- were these colloquies that are reported, the -- the pages we have just been reviewing, heard by the entire jury pool? Michael R. Dreeben: They were not-- Anthony M. Kennedy: Or were they just -- where the person -- the juror was standing in front of the bench for this? Michael R. Dreeben: --That's correct, Justice Kennedy. This was not a case like Mu'Min, where in your concurrence -- your dissent, you pointed out that the colloquy occurred in the full presence of the -- of every other juror, and there was no individualized voir dire. Here there was individualized voir dire. Judge Lake had that juror right in front of him, eyeball to eyeball, and was able to make the kind of credibility assessment, taking into account all of the context, that no other judge can do. And it's not to say that there's no judicial review of that on appeal. In the Irvin case, Irvin v. Dowd, which is really the Court's first case in this line, the Court noticed that there -- 90 percent of the jurors had an opinion that the defendant was guilty. It involved a highly sensationalized murder in rural counties in southern Indiana. There was a barrage of pretrial publicity. Eight of the 12 jurors said they had an opinion that the defendant was guilty. The Court, after meticulously reviewing the voir dire, concluded that the judge had committed manifest error in accepting the representations of the jurors that they could be impartial. But this is nothing like that. Anthony M. Kennedy: It's hard for me to think that the voir dire would have been much shorter even if there had been no showing of pervasive prejudice. Michael R. Dreeben: I think that what Judge-- Anthony M. Kennedy: Five hours sounds to me about standard for a case of this difficulty. Michael R. Dreeben: --I -- I think that's not necessarily correct at all, and it would not have been the case that in a normal trial there would have been as detailed a 14-page questionnaire as there was in this case, that was designed to elicit any and all connections to Enron. Now, whether there may have been some individualized mistakes along the way, whether some of us would have preferred that the voir dire be more extensive, is not the issue; and unless this Court is prepared to set standards that are based either on a stopwatch or some sort of, you know, notion of how many days voir dire has to occur, it's going to be very difficult to administer a standard that says this was too little. The Oklahoma City bombing case, it is true, took many, many days, but that was a capital case, and I know that this Court is well familiar that there are numerous-- John G. Roberts, Jr.: It took many days after it had been transferred. Michael R. Dreeben: --It did, and Denver itself was exposed, probably almost as much as Oklahoma City, to the pretrial publicity, and a terrorist act of that magnitude, Mr. Chief Justice, really strikes at the heart of the entire nation. Judge Matsch, who sits in Denver-- John G. Roberts, Jr.: It was very -- the atmosphere in Oklahoma City was very different from that anywhere else, in terms of the impact of the bombing on that particular community. Michael R. Dreeben: --Agreed. It was 168 deaths. Many of them were children. There was a sense of -- of victimization in the part of the community that I don't think is comparable to what happened with a financial meltdown in Houston, a 4.5 million city with a robust economy and a trial that took place 4 years later, after numerous other Enron trials had already taken place in Houston, resulting in favorable verdicts for defendants, mistrials, acquittals of one defendant. This very trial itself of Mr. Skilling resulted in nine acquittals on insider trading counts. Now, if you would think that the jury had some sort of a substratum of subterranean bias that was ineradicable by the conventional techniques of voir dire that we have been using for 200 years, then insider trading where the defendant pockets personally, as a result of the exploitation of insider information -- you would think that would be the first place the jurors would go to vent-- John G. Roberts, Jr.: Oh, no, no. No. They'd go to the statute that says honest services-- [Laughter] Right. It seems -- it seems -- I'm being flip. It seems that that's where you would focus your attention, if you think your community has essentially been fleeced by somebody because of his dishonesty. Michael R. Dreeben: --I don't think so, Mr. Chief Justice, because the honest services component actually, and the component of this trial, was really a subset of the securities fraud. The essential gravamen of Petitioner's crimes were lying to Enron, lying to its shareholders about the health of the company in a financial sense, when, in fact, he knew that he had been engaging in numerous manipulations of earnings and schemes that are detailed in the briefs, in order to avoid Enron having to recognize that portions of its business were imploding. And the victimization was of shareholders. That was expressed through securities fraud; it was expressed through insider trading. There were counts involving liars -- lying to auditors, and one object of a multi-count conspiracy charge involved an honest services object as well as a money or property fraud object, and as well as a securities fraud object. Now, in our view Petitioner has essentially conceded that the honest services statute is not vague as applied and, therefore, facially unconstitutional. He all but acknowledges that bribes and kickbacks, which constitute the bulk of pre-McNally honest services cases, can be defined with precision. There is not an unconstitutional vagueness in it. And so I think at a minimum-- Anthony M. Kennedy: Well, a concession that a bribe or a kickback scheme statute would not be vague is hardly a concession that this statute as written is not vague. In fact, I thought that was the point. The point is that the Court shouldn't rewrite the statute; that's for the Congress to do. Michael R. Dreeben: --I don't think that in this case, Justice Kennedy, the Court needs to rewrite the statute so much as to recognize that what happened in McNally was this Court said that the mail fraud statute has two clauses, scheme to defraud and scheme for obtaining money or property by false representations and pretenses. The government's position, in accordance with all of the lower courts, was that these two clauses set forth two separate crimes. Scheme to defraud was not limited to money or property. This Court disagreed, and it said, oh, yes, it was. And what Congress did in responding was to invoke words that had appeared in this Court's decision in McNally, in the dissent written by Justice Stevens, in the lower court opinions, and intentionally -- as this Court put it in Cleveland v. United States -- cover one of the intangible rights that the lower courts had recognized before McNally, and that was the right to -- intangible right of honest services. And in the context of the pre-McNally honest services cases, that was well known to include at its core the bribery and kickback cases and, in the additional category, nondisclosure of a personal, conflicting, substantial interest. Antonin Scalia: Well, suppose you have a statute that -- that makes it criminal to -- to do any bad thing, okay? Now it's clear that murder would be covered. All right? Nobody would say that murder is not covered by that. Does -- does that make the statute non-vague? Michael R. Dreeben: No, Justice Scalia, but-- Antonin Scalia: I mean, just because you can pick something that everybody would agree comes within a denial of honest services, doesn't -- doesn't mean that when you say nothing but honest services, you're saying something that -- that has sufficient content to -- to support a criminal prosecution. Michael R. Dreeben: --But this is not like a statute, Justice Scalia, that says prohibiting any bad thing. It's a statute that responded to a decision of this Court in which a term of art, the intangible right of honest services, featured prominently. And Congress has-- Antonin Scalia: And there were cases that -- that -- some of which included bribery, but others of which included a variety of -- of other actions, some of which were allowed by some courts and some of which were disallowed by some courts. There was no solid content to what McNally covered. Michael R. Dreeben: --I think that there was a solid enough content for this Court to be able to respond to the McNally decision by giving shape to the crime in accordance with the paradigm cases that the lower courts had done and logical implications of those cases, just as if it had concluded, in accordance with Justice Stevens's dissent, that the statute did protect intangible rights in the phrase "scheme to defraud". John G. Roberts, Jr.: But if -- if you're going to say that the statute refers to a term of art, the whole point of a term of art is that it's a shorthand for defining something. And then -- but if you're saying that it's a term of art that means the pre-McNally case law over the -- you know, all the different circuits and the district courts and that some knowledge of that, it -- it's descriptive of something, but it's not a term of art. Michael R. Dreeben: I think it's a term of art in the sense that it referred to a -- a body of law that until quite recently, when defendants began making vagueness arguments, was understood to refer to the kinds of schemes that had been prosecuted before this Court held that "scheme to defraud" was limited to money or property. And it-- John G. Roberts, Jr.: No, I'm with you there. But then the kinds of cases -- that's where it gets fuzzy. I mean, you need lawyers and research before you get an idea of what the pre-McNally state of law was with respect to intangible -- the right to intangible services, of honest services. And I'm just wondering how clear does what that body of law is have to be before you can say, you know what, when we tell you that right, you know that that's what it's referring to? Michael R. Dreeben: --I think it's clear enough at the core, this Court can say so and can provide definition, and it can use its standard tools of interpretation of criminal statutes to dispose of cases that are at the periphery and ensure that there is-- John G. Roberts, Jr.: It kind of -- it puts the prospective defendant, I guess, in an awfully difficult position, though, if he has got to wait. There's this common law evolution over time. You have two cases the government wins, one it loses, three -- and he's supposed to keep track of that. That doesn't sound like fair notice of what's criminal. Michael R. Dreeben: --Well, Mr. Chief Justice, I don't think it puts a defendant in a very bad position at all, because this statute is only triggered when there's an intent to deceive, an intentional fraudulent act taken to deprive the victim of whatever right exists in question. Ruth Bader Ginsburg: What was -- Mr. Dreeben, what was the jury told when this honest services count was given to the jury? What was -- what were they told was the definition-- Michael R. Dreeben: Well, the jury instruction, Justice Ginsburg, appears on page 1086a of the Joint Appendix. That's in volume 3 of the Joint Appendix. And I will describe the jury instruction, too, but I want to say at the outset that this jury instruction was drafted against the background of Fifth Circuit law, which I think did take a somewhat broader view of the honest services crime than the government has taken in this Court, and it has to be read against that background. But the -- the instruction said that "to show that defendants deprived Enron and its shareholders of their right of honest services, the government must prove beyond a reasonable doubt that, in rendering some particular service or services, the defendant knew that his actions were not in the best interests of Enron and its shareholders or that he consciously contemplated or intended such actions, and that Enron and its shareholders suffered a detriment from the defendant's breach of his duty to render honest services. " So -- and this was against a background-- Antonin Scalia: But it's circular, isn't it? Michael R. Dreeben: --The -- I would agree, Justice Scalia. I've read this phrase many times, and it does seem a little circular to me. The introduction to this jury instruction says, "Honest services are the services required by the defendant's fiduciary duty to Enron and its shareholders under State law. " So this was tried in a circuit that followed the State law principle that's at issue in the Weyhrauch case. The government defined the fiduciary duty in that way. But the essence of the fraud was that -- that Petitioner had a fiduciary duty to the shareholders of Enron to act in their best interests, and he betrayed that by acting contrary to the best interests of the shareholders, fraudulently upholding the price, and ultimately that constituted the crime. Now, I think there's a-- John G. Roberts, Jr.: So that covers the case that your friend put of the employee using the computer for personal use? That fits under this instruction? Michael R. Dreeben: --Well, whether the employee had a fiduciary duty in that respect would be, I think, quite a litigable question. This case doesn't involve any subtle or arcane fiduciary duty. This is one of the basic fiduciary duties that any chief executive has, not to lie to shareholders about the financial condition of the company. Antonin Scalia: I'm sorry. The duty of an employee to provide honest services to his employer -- that's not included because the employee is not a fiduciary? Michael R. Dreeben: Not all employees are fiduciaries, no, Justice Scalia. I mean, most fiduciaries have a sort of heightened duty towards the-- Antonin Scalia: Where do you get the fiduciary limitation? Michael R. Dreeben: --I think that it's inherent in that-- Antonin Scalia: All it says is "honest services". I would think that-- Michael R. Dreeben: --Well-- Antonin Scalia: --any employee has the obligation to provide honest services. Michael R. Dreeben: --I think, Justice Scalia, that you cannot successfully attempt to understand Congress's reaction to this Court's decision in McNally without some cognizance of the McNally decision and the preexisting law. Anthony M. Kennedy: What authority do I look to, to see that some employees are fiduciaries and others are not? Michael R. Dreeben: That would be a standard agency law principle, Justice Kennedy, and-- Anthony M. Kennedy: If I look in the Restatement of Agency, and they have a section that applies to fiduciaries and non-fiduciaries, both of whom are employees? Michael R. Dreeben: --Normally, Justice Kennedy, no such complexities are necessary, and I think that this Court can resolve this case without introducing such complexities, because the core duties of loyalty that have formed the core of the honest services prosecutions are universal. They are equally applicable to agency. Anthony M. Kennedy: I would assume that any employee, even at the lowest level of the corporate structure, who has corporate property, a car or something, has a duty to protect that car for the employer. Michael R. Dreeben: But that's not an honest services case. The honest services cases are about conflicting interests and the misuse of official position. I'm not even sure, in the personal computer use case, that the government could successfully show that the employee had misused his official position. This case is quite typical in that respect. Petitioner absolutely misused his official position to serve what we say was his private interest in private gain. Samuel A. Alito, Jr.: Were there any pre-McNally cases that involved a situation like this, where the benefit to the employee was in the form of the employee's disclosed compensation? Michael R. Dreeben: There were not to my knowledge, Justice Alito, and I would frankly acknowledge that this case is a logical extension of the basic principle that we have urged the Court to adopt in the nondisclosure cases. And the Court can evaluate whether it believes that that is legitimately within the scope of an honest services violation or not. But it should not obscure our fundamental submission, which is that there was a definable category of undisclosed conflict of interest cases, that a person furthered through his official actions that constituted honest services fraud. A good example of that is United States v. Keane, which was a Seventh Circuit decision. Petitioner, in his reply brief, claims that Keane involved financial injury to Chicago as a result of an alderman's concealment of his interest in properties that the City was selling. Actually there were three separate schemes in Keane. In one of them, the court was quite clear that, even though the alderman got the same deal that every member of the public would have gotten, it still was honest services fraud because he did not disclose his financial interest in that property to the council when the council was voting on it. Sonia Sotomayor: Could I -- the following hypothetical: I'm a councilperson in a jurisdiction that's considering a tax increase or a tax break, and I vote for the tax break, and I happen to have property that qualifies. Is that a breach of the statute? Michael R. Dreeben: It may well be, Justice Sotomayor. It depends, I think, on whether the tax break was something that basically all general members of the public were in a position to benefit from, which may well be the case if it's just a private residence, versus if it's a particularized business property interest that you have either acquired-- Sonia Sotomayor: Please tell me what I look to, to discern -- if I'm a councilperson, to discern what needs to be disclosed or not disclosed? Michael R. Dreeben: --I think in the first instance, you will inevitably, as a councilperson, turn to your local law. And I think this brings up an important point that was discussed in the Weyhrauch decision, which is that the mail fraud statute does not criminalize breaches of duty without more. There has to be a showing of scienter, of a mens rea element of intent to deceive. And unless the government can point to something which shows that the individual knew that they had a duty to disclose and did not do that-- Sonia Sotomayor: So could-- Michael R. Dreeben: --or -- if I could just finish this part of the answer -- or can point to circumvention-type activity, using of shell companies to conceal an interest, then the government is not going to be able to have an indictable case on honest services fraud. And I think what-- Antonin Scalia: That doesn't give me a whole lot of comfort, I mean, just because there's an intent to deceive. An intent to deceive can be the basis for -- for terminating a contract. There's -- there's been fraud in the inducement or something of that sort. So I know I'm liable to have the contract terminated, and maybe for damages for the contract. And you say: And also, by the way, you know, you can go to jail for a number of years, because, oh, yes, it's very vague, but you intended to deceive, and that's all -- that's all you need to know. Michael R. Dreeben: --But this Court has recognized in numerous cases, Justice Scalia, that a mens rea element requiring an intent to deceive, an intent to violate the law, is exactly what helps prevent statutes that might otherwise be considered too vague from falling-- Stephen G. Breyer: You can -- well, you focus on what you just put together. You said intent to deceive, intent to violate the law. I believe in another case, you're saying they don't have to have an intent to violate the law because there was no State law that prohibited whatever was at issue. So is the government now saying -- which is a big difference -- that you cannot convict somebody unless they know, i.e., they intend to violate a law that forbids the conduct in which they are engaging, other than this honest services law, or are you not saying that? Michael R. Dreeben: --I'm not saying that, Justice Breyer. Stephen G. Breyer: You're not saying that. Michael R. Dreeben: I'm saying that in the ordinary case-- Stephen G. Breyer: Then if you're not saying that, what the person has to carry around with them is an agency treatise. [Laughter] Michael R. Dreeben: --Well, I think that what happens, Justice Breyer, is that unless the government does have some sort of legal platform like that to show that there was knowledge of a duty, it's not possible for the government to bring its proof to the court and establish that the individual acted with the requisite mens rea, unless there is activity that reveals an intent to circumvent the law and to withhold the information, as in Justice Sotomayor's example, information about a property interest that might well affect the deliberations of the council. And that kind of evidence often requires use of offshore accounts-- Stephen G. Breyer: Yes, I mean, of course they intend to -- it's not the case that is obvious; it's the case that is not obvious that worries me, and-- Michael R. Dreeben: --I don't see any of those-- Stephen G. Breyer: --in the case that is not obvious, of course they intend to withhold information. I agree with that. But the problem is they don't know it's unlawful to do so. Michael R. Dreeben: --Justice Breyer, I think if you look at the cases in which this has happened, there is -- there's not like a deliberation on somebody's part -- oh, do I have to disclose or not disclose? What these cases are, are really outright criminal conduct in the form of conflicting interests that every fiduciary knows you need to disclose this before you take official action to further that interest. That-- Ruth Bader Ginsburg: --Mr. Dreeben, would you clarify the issue that came up: Is the government's theory focused simply on the compensation or does it involve the sale of shares? Michael R. Dreeben: --It involves the sale of shares as well. That was part of the compensation, and it's linked to it. But, Justice Ginsburg, if you look at the government's opening statement in this case, the government opened by saying, "You will see that defendants Lay and Skilling knew few -- a few key facts about the true condition of Enron, facts that the investing public did not know. " "With that information, defendants Lay and Skilling sold tens of millions of dollars of their own Enron stock. " And then continued: "When an investor buys a share of stock, an investor buys some rights in a publicly traded company. " "When an investor buys a share of stock, they buy the right to hear and receive truth from the chief executive officer. " "And, importantly, they buy the right to have their interests placed ahead of the chief executor officer every day of the week. " So there was, baked into this case at the outset, the notion that these officials were not acting in the best interests of the shareholders. They were furthering their own interests by maintaining a high stock price so that they could profit from it. Thank you. John G. Roberts, Jr.: Thank you, counsel. Mr. Srinivasan, you have 4 minutes remaining. Sri Srinivasan: Thank you, Mr. Chief Justice. A couple of quick points on the honest services fraud issue, and then a couple of points on the juror issue, if I might. With respect to honest services fraud, first of all, I think that the government pointed to the jury instruction -- and, Justice Ginsburg, this goes to some questions that you had raised -- I think what's clear from the capacious nature of the jury instruction that was issued in this case is that the elements that the government say make Jeff Skilling guilty of honest services fraud weren't put before the jury or required to be found by the jury. And for that reason alone, the conviction against Jeff Skilling ought to be overturned. Another point I'd make very quickly with respect to the sweep of the government's theory concerning the workplace is, under our understanding, the duty of loyalty does extend to all employees. It does, and, therefore, the theory that they assert should apply in this case, I think, has devastating implications for workplace relations. Now, with respect to the juror question, a couple of preliminary points, and then I'd like to walk the Court through just one aspect of the voir dire which I think exhibits the manifest flaws in the process the trial court conducted. With respect to the question about the issuance of questionnaires, questionnaires were also issued in the Timothy McVeigh case. But I don't want to limit our comparison to Timothy McVeigh, because I think in response to some of the questions that were raised, I don't want to leave an impression that a multiple-day voir dire with the sort of extensive questioning that we think was required here is not in use in other cases that involve like crimes. In the Martha Stewart case, for example, which was a financial case, there were 6 days of voir dire and after a questionnaire was issued. And in that case, the only reason you needed an extended voir dire was because of the celebrity status of the defendant. You didn't have the deep-seated community passion and prejudice that characterized the Houston venue in this case. So, I think it's not at all unusual to have that kind of extended voir dire, and, in fact, we would say it's absolutely necessary to assure that the defendant receives the fair and impartial jury to which he's entitled. Antonin Scalia: So either this was too little or Martha Stewart was too much? [Laughter] Sri Srinivasan: Well, I think the former rather than the latter-- John G. Roberts, Jr.: Well, but it's -- it's a different model of it. As Mr. Dreeben was explaining, if you have an experienced judge who goes through this all the time, I think it's reasonable for him to say: Look, bring the person in front of me. We've got a questionnaire. I can identify the problems, look him in the eye, and I've got a lot of experience picking a jury, and it's better to let me do it than to have the lawyers have 3 weeks to do it. Sri Srinivasan: --Well, you don't necessarily need all of that, Your Honor, but I think with respect to the way in which the district court, in fact, conducted this voir dire, if I could just take -- if I could just direct the Court's attention to one juror in particular -- and, Justice Breyer, this is -- maps onto some of the points you were making. This is juror 61, and the relevant exchange is at pages 931a to 932a of the Joint Appendix, which is at -- in -- in volume 2. And I think the way the trial court conducted the voir dire in this case exhibits the manifest flaws in his approach generally. This is someone who at page 932a, it's revealed, answered the question whether she was angry, whether there was anger about Enron, with yes, quote -- it was, quote, "based out of greed, hurt a lot of innocent people. " And to paint the picture more fully, the person was also asked: Do you have an opinion about the collapse of Enron? To which the answer was, quote, "Yes, criminal, caused a huge shock wave which the entire community felt. " close quote. Now, at 931a at the top, she was asked the question whether she had the opinion about Mr. Lay and her answer was, quote, "Shame on him". And then much of this was put before her in the course of the voir dire. In the middle of page 932a, the first answer -- she's asked the question: "Can you presume as you start this trial that Mr. Lay is innocent? " The answer is, "I hope so, but you know, I don't know. " "I can't honestly answer that one way or another. " Stephen G. Breyer: Then on 932, she does answer it, and says, "He's assumed innocent". "And can you conscientiously carry out that assumption? " "I could honestly say I will give it my best. " Sri Srinivasan: Not until-- Stephen G. Breyer: And so the judge looks her in the eye and says -- fine. Sri Srinivasan: --Well, not -- not until this happens first, Justice Breyer, between 932a and 933a. And so she's asked, "So that might -- might your views about Ken Lay cloud your judgment relative to criminal responsibility? " Stephen G. Breyer: I see. And I'll-- Sri Srinivasan: And her answer is-- Stephen G. Breyer: --I'll read that again. But my question is, can we get a hold of these 238 questionnaires? Are they in the record in front of us? Sri Srinivasan: --I believe that they are. I think that they're certainly in the record before the court of appeals. So I think that they are. John G. Roberts, Jr.: Thank you, counsel. Sri Srinivasan: Thank you. John G. Roberts, Jr.: Counsel. The case is submitted.

Warren E. Burger: We’ll hear arguments first this morning in number 75-312 Young, the Mayor of Detroit against American Mini Theatres. Mrs. Reilly, you may proceed whenever you’re ready. Maureen Pulte Reilly: Mr. Chief Justice and may it please the Court. For the record, I am Maureen Reilly, Assistant Corporation Counsel for the City of Detroit, representing Coleman A. Young, Mayor of Detroit, and the department heads who petitioners in this matter. The Court is asked this morning to review a decision of the Sixth Circuit Court of Appeals which by two to one decision invalidated Amendments to the City’s Zoning and Licensing Laws regulating adult businesses. This case is now before the Court approximately eight years after the first -- the problem first became apparent in the City of Detroit. In 1969, there were only two of these new uses, land uses within the city -- two adult bookstores, two adult theaters and relatively few topless go-go bars. Within a period of three years, that number had changed so that there were 18 adult theaters, 21 adult bookstores and 70 topless bars. Reports from the Detroit Police Department indicated that these businesses had clustered together along the main arteries of the City of Detroit and were immediately adjacent to or backed up to neighborhoods, residential neighborhoods which were zoned residential. Based on the complaints received by a number of families, residents and businessmen whose businesses served those families, the Mayor recommended changes in the City’s Zoning and Licensing Laws. The changes that were adopted were these: The adult businesses were now designated as regulated uses. These were uses which had been determined by the council to be businesses, which had a deleterious effect on the surrounding neighborhood, which caused a downgrading in property values and the deterioration of the neighborhood generally. Potter Stewart: The category of regulated uses had been one that was part of the Detroit zoning pattern for many years, hasn’t it been? Maureen Pulte Reilly: Yes, Your Honor. The idea, the concept of regulated uses so far as I know was a new concept of inverse zoning adopted by the city in 1962. The city found out that certain uses when clustered together caused the downgrading of a neighborhood. The uses -- Potter Stewart: Pool halls and shoeshine parlors and -- Maureen Pulte Reilly: Motels, bars, those businesses which cater to transient- type patrons -- Potter Stewart: As contrast with the neighborhood patronage? Maureen Pulte Reilly: That’s right, Your Honor. It seemed only proper that the adult businesses be included in the regulated use category because they follow the same pattern. They cluster together, they drew patrons who are not members of the immediate neighborhood but from the surrounding community and had operational characteristics which set them apart from other types of theaters and bookstores. These theaters and bookstores which offered a substantial portion of their stock and trade or they films were sexually stimulating on the spot. It was not like a drugstore that would offer pill and you go home and five hours later you feel sexually stimulated, whether you walked in to the theater, and watched the film on the screen or you walked in to the bookstore and review the material there, the immediate reaction was sexual stimulation. I think this Court can almost take judicial notice of that. When these persons left the store not only the residents were aware of how they may have been sexually stimulated but prostitutes were aware of it. And prostitutes began coming into these areas. It’s a matter of record in the City of Detroit that in these areas where the adult businesses clustered, so-called massage parlors opened. We have padlocked 12 massage parlors within the last few years, all of them in the area of the adult businesses. I called the massage parlors but in fact they were fronts for houses of prostitution. This is one of the adverse effects which is caused by the adult businesses particularly when they cluster together. And this is one of the adverse effects that the families are concerned about when they send the women and the children and some of the men who are concerned to the business area which includes these adult businesses. In 1972, when we passed the ordinances, there was no immediate reaction. The people generally seemed to favor the ordinances. Early in 1973, we had our first test of the ordinances. The respondents in this case, the American Mini Theatres Inc. and Nortown Theatre Inc. both opened adult theaters in the City of Detroit in violation of the city’s zoning regulations. Both were within 1000 feet of two other regulated uses. In fact, the Nortown was within 1000 feet, of I believe, seven other regulated uses; neither adult business, the respondents -- neither of the respondents sought to obtain a waiver by the neighboring community. Now I recognize that the provision in the ordinance, in the zoning ordinance requiring the consent of 51% of the persons living or doing business within 500 feet of the location of the adult business is not directly before the Court today. But I submit to Your Honors that indirectly, the provision is before the Court. If this Court accepts the decision of the Sixth Circuit Court of Appeals, that the city may not regulate adult businesses, because by definition, it refers to the content of the material disseminated therein, then all of the city’s regulations dealing with adult businesses will be wiped out. Byron R. White: That provision that you -- that policy is not directly before that Court, and was invalidated by the District Court and you took no appeals, is that it? Maureen Pulte Reilly: We took no appeal, Your Honor. We amended the ordinance to correct the deficiency, pouring it out by the trial court. Potter Stewart: Yes. And that was -- later after this, after this judgment -- after the District Court’s judgment? Maureen Pulte Reilly: That is correct, Your Honor. When I say that that provision is indirectly before the court, I say that because it includes the same definition and would be wiped out, if the court refuse to allow the provision that is directly before the Court -- Potter Stewart: Before the Court of Appeals, in other words, a fortiori this, the other one would be invalidated in your submission? Maureen Pulte Reilly: That is correct Your Honor, the other point I wish to make is that this provision was needed by council and considered by council because it took into consideration the aspect of protecting the families, the youth in the neighborhood. And that’s why I ask this Court not to ignore it because the package was presented to council as one package to accomplish two ends, two avoid clustering in the neighborhoods in the business area that served the neighborhood, and to ensure the businessman in the zoned business district and the residents that they would continue to have a voice in the kind of neighborhood that they lived in, and to ensure their commitment to the neighborhood. And this provision, the 51 Consent provision has to be at least considered by the Court in the total picture that we’re trying to present to the Court today. The respondents in this matter, the two adult theaters, who by the way admit that they are adult theaters in their complaint in the federal district court and the state unequivocally that no minor were permitted, brought the suit in the federal district court contending that their constitutional rights under the First and Fourteenth Amendment were being violated. I’m sure this Court is aware that the District Court reversed the rule that provision relating to the 51% consent was ruled unconstitutional because the court said it was too restrictive to accomplish the legitimate interest sought to be accomplished by the city. The reason being that the ordinance dealt with a particular residential unit when the court said, we had shown that we were attempting to protect the neighborhood and obviously a single residential unit is not a neighborhood. So that ordinance was stricken because it was more restrictive that necessary to accomplish our purpose. The other provision of the zoning law relating to the 1000-foot restriction was upheld as being a legitimate way of protecting the city’s interest, in allowing the neighborhoods to remain stable and to protect them in providing an atmosphere in which the neighborhood and the business people would continue to live in the neighborhood and -- Speaker: Mrs. Reilly, does the amended ordinance now within 500 feet of a residentially zoned district continue that waiver, provision of 51%? Maureen Pulte Reilly: If I understand you correctly Your Honor, you are asking that -- Speaker: Because as I understand, the initial ordinance had -- it could not be located within 500 feet of a residential unit unless the provision was waived by the consent of some 51% of the persons living or doing business within 500 feet. Maureen Pulte Reilly: Correct. Speaker: I have amended it to really can’t be within the 500 feet of a residentially zoned district. Maureen Pulte Reilly: That’s correct. Speaker: But may there also be the waiver by consent of 51%? Maureen Pulte Reilly: Yes Your Honor, there is the waiver. Both provisions may be waived. The 1000-foot provision may be waived by the -- what was the City Planning Commission under our new organization. It’s a different department, by the waiver still is allowed. And the 51% consent waiver is still continued under the 500-foot restriction. Speaker: Mrs. Reilly, excuse me. Maureen Pulte Reilly: Well at least it was Ayrie [Laughter] Speaker: Mrs. Reilly, -- Maureen Pulte Reilly: Yes. Speaker: -- do you characterize this case as a First Amendment case or something else? Maureen Pulte Reilly: I would have to characterize it as a First Amendment case because of the issues raised. It is the petitioners’ position however that the case of U.S. versus O’Brien would be controlling and we are asking this Court not to apply an absolutist viewpoint on First Amendment rights to this case. Speaker: Are you trying to bring in some place exceptions? Maureen Pulte Reilly: Yes, Your Honor, it’s our position that even though we look to the content of the material to define the type of business, which is causing the deleterious effects, the regulations are not directed toward the content of the material. They are directed towards the location of commercial operations in order to avoid clustering and the adverse effects which results from a clustering and to avoid locating these kinds of businesses in neighborhoods where we are concerned about family values. So, in this sense, I’m saying, yes First Amendment must be considered. Byron R. White: Could I ask you one other question now that you’re interrupted. On a 1000-foot part of the ordinance, I take it, it means that the entrepreneur must know not only what he is doing he has to know what other people within that radius are doing. He has to determine that they are regulated uses before he can undertake operations, is that correct? Maureen Pulte Reilly: That is correct Your Honor, but it’s a simple matter of going to the Community and Economic Development Department in the City of Detroit. And filing an application or stating where he wishes to locate and he will be advised by that department of any other regulated uses within 1000 feet of the proposed location. Byron R. White: I suppose that even without regulation that these kinds of establishments would have to have to have license of some kind of -- Maureen Pulte Reilly: Your Honor, the Class “D” cabarets are licensed both by the state and by the city. Motion pictures theaters have traditionally been licensed within the City of Detroit and adult theaters are subject to the same licensing provisions as the non-adult theaters. Bookstores have not traditionally been licensed in the city and the adult bookstores are not licensed, so -- Warren E. Burger: Is there any occupancy permit or must they go to the city government for any purpose at all or do they just go and open the bookstore? Maureen Pulte Reilly: No, the bookstore, like any other commercial operation must have a certificate of occupancy which is required in order to check out the health regulations. Going back to one of the points raised by one of the Justices, the question of whether or not First Amendment rights, if this is a First Amendment case, I say yes, but I am asking on behalf of the petitioners that this Court apply the traditional balancing of interest test to the case at the Bar. In many cases decided by this Court recently, the Court has looked to the content of the material. I get the impression from the Fort Dix case that was announced today, that the Court said, it is political material, but under the circumstances considering the interest of the state in protecting the military atmosphere in a camp devoted entirely to military purposes and balancing that with the interest of the person who seek to disseminate their political views. The balancing results in a favorable position on behalf of the state, that the state’s interest is more important under this situation. This balancing of interest has been applied in the Ginsberg versus New York case where the Court said, “Material may not be obscene as to adults but may be regulated as to minors,” specific material dealing with sexual conduct if appealing to the prurient interest of the minors, it may be separated and regulated, even though it is not obscene and cannot be totally prohibited. The material which we are discussing in the case at Bar in specifically defined and relates to specific sexual conduct. The definitions are quite explicit. In fact, when the ordinance was presented to city council, our council president asked, if it was permissible to discuss it at the table considering our anti-pornography ordinances. We are dealing with a definition including specific sexual conduct and specific sexual areas of the body, not general ideas relating to feelings, political, social, economic, so on. The definitions are clearly tied into specific sexual conduct in anatomical areas. William H. Rehnquist: But concededly I take it, Mrs. Reilly, some of the material sold would not be barred or could not be barred by the state under the Miller case and the Paris Adult theater. That you can’t call this simply of the City of Detroit’s effort to deal with something could be thought to be obscene? Maureen Pulte Reilly: That is correct, Your Honor We are not implying that the material is obscene because we recognize this Court’s decision that no material is technically pornographic until it has been found to be so by a judicial adversary hearing. The problem is, that there is a great amount of material which may or may not be obscene, which maybe hard core, soft core or whatever, but it is all sexually stimulating and it all -- if that type of material is offered in a business we have the adverse effects existing from these types of businesses whether or not the material is determined to be obscene legally. William H. Rehnquist: Well, don’t you think that your case would be in a somewhat weaker position if the Detroit City Council simply said, “We don’t like this kind of material, and so we’re going to limit the number of outlets that is put it straight on a straight content basis,” rather than as I understand, they did say, “We don’t like the consequences that come in the way of places that sell this material.” Maureen Pulte Reilly: Yes, Your Honor. I think that’s the key to this case that we are not saying the material itself is offensive. We are saying that the operation of these types of businesses causes adverse effects which infringe upon the rights of the neighboring citizens whether they be residents or businessmen. If we said only the material is offensive, we would have no right to prohibit the sale or dissemination of that material without a judicial adversary hearing because this Court in Miller rule that only obscene material may be directly prohibited, and then only after a judicial adversary hearing. Potter Stewart: Can I ask you this Mrs. Reilly, is there any claim or any showing in this case that the effect of this zoning ordinance is ultimately to limit -- put a limit on the absolute number of these theaters and bookstores in the City of Detroit? Maureen Pulte Reilly: No Your Honor -- Potter Stewart: I know the purpose is dispersal. Maureen Pulte Reilly: Yes. Potter Stewart: But is there any claim that the effect is to, actually limit the number of them in the city? Maureen Pulte Reilly: I do not recall that that claim has been made at any time. The claim has been made that we don’t know where to locate and I said at the District Court level, I wasn’t about to point out the places where they might locate. But the zoning law is written in such a way that they may locate anywhere where similar uses may locate in business zoned districts if they’re not within a thousand feet of two other regulated uses. Potter Stewart: Right but my question was, whether the effect was to make this ordinance tantamount to the one that my brother Rehnquist hypothesized. I put an absolute limit on the number of these two kinds of establishments, there is a -- Maureen Pulte Reilly: There is no absolute limit. No sealing on the number of -- Potter Stewart: No. I know there’s no ceiling in words in the ordinance, but my question was whether the -- there’s any claim that that was -- in fact what the ordinance succeeded in doing. Maureen Pulte Reilly: I do not believe that claim was made at any point. Potter Stewart: No, perhaps it’s going to be made. Maureen Pulte Reilly: It may be made now, that’s why I was carefully answering that. Lewis F. Powell, Jr.: Mrs. Reilly. Maureen Pulte Reilly: Yes? Lewis F. Powell, Jr.: Are there adult businesses regulated exactly in the same way that some of the other restricted uses are regulated such as bars and motels and pawnshops and the like? Maureen Pulte Reilly: Yes, Your Honor. In this way, all the regulated uses are subject to the 1000-foot restriction. Public entertainments, many of the public entertainments in the City of Detroit are also subject to the 500-foot restriction. Lewis F. Powell, Jr.: But in terms of the 1000-foot restriction, there is no distinction made in terms of location? Maureen Pulte Reilly: In terms of location, no, except that I have to point out that the adult businesses are now subject our amended ordinance to the 51% consent provision that the adult businesses may not locate within 500 feet of a residentially zoned district. The other regulated uses -- Lewis F. Powell, Jr.: That is not before us, so is it? Maureen Pulte Reilly: No, well -- you’re asking if they’re being treated the same. Lewis F. Powell, Jr.: Yes. Maureen Pulte Reilly: And I’m saying the barrens under a different law are also subject to that 1000-foot provision. I’m sorry the 51% consent provision. All the regulated uses are subject to the 1000-foot provision. The additional requirement that they not locate within 500 feet of a residentially-zoned district applies only to bars and the adult businesses with the regulated -- Potter Stewart: Waived? Mrs. Reilly, the 1000-foot can’t be waived? Maureen Pulte Reilly: Yes, it can be waived. Potter Stewart: You can both? Maureen Pulte Reilly: By the successor the City Planning Commission upon the showing of certain facts basically that it will not adversely affect the neighborhood. Potter Stewart: Mr. Reilly, the waiver of the 51% waiver provision, does that apply to the 1000-foot as well as the 500 feet residential. Maureen Pulte Reilly: No. Let me briefly explain it to clarify it. The amendments to the zoning ordinance involved two provisions relating to adult businesses. The adult businesses were categorized as regulated uses. All regulated uses are subject to the 1000-foot provision. Potter Stewart: And is that waivable? Maureen Pulte Reilly: That is it may be waived by the City Planning Commission upon us showing -- Potter Stewart: --by the immediate residents? Maureen Pulte Reilly: No, that is a separate restriction which only applies to bars, adult businesses which we consider to be entertainment and certain other types of entertainment in the city. Those are listed in Section 5-2-1 in Ordinance 743 (g). So, -- Potter Stewart: Now in fact it could -- that waiver, applies to what, the 51%? Maureen Pulte Reilly: The 51% consent of the surrounding neighborhood applies to the 500-foot restriction that an adult business may not locate within 500 feet (Voice Overlap). Potter Stewart: But applicable only to the adult business? Maureen Pulte Reilly: Adult businesses, bars and certain public entertainments listed in Section 5-2-1. Potter Stewart: Thank you. Byron R. White: Any other type -- I take it, any other kind of a theater could be located right next to a residential zone or two theaters could be located right next to each other if they are in this category? Maureen Pulte Reilly: I believe theaters may be permitted in B3 zones and those zones have become less restrictive, the B4, B5 and B6. Byron R. White: And it could be right up against the residential zone? Maureen Pulte Reilly: Yes. Byron R. White: And they could be next to each other? Maureen Pulte Reilly: Yes, within the -- Byron R. White: (Inaudible) Maureen Pulte Reilly: Or even I flew over the cuckoo nest. It is only those that come within our specific definition. Byron R. White: But all moving picture theaters are licensed? Maureen Pulte Reilly: All moving pictures theaters are licensed, yes. All licensed in the same way, the same kind of restrictions. Speaker: I take it or have you suggested that one of the purposes of these restrictions is to maintain property values, like zoning sometimes is aimed at? Maureen Pulte Reilly: It is very definitely directed to preserve property vales. Yes, Your Honor. Warren E. Burger: But that is also through what you discussed earlier maintaining the kind of values for residential area where people want to live and have their children brought up? Maureen Pulte Reilly: Provide a suitable atmosphere for the raising of children, yes. Warren E. Burger: So it’s an environmental problem which has an incidental impact on property values, is that not a fair way to say it? Maureen Pulte Reilly: Yes, Your Honor. Warren E. Burger: They should set out in the first place to try to hold up property values. They set out to try to as you described it in your briefs, they set out to try to preserve a decent environment in the city and one of the consequences of that is that that will also help property values? Maureen Pulte Reilly: That’s correct Your Honor, thank you. I would like to reserve -- I’m sorry. Lewis F. Powell, Jr.: Maybe, we didn’t give you enough -- very much time to argue what you have in mind. I do wish you’ve reached the charge that this ordinance is vague and overbroad, for example a language with respect to bookstores refers to stores that have a substantial or significant part of their stock in trade within this scope of the definition, what response do you make to that? Maureen Pulte Reilly: Well, of course it’s our position that the ordinances are quite specific. We have had to use relative terms in the definition of the bookstores because it’s extremely difficult to say if a store has 89% of its stock in trade to be adult, but that makes it adult, I’m sorry, that does not make it adult but 90% would make it adult. So we used a relative term substantial, that word has been used time and again by this Court. In fact, I think it’s used in U.S. versus O’Brien talking about substantial or compelling governmental interests. Even though the term is relative, it is not vague. This Court has looked at many relative terms at or near a courthouse, interfere with the administration of justice, or such as that were discussed in Cameron versus Louisiana -- the Cameron case, Cox versus Louisiana. And this Court has said that you cannot always have mathematical certainty. Lewis F. Powell, Jr.: How would you determine substantiality with respect to a particular store? Maureen Pulte Reilly: Well, the department which now controls the zoning ordinances, the Community and Economic Development Administration would make that determination. Lewis F. Powell, Jr.: Is there any provision for an administrative hearing to make the determination? Maureen Pulte Reilly: Your Honor, under our Michigan Court rules, a person may go into Court and within four days, have a decision of an administrative body reviewed and if there’s not substantial evidence, again, the words substantial evidence on the record to support that determination, the Court may interfere with the administrative decision and overturn it. There is a review body. Our board of zoning appeals reviews all decisions that are protested which are made by the Community and Economic Development Department. So there is an in-house review available in the administration of the city and there is court review available on four-days notice. Speaker: Mrs. Reilly, how permanent is the classification? In other words, if a movie shows theater shows one adult theater -- adult performance or bookstore has, for a period of time, an inventory of adult books, is it then permanently prohibited use or whatever the proper term is, or does it change as the operation changes? Maureen Pulte Reilly: Under the zoning law, if a use, say an adult use and then seizes to be in an adults use for six months, then it ceases to have the restrictions upon it or the benefits if it’s a non-conforming adult use say, which was existing before our ordinance and it closed down for six months or changed it’s fair for six months, then it would no longer be considered an adult use and no longer be considered a non-conforming use. And if then wished to become an adult business, it would have to go through whatever the rules are applicable to starting a brand new business. There is a six-month time period on it. I’d like to reserve whatever time I have for rebuttal. Warren E. Burger: Mr. Taylor. Stephen M. Taylor: Mr. Chief Justice and may it please the Court. The ordinance in question, the ordinance before the Court is a zoning ordinance. At least it is termed that whatever the label given to a regulation whether it be zoning, whether it be licensing, the regulation is subject to strict standards of judicial scrutiny where it impinges upon a fundamental right. Now, there is no dispute that the zoning ordinance here impinges upon the exercise of the First Amendment rights. For that reason, we have attacked that the ordinance had a number of grounds and if I might turn to the question, and I believe Mr. Justice Powell directed with regard to the question of vagueness. If we may look at the ordinance for a second, the questions of vagueness arises in three contexts. First with regard to the definition of the materials per se so -- Lewis F. Powell, Jr.: (Inaudible) she decided below? Stephen M. Taylor: The question of vagueness, Your Honor? I don’t believe it was raised but the court didn’t decide on that issue. However this Court can look at it, all of the various issues independently and make its own determination. And that is the reason that we have raised it continually through the Court. However, getting back to the point of -- Warren E. Burger: Did they raise it? Stephen M. Taylor: Yes, Your Honor, in the lower court. I don’t believe however that it was decided on the issue and it clearly was not decided on that issue in the Sixth Circuit Court of Appeals. It was decided on equal protection basis. Now again, with regard to the definitions of an adult bookstore per se, the term is defined as a bookstore having a substantial or significant portion of its stock in trade what is substantial or significant portion, how does one measure that kind of term if -- Warren E. Burger: Well, does this store advertise itself as an adult bookstore? Stephen M. Taylor: Well, of course we’re dealing with an adult theater but assuming that we were talking about an adult bookstore, yes, it probably would identify itself as an adult bookstore. However, taking the ordinances -- Warren E. Burger: It’s another pretty good definition then? Stephen M. Taylor: Your Honor, I would beg to differ with you on this basis taking the definition as it stands that could apply to virtually to any kind of a bookstore selling any kind of a material because we don’t know where the line is to be drawn. That is to say, if in the area of First Amendment rights, precision of regulation is a touchstone, there is no way of knowing at what point a bookstore passes that line from adult to non-adult. So, though it may be true, some bookstores advertised themselves as adult bookstores as that term is used, whatever that term means this nevertheless could apply potentially to any kind of a bookstore. On the same basis, if we take a look at the definition of a motion picture theater and enclosed building used for presenting material, well, that doesn’t tell us whether as one film for two hours, it doesn’t tell us whether that is one film for one week or for six weeks, or six films for shall we say two weeks a piece. In other words, again we have the same problem. We don’t know at what point that line is drawn. Thurgood Marshall: Not Adult theater, is it? Stephen M. Taylor: Pardon? Thurgood Marshall: There’s no question about ambiguity about what an adult theater is because I understand, it was agreed that you didn’t let minors in. Stephen M. Taylor: That would be correct, Your Honor. But on the same basis -- Thurgood Marshall: I think (Inaudible) did? Stephen M. Taylor: If that be the basis that the city stands and we don’t know that, then we can simply say that any R-rated film as rated by Motion Pictures Association would -- Thurgood Marshall: The impression that you excluded everyone but adults? Stephen M. Taylor: That would be correct Your Honor. Thurgood Marshall: So that ergo is an adult theater? Stephen M. Taylor: That is correct as in so far as the Nortown Theatre goes, that would be correct. However again -- Potter Stewart: Within the definition of the zoning ordinance, is it? Stephen M. Taylor: Pardon? Potter Stewart: I have the -- I’m looking at the ordinance on page 81 of this petition for a writ of certiorari. And -- Stephen M. Taylor: Yes, Your Honor. Would you mind if I direct you to page to 66? If that is the appendix or petition for writ of certiorari. Potter Stewart: What’s page beginning on page 80? Stephen M. Taylor: I believe that’s a different ordinance Your Honor. 80? That is the licensing ordinance for adult theaters. Same definition, that would be correct, right. Used for presenting material. Potter Stewart: The same definition? Stephen M. Taylor: Yes, Your Honor. Potter Stewart: And that doesn’t say anything there about -- there is nothing in that definition or that definition certainly is not confined to a theater that does not admit minors -- Stephen M. Taylor: That’s correct. Potter Stewart: It is in quite different language, isn’t it? Stephen M. Taylor: Yes, Your Honor, that is correct. That’s the point we don’t know at what point a theater becomes an adult theater in accordance with this definition. Now, if might turn to the definition of the material -- Potter Stewart: And the theater that did not admit minors would not be an adult theater within this per se, under this ordinance, would it? Stephen M. Taylor: Your Honor, we don’t know, that’s the problem. Potter Stewart: Well, it doesn’t say anything about -- Stephen M. Taylor: That’s correct. It doesn’t define it in those terms. That would be correct. It doesn’t say that a theater which does not admit minors thereby is an adult theater, if that’s what Your Honor is getting at, no, it does not. Thurgood Marshall: And a theater that does more paying customers. If they exclude paying customers, there must be some reason? Stephen M. Taylor: That may be true Your Honor. Possibly because the material is not -- Thurgood Marshall: I think this way, is in fact that the theater itself restricts itself to minor a piece of evidence that can be considered as to whether or not it is an adult theater? Stephen M. Taylor: Again, my answer to that would be no, because there are many theaters which based upon a particular movie which would come to that particular theater at a particular time would exclude minors and we don’t know whether that theatre then would be an adult theater. Now if I might turn to the definition -- Byron R. White: You’re not claiming the ordinance is vague as applied to your clients, you are in effect making an overbreadth analysis, and you claim standing to assert to claim some other business establishments? Stephen M. Taylor: No, Your Honor. We are claiming that it is vague as applied to my client, if not in this context, then in another context which I was just getting to. And also not only as applied that is written, not only to this particular theater but to all theaters similarly situate. Byron R. White: Can we doubt about the fact that this ordinance applies to the businesses operated by your clients? Stephen M. Taylor: Again, we have stipulated (Voice Overlap) that we do show materials of sexual in nature, so if that be the definition, which is what we will get into in a moment, yes. This ordinance then would apply to the Nortown Theatre. Byron R. White: So, you are really asserting that it’s vague as applied to other uses different from those put on by your own clients? Stephen M. Taylor: I am also asserting that it’s vague both as to apply to my client and to other uses. Now, if I might get into the next point, the ordinance defines the term, the material, as material distinguished or characterized by an emphasis on the matter and then goes into the definition of the particular matter. What I point out to the Court, again, we have the same problem. We don’t know at what point the material is distinguished or characterized by an emphasis upon. What specifically or what does that mean? How much of the material? What percentage of the material has to be of a sexual nature and anatomical content if you like before it passes that line between non-adult and adult? So then we have again, the same problem with vagueness. Now, if I might turn to the next position that we’ve taken and that is on a question or overbreadth. Now, as we have said, it’s our position that the ordinance is vague as far as those definitions go, but might I point out the Court with regard to the definition as to specific sexual conduct or specific anatomical area that this ordinance applies to, it is quite specific. However, it defines that material in those, in that context in a way which clearly, it goes beyond the restraints on expression, that is to say an obscenity. The ordinance we far beyond permissible restraints on obscenity, and this is conceded by the petitioners in this matter. There is no question about it. Not only does it go beyond permissible restraints on obscenity, but it differentiates between materials which are, between protective materials which are adults and which are not adult. William H. Rehnquist: Mr. Taylor, do you think that the City of Detroit could have said in an ordinance that regulated uses such as those conducted by your client and pool halls and the other regulated could not be established within 600 feet of an elementary school? Stephen M. Taylor: Your Honor I think that would depend upon the interest asserted by the City of Detroit. William H. Rehnquist: But what if they had asserted the interest that they don’t want elementary schools students coming and going from the school to be exposed to those kind of use? Stephen M. Taylor: My answer to the Court would be no, based upon the definition laid out here by this ordinance and the way this ordinance is written. I would suppose, and I have to speak to Your Honor of the top of my head in the sense that that is not the question that’s before the Court. It may be possible for the city to do exactly what Your Honor is saying. But they can’t do it in this way and that is not the intent of this ordinance or the purpose or the effect of this ordinance. William H. Rehnquist: Well, I realize that. I was asking you a hypothetical question. Stephen M. Taylor: Yes sir, you’re right. I understand the hypothetical question and I think the city would have a difficult time justifying that kind of an ordinance unless there was some indication of an actual thrusting or viewing upon children. In other words, some indication that there was some of the material reaching the children, simply to say which in essence is exactly what the city is saying. This I think is where one of the basic questions of the essence -- the question of overbreadth, the question of justification, the interest asserted by the city. What are those interests that the city asserts? The city asserts in interests in protecting its neighborhoods and preserving its -- the values if you like, community living, all of which simply asserted in the abstract are fine. And there is, without a doubt an interest and the city has a valid interest in that. But let’s take a look for a moment if we can from the abstraction of the interest to the concrete basis for the interests. The City of Detroit has said as a basis and has filed many affidavits by a professor. They have said that there are certain characteristics which because of their very nature cause serious deleterious effects. Yet, they never mentioned what those specific effects are. And I might point out to the Court, this ordinance takes effect that the inception of the operation of the theater or the bookstore, that is to say, there is no theater or bookstore showing adult materials, they have to request -- a bookstore or theater has to request a waiver in essence in the case of the Nortown, a waiver of the standards in order to operate as an adult theater. The City of Detroit said that there are certain interests, there is a basis for this interest and they submit affidavits upon which they base their interests. And if we looked at the affidavits, what they really say is, the people object to the materials coming into their area. They have a concept in their minds, a pre-existing notion in their minds, if you like, that they don’t like the material because they don’t like it, they view the area as going down they thereby sell their property or they don’t take care of their property. The property goes down and brings another people and don’t keep it up. Now this is no more than what this Court has -- Warren E. Burger: As of this time, on generalities, there’s nothing in the record about what you are saying now or is there? Stephen M. Taylor: Your Honor, on the contrary, there is an affidavit submitted by, I believe it’s Mr. Ravitz who’s a professor which is the basis of the ordinances -- this is the basis. This is what the city says. We based our ordinance on this. And what does that ordinance say? Warren E. Burger: But your generalities that as a result of that, people let their property go down. Did he deal with people neglecting maintenance of their property? Stephen M. Taylor: Yes, as a matter of fact, Your Honor, in his affidavit he said specifically that whether it’s true or not, that the property is going down, people will act as if it’s going down, as if there is an effect upon in the neighborhood which is deleterious. And therefore, since they will act, then that will be in fact the truth. And this is the point which we’re making to the Court. All that the city is saying on this record is that what this Court has called an undifferentiated fear or apprehension of harm at sometime in the future as a basis for these ordinances, what the city is doing. Speaker: Is it your case that an adult theater may be located in any zone in which a non-adult theater is located? Stephen M. Taylor: Yes, Your Honor. We are saying that there is virtually no reason, no basis, no rationale. Speaker: Do you think that in Detroit, they have six; is it business zones, B1 to B6? Stephen M. Taylor: That is my understanding and is my -- Speaker: And I take it on the face of the ordinance that says that or it recites that adult theaters are not permitted in the B1, B2 or B3 Zones? Stephen M. Taylor: I believe -- Speaker: Although other theaters are? Stephen M. Taylor: No, Your Honor. I believe other theaters are not permitted in B1, 2 and 3. And adult business and adult theaters are not permitted in B3, 4, 5 and 6 though other theaters are. So there is of difference based upon the kind of the material intended to be disseminated. Speaker: You would think that general provision would fall if you win this case? I mean not just the 500 or 1000-foot -- Stephen M. Taylor: No, Your Honor. Our position is that our theater or any theater or bookstore should be treated no differently than in any other theater or bookstore. Speaker: Well, then you should answer my question yes, so your kind of theater, your kind of bookstore, should be able to be located in any zone in which a an ordinary theater? Stephen M. Taylor: That is correct. William H. Rehnquist: Should a pool hall under your constitutional theory be able to be located at any zoning district where a grocery store can be located? Stephen M. Taylor: There may be a difference there Your Honor, but the difference is that a pool hall is not in of itself protected, for instance the theaters, I might have point to the Court that you can’t show a film without a motion picture theater. If you stop the operation of the theater, you stop the operation -- you stop the showing, not only of a particular film, but virtually all films which will be shown at that theater. William H. Rehnquist: But what it the city says, pool halls and adult theaters produce exactly the same consequences, attract adults kind of a C-D class of adults in the eyes of the city and we simply want to confine them or limit their closeness of which they’re located together? Why can’t the city do that? Stephen M. Taylor: The city may be able to do that but would have to come up with a concrete justification which would be I might have more than merely that the city doesn’t like the people who come to the theater because they assume something is going on the theater, which is exactly what counsel has come up with, recently, just now, in this interest. They assume that the people are sexually excited and therefore, to say this kind of thing we don’t want in our -- William H. Rehnquist: But there is some evidence in the record. Isn’t there that prostitution tends to follow these types of operations and that the city was concerned not about just the content of what was being shown but about the attendant consequences when the neighborhood took on these characteristics. Stephen M. Taylor: Your Honor, one, there has been no independent evidence, no showing that adult bookstores and adult theaters, in and of themselves causes problems. There is virtually nothing on the record. Moreover, what the city has said is that, there are massage parlors which caused these problems. As the city has just said, yet you will note that massage parlors are not included in the regulated uses. So, there is something other than prostitution which is involved. Yes, I’m sorry. Lewis F. Powell, Jr.: Tell me this, is your theater located in one of the districts were adult theaters maybe located? Stephen M. Taylor: Yes Your Honor, as I understand that there is no question that raised by the city that -- Lewis F. Powell, Jr.: My next question is, are you within the 1000 feet of another adult theater? Stephen M. Taylor: We, by way I referred to my client’s theater Your Honor is apparently within a 1000 feet of two other regulated uses. The record does not disclose whether or not -- Lewis F. Powell, Jr.: What happens? Do all three have to go out of business? Stephen M. Taylor: Apparently, the one that has to go out of business is the third one. Lewis F. Powell, Jr.: Do you mean, is that you? Stephen M. Taylor: Yes, Your Honor. That apparently is us. Lewis F. Powell, Jr.: Even though you’ve been established before the ordinance? Stephen M. Taylor: No. In this case, Your Honor, unlike the theater owned by Nortown, respondent Nortown, we had not been an operational theater prior to the time of the promulgation of the amended ordinance. Nortown apparently had been a theater for some 40 years and then changed policy subsequent to the ordinance being passed. We were incipient theater, if the Court will, having passed all of the preliminary test and then the ordinance was promulgated and we were denied the certificate of occupancy. Lewis F. Powell, Jr.: Do we have theater in either of these cases located in an area where adult theaters may not be located under the ordinance? Stephen M. Taylor: As far as I know, Your Honor, neither of the theaters involved in this case is in such a generally outlawed zoning area. So, it’s simply a questioning of this clustering effect of the theaters. Speaker: (Inaudible) John H. Weston: Mr. Chief Justice and may it please the Court. It is critical it seems to recall in this case at all times that notwithstanding the suggestion and possible implication of Mr. Justice Rehnquist earlier in my colleague’s argument that we are dealing here only with speech which is presumptively protected under the First Amendment. The definitions under this ordinance are not the merely definitions nor it there any question that we are not dealing with material which has previously been found under procedural safeguards to be obscene. So we are dealing here with absolutely presumptively protected speech and we resist and resent the attempt on the part of petitioners to try to deal with disseminators, and places or dissemination of presumptively protected constitutional speech, in the same fashion as with pool halls, with grocery stores, with flophouses, with billiard parlors, and the like. Potter Stewart: How far does your argument go? In other words, I suppose you would agree that a city could zone a portion of it’s areas as residents “A” for a single occupancy residential units and thereby exclude from such an area, grocery stores, pool halls, shoeshine parlor, parlors, barbershops, and so on. John H. Weston: Yes, Your Honor. Potter Stewart: But is it -- your claim, if taken to its logical stream would be that it could not exclude from such an area any bookstore? John H. Weston: No Your Honor, not at all. Potter Stewart: Or movie picture theater? John H. Weston: Not at all, Your Honor. Potter Stewart: Correct? John H. Weston: We do not quarrel with the right of this municipality or any municipality to be able to zone in traditional way and in fact Detroit, this has been pointed out, does have the traditional zoning breakdown. Potter Stewart: Traditional? John H. Weston: No, I suppose -- Potter Stewart: Why does a status quo have to be frozen terms of land use and planning? John H. Weston: I would say there is nothing required about that of course Your Honor. But in this case, we have, where Detroit has previously zoned in the commercial, residential and industrial areas. And what we’re suggesting is that, there can be no discrimination, no regulation of theaters in terms of -- in the name of zoning on the basis of content where the content unquestionably at the time of the zoning is entitled to presumptive constitutional protection. It’s that which we are resisting. If the city wishes to say, within consistent zoning policies that no theaters may be located in a particular zone or -- Potter Stewart: But why isn’t that -- why isn’t that a violation in the First Amendment? John H. Weston: There may be other -- Potter Stewart: Under your argument? John H. Weston: Well, because what we are saying is that there is a new inability constitutionally on the part of the municipality or other form of Government to discriminate against theaters on the basis of content where that material is entitled to presumptive protection consideration as these materials are. No theater is one thing, just as, might have and has been said many time by this Court that there may well be instances where to picketing may be undertaken or may well be instances where there are no speech which may be tolerated under circumstances. Potter Stewart: Why would you say that a single family residential zone is sustainable if it excludes pool halls and theaters from it for example? What’s the interest that supports that? John H. Weston: Well it seem Your Honor, in particularly in light of the recent decision of this court in the Belle Terre case that there are interests which are supportable constitutionally in our municipal areas -- Byron R. White: (Inaudible) John H. Weston: Well, I suppose the language of the Court is clear to preserve a certain environment, a healthy environment, a protective environment for -- Speaker: The consequences of having the commercial establishments say are -- John H. Weston: Potentially yes, Your Honor. But the fact that the term zoning and concepts inherent in zoning is superimposed on some sort of scheme, no more confers Talismanic community from constitutional scrutiny than any other such device which has ever been before this Court. Simply because the word zoning is utilize does not end the question and the use of the -- Speaker: I suppose you can have a B1, B2, B3 and B4. In some areas you can have pool halls, but in that area or in grocery stores, but in that area, you could have secondhand automobile dealer? John H. Weston: That may well be the case, yes Your Honor. Speaker: Because of the consequences and the characteristics of the business. John H. Weston: And because of the deference which this Court has traditionally given to certain governmental entities in terms of being able to control their own destinies, subject to a strict analysis of constitutional -- Speaker: Now what if one theater has a different consequence than another? It may be because of its content that it has a different, let’s us just posit that one kind of a theater has a different impact than another. John H. Weston: Your Honor, firstly -- excuse me. Speaker: Why would you say that the one could be -- that neither could be excluded from the district? John H. Weston: Your Honor, it may be under some circumstances which are not present in this case and which are not present in the record which we have before us, that there may be a specific entity, a specific entity, a specific theater, a specific work which in light of the legitimate and compelling interest of the city may in fact be regulated as under any form of speech where appropriate specific particular questions are raised with regard to it. There is nothing unconstitutional for example about denying to a particular group the right to seek a forum under certain circumstances. There may well be a particular case. We do not have this in this case. Lewis F. Powell, Jr.: But suppose -- I gather these 1000 or 500-foot limitations apply only to theaters, defined as adult? John H. Weston: That’s correct, Your Honor. Lewis F. Powell, Jr.: Suppose you didn’t have the limitation, but rather that 1000 and 500-foot limitation should apply to all theaters? John H. Weston: In that case Your Honor, certainly the question of equal protection in light of First Amendment activities making discrimination on the basis of content would be vastly deluded. I’m not prepared -- Lewis F. Powell, Jr.: Wouldn’t it be here, would it? John H. Weston: I would think not frankly. There might well be if they were certain uses -- Lewis F. Powell, Jr.: Would you say that that would notwithstanding the First Amendment provisions, that kind of zoning would be all right? John H. Weston: Your Honor, that’s what I’m trying to suggest in terms of the reluc -- the refusal them of the city to discriminate on the basis of content. Lewis F. Powell, Jr.: Even though there are no other businesses, even though no other businesses are in the area? John H. Weston: No Your Honor, you see that’s the area which I’m reluctant to concede and will not concede. There may be of other and separate First Amendment problems raised by an attempt to exclude theaters wherefore example other businesses were permitted. Lewis F. Powell, Jr.: Can you say it again? Theaters have to be without regard to whether they’re adult theaters or not. No two theaters can be close within a 1000 feet to each other nor closer than 500 feet to a residential district? John H. Weston: Yes, Your Honor. In that sense that would eliminate the content based equal protection discrimination of which we complain most strongly. It would not necessarily eliminate that fact that there may well be able to be under the zoning laws, 97 gas stations which are allowed to proliferate near one another within 1000 feet. Lewis F. Powell, Jr.: (Inaudible) problem then without the First Amendment -- John H. Weston: Without that same compelling to the First Amendment, yes Your Honor. Warren E. Burger: On the First Amendment factors, did it not? John H. Weston: Well, there were some implicit there yes, Your Honor, but the Court -- Warren E. Burger: Deviation. John H. Weston: Yes, Your Honor. But the Court was very specific in that in noting that it was not a fundamental right involved there and the consequently the strict scrutiny test was not required. In this case though, it is conceded by all parties that this is an ordinance which directly on its face purports to regulate first amendment activities, for on the basis of content that involves the fundamental situation and consequently the strict scrutiny test must be applied and it is our position and in this sense, we differ some of what the Court of Appeals because of course we agree that the discrimination, the distinctions that are made in these ordinances cannot stand on equal protections. However, we disagree with the Court of Appeals because we do not concede that the City of Detroit has a legitimate of no less compelling interest in the ordinance and the purposes of the ordinances which they have set up. Now, let me be very clear about that. We are not saying that the City of Detroit does not have legitimate interest in trying to maintain nice neighborhoods and a fine place in which for the citizens to live and maintain property values and a lovely area for children in which to be raised. But that’s like analyzing an ordinance in terms of the interest by saying the purpose of it is to do good. It appears that we must be more precise in our analysis of what the ordinance is and looking at it with more precision. We submit that the purpose of that ordinance is to prevent clustering of adult theaters based on question of content on the basis of the undifferentiated fears of some people or some dominant interest in the community that bad things will happen -- John Paul Stevens: Is it your position that content may not be as standard at all or can it sometimes be -- guide the zoning? John H. Weston: Where the speech is protected Justice Stevens, it is -- John Paul Stevens: Then no differentiations on the basic kind. Supposing for example in the neighborhood next to an elementary school, the city permitted a theater to show nothing but Walt Disney Cartoons, if it granted that permission, I take it your position would be it must therefore also grant permission to show anything protected by the First Amendment? John H. Weston: Certainly, as an abstract proposition, I would agree with that 100%. And clearly, it appears to me that those issues Justice Stevens were really dealt with by this Court in the in the recent Erznoznik decision versus City of Jacksonville, where we cannot condition necessarily, that which is fit for adults on that which is fit for juveniles. And absence some greater compelling interest and demonstrated need which we do not have in this case. It would be, it isn’t simply not possible to say as petitioners have tried to assert that this case is based on a desired to protect juveniles, that theaters are by definition adult, they are by definition and either commercial or industrial areas, this is not an area simply where children are involved. And to the extent that the city wishes to assert that there are somehow something wrong with exterior advertising or whatever may be there that children cannot avoid based on some real record which we do not have in this case. Then, less intrusive regulation on First Amendment rights may be adopted to protect against those specific, not generalized, not undifferentiated fears -- John Paul Stevens: You’re saying its okay to look at the content only for the purpose of protecting juveniles, but there is no such showing made here? John H. Weston: No, Your Honor, I’m not saying that at all. I’m saying that as a general -- John Paul Stevens: You said that you could avoid the advertising outside the theater that would attract the juvenile? John H. Weston: No, what I’m suggesting is this, I recognize for example that the Erznoznik opinion is limited to some extent in that obscene material on the outside of a billboard or for example material which might not be obscene for adults but which perhaps might be harmful matter for juveniles. Stronger material than was involved in Erznoznik might be by appropriate legislation or zoning limited so that it could not be exposed to juveniles in this 600-foot circumstance from schools. What I’m saying however is that content of a theater, content of films or books sold in the theater or bookstore which are not exposed to juveniles which are not present in this factual circumstance such as you said, in the absence of a very specific record which I really frankly cannot even imagine, may not be discriminated against on the basis of content. That is the position which we assert. William H. Rehnquist: Mr. Weston, supposing then instead that the Detroit, this were Dodge City and there the 50 years, they enacted an ordinance that no movie showing western films could be within a 1000 foot -- feet of another one because the cowboys came in on horses. And they just couldn’t accommodate all the horses if the theaters were too close together. Now, would you say there is something wrong with that? John H. Weston: Your Honor, on the basis of the flat assertion that the Court has made, I would say that there would simply have to be a stronger showing that theaters exhibiting western somehow attract more horses I suppose, let alone anything else then -- William H. Rehnquist: But supposing it was that kind of a showing? John H. Weston: Your Honor, it would appear that in the absence of a compelling state interest, in the preservation of the streets, anymore than an interest which this Court has ruled insubstantial to prohibit the distribution of hand bills in the name of littering which simply not be appropriate to justify discriminating against presumptively protected disseminators of speech or dissemination of presumptively protected speech on the basis of conduct. And I would, without question exhort this Court not to remove that bulwark in the American Constitution. Warren E. Burger: Typically, with an ordinance, the zoning ordinance that provided the there must be a parking lot within 50-feet of every theater with parking spaces at a ratio of one car for every two seats in the theater. It has nothing to do with First Amendment. Just to keep the cars off the street. John H. Weston: Yes, I understand Your Honor. Again, I would certainly, again -- without talking about discriminatory enforcement making on it’s face, that certainly becomes much more like O’Brien where the ordinance involved is not -- ordinance or statute is not seeking directly to limit First Amendment rights and I think at that point, then the counsel’s O’Brien analysis would obtain whereas in this case, it seems totally misplaced whatsoever. Thank you. Warren E. Burger: Mrs. Reilly. Maureen Pulte Reilly: Thank you Your Honor. I would like to take the remaining moments to respond to some of the comments made by counsel for respondents. In response to one of the questions by one of the Justices, I was given the impression and I’m fearful maybe some of the judges were that -- the adult businesses may not locate in the same business districts as other non-adult businesses of the similar type. That is not so, the adult theaters may locate in zones B4, B5, and B6, just as a non-adult theater may locate on those zones unless they are faced with the restrictions, the 1000-foot restriction or the 500-foot restriction. Speaker: A non-adult beside -- with an adult theater? Maureen Pulte Reilly: That is correct, yes. Speaker: 1000-foot distance has to between two adult theaters? Maureen Pulte Reilly: Two regulated uses which included other than the adult businesses. The second point is -- Speaker: Do you think are there some areas in which adult theaters may not locate that other theaters may? Maureen Pulte Reilly: Only if it’s subject to the two restrictions that I mentioned the 1000-foot or the 500-foot. Otherwise, are treated the same as a regular theater. Speaker: So far as general zoning goes? Maureen Pulte Reilly: Yes. Speaker: Right. Maureen Pulte Reilly: The point has also been raised by counsel in oral argument and in his brief that we did not zone massage parlors. I think the answer to that is rather obvious. Massage parlors are legitimate business operations as our health clubs, spas and so on. It is only when they’re fronts for prostitution that they create a problem and we -- Speaker: Pool halls, and shoeshine parlors, and motels and hotels are presumptively legitimate operations too? Maureen Pulte Reilly: Yes, Your Honor. But the massage parlors -- the legitimate massage parlors have not created the problem that pool halls, bars and so on have created. It’s only those massage parlors which are fronting as houses of prostitution which have created the problem and clearly we do not intend to zone them. Speaker: We padlocked them. Maureen Pulte Reilly: We padlocked them and put them out of business entirely. One of the Justices raised the question whether it would be feasible to limit all theaters under the 500-foot and the 1000-foot restriction. Our problem with that is, that we feel that if we did that, then the non-adult theaters would claim that the ordinance applied to them was over broad because there are no adverse effects from their operation. Therefore, they should not be restricted. They would claim First Amendment rights and claim that the city’s ordinance unnecessarily restricted their location and their operation and so we have not included all theaters. We won’t include it under the ordinances only those theaters which have been shown to cause deleterious effects in the neighborhood. Speaker: I suppose, a theater if its large enough can cause, it might be considered adverse effects in the neighborhood by bringing a lot of traffic and a lot of noisy people late at night, isn’t that true? Maureen Pulte Reilly: Yes, Your Honor, but that theater -- Speaker: A lot of non-neighborhood people? Maureen Pulte Reilly: If it creates a nuisance in the neighborhood, then the nuisance maybe enjoined. Whatever the operational effects caused by the large theater are, then the city might go into court and ask that those operational effects as to congestion of traffic and so on be enjoined as to that specific theater and those specific operational characteristics. Warren E. Burger: But that’s not an exercise the power -- police power of zoning, is it? Maureen Pulte Reilly: No Your Honor, that relates to a specific nuisance problem. There is a law in the City of Detroit -- Speaker: For instance that’s the reason you exclude from residence “A” districts and from commercial B1 and 2 and 3, all theaters. There’s effect. Maureen Pulte Reilly: (Voice Overlap) and the parking problem is treated by ordinance in the city. There are requirements as to the number of parking spaces which must be made available for a theater having a certain number of seats. But that applies to all theaters regardless of the content. Speaker: (Voice Overlap) parking ordinance. Maureen Pulte Reilly: Yes, Your Honor. If there are no further questions -- Potter Stewart: Mrs. Reilly, I have, it we can get it straight on page 86 of the petition for the writ of certiorari. There is that whereas beside all -- on the third and fourth paragraphs. It said, “Whereas adult motion pictures theaters, adult mini motion picture theaters, adult bookstores and group, and cabarets are not permitted in B1, B2, or B3 zone districts, and are only permitted with the approval of City Plan Commission in B4, B5 and B6. I take it in what you say, I heard that no theaters are permitted in B1, B2, and B3? Maureen Pulte Reilly: That’s correct, Your Honor. Potter Stewart: So that this is true but it’s also -- this recital is true but it’s also true of all theaters. Maureen Pulte Reilly: That’s correct. It did not go far enough to explain that it does include all theaters. Thank you, our Honors. Warren E. Burger: Thank you Mrs. Reilly. Thank you gentlemen. The case is submitted.

Earl Warren: Number 13, Federal Housing Administration, Appellant, versus The Darlington Incorporated.Before the argument in this case I make the announcement that the orders of the Court appear upon the list certified by the Chief Justice and filed with the clerk and will not be orally announced. Now, Mr. Rosenthal, you may proceed in number 13. Alan S. Rosenthal: May it please the Court. This case arises out of the Veterans' Emergency Housing Program, which was established in 1946. In that year, Congress was apprised that a national emergency existed because of a critical housing shortage. In this connection, it was called specifically to the congressional attention, almost 3 million returning World War II veterans and their families would be in need of residential housing by the end of 1946 and that the majority of them would not have the means to purchase homes, and therefore, would require so-called "rental housing". In an endeavor to meet this acute problem in the statutory words to accelerate the production of houses with preference for World War II veterans and at sales prices or rentals within their means, Congress amended Section 608 of the National Housing Act to authorize the Federal Housing Administration to ensure mortgages covering multifamily housing projects in which a preference would be given to veterans. The particularly attractive feature of Section 608 was its provision that the principle obligation of the insured mortgage could be as much as 90% of the reasonable replacement cost of the project. This meant that if the project sponsor served as architect and builder of the project, they could construct it with little, if any, outlay of cash and thus, with little, if any, risk of loss, that the other 10% would be represented by architect fees and the builder's profit. Now, judged by any objective standard, this program established under Section 608 was an immense success. Well over 7,000 apartment houses were constructed containing over 450,000 rental units. These projects were backed by Government insurance in an amount in excess of $3 billion. With extremely due exceptions, these projects were successful in their operation, as is evidenced by the fact that the rate of default has run only between 1% and 1.5% of the total mortgages outstanding. At the same time however, in some instances, project owners having applied for and obtained the advantage of Government mortgage insurance which enabled them to build this residential housing at little or no cost to themselves. Started to engage, endeavored to increase the profitableness of their operations in a practice outside what we deem at any rate to be the scope of the legislative aid, namely the practice of renting units for transient occupancy. One of these instances was that of the appellee in this case. Speaker: How general is that right? Alan S. Rosenthal: Your Honor, there are no specific statistics on it, insofar as the record and the congressional reports indicate that it could hardly be described as a widespread practice, but there were instances of it being done. I don't think that there is any really -- really available figures on the -- the precise percentage of instances, but I think it is fair to characterize it as a -- as not a widespread practice, as a limited, relatively few of the 7000 plus units that were built. Now, the issue in this case is the appellee's right to engage in this practice of transient rentals. Now, on December 1949, the appellee was incorporated in the State of South Carolina for the purpose of obtaining Section 608 insurance of a mortgage covering a 12-storey apartment house to be constructed in Charleston. Consistent with this purpose, it's charter which was prepared on a standard FHA form, specifically prohibited it from engaging in any business other than a construction and operation of a rental housing project so long as any of its property was subject to FHA insurance -- insured mortgage. The appellee submitted an application to the FHA for a mortgage commitment on a -- this proposed project. This application was disapproved by the local FHA officials, because the chief underwriter was dissatisfied with the location, which the apartment house was to have. At the insistence of the appellee however, the rejection by the local officials was reversed by the FHA officials in Washington and the mortgage commitment was authorized not withstanding the local objection to the location at which the project was to be built. Project was completed in July 1951 and in September 1951 as it was required to do under its charter and under the regulations, the appellee submitted and the Federal Housing Administration approved a proposed schedule of maximum monthly rentals. And this schedule contained no indication that the appellee intended to furnish any of the partners. One month later however, with the aid of a parent corporation which held all but three of the 1999 shares of common stock in a dollar form, the appellee engaged on a course of conduct concealed from the FHA which in the words of the Court below was a subterfuge. First, without seeking FHA approval, the parent corporation furnished a number of appellees apartments and the tenants of those apartments were charged $15 to $20 a month in addition to the scheduled approved rentals. This additional rental however was paid to the parent corporation so that it appeared that appellee was maintaining its schedule of rentals. Four month later in February of 1952, again, without applying for permission or even advising the FHA that it intended to do so, the appellee started to rent his furnished efficiency apartment on a transient basis at the rate of $6 per day. Now, the schedule rental on these apartments was $77.50 per month which broken down to a daily basis would have been less than $2.60. In order again to maintain the appearance of complying with its schedule of rentals, the appellee divided the $6 into two parts, it retained the $2.60 approximately and the balance was paid over as a so-called "furniture rental" to the parent corporation. Additionally, in April of 1952, the appellee submitted the required rental housing occupancy report to the Federal Housing Administration. In that report it failed to disclose that some of the units had been furnished and were being rented on a daily basis, despite the fact that the instruction from the Court indicated that the report should reflect those units if any which were furnished. In short, at no time from the inception of the project did the appellee make an extended endeavor to obtain a larger number of residential tenants at the schedule of rentals, nor if I'm able to obtain residential tenants at those rentals, did it make an endeavor to increase the occupancy of the project through lower rentals. Speaker: Has anybody turned down who otherwise would have been eligible or have it or -- or if you had a little preference to -- Alan S. Rosenthal: Insofar as the record shows, no, Your Honor. But the -- our point here is that the appellee at these rentals, the appellee apparently felt it was unable to build its buildings, it resorted to furnishing apartments rather than to lowering their rentals in an endeavor to acquire tenants that way. And there's no showing in this record that their rents could not have been lowered. Now, what it did here was almost immediately after the establishment of the project, it went into the -- first, into the furnish departments of rentals in excess of those approved in the schedule. And then when that didn't prove a financial success, it embarked on the practice of running the transients. Now, it is to be noted here that the rental only was a part but gain was $77.50 a month, that if potentially, these transient units could have obtained up to $180 a month, considerably in excess of that. And of course, it has to be taken again against the congressional background as we'll see that Congress was endeavoring to provide for the veterans, moderate and low-cost rental housing. Now in 1954, the attention of Congress was directed to the fact that some Section 608 projects, which it received as Government aid to provide residential housing for veterans were being used as the appellee's project for transit purposes. It further came to the attention of the Congress that in a due isolated instances, the record indicates that this was between 12 and 15. Where the FHA deemed a hardship to exist, it had granted permission for transient rentals and it had done so in the belief that the power inferred to qualify the statue to regulate the methods of operation, of the mortgagor, gave it discretion in what it deemed be to be a hardship case to -- to permit this, but it was done on these 12 to 15 cases only on a special -- special request. Well, this came to the attention of Congress. Both of the congressional committees concerned agreed that this practice clearly violated the legislative purpose underlying Section 608 and that the integrity of the multifamily housing project program required that the FHA take action to ensure that the practice stopped. Now, the House Committee thought that no further legislation was needed to archive this end. Senate Committee however decided that in order to ensure the enforcement of the legislative intent, a provision emphasizing that intent should be inserted in the National Housing Act, and the Conference Committee agreed with this view and accordingly, Section 513 was added to the statute. And it, one, expressly declares the consistent congressional purpose that housing projects subject to FHA insured mortgages are not to be used for hotel or transient purposes while the insurance remains outstanding. Secondly, provides subject to two exceptions, which do not pertain to this appellee, that no new existing or rehabilitated multifamily housing subject to an FHA insured mortgage maybe operated for such purposes. And three, directs the Federal Housing Commissioner to enforce the prohibition with all appropriate means at his disposal and authorize the Attorney General in the event that voluntary compliance not obtained, to obtain injunctive relief. Now, the Court below has enjoined -- Earl Warren: (Voice Overlap) before you get to that, how about those instances where the FHA did permit them to do that. Are they still operating in that manner, or were they enjoined? Alan S. Rosenthal: No, the -- if your Court pleases, the Congress recognized and the Congress felt that the FHA had misconstrued the statute a provision as to methods of operations, but the -- but the Congress recognized that there were these instances of expressed approval. Earl Warren: Yes. Alan S. Rosenthal: So one of the two exceptions to the operation of this prohibition is that where the FHA gave approval, a mortgagor can continue to rent the number of units that it had been previously given permission to rent on a transient basis. Earl Warren: Is that specifically in the statute? Alan S. Rosenthal: That's correct. Earl Warren: And how could -- how could that logically follow if Congress had always intended that it should be -- should not be used for transient rooms. Alan S. Rosenthal: It follows, we think, for this reason, the Congress -- in Congress' view, the FHA had made a mistake in authorizing these 12 to 15 projects, approval. Earl Warren: Yes. Alan S. Rosenthal: In this 12 to 15 projects. In the Congress' view however, that out of a sense of fairness, believe that it would be unfair to impose this restriction now in -- on -- in those cases where this specific approval erroneously had been given by the FHA. Earl Warren: Well now, if the statute -- if the statute prohibited the FHA from doing it in the first instance, how could a later statute say that they were all right? Alan S. Rosenthal: Later statute -- well, of course, it would be within the -- the congressional power of course to -- to authorize this practice. But in the Congress' view, it at all times had been prohibited, that the FHA had misinterpreted the provision giving it control over methods of operation. And what the Congress was saying is that this practice has always been contrary to the legislative purpose, we're now going to stop it, but we are going to make this one exception, that where, and this of course isn't the appellee's case at all. But where the FHA did and erroneously, give this permission, we will let the -- the project continue, except of course only those units which the FHA had given permission to rent. Now -- Earl Warren: So it's your position that if -- if the FHA had given permission to Darlington before the 1954 statute, you could not enjoin them. Alan S. Rosenthal: The statute would make an expressed exception -- Earl Warren: Yes. Alan S. Rosenthal: -- before that case but the point is that the -- the Darlington never came to the FHA. As the -- the record indicates as the District Court itself have suggested -- Earl Warren: Yes. Alan S. Rosenthal: -- that this was -- Earl Warren: Well now, this -- what you've been telling us is all -- is not legislative history but it's -- it's post history if one might call it that. What is there in the Act that shows affirmatively that they have no power to do this? Alan S. Rosenthal: Well, the Act, if the Court pleases again, as we said -- Earl Warren: (Voice Overlap) -- Alan S. Rosenthal: In the 1946 Act which established -- Earl Warren: Yes. Alan S. Rosenthal: -- this veteran's housing program. All the way through it, is the -- the court below itself recognizes the dominant aim, the single aim indeed of providing long-term modest cost housing for the veterans. Legislative history contains no indication of any kind of congressional concern with providing financing for hotels or for any other kind of transient accommodations. The preamble to the statute to which I eluded before talks in terms of this statute, this program, acceleration of houses with preference for the veterans and their families at rentals and sales prices within their means. And -- Earl Warren: Was there any limitation at all on -- on the -- like the time that -- that these should be occupied, these apartments of veterans. Alan S. Rosenthal: The -- there was a -- there is a limitation, a maximum limitation of three years. Now, we suggest, if the Court please, however that that does not carry with it the implication that anything less including overnight rentals. Earl Warren: Well, what is it to indicate that what the minimum might be? Alan S. Rosenthal: Well the minimum -- of course the -- the minimum, we -- the transient occupancy is defined in terms of 30 days. And again, that of course is a relatively arbitrary figure, but the notion is a long-term tenant is there for at least that period of time. And again, this program, the reason why there would have been -- there would have been absolutely no necessity for the establishment of a -- of a minimum period, because Congress was dealing here, expressly with this problem of the veteran difficulty in finding accommodations for his families, residential units, that's the only thing that the Congress was addressing itself to. Earl Warren: Well, the thing that troubles me is this. If Congress intended that there should be no transient tenancies, why wouldn't that have been on the contracts? Why wouldn't the FHA have put that in some of these contrast. Alan S. Rosenthal: Your Honor, the -- the fact of the matter is again that the -- the whole program being setup in terms of a long-term residential project, the terms of the contract or the terms of rather the charter, there actually wasn't a contract as such, but the terms of the appellee's charter, the regulations of the FHA, were all geared in terms all of this long range operation. Now, if you look at the regulations, they talk, for example, in terms of dwelling accommodations. Dwelling accommodation shall be this and that and the other thing. Now, dwelling accommodations as we indicate in our brief both in common and in legal parlance. We first do something which is intended as a resident for a person on a more or less permanent basis. It talks about leases in the -- in the charter. And again, a lease is a document which normally connotes a occupancy over a period of time, and it talks again in terms of, for example, the deposit, there can't be -- the mortgagor can't require a deposit of more than one month's rent. And in other places there is again as reference to one month's rent. We think if the Court pleases, if you go through these documents, you will see that they are all addressed in the terms of really what Congress had in -- in mind, which was a long-term residential occupancy. Charles E. Whittaker: Do you argue that in those -- for all that those recitals are inconsistent with less than 30-day periods. Alan S. Rosenthal: That's -- that's -- that's correct, Your Honor. We think that they are -- they are inconsistent to -- with a lot of conspiracies. Charles E. Whittaker: Not expressly sold, but implicitly sold? Alan S. Rosenthal: Implicitly sold. Charles E. Whittaker: Implicitly sold? Alan S. Rosenthal: Absolutely, and we think also that the rentals to transients is implicitly, if not expressly inconsistent with the statutory objective as stated in the statute of providing this -- this housing at lower or moderate cost. Transient housing after all is usually as this case itself clearly indicates, not on a low-rate basis, I mean here, this -- on one month basis, one of these efficiency apartments would have come to $180 that per month. And the Congress was thinking in terms again of the -- of the moderate cost, and we think that the charter and the regulations taken together give a little question that the contemplation all on the line, the obligation which was assumed by this appellee was that of renting its apartments for residential use. Now, the appellee has harped on the -- the fact that the regulations referred to structures principally designed for residential use. And if that says that word "principally" means the part of the property could be devoted to transient use. Charles E. Whittaker: Do you argue that use for residential purposes for a period shorter than 30 days is not residential use? Alan S. Rosenthal: It isn't residential use in the -- in the context in which the terms employ, that's right. Now, I think the court below didn't dispute that. The court below said -- it just says principally designed for residential use and it was thinking about the non-principle part of it, but as we just show in our brief, this term "principally designed for residential use", well, it isn't in Section 608, it wasn't some of the other statutes dealing with mortgage programs and it has been consistently interpreted as meaning simply that the -- the mortgagor can put in his building professional offices and such commercial facilities as would cater to the needs of the more or less permanent occupants. And it has never been construed as conferring any kind of authority to rent to -- to transients. Charles E. Whittaker: In conjunction with the questions or series of questions propounded to you by the Chief Justice, would you give us your view of the meaning of subsection (c) set forth at pages 48 and 49 in your brief, saying that "Notwithstanding any other provision of this act." This is 1954 Act now, "No mortgage with respect to multifamily housing shall be insured under this Act, (except pursuant to a commitment to ensure issued prior to the effective date of the Housing Act of 1954)." And skipping the parenthesis now, "No mortgage with respect to multifamily housing shall be issued for an additional term unless the mortgagee -- mortgagor certifies that while the insurance remains effective, he will not rent or permit the rental of the housing or any part thereof for a transient or hotel purpose, is that not inconsistent with (Voice Overlap) -- Alan S. Rosenthal: No, Your Honor. That -- that's dealing of course with the necessity for the mortgagor's certification under oath and the -- the -- and of course the other provision, subsection 2. Subsection -- if you look at 2 (b), that's the -- says flatly that notwithstanding any other provisions of this Act, this is on page 48. "No new existing or rehabilitated multifamily housing with respect to which a mortgage is insured shall be operated for transient or hotel purposes, and that covers the -- the gamut. And then again in the enforcement section which is subsection (b), the -- 49, "The commissioner is hereby authorized and directed to enforce the provisions of this section by all appropriate means at his disposal as to all existing multifamily housing with respect to which mortgage was insured under this Act prior to the effective date of the Housing Act of 1954." The only thing that subsection (c) relates to is, what is going to be required in the future of my way of -- at the time that these mortgages were insured. Now, they only can be insured if the -- the mortgagor certifies under oath that he will not engage in transient rentals, so this was merely an additional weapon that was being placed at the hands of the FHA Commissioner to ensure compliance, but we don't think that that is at all inconsistent with our position that -- that this statute is indeed clarified if clarification was necessary, the legislative intent from the very beginning that this program was set up for this particular purpose and that the individuals who obtained the benefits of this program were restricted to using the property for the purpose which Congress says that the program up for. Earl Warren: Well Mr. Rosenthal, it -- the thing that seems a little strange to me is this, within a program that is going to involve $3 billion, that the -- neither the reports of the committees nor the speeches of the sponsors of the bill on the floor would show affirmatively what type of tenancy this -- this is, you would think that somebody, some place along the line would say, "We are not competing -- going to compete with hotels, we're -- we're not going to do this or that. We're going to -- this is for longer term tenancies." Alan S. Rosenthal: Well, there's no -- there's no doubt, Your Honor, that it would have been much better for all concerned if there had been an expressed provision in the Act, but all I can say is this. The Congress there again, that people -- that Congress' attention was directed to this particular problem. Earl Warren: Well, yes. I can understand -- I could point that, yes. Alan S. Rosenthal: And it was a serious problem and it was to that, that the congressional attention was directed. Now, it might have been better had the Congress said that all of these non-conforming uses are not permitted. The fact is, we submit, that even without the expressed prohibition that this is implicit, in the statute and we submit that these people are governed by that, that when the power -- if the program, anyway that you would look at it, the program was setup, as the legislative history indicates, for this single purpose. And we think that having gotten the benefits of the program, they are obliged to comply with the -- to use their property only for those purposes which are specified. Speaker: Assuming that what you disagree is to the original covering, original scope of the act, namely that is here today, as it were not (Inaudible). Do you claim that the 1954 Act could be applied retroactively? Alan S. Rosenthal: Yes, sir, because we say this at the very least. Speaker: Yes. Alan S. Rosenthal: There was no vested right conferred upon these people to operate as a transient project.But the most there was with an absence of an expressed prohibition. They can find nothing in the statutes and the regulations in their charter which conferred any kind of affirmative right on them to do so. So that there, we do not have here a case of a fairly unequivocally expressed right to rent a transient, which would be entitled to congressional protection against a retrospective statute. I mean we draw in that connection of course on Keefe versus Clark in 322 which indicates that there must be some kind of clearly and unequivocally expressed right by contract or otherwise. That's just isn't here. Speaker: Supposing -- supposing the statute is construed as the lower court, as I read its opinion, construed it, namely that it did not prohibit, did not prohibit 30-day tenancy? Alan S. Rosenthal: Which statute did not? Speaker: The original Act of 1946. Alan S. Rosenthal: Well again, that if it -- if it didn't, it is only because there was not an expressed prohibition. There's no question as even the lower court recognized that this was contrary to the intent of the Congress. The primary intent of the Congress is to provide this veterans housing. So that at most, this was a practice which was of questionable standing and there wasn't any again, any clear and unequivocally expressed right upon these people, either by the statute or by the regulation. It had been a case of the statute saying, "You may rent a transient," so the regulation is saying you may rent a transient. And subsequently, the Congress were to take that away, that would be an entirely different question, but here, there -- it's just that mere absence, there isn't anything here which could be construed as affirmatively giving a right upon these people to do something which the statute obviously was designed not to accomplish. Earl Warren: If there wasn't a prohibition of it, wouldn't there be a right? Alan S. Rosenthal: Not necessarily, Your Honor. It wasn't in any way the clear an expressed right, it was nothing which affirmatively created this right. And all that at most it was, was a congressional oversight not setting forth not only what they wanted done, but all of the things that they didn't want done. But again it was violating the spirit of the -- of the 1946 Act throughout. And we don't think any rights were -- Charles E. Whittaker: Is the difference, Mr. Rosenthal, that in the lease of real property for returns, does not the landlord give to the lessee the right to make any use of the property except as restricted by the governance of the lease? Alan S. Rosenthal: Your Honor, in this case, this wasn't a sale of property. This -- the government was -- Charles E. Whittaker: No, but -- but Darlington did own it. Alan S. Rosenthal: That's right. But it owned it subject of course to the -- this statute was subject to the regulations. And again, we submit, that this was a program set up for this -- this purpose, and it was just as if that the Congress had established a program or to say for the construction of stables, that no one I would think would argue seriously that -- and provided this type of benefit that the -- the mortgagor could turn around and use this property if he didn't find it profitable as a stable for a -- for a garage or for something else. The program -- the program was set up for one purpose and that's the only purpose which Congress had in mind providing these people with these -- these very decided benefits by way of financing. Speaker: During the -- during the three years, 1951 to 1954 that this was going on, after it came to the attention of the Federal Housing Administration, did they try to enjoin to stop the 30-day rentals? Alan S. Rosenthal: The record indicates, if the Court pleases, that as to this case, as to the Darlington, apparently this was not discovered until quite late in -- in the proceedings. There is evidence to the effect that the FHA had discovered other instances of transient rentals. And when they discovered these instances, they tried, the record indicates, to put a -- to get these people to stop. Speaker: By a suit? Alan S. Rosenthal: They did not -- they did not resort to suit. What they did was, they -- they tried to do it through this period of time by voluntary compliance, there is no indication of any -- of a suit. Earl Warren: What practicum in this case to -- Alan S. Rosenthal: Well -- Earl Warren: -- to we have a suit? Alan S. Rosenthal: Of course, this -- the 1954 Act if Your Honor recalls, and -- and it provided certain specific weapons, namely the injunctive process and directed the -- Earl Warren: Yes. Alan S. Rosenthal: -- the -- the FHA couldn't obtain a voluntary compliance to turn it over to the Attorney General for the use of this process. Earl Warren: Yes. Alan S. Rosenthal: And it was the threat of turning the matter over to the Attorney General which brought this suit for declaratory judgment and for an injunction against the enforcement of the provision. Earl Warren: Now, when this suit was started did the others stop or continued to -- to use them for places for transient rentals? Alan S. Rosenthal: The other properties? Earl Warren: Yes, the other ones that you say were not enjoined. Alan S. Rosenthal: The record doesn't -- doesn't disclose what the -- the status of -- of the other -- of other properties are (Voice Overlap) -- Earl Warren: Well, isn't that rather important to us? Alan S. Rosenthal: Well, we would submit to Your Honor that all of these -- these properties of course are -- are subject to the -- the provision of the Act. Now, I suppose you could regard this in -- in part as being a test case, because it will determine whether these -- these projects in the Darlington's position can continue to the rental transient or not. But there's no suggestion that the FHA was engaging in discriminatory enforcement of these provisions against this particular appellee. Earl Warren: How many apartment houses would you say would be affected by this decision? Is it a great number? Alan S. Rosenthal: I don't know, Your Honor, how many apartment houses are in the category of the Darlington. I could of course call upon the FHA for such information as they may have, and I'll be glad to furnish it if the -- Earl Warren: It might be interesting if -- Alan S. Rosenthal: If -- I don't know -- Earl Warren: Yes. Alan S. Rosenthal: I just don't know whether they have information available on this -- Earl Warren: If it is -- we'd like to have it. Alan S. Rosenthal: -- on that particular aspect of the problem. Earl Warren: Well, you may have three minutes afterward to sum up -- we've taken out your time. J. C. Long: Mr. Chief -- Earl Warren: Mr. Long. J. C. Long: Mr. Chief Justice, members of the Court. It's been a rather rugged history to this little case, started about four years ago and the issue is a very simply one. Simply can Congress pass a law that will retroactively effect the vested rights? The facts in this case -- Felix Frankfurter: Aren't you going to argue the construction -- J. C. Long: I've -- I must say that I'm a little hard to hearing, not deaf enough to one of those ear trumpets and I do have a little complication, so I want to ask the justice to repeat. Felix Frankfurter: Are you not going to argue that as a matter of construction -- J. C. Long: I intend -- Felix Frankfurter: -- exactly bars such a construction before you ever reach the constitutional question or added thereto that since there maybe a non-frivolous and serious constitutional question, it ought to be construed the way you contend it. Aren't you going to argue that? J. C. Long: Yes, Your Honor. Felix Frankfurter: All right, I was just wondering because you started off a simple question with constitutionality. J. C. Long: Well, Your Honor, it's our -- Felix Frankfurter: All right. You follow your own course of argument, but I just wanted you to -- wanted to know whether you give up the construction problem. J. C. Long: Not in the least, I have been fighting that for four years, and I'm right here still continuing that when you read the Act itself, that if you read the Act itself you will find that's an ingeniously worded piece of legislature. On its face, it would appear as if it did as the wording of the Act, to retroactively apply to the prior insured project. But when you start analyzing the Act, where it states this Act and that Act, you will find that Congress has itself stated that this Act shall not apply to those projects that was insured prior to a State. In the 1954 Act that even goes farther than that. It says that shall not apply to projects upon which a mere commitment had been issued prior to the effective date of the Act. And I will say, if the Court pleases, if you will refer to the decisions in the two lower courts, you will find that they didn't come out and just say the Act was unconstitutional, they simply state that we simply hold that the terms of the 1954 Act cannot retroactively be applied to the Darlington apartments, implying that the Act -- the terms of the Act did not apply to those projects prior thereto. Now, I have at some length in the briefs here taken section by section of the 1954 Act and shown where the Act does not apply to projects insured prior to the date thereof. You will find that in my brief, it's set forth starting at page 63. We take section by section and show that the wording of the Act does not apply to projects insured prior to the dates thereof. It has been however the contention of the Government throughout that the 1954 Act was constitutional and it could be retroactively applied to the prior situation. It would be rather hard for me to take and go over this for the Court section by section, but I call your attention to this. The enacting clause of the Housing Act states that this Act will be merely cited as the Housing Act of 1954. Now, they distinguish it as I say, as separate act. The second paragraph state, "It had been the intent of Congress since the enactment of National Housing Act that housing built with aid to mortgage and insured under that Act, be used possibly for residential use and that such intent excludes the use of such housing for transient or hotel purposes." There was little interest in side like there that we mentioned in our brief but -- which Senator Capehart, who introduced this Act, that said it always would be the intent -- has always been the intent of Congress that it would be used for residential purposes. When asked about this Act before the Committee Hearing, they -- he said, "I can't tell you Senators what was the intention back there, and I wasn't him." So I respectfully submit that any approach of one Congress to declare what was the intent of another Congress literally goes into the use of (Inaudible) Board in my way of thinking, I don't see how they could tell what was the intent of another Congress. Certainly, the gentleman who presented this Act admitted that he couldn't tell what was the intent of the prior struggle. Now, and the third paragraph states -- Felix Frankfurter: It does -- it does shed some light on an earlier act, if Congress in the later act thinks it has to do something which would be needless if it hadn't been accomplished by the earlier act. It shed -- Felix Frankfurter: That has nothing do with technical law, but it has to do with good commonsense. J. C. Long: It certainly does, Your Honor, and this Court has held that and specially in the Sioux Indian Tribe case, in an opinion of this Court. They went back and said that what one of the committees I think on -- forget the committee, had stated that it had never been intended to give the Indians a grant and that all they had was a easement to use the land and this Court views what that committee said then and they reached a decision as to whether a grant had been given to the Indians or not, that's under Sioux Indian case here that's cited in the brief. Now, the third paragraph states that no multifamily housing with respect to which a mortgage insure under this Act. I take that to mean the 1954 Act, on page 68, shall be operated for transient or hotel purposes. The two stated exceptions however where projects operated for transient or hotel purposes maybe insured under the 1954 Act, where the Commission had agreed to such operations prior to May 28th, that was the date of the Committee Report to Congress, and where the project is located in an area which the Commission determines to be a resort area. To us, that is an unusual part of this Act, because in the discussion and on the Senate floor, Senator (Inaudible) who was taking care of the State of Florida said to Senator Capehart, said, "Does that exclude the whole State of Florida?" There was no misunderstanding about this. Senator Capehart said, "It excludes the whole State of Florida and the statistics we have from the Federal Housing Administration is that there's 10,400 apartments in the State of Florida." That is excluded under this Act, had they been renting apartments prior to the effective date thereof. Now, we go to this, we submit the term of this Act as used in paragraph B specifically refers to the 1954 Act. Then if you go down to paragraph C, it says that no mortgage with respect to multifamily housing shall be insured under this Act. The Housing Act of 1954 are insured for an additional term unless the mortgagor agree he will not rent any part of the project for hotel or transient purposes. There is the significant thing. They said that, "We won't increase it unless you agree that you won't do what you've been doing, but if you are willing for the same amount, you can keep on doing what you've been doing." You read this throughout that it would take all of my argument if I attempted to digress the -- I mean analyze the Act, you will find that the wording of the Act itself does not apply to projects insured before it. The first three-judge court, this case got before, held that. The situation was this, we appeared before Judge Hoffman. Judge Hoffman thought there was a constitutional question involved. He asked for a three-judge court, our late and beloved judge Parker called the court. And then when the matter -- he called for brief and when we set it in the brief by a per curiam decision by Judge Parker, Judge Timmerman and Judge Hoffman, they sent it back to the Judge Hoffman and said, "We don't need a three-judge court here, this is a matter of simple statutory construction, does not involve the constitutionality of the Act." So then we went back and we had our day before Judge Hoffman and the matter was referred to this Court, and this Court thought there was a constitutional question and sent it back and we had our day before the three-judge court, and the three-judge court adopted the decision of Judge Hoffman and here we are now. And before -- Earl Warren: Mr. Long -- Mr. Long, if we -- if we decide in your favor, does this mean that every apartment house that was built under this program prior to the 1954 Act can now lease any or all of its apartments on a transient basis? J. C. Long: I would not think so for two reasons. One, I would not think so because I feel that the corporate charter in this case is in a grave deal like a lease or a restrictive covenants on the land. And it is true that the -- the rules and regulations of the Federal Housing Administration which was not incorporated in the charter itself, but as a matter of law, becomes a part of the charter. It said that it shall be designed, not used, principally for residential use. Second, it said that our corporation shall engage in the operation of a rental housing project, it's our contention. And third, that preference must be given to veterans in the occupancy of the building. It's our position that the courts below was correct when it simply held that we had a right to rent a reasonable number of apartments in the building and have them available for transient use if there was no demand otherwise, if there was no demand otherwise. To me, this case involves, and we get away from the 1954 Act not applying to it, it involves this. Congress when it passed Section 608 of the Act and has set forth in the appellant's brief, and it's very brief law, and I tell you why it's a brief law. Congress was faced with a dilemma. They needed housing, and the -- the boys were returning home, the -- the young fellows that had went out to war, come back as young men and they needed -- my friend here stated not hundreds or thousands of houses, but millions of houses. Congress unlike in any other provision of the Housing Act, turned over to the Commissioner, said, "You go out and get these houses built, you use your emergency power and get these houses built." We placed no restriction on them at all, Congress placed no restriction on them at all. And in not placing any restriction on -- on them at all, Congress had to eliminate a prior provision of an Act which this Act amended that had required them to be designed for principles laid for residential use. Now, having eliminated that, they said to the Commissioner, "You go out and get it." And here is what the Act said, the mortgage on property shall be held by a mortgagor, approved by the Commission. The Commissioner may, leaving it to his discretion, and his discretion requires such mortgagor to be regulated or restricted as to rents or sales. Charges, capital structure, rate of return, methods of operations, rate or returns or methods of operations. In that regard, I would like to say to the Court that he could have -- the Commissioner could have restricted the use of these apartments in any way he seen fit, Congress give him that right. Congress further said, "If you are going to use that right, Mr. Commissioner, this is a manner in which you must use that right." The Commissioner may make such contract with and acquire but not exceeding $100 stock, or interest of any such mortgagor, as the Commissioner may deem necessary to render effective such restrictions and regulations. Now, he did do that. He said to -- to the Darlington and my friend said to 7000 others, in a charter that they prepared as my friend admits, their wordings, their charter considered perhaps 7000 times. They said, "We are going to put this provisions in the charter. First we are going to say the purpose for which your -- your corporation shall organize," and I'm reading from the charter itself. Hugo L. Black: Where is the charter? J. C. Long: On page 184 of the transcript of record. Here is the purpose as is stated. The purpose for which the corporation is formed and the business objects to be carried on and promoted by it are as follows. To create a private corporation to provide housing for rent or sale and to acquire any real estate or interest of right therein or pertinence thereto, in any and all personal property in connection therewith. To improve and operate, to sella and assign mortgagors. To borrow money, and issue evidence of indebtedness in further of and all of the objects of his business, to secure the same for mortgage, deed of trust, pledge or lien. Now, this is the two provisions I call your particular attention to is D and E, because I say this is our lease, this is the written contract that controls our methods of operation. To apply for and obtained to be caused to be obtained from the Federal Housing Administration a contract, a contract to mortgage insurance. Pursuant to the provisions of the National Housing Act as amended, covering bonds, notes, other evidence of indebtedness issued by this corporation and any indent to a mortgage or deed of trust securing the same. So long as any property of this corporation is encumbered by a mortgage or deed of trust, insured by the Federal Housing Commission, it shall engage in no business other than the construction and the operation of rental housing projects of such. Now E, to enter into, perform and carry out contracts of any kind necessary to or in connection with the incidental accomplishment or any one or more purposes of this corporation. Then if you go further into this charter, you will find that the Commissioner gave consideration to the term of rentals, stated first, "You shall not rent any apartment for more than three years, nor can you rent all of the apartments in the building." But the Commissioner did not put any limitation expressly or impliedly anyway whatsoever on renting apartments for less than 30 days and there was good reasons why, because Senator Alben Barkley when he introduced this legislation, he stated in the Senate. He says, "An emergency is upon us, the emergency begets the need. This Act, we will not introduce it as a part of the permit of Housing Act, but deals with permit or housing, we need temporary housing to serve the temporary needs of the veterans, many of them in schools," Senator Barkley said." Many of them is out seeking jobs, many of them don't know where the home would be, they need temporary housing now and I instruct the Federal Housing Commissioner to go out and use its emergency power to produce those houses." I submit that a project owner had one of these apartments, had a vacant apartment and a veteran who gets priority under the Act, knocked on his door and said, "I want to rent this apartment for two nights," how could the project owner under the law say to the veteran, "I won't let you have it for two nights, I am limiting this for 30- day rental." Felix Frankfurter: Mr. Long may I ask you this question, you say for two nights, he might rent part of these things for one night, yes? J. C. Long: Right. Felix Frankfurter: Now, what I want to ask you is this. Does the phrase operation of a rental housing project as a matter of ordinary English, let's forget our specialized thing in the law, operation of a rental housing. Is that a phrase that one would use for overnight guests? J. C. Long: No, sir. It's not if he intended that the operation would be for overnight guests only, that's not what he would do. Felix Frankfurter: Well then one night, I thought you agreed it could be for one night rather than two, that's what I mean by (Voice Overlap) -- J. C. Long: It could be for one night over two, it could for one week or three weeks. Felix Frankfurter: Well now, does that phrase cover that kind of occupancy? J. C. Long: The part that we state in reference to that, that particular phrase does not, rental housing implies something more than renting by overnight occupancy. But by the same token, if the Court pleases, in subdivision (e), it says, "To enter into, perform and carry out contracts of any kind necessary to or in connection with or incidental to the accomplishment of any one or more in the preference of the corporation. I think it would be practical enough when an apartment building the size of The Darlington, the 156 apartments. From time to time, the people who lived in that apartment may have a relative come to visit them, there is not room for them.Would the apartment owner be prohibited from renting that, a relative of the regular owner for two or three days, that's an incidental use. And in this case, if the Court please, the rental -- the transient is an incidental use. It's undisputed, conceded, they sent the order to Charleston that no time in the history of this project has much as 10% of the apartments been rented for transient purpose. Felix Frankfurter: Did I understand you to say earlier that they could set apart, set apart not for the kind a mother-in-law visiting a young couple, but set apart a fraction, a reasonable fraction of the total available apartment for transient. J. C. Long: I don't -- we don't content that could set apart, no sir. We contend that those apartments available then, and if those entitled to priority comes in and wants one, they are entitled to it, but we contend that as an incidental purpose of the operation of this corporation, that they shall have a right from time to time when there is no demand otherwise, to rent available vacant units for less than 30 days when they don't go out and advertise as a hotel. They don't give any bellboy service, there is no room service attendant to it at all. The only way the record shows that any man gets a room in this building for less than 30 days is to come there and ask for it. Felix Frankfurter: Well, let me -- let me put another question, Mr. Long. J. C. Long: Yes, sir. Felix Frankfurter: I can understand if this were the letting overnight or for two nights of a transient couple or a transient person, one apartment or two. For myself, I would dismiss that as de minimis. That's really not to be taken into account. But this was a practice, wasn't it? This was a systematic letting of available apartments to transients of the part of the carrying on of the business.So, am I wrong about that? J. C. Long: I -- as a matter of fact, the record would not show that but I think it is in so many words, but I think the record discloses this, that here sits a man with his apartment building. It must be remembered that this record shows that at all times when he was renting for less than 30 days, there was other apartments available for rent for more than 30 days, there was always vacant apartment, the record shows in this. The situation is, that a man has entered into a mortgage, the Government has insured. He's got to pay that mortgage, and it comes, vacancies in his building. He sits there and someone wants to rent a vacant apartment for a night, a week for which there is no demand, he does the intelligent thing, he rents the apartment and we respectfully submit that that apartment maybe rented overnight tonight. Tomorrow it maybe rented for six months or a year, there is no given apartment set aside for a transient guest and there's no (Voice Overlap) -- Felix Frankfurter: I will -- I will wait the Government's reply to what you've just said. For me it would make a lot of difference if what you -- if what you've just said presents -- is the problem in this case, rather than a practice, a business practice of utilizing part of the available apartments for transient uses. J. C. Long: Your Honor, there is the record. Felix Frankfurter: All right, I'll do what he said. Earl Warren: Well, Mr. Long, in addition to what you have said Darlington did, didn't they go out and furnish up a large number of these apartments for the -- for the sole purpose of -- of renting them in a -- in a different manner than the -- than the vast majority of them? J. C. Long: No, Your Honor. Under FHA regulations, you are allowed to rent apartments and I'm glad Your Honor called that point to my attention because I wanted to correct something. Under FHA regulations, you are allowed to rent apartments but you cannot charge the tenant over one forty-eighth of the cost of the furniture per month. In other words, the -- they was trying to protect the veterans. And now, you can rent this furnished apartment but you can't charge them over one forty-eighth of the cost to the apartment per month. In this record, it shows that many of these -- many furnished apartments, maybe ten times as many was ever used for transient purpose was rented on a monthly basis upon which the tenant only paid $14 a month for the rent, for the furniture that went in that apartment. Now, there were some mentions made about a corporation other than the Darlington, buying that furniture. Under this charter, the Darlington cannot go out and mortgage any property and it was a question of those that was interested in the apartment putting the furniture in there which the FHA allowed, and so much until now, they have passed in such a case, they passed a regulation that you can put furniture in the apartment, you don't have to -- and it's in the record what I say. And you don't have to charge one forty-eighth, you can charge what you please but you must sign that you won't rent it for less than 30 days. In other words, if you don't rent it for less than 30 days, now you charge what you please for as many apartments as you want, that's in this record in this case. Now, the if Court pleases. Hugo L. Black: I still do not understand precisely what is this agreement, a part, who are the interested persons, are they stockholders or officers of the company, have they formed the corporation which requires some way of payment of rent to them instead -- for the furniture instead of the The Darlington? Is it an open and shut thing, or is it a mess of some kind to get away from the regulations of the apartments? J. C. Long: Absolutely open and shut, set forth in the records of the company, and when requested by the Government that they'd be allowed to send the order to the Charleston, it was agreed that they could send the order to -- in Charleston and do the operation. Hugo L. Black: Who owns that corporation? J. C. Long: It's owned by Long Corporation. Hugo L. Black: Who's the Long Corporation? J. C. Long: The Long Corporation happens to be relatives of mine. Hugo L. Black: Well, who are they?[Laughter] Are they interested in the Darlington? J. C. Long: Darlington Corporation is owned by Long Corporation. Hugo L. Black: Darlington Corporation is owned by Long -- J. C. Long: Long Corporation. Hugo L. Black: And the Long Corporation owns the furniture. J. C. Long: Owned the furniture. Hugo L. Black: And it bought the furniture. J. C. Long: Bought the furniture -- Hugo L. Black: I suppose the transient comes in until -- stay there at night.Does he pay the Darlington or does he pay the Long Corporation? J. C. Long: Pays both of them. Hugo L. Black: Pays both of them. J. C. Long: And the record shows that. What -- Hugo L. Black: The object -- what's the object of that? J. C. Long: The object of that is this, the furniture does not belong to the Darlington. Under their charter, they couldn't go out and buy it on time. They was losing money the first nine months they was in existence, they lost 70 odd thousand dollars. And I'd like right at this time to make an observation. We talked about somebody making profits, only six or eight cases. Well, we've heard alot about windfalls in some of the cases, but this is a winless case.[Laughter] My client, if the record is undisputed, had over 300,000 of cashed American dollars invested in this building when it was completed and that's what he is fighting to try to save. Hugo L. Black: How much did the Government have in? J. C. Long: The Government has a mortgage for $1,300,000 and they've been paid on that now about a 100 and some odd thousands, paid by my clients at a loss to them each month. They -- Hugo L. Black: And may I -- may I ask you one other question? J. C. Long: Yes, Mr. Justice. Hugo L. Black: Suppose you were to lose this case, are there any damages that your company will suffer or is it merely to regulate the use of the building in the future? I don't quite understand. J. C. Long: As a matter of audited record, my client would suffer a loss of more than $400,000. Hugo L. Black: How? J. C. Long: Because the Government said the building would cost so much money, and I'd say the Government said the building costs that because under FHA regulation, they set the contract price. My client went out and built this building and the cost to the building ran $300,000 more than what the cost was supposed to be. The FHA insured only 90% of what they estimated would be the cost, what they estimate would be the cost. So my client would lose that $400,000 if they went out and if this thing was foreclosed because of -- Hugo L. Black: Is the Government -- is the Government claiming that it will foreclose or is this an effort to foreclose or is this is an effort to regulate the conduct of the Darlington in the future? J. C. Long: Well, this Your Honor, was a suit where my client brought against the Government because they said this. This case started when they wrote down to my client and said, "You can't rent for less than 30 days." My client wrote back and said, "Listen, we'd like to find out why we can't rent for less than 30 days, we don't see any charter provision prohibiting it, we want to cooperate but what stops us from renting for less than 30 days?" And the Deputy Commissioner of the Federal Housing Administration, he wrote back and said, "Have you heard of a new law, the 1954 law?" Says, "That stops you from renting for less than 30 days." We at Charleston not too big a place and it is a nice thing to have someone bring a suit against you to say you're violating something. So, my client brought this declaratory judgment suit just to ask the courts to declare the rights of the parties to this -- to this action. Hugo L. Black: Has your client since that time -- J. C. Long: What's that? Hugo L. Black: Has your client since that time been renting for transients? J. C. Long: Yes, sir. Hugo L. Black: It's carried on that practice up to now. J. C. Long: That -- that on -- Hugo L. Black: And if you lose this, all you lose is -- so far as I hear what you say, I don't know, is that you filed a suit to enjoin them and try to enforce that regulation against you, and that's what this suit is about. J. C. Long: That's right. Felix Frankfurter: You wouldn't have to, if I may break in or add to Justice Black's question. I think you answered this question, but you wouldn't have to restore to the Government the records you received for less than 30 day rentals, would you? J. C. Long: No, sir. Felix Frankfurter: So this is merely a question of whether you can continue to do this in the future. J. C. Long: That's right, but it is -- Felix Frankfurter: Well, I don't understand your answer to Justice Black, you lose -- what is it?$40,000. J. C. Long: Well, this is -- Felix Frankfurter: But as far as I can understand it, you don't need to lose that which you would be disabled from renting less than for 30 days. J. C. Long: We would go broke. Charles E. Whittaker: Well, Mr. Long, I thought you -- J. C. Long: The record shows in this case that without this rental from this transient, there will be no money to pay them all. Felix Frankfurter: In the future, in the future, you would -- J. C. Long: In the past, it's told in the past, and the record (Voice Overlap) -- Felix Frankfurter: Well, I don't understand again. Would you have to restore any cash that you have gotten up to date? J. C. Long: No, Your Honor because while my friend talked about $180 a month, that's presuming a transient -- rents it $180 a month, but there is a little thing about laundry, you understand and cleaning up (Voice Overlap) -- Felix Frankfurter: But this is all -- this is all in futural, this is all for the future. J. C. Long: It's all in the future from this standpoint, but without this transient rentals, my client doesn't have funds to make the payments called for by the mortgage which has been insured by them. Felix Frankfurter: This is a forecast of the income that you would lose if you couldn't rent for less than 30 days, the access -- the excess apartment. That's it. J. C. Long: That -- Hugo L. Black: What you are saying is that this project which you undertook cannot possibly be operated with a pure rental housing project. J. C. Long: It cannot. Hugo L. Black: That you've got to run it as a kind of motel or hotel in part. J. C. Long: We've got to take advantage of any vacant apartments that we have that we can rent that the people come and ask for and which there's no demand for more than 30 days, I think Justice -- I thought one of you gentlemen -- Speaker: I thought that Judge Hoffman -- Hoffman -- his opinion was adopted by the three-judge court in substance found that if you were not permitted to avail yourselves of these ad hoc 30-day rentals, not at the expense of anybody who is entitled to a longer rental, but rather than having them lying vacant, that that would simply put a hold to the project back on the Government's hands and the mortgage would be foreclosed. J. C. Long: That is right, and that's the statement of facts. Charles E. Whittaker: As I understand it, you -- the judge of the trial court found in your argument that without these rentals that you fixed up that you wouldn't otherwise get too many while you could make payments of interest and amortization on the mortgage. J. C. Long: That's the Court -- Charles E. Whittaker: Default would occur, foreclosure would result. Your $400,000 would be gone. The Government has the property as what it -- is -- as it found to one note which it insured, isn't that right? J. C. Long: That's right, Your Honor. Hugo L. Black: What percentage -- what percentage of your income comes from these rentals to transients? J. C. Long: About 8%. Hugo L. Black: 8%. J. C. Long: I base that upon this, Justice Black, and I am doing some mental calculation. There's 156 apartments in the building. At no time has it been rented more than 10% or 15% and that's in the fair best months. Sometimes they -- they don't rent it one a day, sometimes it's four day, but at no time has it ever been more than 15 apartments in this building rented at any one day. Hugo L. Black: What evidence was it before Judge Hoffman upon which he could base a forecast at Charleston business nature as such that he would know at this time if you lose this 8% of the income that you would go broke? J. C. Long: The affidavits that was in the record by the Government to file orders that were not contested. The facts as found by their own orders, showed that prior to the time that we started renting on a transient basis, that the rental to this project had to be supplemented by the people that owned it but better than a $120,000. And the record showed that if this rental was not coming in, they would still have to supplement it to the tune of many thousand dollars each month. Hugo L. Black: Was an audit made of your books by the Government? J. C. Long: Yes sir. Hugo L. Black: Was there audit made of the Long Corporation's books looking at their expenses from whom they bought (Inaudible) and what dividends the owners of the Long Corporation furniture company or if you call it that -- J. C. Long: But there's never been any dividends paid for this corporation.Darlington never paid a dividend yet. Hugo L. Black: So what about Long, the one -- the subsidiary? J. C. Long: The construction company? Hugo L. Black: The one that rents the furniture. The Long Company. J. C. Long: The Long Corporation. Hugo L. Black: The one that rents the furniture. J. C. Long: No, there was no audit made of their books. Hugo L. Black: Well, how could he know that, precisely what was going to happen? How could the judge know precisely what's going to happen in the future laying aside the fact it forecasted, included different things. J. C. Long: Well, I've got to admit, Your Honor, I don't know how anybody can know what's going to happen in the future except with the past. And the past showed that unless this rental come in, there weren't going to be sufficient funds to make the payment of the mortgage, and while some people may have the money filed that gives out and we put out over $120,000 in making up the payments even would -- it loses money even with the furniture rent. This project actually loses money even with rental coming out from the furnitures. Hugo L. Black: Does the Long Company lose money on its furniture investment? J. C. Long: That would depend as to whether or not the likelihood of the furniture is going to withstand the way of these -- the furniture rental charge were based upon the rental, furniture rental charge per day, would based upon the basis of 148 of the cost per month. Then it was the expense of cleaning the linen and other things, based upon the four year life that the FHA has established for the furniture. This corporation would continue to lose money. Hugo L. Black: Did Judge Hoffman take any evidence on the business operations of the furniture corporation -- J. C. Long: No, sir. Hugo L. Black: -- showing how much it had invested, showing how much it had paid out and to show -- make a basis of whether they were going to lose or make money. J. C. Long: Well (Voice Overlap) -- Hugo L. Black: The subsidiary company. J. C. Long: There is an affidavit in the file here of how that -- of how that works, the -- of the $6 a day. And let me say this, three people sleep in one room $6, one people sleep -- one person sleep in a room $6, it isn't of this business like the wholesale you go out, two people you are charging twice as much as one, to be rented a room, that's all. And they took the -- they take from that $6 first, one-thirtieth of it for the rent for the apartment. They deducted the maid service and other service and then the remainder was supposed to represent a one-thirtieth or one forty-eighth of the cost to the furniture with a day's rent. Felix Frankfurter: I'd like -- I'd like to ask you what the Chief Justice has commissioned, one question. When an apartment was rented to a transient as my brother Harlan said, these ad hoc rentals, whether such an ad hoc rental was made. Was the furniture brought in for the transient guest or there are always apartments which had Long furniture to await the transient customer? J. C. Long: There are some 60 odd apartments in the building furnished and there was no furniture brought in. If one of those was available, he -- Felix Frankfurter: Well, then -- J. C. Long: -- moved in. Felix Frankfurter: So -- well, then those 60 odd apartments that were furnished by Long furniture always set aside in expectation of a transient flow? J. C. Long: Absolutely not, and the record shows that -- shows that they were not. That -- Felix Frankfurter: Well, then suppose a -- suppose a veteran came in, would he -- would he take one of these furnished apartments for six months or a year? J. C. Long: He did, but he only paid $14 a month for his furniture, only $14 a month. On a monthly basis, the furniture charge was $14 because the veteran would sweep his own floor, take care of his own linen and it becomes his. Felix Frankfurter: On what basis was 60 apartments out of the total, whatever they were, furnished as against the others that were not furnished? J. C. Long: A matter of finance because that's all the Long Corporation could afford to put the money in there too, because it costs -- that were some $50 or $1000. It cost about almost $1000 per apartment. Felix Frankfurter: And they would -- that furniture would be available to the yearly tenants as well as to the 20-day tenant. J. C. Long: And two-thirds of it, this record disclose, was rented to the yearly tenants and not the daily tenants.I see the red light. Thank you, gentlemen. Earl Warren: Mr. Rosenthal. Alan S. Rosenthal: If it please the Court. With reference to Mr. Justice Frankfurter's point, Mr. Justice Frankfurter's -- Felix Frankfurter: A question, it wasn't a point. Alan S. Rosenthal: -- question on page 235 of the record, there is a -- Felix Frankfurter: What page, Mr. -- Alan S. Rosenthal: 235. There are the four which the Darlington used in connection with their transient rentals which has on it, "Have you left your key, and rent, security deposits, telephone, furniture rental." And I suggest that this at least is one indication that this was not a merely ad hoc occasional relationship. Felix Frankfurter: But that doesn't -- that doesn't tell us -- that doesn't give you the quantitative light. Alan S. Rosenthal: No, but if the Court pleases, these people, right from the very outset started to rent -- furnish apartments and rent furnished apartments. They didn't wait to -- and to see whether on a furnished basis, they could attract veterans. They went right into the furnishing business, they charged, I think the record indicates, $15 to $20 per month more. So instead of this being $77.50 apartments, they were $92 or $97 apartments. Felix Frankfurter: How long has the practice you complain of been going on (Inaudible)? Alan S. Rosenthal: The practice (Inaudible). Felix Frankfurter: (Inaudible) I think it is still going on. Alan S. Rosenthal: This building was built in -- finished in July of 1951. They started to furnish in October 1951, they started to rent to transients in February 1 and the FHA didn't know it because when they filed their occupancy report, they disclosed the fact that they were even renting to -- even renting furnished apartments. Now, insofar as -- Speaker: I thought the record showed that the Darlington people had gone to the FHA, had disclosed they were renting the -- wanted to rent these things on a -- on a basis, and asked for their approval of a rent schedule. Alan S. Rosenthal: Absolutely not. Speaker: Isn't -- am I wrong about that? Alan S. Rosenthal: No, the record in -- the record does not indicate that, what the record indicates is that the FHA sometime around to December of 1952 discovers they are renting furnished. They didn't -- FHA didn't know transient, but they knew that they had furniture in some of these apartments. So the FHA then says to the Darlington, "You can't do this unless, one, that you get a furniture rental schedule approved, and second, you agree not to rent to transients. Now, the record doesn't express -- the -- the printed record at any rate does not expressly indicate when the practice of renting to transients was discovered by the FHA, but it's at least an implication from this later correspondence, it wasn't until very late in the game, but they never came and asked for permission. They were doing this and they were concealing the fact and -- Felix Frankfurter: But is there nothing in the record which fairs on the determination of this fact? That was my question to you in the light of what this -- the Long said, namely that rentals to transients was not a device to make extra money, although they could have rented for -- beyond 30 months, but that was a necessity as a matter of experience. Some of these apartments would have stood empty and this was a way of utilizing the excess available apartment. Alan S. Rosenthal: The Court -- Felix Frankfurter: That's what Mr. Long said if I understood it. Alan S. Rosenthal: If the Court -- if the Court pleases, we -- we don't think that the record indicates one way or the other on that. We would suggest this that before experience could tell them anything in this instance, right -- beginning with February, they -- they furnished 60 of their units. Secondly, we would submit that -- Felix Frankfurter: Well, how do you know that -- how long -- when -- how soon after apartments were available, did they rent it to the -- the transients? Alan S. Rosenthal: They rented to transients. Well, it was the period from the very end of July to the following February. Now, on that -- Felix Frankfurter: July to February. Alan S. Rosenthal: That's right. Felix Frankfurter: But on the other side, I know little about these things, but very often before an apartment house is under way, inquiries are made about future rentals. Alan S. Rosenthal: That's -- that's -- that may well be true. But of course in the interim here, they had taken out 60 apartments without the FHA's knowledge from the -- from the range of unfurnished apartments. Secondly, and this is we think is the very important point. And this again, and you view it in terms of the purpose for which this -- this program was established. These people hit upon the device of furnished apartments and then transients is the way out of their difficulty. They made no endeavor here to try to and reduce their rents. The record indicates they were in a poor location. This isn't the FHA's fault, it was their fault, they insisted upon it. Before it -- but first, this is being a error of judgment on their part, instead of trying to encourage veterans to come in. That's the purpose of the program. Felix Frankfurter: Let me -- Alan S. Rosenthal: They go out immediately and follow this -- this entirely different task. Felix Frankfurter: Let me ask you a question, Mr. Rosenthal. So far as I am concerned, if this was an isolated case, this just as Darlington Company -- Alan S. Rosenthal: I have some information on that. Felix Frankfurter: -- down there -- let me put my question. Alan S. Rosenthal: Oh, excuse me. Felix Frankfurter: I wouldn't think this was -- the case was fit to be here. And therefore, the only problem as far as I am concerned is the construction of a statute or the implied powers of the FHA. What I want to know is this. Does the FHA, insofar as you are able to speak for it and you ought to be able to speak for it, contend that if as a matter of honest business judgment, an apartment house is practically not rentable and that there is some excess apartment that the owners or the mortgagor may rent that excess, shown by past business experience or allowable judgment, to transients. Alan S. Rosenthal: I think -- Felix Frankfurter: As a matter of policy. Alan S. Rosenthal: No, the FHA's position today is that even in the so-called hardship cases to which Your Honor has alluded, the congressional prohibition operates that they may not do it. This that -- and there was one time they took a -- this is right through before 1954, they thought that in the -- Felix Frankfurter: Has your apartment houses mortgaged prior to 1954? Alan S. Rosenthal: That's right (Voice Overlap) -- Felix Frankfurter: They must leave those vacant and not to make (Inaudible) to which you may put its rent. Alan S. Rosenthal: Yes. Of course, they -- they may -- Felix Frankfurter: That is your position. Alan S. Rosenthal: They may not resort to the transient rental, the advise, in an effort to -- to fill the house. Felix Frankfurter: They must -- Alan S. Rosenthal: It doesn't -- Felix Frankfurter: -- leave them vacant. Alan S. Rosenthal: Oh, no. There is other -- again, we come down to the fact that there is no -- nothing in this record on which to base an assumption that the Darlington was faced with that desperate Hobson's choice. Felix Frankfurter: I'm -- I'm trying to -- I'm trying to enlarge this problem away from the Darlington to a general proposition if that's the law of it. Alan S. Rosenthal: As -- as a general proposition, we would say that's right, and we would say again this, that if Congress sets up a program for a particular purpose, the beneficiary of that program cannot, because he's unable to make a success of the program -- to working at the program as it was constituted, go in and into some other completely different field of endeavor. Felix Frankfurter: That is not as a matter of explicit congressional language, but the implication from the general policy underlying it, right? Alan S. Rosenthal: I think that's correct. Now, I might just -- if I may I say this, in answer to a question that was asked.I had been advised while I was sitting down that there are between 12 to 15 suits now -- no 10 to 15 suits now pending with respect to this transient rental issue which are of course waiting for this decision to -- decision of the Court. Earl Warren: Does that include all of those who were -- who were permitted prior to the 1954 -- Alan S. Rosenthal: No, the -- Earl Warren: -- Act? Alan S. Rosenthal: -- no, the people that were permitted, expressly permitted prior, they have an exception. Earl Warren: Those were in -- had a contract to that -- Alan S. Rosenthal: Well, it had asked the FHA for permission. Earl Warren: Yes. Alan S. Rosenthal: The FHA -- Earl Warren: Yes. Alan S. Rosenthal: -- under the methods of operation clause granted it, that's right. Earl Warren: Now, excluding those, are all of the others treated the same as this -- this one? Alan S. Rosenthal: Well, I would -- I would presume -- presume so. I will check -- ascertain whether in addition to the 10 to 15 lawsuits pending, if there are other -- Earl Warren: Yes. Alan S. Rosenthal: -- instances of this, of the persons in the Darlington position which would, if necessarily to -- Earl Warren: Yes. If you will please. Hugo L. Black: May I ask you what I -- excuse me. Earl Warren: No, no, no. Please, go ahead. Hugo L. Black: -- what I asked to Mr. Long. What from your standpoint is the effect on this company, as to the past and as to the future if the Government wins? Alan S. Rosenthal: As to the past, there is no effect at all. The statute is perfectly clear on that, that the -- the statute does not impose any kind of liabilities with respect to the past, so that the Government -- Hugo L. Black: Is the Government is claiming that it can be (Over Overlap) -- Alan S. Rosenthal: No, of course not. We're not claiming that they are liable for the -- they -- their past transient rental collections at all. Our -- the effect of this would be simply, that in the future, they would be prohibited from renting these units to transients. They could furnish them, they can rent them on a furnished basis, but not for periods of time less than 30 days. Hugo L. Black: Now, would it be possible for you to the Federal Housing Administration to give us the example of the same thing if there are such, in other parts of the country, where they are. Alan S. Rosenthal: Examples of? Hugo L. Black: Of -- of the rental of these units that were built, the lower rental houses for veterans being used for motels or hotels or transients. Alan S. Rosenthal: I think that I'll make an endeavor to get them, Your Honors. Felix Frankfurter: You are really suggesting, this is a device to submerge a purpose of their houses. Alan S. Rosenthal: That's right. Felix Frankfurter: That is the -- Alan S. Rosenthal: That's precisely what -- Felix Frankfurter: That's your position. Alan S. Rosenthal: That's precisely what -- Felix Frankfurter: Therefore, the enquiries that Justice Black made have -- seems to me very important. But as to that -- Speaker: What have you got to say as to this comment of Judge Hoffman in his opinion? The unusual situation created by reason of the FHA's insistence to cease the practice of renting apartments for periods of less than 30 days will admittedly necessitate, will admittedly necessitate the financial downfall of the Darlington with the result in the loss of an initial investment together with the monthly payments of $6000 each beginning January or June 1. It certainly would not justify the continued existence of Darlington, and bankruptcy would be the ultimate answer, the foreclosure of the mortgage would follow with the Commissioner of the FHA requiring title, as it is a bear assumption, no purchase or sale or there's an amount equal to or in excess of the unpaid balance due on the mortgage. Alan S. Rosenthal: I don't -- my recollection is that the Government certainly made no admission. It -- I think -- Speaker: That finding was adopted by the three-judge court afterwards, wasn't it? Alan S. Rosenthal: It what is -- that was true on this record or at least appears to be true, is that if the Darlington continues its operation in the manner in which it has been continuing it, leaving off simply the practice of renting the transients that they will be in financial difficulties. Again, I come back to the -- the point that there's no indication in this record that I can see, that on a lower rental basis or by adopting certain other practices which are within the scope of the -- the statute and the regulations, the Darlington could not make a goal. But again we would emphasize that if -- even if that so, we say that -- that that isn't a critical consideration here, because these people, I misspoke myself for this purpose, and we think that whether they are -- were unable to make a financial success of the -- the project for the purpose for which it was established. We think that that's regrettable, but we don't think it is warrant for going into some other completely different line of endeavor and competing with hotels in this case and other transient accommodations which didn't have this type of alien construction, and which Congress clearly, by the 1946 Act, was not intending to setup competition for. Earl Warren: Well, in that connect, Mr. Rosenthal, what -- what do you have to say to the -- the point Mr. Long raised about this second exception in the 1954 Act where the project is located in an area which the Commissioner determines to be a resort area plus the response of the sponsor of the -- the bill that that would include the entire State of Florida with about 11,000 projects of it. Alan S. Rosenthal: The answer is here that -- to that is this, that the Congress as determined by the 1954 Act that it wasn't incumbent upon the FHA, they have been doing before to determine what was hardship cases and what weren't. The FHA was given no discretion in that regard. What the Congress decided was that they were going to carve out an exception for the State of Florida, where as a overall basis, it's very difficult during seasons of those years for -- to -- to rent, except on a -- on a transient basis. Now, that determination, we submit, is hard, works an unconstitutional discrimination against the appellee and we don't think actually the appellee is affected by it and has an -- works then as a challenge. Earl Warren: Well, but my point is this, when you -- you use this, 1954 Act to establish legislative intent to apply this original act, only to long-term tenancies. Now, how does this establish any such thing if they eliminate an entire State that has 1100 projects in it. How does that establish the fact ten years before they intended for the entire nation to be under it? Alan S. Rosenthal: Well, of course this intent continued all along, as is seen by the -- the express -- expressed statement of intent in the 1954 Act, which has this -- this provision for resort areas. Earl Warren: And was there any such thing in the prior Act? Alan S. Rosenthal: No, no, no. There could be -- the prior Act did not have any provision for resort areas. The prior Act wasn't dealing with the -- the transient rental problem directly because the prior Act again was in terms of providing residential housing for veterans. The Congress then when it was called to their attention that there were these activities beyond the scope of the program as intended, got into the matter of transient rentals, and 513 of course has these particular provisions. But 513 itself, well it has the -- the resort area exception, again contained the expressed declaration of the congressional intent on the inception of the Housing Act right up to the -- the present time. Earl Warren: What is there in the legislative history to show why they exempted the resort areas? Alan S. Rosenthal: Resort areas were exempted, Your Honor, because it was -- they were deemed by Congress to present a special and sui generis situation. In the resort areas, people in those areas do not -- or -- or very small numbers actually established long-term residence. In that case, it (Voice Overlap) -- Earl Warren: You mean in the entire State of Florida, people don't establish permanent residencies? Alan S. Rosenthal: Well, these projects were -- Earl Warren: I thought it was one of the fast growing States in the union? Alan S. Rosenthal: Yes. But these projects are presumably are established in the -- are in the resort area. Earl Warren: And you mean that the FHA deliberately established all of these apartment houses in -- in Florida in resort areas where soldiers wouldn't come? Alan S. Rosenthal: I don't know -- I don't -- I don't know where the projects were -- were established in Florida. But Congress in its wisdom chose to -- to setup this -- this resort area exception, but that -- at the same time that they again came down with the reaffirmation of a -- of the legislative intent, we don't think of course -- Earl Warren: Reaffirmation was in there, was it? Alan S. Rosenthal: Well, if they -- as they viewed it, the Committee Reports viewed it, this was merely a restatement of an intent which they thought had -- was clear enough from the -- the 1946 Act itself when it's preamble. They weren't thinking of the 1954 Act, Section 513 in terms of a change in the existing law. Felix Frankfurter: You mean that the 1946 Act impliedly without all the resorts? Alan S. Rosenthal: No, no, no. The 1946 Act didn't contain any -- anything to -- Felix Frankfurter: But you said that this doesn't make a change, in -- in answer to the Chief Justice's question that if this was the purpose of the Housing Act, why should the Housing Act go in for supporting resort -- resort communities instead of communities by which -- which reference common law's housing. Alan S. Rosenthal: The initial -- no it made a change in the existing law to that extent, but they didn't view the prohibition, the general prohibition of transient rentals as constituting a departure from existing law. And we think that the -- the Committee Reports on that indicate that quite clearly, thus, I indicated earlier, the House Committee for its part, it didn't think that there was any -- Felix Frankfurter: Did it or didn't it make a change as to resorts? Alan S. Rosenthal: It made a change as to resort. And what Congress was doing in effect was saying that we are going to take over the job which the FHA had been in our -- in the Congress' view was proper in exercising before, under take before. That of determining what are the -- the hardship cases. And I said the FHA does not have discretion under the methods of operation, we're going to carve out the two exceptions. Felix Frankfurter: But my question is, why should an inapplicable situation with reference to the purpose of the Housing Act to which resorts, the taking out of the statute or had been in the statute to begin with.Congress wasn't concerned with fly-by-night Florida visitors, was it? Alan S. Rosenthal: No. Congress -- Congress -- Felix Frankfurter: And yet it took them out. And since before that, and you said that, that implied that it was always in there as to every other place. Alan S. Rosenthal: No, I don't say that they -- because they took it out from -- took -- included a expressed exception for Florida; as that -- in those that -- it was in as to everybody else before. I would -- all that I said was that Congress, when they were viewing the problem in 1954, they deemed Section 513 as making no change in its broad scope of an existing law. They then decided in their wisdom and this is we submit is an appropriate subject of legislative resolution whether we might agree with it or not, then decided to -- Felix Frankfurter: But it would -- it would get nonsense to Congress if you can help it. Alan S. Rosenthal: But they then decided to carve out the -- the Florida exception and we think there's no question from the enforcement provisions of this Act as well as from subsection (b), that contrary what Mr. Long has suggested, the Act in terms applies to existing projects as well as projects built subsequent to 1954. Of course, Section 608 itself, there have been no mortgages insured under that section since 1950, the program expired, even though they still are permanent mortgage programs. Earl Warren: Mr. Rosenthal, are there any other states that come under the umbrella of this -- of this section? Alan S. Rosenthal: Not to my knowledge Your Honor. Earl Warren: Are there any other great areas that are denominated as -- as resort areas? Alan S. Rosenthal: Not to my knowledge. Earl Warren: It applies only to the State of Florida. Alan S. Rosenthal: It is -- that is my understanding of this restriction in its operation to the State of Florida. Earl Warren: And why -- why then didn't they say so in the Act and -- and why did they leave it to this -- to this conversation between the sponsor of the bill and the Senator from Florida as to -- Alan S. Rosenthal: That -- Earl Warren: -- to whether it excluded the whole -- whole State of Florida? Alan S. Rosenthal: That, Your Honor, I don't know but I could guess. Earl Warren: But that's the interpretation that the FHA puts out. Alan S. Rosenthal: That's -- but that's -- that's right. And that again, that the statute declared -- Earl Warren: Florida -- State of Florida is out -- Alan S. Rosenthal: That's the way I -- Earl Warren: because of that -- Alan S. Rosenthal: -- that's how I understand that. Earl Warren: -- conversation in the -- in the legislative history. Alan S. Rosenthal: That is -- Earl Warren: -- and not by reason of any words that are in the Act. Alan S. Rosenthal: That is my understanding, if I'm wrong in this regard, I will -- Earl Warren: Yes. Alan S. Rosenthal: -- correct it by statement. It is my understanding. Earl Warren: Yes. Alan S. Rosenthal: That is how -- Earl Warren: That is that your understanding also that it was -- that, that conversation limited it specifically to -- to the State of Florida and did not mean other -- other resort areas where they'd use this language? Alan S. Rosenthal: All, but I wouldn't go to that extent. That all that I -- that I would state at this point is, it's -- it's my understanding that the -- the Federal Housing Administration is -- is applying the resort area exception to the State of Florida and I know of no other things in other States. And whether -- Earl Warren: Now, will you let us know please if it is applying it to any other States besides Florida and if so, to what States? And if not, to entire States, to what resort areas? Alan S. Rosenthal: I will do that. Earl Warren: If you please. Felix Frankfurter: May -- may an Easterner say that Southern California is -- is repeatable in those areas? Earl Warren: [Laughs] Well, I was again in terms of --[Laughter] -- was again in terms laughing. Hugo L. Black: One -- one other question -- one other question. Does this record contain all the evidence? Alan S. Rosenthal: I -- Hugo L. Black: If not, where is the other evidence? Speaker: Or is it the same to all the evidence undertaken that all in such a plan that (Inaudible) Hugo L. Black: This shows the whole evidence that exists with reference to the financial operations and the conditions. Alan S. Rosenthal: That's right. Hugo L. Black: And with reference to whether they could have been rented at a cheaper rate and anything of that kind. No other evidence except what's in here. Speaker: I think -- I think it is planned (Inaudible) Felix Frankfurter: Did the Government put in -- did the FHA put in evidence? Did the FHA introduce evidence before either Judge Hoffman originally or when it came back to the three-judge court on -- I know the veteran if it's so because they just acted under Judge Hoffman record. That's how it is. Alan S. Rosenthal: Yes they had a new -- Felix Frankfurter: The Government -- did the Government introduce any evidence under that? Alan S. Rosenthal: Yes. Yes, Your Honor. They put on the stand two witnesses and a couple of affidavits. It's in the record.

Earl Warren: Number 481, Rockwell Kent and Walter -- Walter Briehl, Petitioner, versus John Foster Dulles. Mr. Boudin. Leonard B. Boudin: Mr. Chief Justice and Your Honors. These cases which are suits for passports by American citizens against the Secretary of State arose in the District of Columbia and involved the following issue, whether the Secretary of State has the right to deny passports to American citizens on the basis of political standard devised by the Secretary of State and the issues involved are both statutory and constitutional. So, of course, we address ourselves to the alleged lack of authority on the part of the Secretary of State under any statutes of the United States. The facts which I actually referred to very briefly are these. Dr. Walter Briehl is an American psychiatrist who's approximately is 27 years. He served as a lieutenant colonel in United States Army in charge of Army hospitals at the psychiatric parts of the hospitals. He is a practicing psychiatrist in Los Angeles and is connected with many medical societies, psychoanalytic, psychiatric and otherwise which I specified in the record. As a member of the society as a delegate of these medical societies, he has had occasion to travel abroad, most recently in 1953 with an American passport for the purpose of attending international conventions on mental health and on psychoanalysis and reporting back to his medical societies. He did that in 1953, and when he attempted to renew his passport in 1955 for the same purpose acting as a delegate of his medical societies, he received instead a typical letter from the Director of the Passport Office in which it was said, that certain allegations had been made against Dr. Briehl by persons who are not specified. The allegations were of course not for him, but we know that he had at one time unspecified been a member of the Communist Party and that he has been a member of a number of organizations on the Attorney General's list, three or four or five, or associated with him and that he had once petitioned to the President of the United States not to prosecute Communists under the Smith Act. And so, the Department had he made these charges against Dr. Briehl said to him in his letter, “We ask you now for an affidavit as to whether you have ever been a member of the Communist Party, ever, whether you are now, and we ask you also to explain under oath your connections with the Communist-front organizations which we have described in our letter and any other Communist-front organizations?” Dr. Briehl demanded a hearing, a quasi-judicial hearing in view of a recent decision of the Court of Appeals, Dulles against Nathan, and instead he received an informal hearing in the Passport Office in 1955 and which he was the only witness. No witnesses were offered by the Government in support of any of the allegations and instead, the Passport Office sought to examine Dr. Briehl with respect to the subject matter of his letter. He declined to answer the questions with respect to Communist Party membership, Communist-front organizations so-called or his associations. And the Department refused to issue a passport to him, indeed, refused to act upon his passport application at all. Now, the case of Mr. Rockwell Kent is essentially the same. Mr. Kent is well-known explorer, writer and artist, internationally known of course, known -- I assume to the members of this Court. He has traveled abroad very widely for more than 50 years using passports. Well, passports were required as they have more recently and I assume traveling without passports in the earlier years when they were not required. And the great created work manifested in his writings and in his art has been the product of this international travel. Mr. Kent applied in 1955 for a passport to travel abroad where as he said under oath, "Pleasure and profession." And I assume that the tour intermingled with him, and he received a similar letter from the Director of the Passport Office stating, “You Mr. Kent are alleged who have been a member of the Communist Party, time, place unspecified. You Mr. Kent had been connected with many organizations on the Attorney General's list and you have done many other things, some of which we will now specify. And Your Honors will see and I think the outrage of the kinds of things alleged on page 8 of my brief, alleged against an American citizen as mentioned as a reason for denying him liberty of movement. For example, it has been alleged if you sought to repeal in the Walter-McCarran law. It has been alleged that you urge clemency for Rosenberg, so it is. You urge to release on bail of Steve Nelson who was convicted of sedition in Pennsylvania, he was sponsor of a petition addressed to Attorney General Brownell criticizing the use of paid informants. I surely, do not have to rely upon the decision of this Court upholding the positions taken by Mr. Kent on many of these issues. The fact is that Mr. Kent had a constitutional right to take all of these positions and at the same time to have the liberty of movement which is demanded. Now, both Mr. Kent -- Mr. Kent also, I may say, was given the same kind of informal hearing, only with two variations. His autobiography called “It's Me, O Lord” which he tells the entire philosophy of life as candidly as anyone could, was introduced in the evidence by the Passport Office. His book was put in there for the purpose of showing that Mr. Kent had admitted that he had been connected with the organizations on the Attorney General's list. And also, the Passport Office introduced testimony given by Mr. Kent before the McCarthy Committee in 1953 because the Department considered it significant that he had asserted his constitutional privilege against self-incrimination. Both plaintiffs started these lawsuits which were dismissed in the District Court under the Secretary regulations and the dismissal was affirmed in the Court of Appeals. Now, I should of course give Your Honors first the regulations because they are -- before I give Your Honors the regulations, may I state two concessions made by the Government which has never been made in the course of these two years of litigation or indeed in the five years in which we have been litigating many other passport cases in the district. For the first time, we learned in this Court and into the credit of the Government that there is a constitutional liberty of movement. They make that concession. They seek to undercut it but we'll discuss that later. Secondly, they, for the first time disavow the claim of inherent power on the part of the Secretary of State to control the movement of citizens abroad, a claim of inherent power that was made up to this Court's level. Therefore, we come down to the preliminary questions. Where is the statute that authorizes the Secretary of State, prevent American citizens from going abroad for profession, pleasure, vagrancy or any other reasons? Now, we turn to the regulations again. The regulations holds vagueness and I must say, outrageous character is apparent from their reading -- Speaker: (Inaudible) Leonard B. Boudin: I shall hold -- Speaker: (Inaudible) Leonard B. Boudin: Very well, I shall hold -- withhold to turn, Your Honor. I shall let Your Honor's judgment determine that after reading the regulations. The regulations provide in Section 51.135 at page 66 the following. Hugo L. Black: Page 56, of what? Leonard B. Boudin: 56, thank you, Your Honor, of my brief. Hugo L. Black: Your brief. Leonard B. Boudin: There are three categories of citizens who are not to be permitted the right to travel, three categories. The first, category A are members of the Communist Party who have recently terminated -- or who have recently terminated such membership under circumstances indicating of the view of the Secretary of State, they are still controlled by the Communist Party. Category B are persons regardless of a formal state of their affiliation who engage in activities which supports the Communist movements under circumstances indicating the view of the Department as subject to control. And category C on page 67 are persons regardless of a formal state of their affiliation after whom there is reason to believe on the balance of all the evidence of a going abroad to engage in activities which will advance the Communist movement. We are not concerned in this case with 51.136 which talks about people who are going abroad to violate the laws of the United States, or the people who would do things prejudicial to the orderly conduct of foreign relations or even prejudicial to the interest of the United States. We are concerned with 51.135. Now, the question is, where is the authority for 51.135? The regulations themselves, Your Honors will see on page 66 cite a single statute, 22 U.S.C.211 (a). And that statute, which is on page 59 of my brief, is also disavowed in this Court for the first time, although it's the only statute referred to the regulations as a source of the Secretary's authority. Because of time, I won't go into that statute because the Government has conceded that it does not give it the power to control travel, but merely to issue passports a somewhat different problem which I think I need not go into. The Government now however, for the first time relies exclusively upon the McCarran-Walter Act of 1952, print -- 8 United States Code Section 1185 is on page 60 of my brief, and which makes it a crime during the period of national emergency proclaimed by the President for American citizens who travel abroad, to depart from the United States or to enter the United States without a valid passport. Your Honors will note that this statute is not cited in the preamble to the Secretary's regulations. Your Honors will as a matter of fact note that this statute was not in effect at the time of the regulations of August 28, 1952. And finally, that the statute says nothing about an authority to the Secretary of State to control travel, and if it had said anything about such authority, I would of course call Your Honor's attention to the fact that there are no standards in the statutes. Now, if this statute is to be given any meaning whatsoever, it would have to be read in conjunction with, as a complement to the Internal Security Act of 1950, Section 6. That was the statute in which Congress decided what character of persons should not have passports. And that statute appears at pages 59 and 60 of my brief. The standards set forth in that statute, the standards set forth in that statute is a single one, persons who are members -- presently members of an organization found by a final order of the Subversive Activities Control Board, to be a Communist action organization. Present membership in an organization found by that Board to be a Communist action. Your Honors can compare that particular statute with the standards set forth in the Secretary's regulations and the differences are quite obvious. William O. Douglas: Are you going to refer to the executive order cited in the regulations? Leonard B. Boudin: Yes, I shall Your Honor. The Executive Order referred to in the regulations is an executive order which merely provides that the Secretary may issue regulations with respect to the issuance of passports which regulations must be consistent with the provisions of the Executive Order. The Executive Order itself following the tradition of Executive Orders from the beginning of this nation set forth no substantive conditions for the right to travel and we therefore assume that when the Executive Order said that the Secretary can issue a regulation consistent with, there must be regulations of essentially the same kind. William O. Douglas: But page 65 of your brief, item 124 of the Executive Order that the Secretary is authorized in his discretion to refuse to issue a passport. Leonard B. Boudin: Yes. Now, of course those -- those regulations, that regulation of 7856 was promulgated at 1938 in a time when a passport was not necessary for travel. And we are now discussing a situation in 1955 and 1958 when a passport has become necessary for travel. The President has never in any regulation, in any proclamation said that the Secretary has the power to issue regulations, establishing substantive conditions. Now, with regard to this part of the President's Executive Order as relating to the normal -- normal right to issue passports, but not to the right to deny passports when travel is a condition upon it. Now, the Secretary -- William O. Douglas: The only relevancy then in that order is 1 -- paragraph 126. Leonard B. Boudin: That is correct. I think that would be true and that would -- I think that would provide for the Secretary to issue regulation of the same procedural time that he always had issues throughout the history of this country, not regulations which determine who can travel. Now, the Government cannot find any content in the McCarran-Walter Act, either by way of authority to the Secretary to control travel or by way of determine -- setting forth the standards pursuant to which this travel can be controlled. And so, the Government relies upon a statute of 1918 and the statute of 1941, predecessor statutes but both of course, dealing with war-time situations. And the Government cites a House Committee Report in which it was indicated. There is some language there that it was intended, statute of 1918, to present espionage. All that we can say to that is that it is -- the statute of 1941 -- sorry, the statute of 1952 which is here involved contains no authority of any kind and that it is very difficult to read into that statute, a House Committee Report involving a 1918 statute involving war time, and war time espionage as an authority to the Secretary in 1952 to promulgate regulations dealing with the subject of Communism and membership on the Attorney General's list. And we may also add that of course in 1918 and 1941, Congress had not spoken. Congress had not said that a certain class of American citizens could not travel, an issue that is not before this Court of course, because Your Honors recall, there is no final order involving the Communist Party or everyone else as a result to the litigation that has been in the courts since the passage of the McCarran Act. But what is significant is that all the reading of the McCarran-Walter Act at least gives it some meaning because we can read it in conjunction with the Act of 1950. The Secretary's reading gives him authority carle blanche to deny the right to travel to American citizens, no limitations, no standards whatsoever. I may say also as a final word on this subject that the regulations of 1952, August 28, 1952, were never intended to be based upon the McCarran-Walter Act, aside from the fact they don't mention it, and the fact the Act wasn't in effect then. As the Government admits, as we have cited Secretary or Secretary Office is admitting. The regulations of 1952 are intended to comply with what the Secretary believed to be the spirit of the Internal Security Act of 1950. And it is our position that the Secretary must follow the latter of that statute and not what he conceived to be the spirit. If Congress determine the adequate remedy, namely the remedy by a hearing, certainly consisting of more due process than has -- than has occurred here on the part of the Secretary, namely hearing before the Subversive Activities Control Board. And then a relatively precise statement of who it is who is to be denied a passport, namely a present member, not a person who may have, in the view of the Department, follow the Communist Party line, not a person who may have been a Communist Party at one time. We are not here arguing the constitutionality of the Internal Security Act of 1950. We think that the objections which I'll next turn to are very substantial objections even against that statute but are not to the same degree, namely the objections under the First Amendment. I therefore, now turn to the First Amendment part of my argument. We have seen here that there are sanctions imposed by the Secretary of State. The sanctions consist of a restraint of movement. May not seem like a great restraint to a man who's confined in the present but is certainly a restraint. And it is a restraint which has had an effect upon the professional activities of these men, upon Dr. Briehl's patient, upon his medical society, upon Mr. Kent's creative work and of course upon their livelihood. The admitted basis for the restraint is the exercise of lawful activities, disapproved by the Government, there's no conceptual questions to that. It referred to the Secretary of State, the Attorney General and congressional committees or the certain character as the Government. But the fact is that these are all lawful activities protected by the First Amendment. And because of this past exercise of lawful activities, constitutionally protected, no one has ever charged a fine here on the part of either petitioner. These petitioners are denied this liberty of movement given to other American citizens. I may say of course that we have called attention in our brief to the vagueness of the Secretary's standards relying upon -- inquired upon statements made by Mr. Justice Frankfurter's concurring opinion in the Burstyn case which I will not quote from at this moment, but we consider equally significant, the fact that there are lawful activities which are the basis of the denial of the right to travel, and that there is a complete indifference for the purpose of the travel. It makes no difference from the Secretary of State whether there is a medical convention abroad or whether a man wants to paint. Indeed, Mr. Kent was told by Mr. Shipley, the former Director, “I will not give you a passport to go to any country for any purpose.” This -- Charles E. Whittaker: I don't deny that -- I don't deny the actions, I don't deny the availability of the constitutional rights, but where do you get it from the First Amendment, what part of the First Amendment? Leonard B. Boudin: Let me tell Your Honor that. I get it in two ways. First, because these people -- because they have exercised the right of petition, the right of making speeches. Felix Frankfurter: Well, that's the first time you used the word “a right to petition”. Leonard B. Boudin: I -- well, I should have that. The right of assembly. Felix Frankfurter: What kind of right of petition is urged here? Leonard B. Boudin: Well, they have addressed themselves to the President of the United -- Felix Frankfurter: I'm not bringing -- he may not have the right of petition but in order to invalidate something on some constitutional ground -- ground, we must refer to a provision of the Constitution or something that is inevitably drawn from the whole provision. Leonard B. Boudin: Of course. Felix Frankfurter: Now, which part of the -- we just announce it everytime a question of constitutional order comes up here, just First Amendment -- Leonard B. Boudin: No. Of course -- Felix Frankfurter: -- you can call the universe. Leonard B. Boudin: Of course, I would not make any such broad statement, Your Honor. Felix Frankfurter: Well, which part in -- Leonard B. Boudin: I am -- I am -- Felix Frankfurter: -- from the First Amendment is it? Leonard B. Boudin: I am -- Felix Frankfurter: Is it freedom of speech -- Leonard B. Boudin: It is -- Felix Frankfurter: -- or establishment of religion? Leonard B. Boudin: May I? It is freedom of speech. Felix Frankfurter: Well -- Leonard B. Boudin: It is freedom of assembly. If Your Honor -- Felix Frankfurter: One -- one person going by himself? Leonard B. Boudin: Well -- well, no. I -- I -- let me turn back first -- Felix Frankfurter: I just want something explicit -- Leonard B. Boudin: Yes. I think it must be explicit -- Felix Frankfurter: -- saying, something else is undue but either by ancillary government does. Leonard B. Boudin: I would make two points, Your Honor. The first is that in denying the liberty of movement to the petitioners -- Felix Frankfurter: Now, where does that come from? Does that come from the First Amendment? Leonard B. Boudin: Well, I think it probably is simply a liberty within the meaning of the Fifth Amendment. The Government concedes that. Felix Frankfurter: Well, all I'm suggesting is that you give me the basis on which you asked me to declare action of Congress or the precedence or a subordinate's unconstitutional -- Leonard B. Boudin: I am coming to that, Your Honor. Felix Frankfurter: Is that asking too much? Leonard B. Boudin: No, it certainly not. I am suggesting to Your Honors that when Mr. Kent is denied the right to travel because he has petitioned the Attorney General or because he has made a speech or because he has taken a public possession or when Dr. Briehl is denied his right to travel because he, Dr. Briehl, wrote an article for a magazine called "Social Work Today" with -- which the Attorney General disapproves of that that this is a restraint upon Dr. Briehl and Mr. Kent in the First Amendment activities which they exercised in the past. Felix Frankfurter: But I understood you that your main ground and almost the major premise of your argument is that here is an unfair limitation upon the right of motion, the right to travel? Leonard B. Boudin: Yes. Felix Frankfurter: Now, does that come from the First Amendment? Leonard B. Boudin: I think it comes from the First Amendment and I think it comes from the Fifth Amendment. Felix Frankfurter: Well, if they come from the Fifth, but does it come from the First? Leonard B. Boudin: Well, I think I -- Your -- Your Honor is really saying is liberty of movement, the First Amendment right. Felix Frankfurter: That's what I'm asking -- Leonard B. Boudin: I -- I would say liberty of movement is a Fifth Amendment right and that the Fifth Amendment right cannot be taken away from the petitioners because they have exercised First Amendment right in the past. That was really my point. Felix Frankfurter: Yes, but I -- Leonard B. Boudin: Now -- Felix Frankfurter: I -- I was -- I appeal -- I can understand the problem better if it's unlikely because -- Leonard B. Boudin: Well, I'm -- I'm sorry I didn't make it that clear, Your Honor, before. Now, the -- the Secretary of State takes the position here through the Government that somehow, or that something may happen abroad if the petitioners go there which justified a restraint and he believes as something may happen because their past political associations are to him undesirable. And we have never really had it specified in any of the courts or indeed in this Court whether it is that his belief, Dr. Briehl will do or Mr. Kent will do if they are abroad. Now, even if it was specified, even if we were told what they would do when they went abroad, we would argue that this is a form of prior restraint. We thought -- Speaker: Could I ask you a question about the posture of this directivee? I had understood, maybe I'm wrong, that there was no determination made here. There was no informal, there was an informal hearing, but no formal hearing that things came to an end in the Department when your clients declined to, both will look to furnish a non-Communist affidavit? Leonard B. Boudin: More than that, and where they declined to submit the examination with respect to other matters -- Speaker: Right. Leonard B. Boudin: -- of past political associations. Yes, the Department (Voice Overlap) -- Speaker: And that therefore, the Secretary's position was, if that stays that since he had a right to request that information and since you refuse it, that ended the matter and he will justify in denying a passport, is that the substantive -- Leonard B. Boudin: That was the Secretary's position. Quite so, yes. Felix Frankfurter: That -- does that mean that if the Secretary asks certain questions by which say as Judge -- Justice Washington's view, he could have and by which he couldn't, that he can just say, "I won't answer any and be justified because they've included some that shouldn't have been asked?” Leonard B. Boudin: Well, the Secretary -- I can't answer that, Your Honor. The Secretary -- Felix Frankfurter: But that is not this case? Leonard B. Boudin: No. The Secretary never asked -- offered United States a choice. Felix Frankfurter: Pardon me? Leonard B. Boudin: That would be this case if we were limited it to the affidavit issue, but we aren't. We say that the Secretary have no right to promulgate -- political regulations at all. Felix Frankfurter: Well, I know but you passed that. But you passed that. Leonard B. Boudin: But if we pass that and we come nearly to the affidavit, then Your Honor would have a point on the affidavit, but we're addressing ourselves to the basic standards, and the affidavits we regard is a secondary aspect of this. Felix Frankfurter: Well, you break up your argument into three or four positions. I can deal with each one separately just as you do. Leonard B. Boudin: I'm sure you -- I'm sure Your Honor, and -- Felix Frankfurter: And I'm asking you whether -- I've asked you a specific question which to me is in the case, namely, the Secretary asked a man to answer 10 questions. Suppose agree without further ado that five of them, he's unauthorized to ask. May an applicant for a passport say, “I don't propose to answer any of these.” Leonard B. Boudin: Well, if Your Honor thinks that the Secretary has a right to ask five out of 10 questions -- Felix Frankfurter: Well, at this point, I'm -- I must make that assumption or to put the question. Leonard B. Boudin: Then that -- I must put aside my assumption he has the right to ask none. Felix Frankfurter: Well, I -- Leonard B. Boudin: Therefore -- therefore, adopting Your Honor's assumption, my answer is that, no, the Secretary would still act improperly in denying a passport because he isn't giving us a choice. He knows whether he will take three or four. He says he wants them all. Now, we aren't suppose to pick and choose. We aren't the judges there .When the Secretary says he wants 10 answers, we can't assume that he'll take three. That's really my position on that. Felix Frankfurter: Well, but you can -- you can make him a tender. Leonard B. Boudin: Now, well, I think you -- Felix Frankfurter: You could answer -- all of us give questions, hasn't -- we answered some questions and not answer others. We can ask him.(Voice Overlap) Leonard B. Boudin: I -- I suppose one can make tenders if the Secretary was dividing his examination into separate pieces. But this a full-scale demand of a right to examine a man's political associations, or the right to ask him why he -- why he filed the petition with the Attorney General. Why he invited Paul Robeson for dinner. Well, we aren't supposed to take each one of these 100 questions and break them up and say, “A few will answer and then in few cases, we won't answer.” Felix Frankfurter: And you suggest -- Leonard B. Boudin: I suggest as if -- Felix Frankfurter: And you think that -- that answer of yours doesn't even require a discussion? That's the matter of -- Leonard B. Boudin: I -- I now -- Felix Frankfurter: It's so obvious, so obvious -- Leonard B. Boudin: I never think that anything I say is obvious, Your Honor. I'm merely suggesting that to me. It seems to me that the Secretary is the best one to decide whether he will take a few answers or a lot of answers or whether he will insist on everything. Now, I may say that there is a question that the -- the Secretary here relied upon the Japanese relocation cases, upon the English detention cases, upon A.C.A. against Dowd, upon the alien, upon the cases like Garner. And of course all of these are distinguishable. The Japanese cases and the English cases were cases of actual war time danger and they are extreme cases, these cases which certainly cannot prevail at this time. A.C.A. against Douds, we dealt with a congressional determination, a finding that Communist leadership of labor unions was a dangerous thing because of the political strikes and that these unions have been given tremendous power by the Act. And therefore, although Court was careful to say they weren't actually agencies of the Government, I think, there was an implication of responsibility there which in the view of the -- the legislature and which this Court pay deference to, justified a degree of control over this union leadership. And of course in that case, the unions could have remained with their union officials, Communist if they were, simply not use the facilities of the National Relations Board. A loss and a substantial loss, but the unions could have functioned. We of course cannot travel in the absence of passport. Felix Frankfurter: This is on your proposition that there's no power to withhold a passport or rather that a man can go abroad without a passport. What's stopping them from going abroad without a passport? Leonard B. Boudin: Under the McCarran Act of 1952, it is made a crime to go abroad without a passport in the event of a national emergency declared by the President. In January 17, 1953, the President declared such a national emergency. That declaration has never been rescinded, now five years later. I think I will reserve my time if I may. Earl Warren: You may. Mr. Solicitor General. J. Lee Rankin: Mr. Chief Justice and may it please the Court. The Government concedes before this Court that there is a right to travel and believe that it was protected by the Fifth Amendment. That concession was made in this Court for the first time. I don't think we are entitled to any credit for it.It's our duty and obligation to this Court and the country, as soon as we are able to learn that we are wrong to come forward and say so and we do. That does not decide this case however. The problem in this case is much more complex than counsel has indicated to this Court. The question that seems to us stops at the threshold in these two cases and is best considered if we recognize that the Secretary here refused to proceed with these proceedings, hearings or processing. In any respect because of one thing, the refusal of these petitioners to give the affidavit that was required in -- under the proceedings that the Secretary had set out. So, we then reach back into the question of what authority used there under the law for the Secretary to require of these things, and we first have to turn to the statute. Now, it's been claimed that the Government never called attention before to this -- to this statute in regard to travel control, Section 1185. And in our brief on pages 13 and 31, this very case before the Court of Appeals, we call attention to both of those statutes and say that they have to be construed together in order to determine the right to the parties and the authority that we conceive in this case. Now, that's not the brief in this Court, but I want to make it clear that we did call attention to this very point in developing in our brief before the Court of Appeals because it's charged here that this is the first time we raised that point. Speaker: You're going to take a substantial -- J. Lee Rankin: Yes, sir. The problem in regard with the statutes are these. The Government would have an easy time of it, if we could just say that the Secretary has the authority to grant or deny passports either inherently or by statute and thereby, the petitioners have no rights to travel. Because if we could put that statute to 11 (a) and its predecessors in a water-tight compartment one side and say, “You examine that.” I'm satisfied but this Court would come to the conclusion that for a period of -- 143, there are some three years or some lesser period, at least since 1856. That power has been exercised both as an inherent power of the Secretary and also recognized by Congress in later years whereby he has issued passports and denied passport or that long history of this country. Now, I think -- Felix Frankfurter: Are the terms -- is the -- is the passport printed here where -- that exact terms of the passport. J. Lee Rankin: I don't believe it is, Mr. Justice, but it's referred to, I think in a footnote, the nature of it and it's recognized that it is a political document. And it asked the -- the foreign country to recognize this person and treat him with consideration and so forth. Felix Frankfurter: Could you -- could you have a copy, a struck off of the exact text of what it is that the passport says? I'm thinking of -- I like to see what the present passport is. Maybe I could look at some of my old ones, compare to what it was in -- in the old case that you cite in the D'Arbel case. Is it substantially like that? J. Lee Rankin: I think so, Mr. Justice but my co-counsel says he thinks it's in the brief and we'll -- since we find it, I'll tell you, call it to your attention. That statute of -- but first, this power was exercised by the Secretary over such a long period of years and the Government claims, I want to make this clear, that there is the inherent power in the Secretary to grant or deny the passport, but it does not claim the power in the executive branch of the Government at all to grant or deny the right to travel. Our problem is not as difficult here because, it -- in fairness to the petitioners, it seems to the Government, that's the only way you consider this, can -- can properly consider this question is to take both of these statutes which clearly Congress intended to do in the history and it -- its consideration of this problem and try to put them together because the Congress took this power that the Secretary had been exercising over a considerable period of years as an inherent power and later recognized by the Congress and passed in this statute in which there's a general statement of the legislative history in our brief, and said, “Take this power of granting or denying a passport that you've got over here, Mr. Secretary, and you act upon it.” And then they passed over here, a separate statute, 1185 and I'll call your attention to it in Appendix A of our brief, the Government's brief in which they said, “If you don't have this passport that the Secretary grants or denies, you can't travel.” So, we say that the Government must face up to the proposition that it must consider both of these statutes and we think the petitioners must barely consider both of them in order to try to construe the rights of the parties in -- in this case before the Court. Felix Frankfurter: Mr. Solicitor, I noticed that in Robert E. Johnson and Taney's argument in 1835-1 haven't looked at the statute,but the reporter Peter gives their argument. It says the acts of Congress recognized passport. This is what Robert V.Johnson and Tony said in their arguments in 1835. You happen to know that those -- what those recognitions were by a statute? I don't think they are refer -- I've just looked at statutes and outside of your brief. J. Lee Rankin: Sorry, Mr. Justice, I don't recall that particular -- but there was a recognition back in 1814 of the restriction in travelling from parts of the United States, outside back in those days and there was also by Secretary Seward, a restriction that he made that was not statutory at all. Now, we don't claim that the Government has that power, that the executive branch has that power to do it on its own, but he did exercise it. Felix Frankfurter: Well, this case, as you know, is a passport that John Quincy Adams signed as Secretary of State. J. Lee Rankin: That's right. Felix Frankfurter: So evidently, he must have thought that is the power to issue passports. J. Lee Rankin: Well, it was such a recognized power by all sovereign countries. That has been exercised all over the years, but that doesn't solve our problem -- Felix Frankfurter: No, no, no, but -- J. Lee Rankin: because the -- it's always been treated over a great period of years as a document that said, “Mr. Citizen A is entitled to travel as a respected citizen of our country throughout the various countries that are designated or except for the questions.” Felix Frankfurter: It couldn't answer the question of whether a man can travel and have consequences follow, deleterious consequences if he doesn't get one of these documents, which is the problem here. J. Lee Rankin: That's right, Mr. Justice. And we have to reach back to the question of whether or not the Congress properly could tie these two powers together, that is the travel control and say that it will be measured and regulated by whether or not a man has or it does not have a passport and then examine the question of whether or not this Congress actually did that very act in it's passing of the statutes, whether the statutes are broad enough to cover what the Secretary did. William J. Brennan, Jr.: Well, Mr. Solicitor, are you saying that without 1185, 211 (a) could not in any event be the source of any power to control travel under the guise of a power to grant or refuse passports? J. Lee Rankin: That's what we say. So that if there is such power that is the use of the passport power to control travel. It's got to be found in 1185. I would say, yes, Mr. Justice. The only thing that I would like to add to that is it seems to me, the history shows that Congress contemplated the use of that in such a way that it -- it considered that they were making the two statutes and that it was using this passport control, but it's that particular statute that gave the right to grant or deny passports, did not give the right to grant or deny -- William J. Brennan, Jr.: Well, as it was as I understood you. J. Lee Rankin: -- travel, yes. William J. Brennan, Jr.: So in other words, you really have to focus on 1185 to find congressional authority. J. Lee Rankin: Very largely or entirely. The problem -- the consideration in the -- Felix Frankfurter: Congressional authority but I take it -- do you say congressional authority or -- or congressional actions or basis for the Secretary's authority which -- Felix Frankfurter: Well, I know it's congressional action as a basis for the Secretary's authority. William J. Brennan, Jr.: And that's what I have with reference to -- J. Lee Rankin: All right. Now, Section 1185 is set out in the Appendix A and it provides in -- generally, in regard to the proclamation of the emergency. There's no question between the parties that that emergency was proclaimed by the President and that thereafter, it also provides that he proclaim that these restrictions be necessary in that emergency and that was proclaimed. Earl Warren: We'll recess now.

Earl Warren: 118, Bantam Books, Incorporated, et al., Appellants, versus Joseph A. Sullivan. Mr. Manges. Horace S. Manges: Mr. Chief Justice, all the members of the Court, may it please the Court. This is an appeal from the Superior Court of Rhode Island. Before appellants, Bantam Books, Dell Publishing Company, Pocket Books and the New American Library of World Literature are publishers of paper bound books distributed in that state. The appellees are the members and the executive secretary of the Rhode Island Commission to encourage morality and youth. This appeal raises two basic questions. First, does Rhode Island Resolution Number 73 which created this commission tend to suppress or inhibit the circulation of books in violation of the First and Fourteenth Amendments? Secondly, did the Commission's actions in sending notices to book sellers and police chiefs throughout the State of Rhode Island stating that, “particular publications were objectionable for a sale or display to youth tend to suppress or inhibit the circulation of those books and did those actions actually suppress or inhibit the circulation of those books again in violation of the First and Fourteenth Amendments”. Rhode Island Resolution 73 was enacted in 1956, its operative provision as amended in 1959 insofar as pertinent here reads as follows and I read from page 2 of the record, “It shall be the duty of said Commission to educate the public concerning any book, etcetera, containing obscene, indecent, or impure language as defined in chapter 11-31 of the general laws entitled obscene and objectionable publications and shows and to investigate and recommend the prosecution of all violations of said sections”. Speaker: (Inaudible) Potter Stewart: Sections are criminal sections? Horace S. Manges: Yes. Potter Stewart: The section to which reference is made? Horace S. Manges: Yes. They deal not only with minors but also adults and they also deal with in rem proceedings which may be brought in connection with allegedly obscene literature. Potter Stewart: So, to that extent there's non-criminal. They're criminal plus the some other kind of a prohibitory -- Horace S. Manges: Both Mr. Justice Stewart. In 1960, these plaintiffs instituted this action in the Superior Court. The case was tried before Justice MacKenzie and a decree was there added, adjudging one that the resolution was constitutional. Secondly, that the Commission's actions were unconstitutional and the court issued an injunction enjoining the Commission from the continuance of those acts. Both sides appealed the Rhode Island Supreme Court. The appellants from that portion of the decree which upheld constitutionality of the resolution the appellees from the rest. That court by its majority opinion sustained the constitutionality of both the resolution and the Commission's actions.

William H. Rehnquist: We'll hear argument now number oh oh seven thirty, Adarand Constructors, Inc. versus Mineta. Mr. Pendley. [Inaudible] William P. Pendley: Mr. Chief Justice, and may it please the Court. In nineteen eighty-nine, the small family business that is Adarand lost a Federal contract because of a racial program and the race of its owner, Randy Pesh. In nineteen ninety-five, this Court held that Adarand had standing to seek forward-looking relief because that program prevented it from competing on an equal footing. In two thousand one, Adarand returns to this Court because it still can't compete on an equal footing. [Inaudible] William H. Rehnquist: Mr. Pendley, That... William H. Rehnquist: treat, if you will, fairly shortly coming up in your argument, the Government says that in a direct procurement program, these sort of preferences that you're challenging are simply not used in Colorado. William P. Pendley: No, Your Honor. Antonin Scalia: challenged those, as I understand it. William P. Pendley: Your Honor, Adarand has challenged all manner in which the pro- Antonin Scalia: But they apply only in the State subsidized programs. William P. Pendley: No, Your Honor. Speaker: In i- Ruth Bader Ginsburg: I thought the monetary incentives have been declared unconstitutional by the district court, affirmed by the Tenth Circuit. Speaker: Not at all, Your Honor. Ruth Bader Ginsburg: call they what they call the subcontracting... Speaker: Compensation clause, Your Honor. Ruth Bader Ginsburg: Wel- didn't both courts hold that that was unconstitutional? William P. Pendley: What happened was that the the the district court held that the entire program, all of section eight D of the Sub-Small Business Act, was unconstitutional. Speaker: sufficiently. Ruth Bader Ginsburg: that you were complaining about last time around, that one has been held invalid. William P. Pendley: It it Your Honor, it is the... Speaker: There are... Ruth Bader Ginsburg: challenged that. William P. Pendley: Excuse me. Ruth Bader Ginsburg: Th- the Tenth Circuit, I thought, said that the clause that you were complaining about last time around was invalid. William P. Pendley: No, Your Honor, it is not correct. Speaker: you just answered my question. You said they... Ruth Bader Ginsburg: mov- they removed the program. William P. Pendley: No, Your Honor. Speaker: They did not remove the program. Ruth Bader Ginsburg: case was moot or not because of it, but it's no longer what the specific thing you were complaining about no longer exists. William P. Pendley: y- it is not right, Your Honor. Anthony M. Kennedy: If we disagreed with you on that, are there other issues on which which are alive and... Speaker: which you have standing. And what are those? William P. Pendley: Absolutely, Your Honor. Speaker: Are are these in... Anthony M. Kennedy: Are these provisions you just mentioned in paragraphs four through six of fifteen USC s- six thirty-seven... Speaker: Yes, Your... William P. Pendley: Honor, they are. Speaker: Okay now th- Anthony M. Kennedy: th- that's those are the plans as to which the court of appeals said in in a in one sentence rather terse comment, nor are we presented with any indication that Adarand has standing to challenge paragraphs... Speaker: four through six. William P. Pendley: as this Court said in Adarand two thousand, the courts and parties have been confused as to the difference between standing and mootness, and the Tenth Circuit was confused as to mootness and standing, resulting in the Court's Adarand two thousand decision and and it appears to be... Speaker: still confused as to the two. Anthony M. Kennedy: that you have no standing to attack these paragraphs so we've just discussed. William P. Pendley: Well, Your Honor, we believe the issue of standing is always before the Court. Speaker: But what of the issue of... Antonin Scalia: lack of standing is not always before the Court. William P. Pendley: Well, well Your Honor, the... Antonin Scalia: All the cases you're citing are cases where the both of the parties assumed standing and the Court looked into it on its own. William P. Pendley: Well, a- Adarand believes that standing is is fair under rule fourteen A is fairly included within the questions presented because it was plain error for the Tenth Circuit below to hold that Adarand did not have standing because the Tenth Circuit below addressed the SCC and yet declined to address the statutory... Speaker: program that we're -- Yes, ma'am. Sandra Day O'Connor: challenge below the Small Business Act provision, section eight D four through six? William P. Pendley: Absolutely, Your Honor. Sandra Day O'Connor: Were were h- did Adarand bid on contracts issued by states with federal assistance? William P. Pendley: Yes. Speaker: Were they at issue... Sandra Day O'Connor: in the suit? William P. Pendley: It's not at issue in this case, Your Honor. Sandra Day O'Connor: So, the only thing that you now say you're challenging are contracts direct contracts... Speaker: Yes ma'am. Yes, Your Honor. It's... William P. Pendley: the direct Federal procurement program which remains unchanged. Sandra Day O'Connor: And the Tenth Circuit seemed to think that you did not challenge those Small Business Act sections that I referred to. William P. Pendley: Well, the Tenth Circuit was abso- absolutely incorrect. Antonin Scalia: Can you cite us any filing in the district court that specifically referred to section eight D four? William P. Pendley: Yes, Your Honor. Sandra Day O'Connor: Well, we have a joint appendix. Speaker: you... Sandra Day O'Connor: refer us to the pages where you challenged section eight D four through six? Can you say on page so and so of the joint appendix, it shows that we did that? William P. Pendley: Well Your Honor, I I can cite to the pleadings t- that Adarand filed in this case where Adarand asserted that all parts of the program, all the statutory provisions that allow this program to exist and the United States to implement it, h- have been have been challenged by Adarand. Speaker: What it says on... Sandra Day O'Connor: there a separate question in your petition for certiorari addressed to eight D four through six? William P. Pendley: No, there was not a separate question addressed to that, Your Honor. Stephen G. Breyer: What they didn't say you didn't file it. William H. Rehnquist: Jesus God... Stephen G. Breyer: Do we dig the whole thing? Do we do something else? William P. Pendley: We Your Honor, Adarand had challenged consistently first first of all, the subcontracting compensation clause is one mechanism that the United States developed to implement the statutory program that Adarand challenges. David H. Souter: What's the answer to Justice Breyer's question? William P. Pendley: That Adarand had standing at that time. David H. Souter: No. Speaker: What do we do? Anthony M. Kennedy: premise was that you had no standing at the time the court of appeals wrote this decision. William P. Pendley: I do not, Your Honor. Anthony M. Kennedy: Okay. William P. Pendley: The reason Adarand does not agree with that premise because the Laidlaw decision holds that once Adarand had standing, as a result of this Court's nineteen ninety-five decision, that standing continued until such time as the United States somehow made the case moot as the result of revocation... Sandra Day O'Connor: Well, I thought Laidlaw stood for the principle that standing is judged as of the time the suit is filed. William P. Pendley: Yes, Your Honor. Sandra Day O'Connor: And subsequent changes affect mootness possibly, but not standing. William P. Pendley: Yes, Your Honor. Sandra Day O'Connor: Is that correct? Speaker: That's my understanding. William P. Pendley: But so what are the the question before the Court... Speaker: on the issue... Stephen G. Breyer: question was not quite so technical. William P. Pendley: Conclude that the Tenth Circuit was wrong in stating what it stated in that footnote because Adarand specifically challenged eight D four. Antonin Scalia: Well, you raised it, but you surely didn't address it. William P. Pendley: Well, what what Adarand addressed was the const- at the Tenth Circuit was the constitutionality of this of this racial program, and and there are a number of mechanisms by which the ran- racial program is implemented against Adarand. Antonin Scalia: That's right, but all of those other mechanisms the Government says in their brief have been washed away by by the by the benchmark study provision, which eliminates which eliminates the difficulty. Speaker: You simply... Antonin Scalia: say that despite the benchmark study, there is still one other objection we have. William P. Pendley: It is one of the mechanisms by which the United States continues to implement this this regime, this program. Antonin Scalia: And that wasn't discussed below and it and had barely been discussed in the briefs here. William P. Pendley: W- in in addition, Adarand Adarand noted that the benchmark study allows it to be turned on and turned off, and it still can be turned down turned on in the State of Colorado. William H. Rehnquist: What what do you mean by that, Speaker: the th- to be turned on and turned off? William P. Pendley: Mr. Chief Justice. Speaker: Well you say... William H. Rehnquist: they reserve the power. Speaker: They... William H. Rehnquist: that mean that in a state where they say like Colorado where they say we're we're not using it, they no- they nonetheless do use it or that they could later... Speaker: use it on a... William H. Rehnquist: different study? William P. Pendley: That's that's what our lodging demonstrates, Mr. Chief Justice. David H. Souter: But to the extent that your your answer, in effect, tells us that the controversy is live and presented based on what you have in a lodging, you're really asking us to make a a determination of fact in a disagreement between you and the Government as to whether they're being used or whether they're not being used. William P. Pendley: Well, the United States cannot assert that it does not use the mandatory subcontracting incentives because it's required by law. Antonin Scalia: It has asserted that. Speaker: That's what I thought they said in their briefs. Antonin Scalia: Maybe maybe you say I mean, and and they have filed a a memorandum from Arthur Hamilton, Speaker: Federal Lands... Antonin Scalia: Program Manager. William P. Pendley: I I'm asserting that it violates law and it violates the regulation. Speaker: And then -- Your Honor, may I... William P. Pendley: may I finish this? I'm I apologize. Speaker: Court -- I'm sorry Your Honor. Ruth Bader Ginsburg: ask m- what is i- very important, I think, in this in this case? And and you seem to be walking to away from it. William P. Pendley: I'm apologize. Ruth Bader Ginsburg: This Court is a court of review. William P. Pendley: Yes. Ruth Bader Ginsburg: Not a court of first view. William P. Pendley: Your Honor, the the controversy Adarand presents in two thousand one is that Adarand still is unable to compete on an equal footing because the United States still has in its tool of in its tool kit mechanisms by which it is applying this racial preference against Adarand. Speaker: Mr. Pendley... John Paul Stevens: May I ask you just one question? William P. Pendley: Yes. John Paul Stevens: I I'd like you to a just assume for a minute that you're dead right on everything you've argued so far. William P. Pendley: Absolutely, Your Honor. Speaker: first rea- John Paul Stevens: provisions of the statute that you challenge are unconstitutional. William P. Pendley: Well, under strict scrutiny, the Court must start, as Croson dictates, with the question, has is there a strong basis in evidence of a compelling governmental interest? Congress declined this Court's invitation, and generous invitation, in nineteen ninety-five to provide that. John Paul Stevens: Your first point is that the congressional findings are inadequate. William P. Pendley: There are no findings, Your Honor. William H. Rehnquist: Very well, Mr. Pendley. Speaker: General Olson, William H. Rehnquist: if if counsel for the petitioner is correct, it would be fair to infer there's a certain amount of bobbing and weaving going on on the part of the Government in this case. Speaker: somewhere in your... Speaker: and may it please the Court. Sandra Day O'Connor: And that was the provision that was the focus of the original suit? Speaker: Yes, Justice O'Connor. Antonin Scalia: Well, can't cannot those under under the amended statute, cannot some additional compensation be provided but subject to the new regulations? Speaker: Well, y- if we distinguish between the the Federal aid program and... Speaker: the direct... Speaker: Federal procurement program and the subcontractor compensation clauses the United States Government has abandoned in all respects, those provisions have not been justified, and the United States Government is not employing those. Antonin Scalia: You're You're not employing them on what basis? Speaker: On the basis that that... Speaker: they've been determined... Speaker: to be unconstitutional. Speaker: of those paragraphs. Antonin Scalia: provisions were specifically mentioned in Adarand's amended complaint. Speaker: They they were mentioned. Antonin Scalia: Specifically mentioned. Speaker: The challenge was to the s- compensation clause provisions. Speaker: business pursuant to... Antonin Scalia: certainly didn't come as late as the reply brief, Mr. Olson. Speaker: The... Antonin Scalia: That is precisely the issue that... Speaker: they they were arguing... Speaker: in at th- at the beginning of the brief and not addressed in those provisions were not addressed in the arguments of the brief. Speaker: confirmed that. William H. Rehnquist: do are the benchmark studies conducted every year? Speaker: They're to be conducted every year, but they're not actually being conducted that is that often. William H. Rehnquist: What does that mean? Speaker: Well, it's one of those one of those Government programs that it it is hoped will be conducted more often than they actually get conducted, audience laughter> Justice -- Chief Justice Rehnquist. William H. Rehnquist: But /audience laughter> a n- a new benchmark study could find that Colorado was subject to... Speaker: Well, it's conceivable, yes. Speaker: usual. Anthony M. Kennedy: evidence that Adarand is working in a context where regulations are changing year to year in order to effect the one th- this one goal, to to to which it it claims there is a subs- Speaker: substantial doubt in any mind. Speaker: no evidence in this record that the subcontract clause provisions, which Adarand is now discussing, have been applied ever in Colorado or in those states precluded by the benchmark... Speaker: study. so... Antonin Scalia: for not applying them, Mr. Olson? That tha- that's what puzzles me. Speaker: Well, a- and also they are required by the holdings of this Court to apply and interpret that statute in a constitutional fashion. Sandra Day O'Connor: Well, Mr. Olson, does are those clauses covered by section eight D four through six? Speaker: Yes. Sandra Day O'Connor: And I thought that Mr. Pendley argued that, in fact, in Colorado some of those provisions have been and are, in fact, now in contract forms. Speaker: They are in the contract forms, but the Depar- the that is again another carryover of instances where they probably should be removed from the contract forms, but they're not being in- implemented or enforced to impose any race-conscious remedy... Speaker: Well, why wouldn't the why wouldn't the contractor... Anthony M. Kennedy: have standing to say that I'm contracting, I'm trying to business in a milieu where the Government has, through either prior or existing policies, required contractors to put in clauses that injure me, and I want those clauses removed so that I can do business on a fair basis? Speaker: Well n- th- the... Anthony M. Kennedy: standing to say that now. Speaker: Well, he w- well, in the first place, the three contracts that were mentioned in the reply brief... Anthony M. Kennedy: Mhm. Speaker: Adarand was not the high bidder in those three contracts. Speaker: [Inaudible] Speaker: I mean the low bidder. Speaker: Court. Anthony M. Kennedy: all these years of litigation, he still has to litigate bid by bid. Speaker: Well, he has got to demonstrate under- as I understand this Court's holdings with respect to standing, he's got to show some immediate impact or the potential for actual harm. Speaker: Well, all... Sandra Day O'Connor: of this is new since the Tenth Circuit looked at it... Speaker: Yes. Sandra Day O'Connor: What are supposed to do now, please? Speaker: This case... Sandra Day O'Connor: are new things the Government is... Speaker: presenting. Speaker: no. Speaker: in rewarding the contract. Antonin Scalia: contracts. Speaker: I don't... Antonin Scalia: think that that's adequate assurance to those to those companies who are competing for for contracts where where the where the prime contractor has signed a commmitment to to get a certain a certain goal of of minority participation. Speaker: The the Department of Transportation and the Department of Justice have consistently adhered to the provision that those race-conscious provisions will not be enforced in the direct procurement program in these areas. Speaker: that they ever have. Antonin Scalia: told the contractors and subcontractors? Speaker: Yes, they have. Speaker: And they reaffirmed... Speaker: Well, this this... Speaker: memorandum... Antonin Scalia: Lands Highway Division engineers. Speaker: Well, Justice Scalia, it strikes me and I I respectfully submit that that you're switching it around. Speaker: Do you think that for a single minute if... Anthony M. Kennedy: these clauses required racial discrimination, an absolute clear, patent violation of the Fourteenth Amendment, that we would say there's no standing for a minority who wanted these removed? Not for a single minute. Speaker: Well, I'm I I wouldn't contradict that, but I would say when the Government has made it absolutely clear that it is not enforcing race-conscious remedies, as instructed by this Court in in the first Adarand decision, except in in a narrowly tailored fashion, there's been subsequent legislation of a compelling need, but that that response to that compelling need has been narrowed down to the areas where it is necessary... William H. Rehnquist: But the... Speaker: provision... William H. Rehnquist: hasn't been removed from the contract. Speaker: The the provision was not removed in some of those contracts, and I'm I can't tell this Court how many. Speaker: enforced with respect... William H. Rehnquist: were being enforced, do you agree that Adarand has standing to c- to challenge it? Speaker: If they were being enforced and Adarand could suggest that it was somehow affected by that. Sandra Day O'Connor: They were the high bidder. Speaker: They were the high bidder and therefore... Speaker: they didn't get the contract because they were were not the low bidder. Antonin Scalia: And and you think they're they're they're they're not at risk of that happening in in in other contracts when these provisions still exist in the contract clauses and all we have is is your assurance? if if I were the prime contractor, I'd say, I better not take a chance. Speaker: told about it. Speaker: well, Justice Scalia, it has been the demonst- documented, articulated policy of the since the Department of Justice study. Speaker: contrary. Antonin Scalia: Let's let's be clear about what programs we're talking about. Speaker: Well, if you look at the... Speaker: Government's... Antonin Scalia: with the contracting clauses. Speaker: No. Speaker: in those areas... William H. Rehnquist: when was that memorandum? Speaker: That was in nineteen ninety-six. William H. Rehnquist: Well, but why, if that went out in nineteen ninety-six, was it necessary to have this memorandum in the summer of two thousand one, if that had a- if the earlier one had any effect? Speaker: Well, it well, the the memorandum in August of of two thousand and one reiterates the policy that the Department of Transportation had been operating... Speaker: under. It was... Antonin Scalia: the ninety-six one? I I think it's it's pretty clear to me that the ninety-six one did not cover the contracting requirement. Speaker: I don't agree with you. Speaker: I I can't I can't give... Speaker: you a cite to the record, but the ind- the the i- the the Department of Justice memoranda is in the Government's appendix. David H. Souter: Is there another reason here why it doesn't apply and that is and I I read this somewhere that Mountain Gravel is itself a small business and for that reason the clause wouldn't apply in any... Speaker: event? Speaker: not have applied in nineteen eighty-nine when this case first arose. Speaker: Well wha- why is it... Stephen G. Breyer: why is it then that that what they say in the first three pages of their reply brief, for example, is that they have to th- they want to get a sub under a prime, that the Weenomunch Construction Authority got the prime. Speaker: Well, as I say, they weren't not the low bidder on that contract. Speaker: All right, but they're saying give you three... Stephen G. Breyer: examples, you know. Speaker: Well, all I can say is that the Government has announced its policy, and there's no evidence in the record that it's acted inconsistently with... Speaker: any application... Speaker: of race-conscious remedies in the area... Speaker: in which Adarand... Stephen G. Breyer: possibly, the appendix C. Speaker: it out. They say... Stephen G. Breyer: they're facing these clauses all the time. Speaker: [Inaudible] Speaker: important to emphasize that this is a facial challenge to the statute and to the system. Speaker: Salerno case. William H. Rehnquist: what what's a what's a facial challenge in in this context? I mean, it seems to me a lot of the questioning here and to a- Adarand's counsel has been to show that Adarand was directly affected by the thing. Speaker: I I respectfully disagree with respect to whether Adarand was adversely affected by the program. William H. Rehnquist: Well, they certainly in in the case we first we first decided, the nineteen ninety-five case we decided that they they they were sufficiently affected, so we ruled. Speaker: Yes, and they were affected by the we're not contending that they did not have standing to challenge that subcontracting... Speaker: compensation provision. Sandra Day O'Connor: that financial compensation provision. Speaker: Yes. Sandra Day O'Connor: Which now has been found to be... Speaker: unconstitutional. Sandra Day O'Connor: And it's out of the picture. Speaker: That's correct. Sandra Day O'Connor: But now we have a new set of arguments basically. Speaker: Yes, and and to the extent that that the th- the the program, as it exists, requires people to in order to be designated as a disadvantaged business enter- enterprise, must file certificates articulating that they have been the victim of a social and economic disadvantage. Antonin Scalia: What does that mean? Speaker: Well, it's defined in... Speaker: the statute. Antonin Scalia: probably certify to that. William H. Rehnquist: For yourself? Antonin Scalia: Yeah, absolutely. Speaker: It's it's it's explained in the statute both with respect to ethnic and racial prejudice because of their identi- identity as a group without regard to individual qualities, and that economic disadvantage the ability to compete in the free enterprise system has diminished capital and credit opportunities as compared to others in the same business area... Speaker: one of those... Antonin Scalia: either social or economic, even though the social would... Speaker: would would be quite... Antonin Scalia: irrelevant to whether you can... Speaker: Both get well, is- that's a social the us- the use of the term in the statute described a victim of of prejudice or bias, and that has had economic effect on the individual. Speaker: in... Antonin Scalia: I think the form is attached to the reply brief of the... Speaker: No. Antonin Scalia: That is not the right... Speaker: form? Speaker: is not the right form. Antonin Scalia: I I'm just saying if this isn't the right form, what is? We- the The form has not yet... Speaker: [Inaudible] Speaker: the the different States use different forms. Antonin Scalia: But apparently what what the agency proposed proposed on May eighth, two thousand and one simply says, I hereby certify that I am a member of one of the following groups you check the minority group and that I have held myself out as a member of that group. Speaker: That but that is that is a- Antonin Scalia: That's what the agency said. Speaker: Right? Speaker: but the but the but the but that has to be looked at in terms of the what the statute defines as social and economic disadvantage and what the regulations, which are in in at pages seventy to seventy-two A of the Government's appendix, which define which which are the regulation Department of Transportation regulations. Speaker: agency... William H. Rehnquist: one go about rebutting it? I mean, who could rebut it and how would you go... Speaker: about it? Speaker: Any adversely affected party can rebut it. Speaker: In fact... William H. Rehnquist: w- w- what what... Speaker: would you have... William H. Rehnquist: to show to rebut it? Speaker: Well, what you have to show to be entitled to certification, according to the regulations, is substantial and chronic social disadvantage in the business world and that s- and that credit has been impaired due to diminished capital or opportunities have been impaired due to diminished capital and credit opportunities, as compared to others in the same or similar line of business. Antonin Scalia: Social disadvantage in the business world. Speaker: Social and i- social disadvantage, Justice Scalia, is defined in the statute as having been a victim of racial or or or prejudice of that nature, and that ha- it has produced economic disadvantage... Speaker: You say just... Stephen G. Breyer: two opposite things on this economic disadvantage. Antonin Scalia: understand that... Stephen G. Breyer: You say in your brief that they ha- you have to sign an affidavit that says my ability to compete in the free enterprise system has been impaired due to diminished capital and credit opportunities. Speaker: Well, I I I believe that we're correct. Antonin Scalia: That's the right answer. Speaker: And I hope I said it persuasively. Speaker: were... Stephen G. Breyer: your point, to be absolutely explicit, is if you are below the at- the plateau, seven hundred and fifty thousand, you still might not qualify as being economically disadvantaged. Speaker: That's correct. William H. Rehnquist: Well you you have but when you get to that, General, you have this list of people. Speaker: [Inaudible] Speaker: there's about thirty-some years of study by Congress of disadvantage and discrimination, which this Court recognized in Fullilove and in Croson and in Adarand, that is taking place in the contracting industry. Speaker: categories... William H. Rehnquist: The people from Macau were discriminated in the... Speaker: contor- contracting... Speaker: of a certain racial background and a certain color... Speaker: are discriminated against and those... William H. Rehnquist: this thing just sets it out in great detail by country. Speaker: Well, I I submit that when you if you were to describe different people of different national backgrounds or racial backgrounds that have been guilty of discrimination, they may fall in any one of those categories. Antonin Scalia: Well, but they but they aren't. Speaker: Well first... Antonin Scalia: against people from Gabon but but not from the next-door country. Speaker: that's weird. Speaker: what what the Congress said over and over again, on on the basis of detailed analytical studies which are which are described in considerable detail on the in the court of appeals opinion, and what this Court has said is that there has been the lingering effects, unfortunately, of publicly financed discrimination in the construction industry. William H. Rehnquist: Thank you, General Olson. William P. Pendley: Mr. Chief Justice, may it please the Court. Speaker: Jacksonville... Antonin Scalia: we know they haven't been implemented? The the Solicitor General tells us they have. William P. Pendley: I- the the Government the Government concedes, with regard to the State aid program, that that's not at issue in this in this case. William H. Rehnquist: Thank you, Mr. Pendley.

Earl Warren: Mr. Moody, you may continue. Ralph Moody: May it please the Court. I -- I think that I will discuss this -- so far as I know, the -- the view point of State of North Carolina has about the case, and it's more, it seems to me, in valuation of the record anyway, I -- conceding that Betts against Brady is still the law. And so, unless the Court -- whoever member of the Court has wishes to ask me a question about the record or anything, I think I'll say anything follows. Earl Warren: Very well. Mr. Joslin. William Joslin: Thank you, sir. Mr. Moody stated that there were no instances in the record of admission of incompetent testimony against petitioner in this trial. At page 29 of the record, 28 and 29, the prosecuting witness there is the one of the deputy sheriffs and he's being examined by a solicitor. He's about to quote a statement made by one of the defendants. The Court cautioned him on page 28, cautions the jury not to -- not to consider any testimony given as against any defendant other than David Cain, the one who is supposed to made the statement quoted. Then, over about -- it follows a series of questions and answers. And on page 29, it finally gets around to the damaging part. Question, “Did he name them?” Meaning the defendant David Cain. “No, sir.” “Well, you did later on?” “Yes, sir.” Question, “Who were the other three boys in the car?” Answer, “It was Larry Hudson, Ray Stalling and Rubin Grimsley, which is a juvenile which is now turned over to the juvenile authorities.” “All right.” There was no objection taken at that point and no limiting instruction at that point that the testimony should not be considered as against petitioner, Larry Hudson. And true it was. It did appear, it does appear over on the preceding page but that's a long waste of way in the jury. I think if counsel had been present, there would certainly had been a -- another instruction made to limit it. Potter Stewart: Now, over on the preceding page, we find that the Mr. McGeachy Cain's lawyer was actually still representing the petitioner and the other codefendant, wasn't he? He said, “I object in behalf of the other boys to any statements by David Cain.” William Joslin: Yes, sir. He did there -- he did make that objection at that point. And there -- there are instances in here where it says objection by defendants, it isn't clear who made the objection whether it was one of the defendants in person or was the attorney. Potter Stewart: Such as on the middle of page 29. William Joslin: Yes, sir. On the next statement whereas he begin to quote another statement -- Potter Stewart: Yes. William Joslin: -- there. Mr. Grimsley's statement. Speaker: What about the procedural point? Could a state ground of the (Inaudible) William Joslin: No, sir. I don't believe that -- that you can -- the -- I know the State argues that in this case, and they -- they cite State against Cruse as a support for that. Now, that was a right to counsel case which came up on a post-conviction hearing. And the -- the Court -- in the North Carolina Supreme Court in the Cruse case stated that you cannot use a post-conviction procedure as substitute for an appeal. They damage general principle. But then, it went into consideration of the merits of the case and it discussed in detail the fact that there was no request made for appointment of counsel at the trial that the case was one which fell within the line of -- of cases cited by this Court, the Betts and Brady. It was a long discussion on the merits of the complaint made. So, as I see it, the North Carolina Court, in the Cruse case very definitely decided that in a post-conviction hearing, the -- an allegation of denial of right to counsel could be heard and determined on the merits. Now, there are one or two other questions that were raised. It -- I did not have the North Carolina law before me at the time. I would like to read one -- one statute in particular. This is the post-conviction procedure. And the -- the statute says if the petitioners without counsel and alleges in the petition that he is without means of any natures sufficient to procure a counsel, he shall state whether or not he wishes counsel to be appointed to represent him. If appointment of counsel is so requested, the Court shall appoint counsel if satisfied that petitioner has no means sufficient to procure counsel. The Court shall fix the compensation to be paid such counsel which when so determine shall be paid by the county in which the conviction occurred. Potter Stewart: What is that statute? William Joslin: That is 15-2 -- Hugo L. Black: 15 what? William Joslin: Section 15-219 of the general statutes of North Carolina. Charles E. Whittaker: That is not limited then to a constitutional question, isn't it? William Joslin: The -- the statute -- the -- the hearing provided by -- in this -- in this section is supposed to be on constitutional questions only. Charles E. Whittaker: Only, is it? William Joslin: Yes, sir. And there was one other statute that was discussed dealing with a procedure on arraignment and appointment of counsel in a -- now, the -- the North Carolina statute provide for appointment of counsel in capital cases as a matter of right and when the -- if -- provide as follows, “If the judge is satisfied that the accused is unable to employ counsel, he shall appoint counsel to represent the accuse as soon as maybe practicable. He may appoint counsel anytime regardless of whether notified by the clerk and before preliminary examination. In any capital case where the appointment of counsel is delayed until the term of court which the accused is arraigned on motion of counsel for the accused, the case shall be continued until the next ensuing term of criminal court. Potter Stewart: What's that statute, please tell me? William Joslin: The library didn't have the general statutes for me. I had to look it up in session laws. I don't know exactly what this is. They just brought me this volume just while I was talking. I do not know the cite here, but the citation in this -- in the session laws is 1949 Session Laws Chapter 112. If there are any other questions, I could answer them if I had to do so. Earl Warren: Mr. Joslin, on behalf of the Court, I want to thank you for undertaking this assignment to represent this indigent defendant. We're always comforted when lawyers are willing to undertake a public service of that kind, and we appreciate it very much. And Mr. Moody, we appreciate of course your very frank and -- and very earnest method in which you represent your State on this case. Speaker: Thank you, sir.

Earl Warren: Number 241, Bulova Watch Company, Incorporated, Petitioner, versus United States. Bernard Weiss: May it please -- Earl Warren: Mr. Weiss. Bernard Weiss: May it please the Court. This proceeding is consigned with the question in computing interest as provided by law that the judgment of the United States Court of Claims, Section 2411 (a) of Title 28 of the U.S. Code Section 3771 (e) of the Internal Revenue Code of 1939, which is Title 26 apply. It is the -- the petitioner's contention that Section 2411 (a) govern since it is contained in the Judicial Code, now called Title 28, a judiciary into the -- under the title, Judiciary and Judicial Procedure and the question of determining. The interest on a judgment is peculiarly within the province of the Court which is adjudicating a case. Section 2411 (a) is a specific provision in the Judicial Code dealing with interest in an -- with interest on any overpayment and federal tax, as a result of obtaining a judgment to such overpayment in any court. I'm going to read these two Sections which are alleged to be in conflict and then I'll try to distinguish them and show why. 3771 (e) never applies in any case where we run into a situation where the Commissioner of Internal Revenue refuses to allow the claim for refund. That Section is only applicable when the Commissioner of Internal Revenue has allowed it. And if he doesn't allow, the claim for refund within the -- those provisions, that Section cannot be used. This is an administrative proceeding when you say, “If the Commissioner determines.” He's not a judicial officer. Therefore, when we use this particular expression, if the Commissioner determines an overpayment in tax which is attributable to an unused excess profits, credit carry-back or a net operating loss, credit carry-back from a subsequent year, what we're in effect saying is that the Commissioner has now made a determination. There is no judgment of any kind involved because when he makes the determination, there isn't -- the -- the taxpayer is in no position to refer to the Judicial Code. And therefore, when the taxpayer seeks to -- seeks a refund, he has to come within the meaning of the law. Now, when the -- I'm going to read these two Sections and this is what it said, reading now 2411 (a). It says, “In any judgment of any court rendered that (whether against the United States, a collector or deputy collector of internal revenue, or the personal representative in case of death) for an overpayment in respect of any internal-revenue tax, interest shall be allowed at the rate of 6 per centum per annum upon the amount of the overpayment, from the date of the payment or collection thereof to a date preceding the date of the refund check by not more than 30 days, such date to be determined by the Commissioner of Internal Revenue.” Now, the language of this particular provision of the Judicial Code requires no further explanation than just the words themselves. They speak for themselves, they're unambiguous. And what does Section 3771 (e) say? It says, “If the Commissioner determines that any part of any overpayment is attributable to the inclusion in computing the net operating loss deduction for the taxable year of any part of the net operating loss for succeeding taxable year or to the inclusion in computing the -- unused excess profits credit adjustment for the taxable year of any part of the unused excess profits credit for succeeding taxable year, no interest shall be allowed or paid with -- with respect to such part of the overpayment for any period before the filing of a claim for credit or refund of such part of the over -- of the overpayment or the filing a petition with the Tax Court, whichever is earlier." Now, before I go into discussing these two provisions, I want to make a short statement of what the facts are. It's only one paragraph and we can deal with that. March 28th, 1959, the petitioner obtained a judgment in the United States Court of claims against the defendant for overpayments of income and excess profits taxes in the sum of $520,000, approximately, when adjustments for interest as provided by law for the fiscal year ended March 31, 1942 to March 31, 1946, inclusive. This judgment included an overpayment of $211,900 of excess profits tax for the fiscal year ended March 31, 1942 of which amount $150,000 was attributable to an unused excess profits credit carry-back from the fiscal year ended March 31, 1943. The defendant in computing the amount of interest on the overpayment of $150,000 commenced with the date of June 14th, 1945, which is the date the claim for refund was filed rather than March 31st, 1943, which is the close of the year, giving rise to the unused excess profits credit carry-back resulting in several payment. It is alleged that Section 3771 (e) requires such computation. Now, interest on the rest of the overpayment in the fiscal year ended March 31, 1942 was properly computed. The Court of Claims agreed with the basis of computation as set forth by the defendant, but rendered no opinion, the taxpayer petitioned for certiorari and this Court rendered it. Now, it's the petitioner's contention that the language of Section 2411 (a) applies to any overpayment of federal tax which has been determined by a judgment of the Court, except for slight modifications which are not material in this proceeding. The statute as it reads today is the same as it read at that -- as it has been since the Revenue Act of 1928, when it was known as Section 177 of the Judicial Code. The Judicial Code was incorporated into the U.S. Code in 1948. Probably, due to some error, Section 177 or its equivalent or words to the same effect, were omitted when they -- when they merged the Judicial Code into the U.S. Code. This error, however, was corrected in May 1949, when Section 177 (b) was put right back into the law. At the time that they had put in, when they eliminated Section 177, they came in with a Section called 2516, which they thought might be the equivalent of the old Section 17 -- 177. But an examination of 2516 which is shown in the respondent's brief in his appendix and an -- in the next to the last column reads, 2516, “Interest on claims and judgment, interest on claim against the United States shall be allowed on a judgment of the Court of Claims only under a contract or act of Congress expressly providing for payment thereof.” Now, there are shortcomings in this particular Section. It must be obvious, because it only talks about the Court of Claims. It doesn't mention anything about what would happen if you had a case in the District Courts. And whatever the reason was, the fact of the matter is that the Congress saw fit to put it back in. And at that point, 3771 (e), when this would for a particular provision now known as 2411 (a) was put into the code, Section 3771 (e) was in the code. And despite the language of that code, if there is any alleged difference between the two sections and we claim there is none, we claim that Section 3771 (e) applies in -- in administrative proceedings when the Commissioner of Internal Revenue allows it. They did not allow anything. In fact, they fought this taxpayer for a period of 14 years and refused to allow it. The claim for refund based on its excess profits credit carry-back or the two there from the year 1943 to the year 1944. Charles E. Whittaker: May I -- Bernard Weiss: And this is a non -- yes, sir. Charles E. Whittaker: May I ask you please, sir? Do you -- does that argument mean that you contend that Section 2411 applies only to instances where judgments are rendered? Bernard Weiss: That's right. Charles E. Whittaker: Well then, is it not true that in all except where an excess profits credit adjustment is involved, the administrative remedies by the Commissioner in the absence of a judgment pay its interest from the date of the overpayment? Bernard Weiss: Oh, yes. I know, but we're now talking about -- we're talking about this special provision which is a limitation. Section 3771 says that there's any overpayment of tax. Now, the taxpayer is entitled to receive interest on the overpayment of tax from the date of overpayment. It says so, but the Commissioner of Internal Revenue or the defendant in this case says that 3771 (e) prevents the taxpayer from receiving interest from a date prior to the date that he files his claim for refund. But what does it say? It says only if the Commissioner determines and allows it. It's only when you allow it that -- that that particular provision applies. It's ridiculous to talk about applying a section of law where you're refusing to conform with the -- with the language of the statute and that is one that -- that is the thing that we claim. Now, this question is not an old question as to whether or not, they are claiming supremacy here of the provisions of the -- of the section -- the internal Revenue Code over the Judicial Code. The only time you go into the Judicial Code is because the Commission of Internal Revenue has refused to allow your claim. They haven't allowed it. Now, you are forced to go in -- go into court and sue to collect that which your claim calls for. Now, what does -- what -- what are -- and let -- let's me see whether we get any help from the Internal Revenue Code itself. Section 37 -- I'm going to read some of these sections and then we will see whether we're coming in. Section 3770 is a section in the code which deals with the question of making refunds or repayments to the taxpayer in the case he's overpaid his tax. 3771, now that he's made an overpayment tax, deals with the question of allowing him interest. Now, when we get into Section 2772 says that if you can't get along with the Commissioner of Internal Revenue and he's not going to allow your claim, you have a right to go in and sue. And what do you have to do? There are some conditions proceeding to sue. At the suit, you have to put in a -- you -- have to file a claim for refund. You assert the basis on which you claim your refund. In this -- that the Commissioner was entitled to have six months within which to consider your claim. If the Commissioner considers your claim and allows it, then we don't have to talk about what's Section 2411 (a). And if he does allow it, then under that expressed language of Section 3771 (e), he is entitled to -- to get -- to restrict the interest that the taxpayer is to receive from the date of payment to the date that he files a claim for refund and not the date of overpayment. Now, they seem to be confused. Charles E. Whittaker: Are you saying you're (Inaudible) Bernard Weiss: Now, in my claim -- in my claim, the Commissioner of Internal Revenue disallowed the claim. They denied that we had an unused excess profits credit carry-back. Therefore, they can't talk about a section which though -- and where they're disallowing your claim and say that this is the basis upon which we're -- we're going to give you interest. If you don't want to allow us to claim and you force me to sue, the law rears that I'm now forced to sue, 2411 (a) says, that I will receive interest on the day -- on the amount of the overpayment from the date of the overpayment to the -- to the date of the payment, 30 days before the refund -- before the refund check. Charles E. Whittaker: Not as so (Inaudible) your argument imply defendant is ordered by a judgment acknowledged (Voice Overlap) -- Bernard Weiss: That is correct. Now, this -- in this particular case, the Bulova Watch people are not making any claim for any interest for a period prior to the date that the unused excess profits credit arises which is at the end of the taxable year. That's the only thing that we say. Now, to help us out in this situation, the -- the Commissioner or the defendant cites a case, which I'm very pleased are being decided, the Seeley Tube. Now, in the first place, the Seeley Tube case is not a case involving a judgment. There's nothing to do with judgment, so that when a taxpayer comes in and they allow the refund which is what they did in the Seeley Tube case, it was proper for the Court to say that the -- since the right for the refund, only accrues at the end of the period giving lives to the lost. That entry should not be paid for any period prior to that. Now, what happened in that Seeley Tube case? In the Seeley Tube case, the -- the taxpayer had filed an income tax return and paid his tax. Thereafter, he -- the tax return was examined on one of these quickie examinations by reason of the fact that the corporation had gone into receivership. The -- then the Commissioner now asserted a tax -- they asserted a tax based on the fact that the income for that year was -- was under -- the net income was understated and therefore, there was an additional tax. The taxpayer now said that since the net loss, operating loss, wiped out all of the income, there's no tax due. And this Court properly stated that the cause of action did not arise until the loss -- until your loss arose and therefore you're not entitled to (Inaudible). Now, what is the -- where -- what is the position of the defendant? The defendant says in this particular case that having -- it says that the three -- there are three sections of the -- three parts that would affect any -- well, that -- let me put it this way. The excess profits credit carry-back is allowed on the Section 710 (c) of the U.S. Internal Revenue Code. The Section 122 (c) is the net operating loss section, which allows you to take a subsequent year's loss and carry it -- and carry it back. And so they say that this is one of the restraints, one of the limitations if they allow the claim. That's true, if they allow the claim, which they didn't do. And it's -- from now, the question has come up. Several times before, whether or not, a provision of the Judicial Code takes precedents over a provision of the U.S. Code that I in my brief, in my reply brief on page 2 have sighted the Bonwit Teller case. Now, the Bonwit Teller case was a case in the United States Court of Claims. That case -- that case arose in this way, the taxpayer filed a claim for refund. They were entitled to -- they were entitled to the -- and the Commissioner determines that they're -- they're entitled to an overassessment. He now signs a certificate of overassessment. By signing the certificate of overassessment, Section 1116 of the Internal Revenue Code of -- of the Internal Revenue Act of 1928, in effect, stopped interest from being paid for any period of time after the signing of that certificate of overassessment. But what did the Commissioner in fact, do? Did he pay him the money? No, he refused to pay him the money. As a result of which the taxpayer sued. The taxpayer recovered the judgment in the United States Court of Claims. And the United States Court of Claims, in dealing with this particular section had this to say, “That the papers of Section 177 (b) of the Judicial Code has amended is, where it is necessary for a taxpayer to bring a suit. So give him interest upon amounts erroneously collected as a tax from the date of its payment, then a date preceding the date of a check therefore, by not more than 30 days. And if swept aside any argument in here, that the internal revenue provision, the precedents over the U.S. Code.” They said when you put -- the man -- you're putting the taxpayer any expense of going in there and fighting in the courts, they're entitled to get. They are entitled to get interest from (Inaudible). I think I'd better stop with this, (Inaudible) Earl Warren: Mr. Davis. Oscar H. Davis: Mr. Chief Justice, may it please the Court. This is an interest case. It's a case that involves the question of how much interest is payable on a refund judgment. And the interest is not after the judgment has been rendered, but from what time the interest should be computed in the past. It arises in the context and the -- the reason for the -- its arising is the fact that there are two separate provisions of the federal laws which are said to be applicable. The petitioner says that Section 2411 of the Judicial Code as he says, if you just read on its face, something that we do not agree. That if you read it on its face, it holds in his -- it -- it rules his case. We say that 3771 (e) of the Internal Revenue Code is precisely applicable here. Now, why -- why does this case raise a problem? It raises a problem in particular, because you have to tell what the interrelationship of these two provisions of the federal legislation is. And in our mind, it raises a problem, a second problem because it is quite clear that this taxpayer could have sought the route of going through the Tax Court and -- if he wanted to or if the taxpayer had wanted to. And in that case, it is undoubtedly true that 3771 (e), which is at the very beginning of the Government's brief, would have been applicable and that is that the -- the limited interest for which we contend and which the Court of Claims allowed in this case, would have been the only one allowed. He did not do so. I mean the taxpayer did not do so. It paid the tax and then sued for a refund and it claims that because it did -- it took the route of paying the taxes and suing for a refund, it's entitled to more interest than if it had gone through the other procedure of going to the Tax Court. I think I also -- also want to say before launching into the burden of my argument.I want to spell out a little bit perhaps more for the Court, precisely what kind of -- of taxes are involved here. There is no doubt that when the -- the tax here involved is the one ending, March 31st, 1942 -- March 31st, 1942. There is no claim that the taxes which were assessed and to -- and collected in 1942 for that year were in any way illegal or erroneous or improper as of the time they were assessed or collected. There was no such claim. What it -- it said is that Congress, in allowing the carry-back provisions which the Court has had in several cases, said that if at the end of the next succeeding year, March 31st, 1943, the taxpayer discovers that he has an unused excess profits credit applicable to the excess profits tax of World War II, which he hasn't had to use for that year, he can carry it back and alter or change his tax for the year 1942. And that -- and he has that right under the statute and that was done in this case. And that his claim is that when he does that, when he carries it back by grace of Congress, therefore, he is entitled to interest from the Government, interest from -- not from the time he makes his claim that he should be allowed the carry-back, but from the time that he says the -- the right to make this carry-back arose, March 31st, 1943. Now, the answer we think and I'll try to spell that in some more detail, is that Congress deliberately chose not to make the interest run from that period. That it deliberately chose to say, “Interest shall not run until you make your claim for refund which this taxpayer didn't do the two years later. The difference is the tax between March 31st, 1943 when the claim could have been made and June 14th, 1945, a little over two years later, when the claim was actually made. Felix Frankfurter: How much time did he have to make the claim within which -- Oscar H. Davis: Over three years. Felix Frankfurter: Over three years. Oscar H. Davis: Some -- some -- quite a long period. And that Mr. Justice is why Congress deliberately chose as the -- as Senate report shows to say interest will not run until you make your claim in -- in putting Section 3771 (e) into the statute. They were aware of this problem and the Senate report says “We want to require prompt filing of refund claims and therefore we will not allow interest to run until that has occurred.” Felix Frankfurter: You said-- Oscar H. Davis: That -- Felix Frankfurter: Mr. Davis, you said that Congress deliberately chose not to. Is that right? Oscar H. Davis: Yes. Felix Frankfurter: Well, so I'm going to wait for that demonstration so I would have to read your -- your (Inaudible) will I? Oscar H. Davis: If you will turn the -- perhaps and anticipating the -- page 16 of our brief, Mr. Justice. You will see the Senate report and in the middle of it, they're talking about carry-backs there and they're talking about this section which was put into the code on which we rely, 3771 (e). And they say there, “He must therefore file his return and pay his tax without regard to such deduction,” that's the carry-back deduction. “And must file a claim for refund at the close of succeeding year, when he's able to determine the amount of the carry-back.” Then they go on, “Inasmuch as any overpayment resulting from the deduction of such carry-back does not occur as a practical matter until the net operating loss or the unused excess profits credit and the future taxpayer has determined and inasmuch as it is desirable to ensure promptness in the filing of claims to inform the Commissioner that such deductions have been determined, this section provide that no interest will be allowed with respect to any such overpayment for any period before the claim therefore is filed, or a petition asserting such overpayment is filed with the Board of Tax Appeals, now the Tax Court, whichever is earlier." So, would they adverted to this precise problem and they their made a choice. Earl Warren: Mr. Davis, how much time does he claim he has, the petitioner, in which to do this and still date it back to the original date? Oscar H. Davis: I don't know what the -- Earl Warren: Yes, they don't -- Oscar H. Davis: -- petitioner has not said, but we -- we figure he has about three years or -- or -- quite a long time. He -- he took actually two years and two -- Earl Warren: Yes. Oscar H. Davis: -- and two months in which to do it. Earl Warren: Yes. Oscar H. Davis: And I -- Earl Warren: But does he claim there is no limitation on -- Oscar H. Davis: He has not stated it. Earl Warren: Is not said? Oscar H. Davis: He has not said anything. Felix Frankfurter: Well, except the statute of limit -- except that there's no limitation if he can make any claim at all. Is that right? Charles E. Whittaker: Well, isn't -- isn't -- Oscar H. Davis: We figured out to be as 39 and a half months. Felix Frankfurter: Well, if he has 39 and a half months -- Oscar H. Davis: From the end of the year. Felix Frankfurter: Yes. There isn't any weight stationed by any provision of law either he has what he claims full time within which he can file or review claims. Oscar H. Davis: Well, no. We -- we don't deny that he has the full -- the right to -- to wait to 39 and a half months. Felix Frankfurter: I understand that, but not get interest if he waits. Oscar H. Davis: That's right. That's what Congress said. Felix Frankfurter: But I'm saying is for that -- if he can get interest for any part of the time, he can get it for all of the time, because there's no provision in the law which -- Oscar H. Davis: Well, that's right. Felix Frankfurter: -- says he can get perhaps two years or one and a half year or is there? Oscar H. Davis: No, there is not. Felix Frankfurter: So, the either it's all or nothing, he claims for all or nothing. Isn't it? Oscar H. Davis: Yes. Perhaps that was quite out of -- out of the order of my argument. I should say right at this moment that though the taxpayer has not indicated to the Court, he is not relying on the literal words of Section 2411 which is the section in the Judicial Code printed in our brief at 3 and 4. Because that section says that the -- interest -- it's on page 4 of our brief, the Government's brief. It says, “Interest shall be allowed at the rate of 6 per centum per annum on the amount of the overpayment from the date of the payment or collection thereof. Now, he paid these taxes in 1942 and if you take those words in the ordinary sense in which they have any meaning to people in the English language or that they have the meaning in the -- in the tax law. He paid the tax in 1942, because that's when he paid the tax. But he isn't claiming that he is entitled to interest from that time, because he knows it would be absurd to do so. That it would be absurd to claim that even though there was nothing wrong at the time he paid the tax as far as the Government was concerned, even though the events had not come into existence, made the carry-back provision proper and would not come into existence until a year later, March 31st, 1943, a year after that the tax -- the -- the end of the tax year with which we're concerned. He says that he is limiting his claim for refund to the end of that succeeding year. All I wish to point out now here, is that he is not relying on the -- on the words of 2411, of course if he did, he would be claiming interest back to a period before the any of the events that occurred which made the carry-back -- which brought the carry-back into existence. Felix Frankfurter: Nor is he implying on -- on unjust in Richmond. You've been putting his money to use after the -- Oscar H. Davis: Oh, no. That -- that I will try to develop too as that precisely what -- what hasn't been happening here, because this is not something where there was an illegal attack at the very beginning. This is -- Felix Frankfurter: Not at the very -- but there comes a time wherein something was owing to him from the Government for which he could have been there and there sued. Oscar H. Davis: And Congress -- Felix Frankfurter: If he had sued, he would've had interest from, if he succeeded. Oscar H. Davis: He would have to -- Felix Frankfurter: Well, I'm suggesting you, the matter of unjust in Richmond, you've used his money. Presumably, the Government has also put it out on interest and so he wants to have the interest to which you're not entitled. Oscar H. Davis: But Congresses has said that -- Felix Frankfurter: I'm not saying that's true, but that is -- Oscar H. Davis: No, no. But Congress has said in the 1939 -- in the 1942 Act which is the one involved here. And I should say that all of this arises under the 1939 Code, because the 1954 Code did change the provision. This arises under the 1939 Code. And Congress did say as I pointed out deliberately that until he brings to the Commissioner's attention, the facts which show that there has been an overpayment on his part, he isn't entitled to any of these. Felix Frankfurter: But it must be more complicated though as -- as you'd sit down at this point. Potter Stewart: Well obviously, Mr. Davis, it is, isn't it? Oscar H. Davis: Yes. Potter Stewart: You're relying -- you can't be relying on the literal language of 3771 (e) either. Oscar H. Davis: Yes. Potter Stewart: Alright. Oscar H. Davis: Well, no. Potter Stewart: Because at the very four words. Oscar H. Davis: I'm -- I'm -- well, but I'm -- I'm trying to go back and I will try to go back now and to state my -- what I want to do is to clear the ground from some of what I think some of the -- the provisions here which cannot be applied on their phase. Potter Stewart: Yes. Oscar H. Davis: And what the problem really is, is that you have these two provisions I set at the beginning, which have to be integrated. And -- William O. Douglas: It's the same kind of problem that was present in the Carter case, in the Ninth Circuit decided in 1939? Oscar H. Davis: No. It's -- it's a different problem in two respects from the Carter case, Mr. Justice Douglas. One is that in that case, the tax when it was collected was erroneous and illegal at that time it was collected, so that the Carter case is different in that very important respect. And the second thing in which the Carter case is different is that in the Carter case, related to excess -- excise taxes in which there was not the double rule applying either through the Tax Court or through the -- the Court of Claims in the District Court. And one of the points of our -- of our argument is that Congress has been trying to equate as -- at least as between people who go through the Tax Court and people who go through the Court of Claims of the District Court, the provisions were interest, since interest was first allowed in 1921. Neither those two factors was -- was present in the -- in the Carter case in 1938. But if I may go back and state more generally, our -- we have two general positions. First, the broader one and which is that 2411 of the code is a general proscription and that there are qualifications and exceptions to it which are found in the Internal Revenue Code. That is that the -- these, the provisions have to be read together as if they were an integrated body of law. And though they appear in different provisions of the code, they are part of a single whole and that the provision which we're concerned with, 3771 (e), is a specific qualification and exception. And that unless something is found in the -- in the wording of the particular provision, it should be applied whether the case is one that goes through the Tax Court or one that goes through the -- the District Courts or the Court of Claims to the refund method of procedure. And in general, we would say that the specific restrictive interest provisions of the Internal Revenue Code in which there are a number. Someone has counted 15, of -- of various kinds are applicable, whichever way the taxpayer brings -- seeks judicial review of his -- of his proceeding. That is through the Tax Court or through the Court of Claims of the District Court unless there is some specific reason to think that that particular specific provision of the Internal Revenue Code should not be applicable as a qualification or exception to 2411 of the Judicial Code. And the more particular position which we have which I've already stated in part, rests on the fact that this is a -- an unused excess profits tax carry-back. That is even though as it -- and there maybe other provision -- other restrictive interest provisions which are not applicable under 2411 that is when suit is in the Court of Claims. This provision is applicable because of its history to which I've averted, the Senate Committee that they deliberately wished to start interest only from a certain time, because its purpose was to require the prompt filing of refund claims which would not -- which would be frustrated if the petitioner's view of interest would be allowed. And because of the other factor that I've mentioned that is consistent effort by Congress to get -- to attain equality as in interest matters, as between taxpayers who seek review through the Commissioner and then onto the Tax Court and Court of Appeals and possibly this Court, and those other taxpayers who pay the tax and make -- and -- and make refunds. But there's been a consistent history, we believe, of an effort to attain equality as between those -- those two sets of taxpayers. I should say a word to because I think it is relevant about the fact that this is an interest case because from the beginning of -- of Anglo-Saxons jurisprudence on this subject. And certainly in this country, interest has been looked at with a very severe eye with respect to claims against the Government. Interest does not -- it was not allowed at common law on claims against the Government, when the Court of Claims was established as a tribunal for the settlement of claims against the Government. In the 1860's, Congress provided that unless there was a specific provision to the contrary, specific provision, interest was not to be allowed prior to judgment in a suit against the Government. And -- and this Court has applied that rule as Mr. Justice Brandeis said, “rigorously.” And this, we think is -- and they've applied it in -- in income tax cases. There was no interest against the Government in income tax cases either administratively or in -- in court cases until 1921. Now, it's true you could sue the collector and get interest against him, but the Court early held that when you sued the collector and got a judgment against him and then you didn't go around to the Treasury and file your certificate of probable cause for years -- to the years later, you didn't get interest on the judgment from the time you've got the judgment against the collector because the Court said, “When you turned it into a claim against the Government, the usual rule providing against payment of interest was applicable.” Now, I mentioned these general principles because -- I should even say that when -- when Congress and statutes has said that that there is -- just compensation shall be allowed on a claim in a non-eminent domain context. Just compensation which are words which in eminent domain cases clearly involves interest, the Court has said that just because Congress used the word “just compensation,” does not mean interest is allowable prior to judgment. That -- that Congress has to be more specific. Now, all of these body of law we think is important, because we think that it puts upon the taxpayer the burden of showing specifically that Congress intended that he obtained the interest which he seeks in a -- in a case. It's not this -- Potter Stewart: Not that -- is that -- quite right. You have a general statute giving 6% interest from the -- Oscar H. Davis: Yes. Potter Stewart: -- time of judgment. Now, doesn't the burden fall on you to show that for -- for some reasons, some special statute is an exception to that general rule? Oscar H. Davis: Well, perhaps in -- Potter Stewart: Regardless of all the history to be sure, interest was thrown down against the Government of common law and all the rest of it. But now, Congress has enacted a general statute of general application applying the tax refund claim saying the judgment of 6% shall run. And now -- and that certainly is of -- Oscar H. Davis: Yes. Potter Stewart: -- of general applicability. Now, isn't it up to him and says there's something peculiar about this kind of a tax refund claim to show that that general statute shall not be applicable? Oscar H. Davis: Well -- Potter Stewart: It's the burden there rather than where you seek through it. Oscar H. Davis: Well, we think the history does indicate that even in this situation, it's up to the taxpayer to show that -- that the section should be applied as he says it should be applied. And I would point out again, Mr. Justice Stewart, that he doesn't -- Potter Stewart: Yes. Oscar H. Davis: -- seek to apply it in the literal terms of the statute. Potter Stewart: Yes. Oscar H. Davis: And because he -- I think because he thinks have lead to an absurd result, so he seeks to -- to modify that thing. But even on the assumption that you make Mr. Justice, I think that perhaps one -- one of the ways I can be helpful is to say -- is to point out to the Court that the provision on interest in overpayments in the Judicial Code which is at Page 2 of our brief, starts out with a general statement, “Interest shall be allowed and paid upon any overpayment in respect of any internal revenue tax at the rate of 6 per centum per annum.” Now, it doesn't say there except as otherwise provided or anything else. It's a general provision. Later on in the same Section, Congress provided that in the case of the type we have here, interest should be more restrictive than the general provision at the beginning of Section 3771. Now, what I'm saying is that we don't think it would make any difference if in 1942, when Congress added the restrictive provision on which we rely (e), 3771 (e), if it -- if in 1942, it added that as another part of the Internal Revenue Code or as a separate statute or perhaps even if they put it in to the Judicial Code, that you would have to read them altogether because they relate -- all relate to -- to taxes and so we think it does make any difference here that there is this general provision of 2411 in the Judicial Code that you have to when you're -- when you're dealing with interest on -- in tax matters, look throughout the body of federal tax law to see whether there are any exceptions to -- to this general statute. And here we say you find a -- a section which we think it is applicable in its terms and which Congress desired should be applicable here. So we -- what I'm really saying I think is that you can't look at these as desperate or discreet provisions of the -- of the law. You have to look at all the interest provisions of the internal -- of the internal revenue legislation whether they appear in the Internal Revenue Code or whether they appear in the Judicial Code or in a separate statute as a body of law. And just as you would do with any body of law, you then organize them to see whether there isn't a general provision and exceptions to it. John M. Harlan II: Are you going to -- Oscar H. Davis: And -- John M. Harlan II: -- deal with this argument that turns on whether the payment is voluntary or involuntary in the sense the taxpayer has to sue -- sue for it. Oscar H. Davis: Well, that I think is just another way of saying that -- John M. Harlan II: That's his whole case. Oscar H. Davis: His whole case is that if -- if what I -- I'll try to answer that by saying that Congress didn't make a distinction between the taxpayer who goes to the Tax Court. This payment in a sense wasn't -- this -- this taxpayer could have gone to the Tax Court, there's no doubt in the world that he could've gone to the Tax Court, I think. And -- and if he had gone to the Tax Court to -- to test the deficiency which the Commissioner says, he then would've gotten a -- a decision of an overpayment, which would've been paid for the interest only under subsection (e). Potter Stewart: Now, how could he have gone to the Tax Court? I just want to be clear. Oscar H. Davis: Because the Commissioner assessed deficiency. See this -- the excess profits taxes and the income taxes of -- for the year 1942 were correlative. That is the higher your one was, the lower the other one was. And so when the Commissioner assessed the deficiency against him, that necessary -- Potter Stewart: For -- for what year? Oscar H. Davis: For -- for 1952 -- 1942, I'm sorry, I may not say 1952. For 1942 that necessarily meant that the other -- that Commissioner did assess a deficiency against him in regular income taxes. He could've gone to the Tax Court -- Potter Stewart: On that. Oscar H. Davis: -- on that deficiency. Potter Stewart: Yes. Oscar H. Davis: That would've opened up the whole thing. And there's some specific provision of the Internal Revenue Code which says that the Tax Court can consider whether the deficiency exists for that year or whether there's an overpayment for that year and it can determine what the overpayment is. And if there has been an overpayment, this overpayment shall be refunded by the Commissioner. Now -- Felix Frankfurter: Well that would draw the overlapping? Oscar H. Davis: Pardon me? Felix Frankfurter: That would draw it. That would draw into that Tax Court proceeding. Oscar H. Davis: This, yes. That's what I'm saying. And if had gone to the Tax Court on -- on this claim, then 3771 (e) would clearly have been applicable. In fact it ends by saying that the interest starts running at the filing of a petition with the Tax Court. John M. Harlan II: And you say that's a so-called involuntary payment on that premise which by its terms carries interest only on a limited basis. Oscar H. Davis: That's right. John M. Harlan II: And therefore, his distinction between -- broadly between 3771 and 28 and the Judicial Code is not a tenable distinction issue. Oscar H. Davis: That's right. John M. Harlan II: (Voice Overlap) -- Potter Stewart: Now, is there any disagreement between you as to what you just told us about the fact that he could've gone to the Tax Court without question? Oscar H. Davis: I don't know because I -- I think that -- Potter Stewart: That's not developed in the case. Oscar H. Davis: Nothing -- it's nothing developed, but I think it's quite clear that it could have been. Potter Stewart: Alright. Oscar H. Davis: And anyway, I would say, Mr. Justice Stewart, that Congress quite clearly decided when it added subsection (e) that the Tax Court was -- was a -- an appropriate vehicle in most of the cases, because it provided that interest shall stop when -- when a petition was filed in the Tax Court. Potter Stewart: Yes. But that might -- wouldn't necessarily arise in a way that this you say, could have arisen by a -- on a -- on a deficiency assessment on an ordinary income tax. Oscar H. Davis: Well, it could have arisen in one several ways. In whichever way it arose, there was a probability. I can't really say to you that it could occur in every single case, but there was a broad probability that these -- that these provisions could go -- I mean the -- the claims of this type could go to the Tax Court, as well as through the refund system. And -- Charles E. Whittaker: For what situation wouldn't or couldn't? Oscar H. Davis: Well, I -- I'm not enough with the Tax law -- lawyer, Mr. Justice Whittaker -- Charles E. Whittaker: I don't understand that there is any proposed deficiency by the Commissioner that is not subject to redetermination by the Tax Court in its timely petition. Potter Stewart: Well, I don't either -- Oscar H. Davis: It's not -- I -- Potter Stewart: -- in some areas of course, but on a proposed deficiency in income tax whether or not that opens up all the person's excess profits. Oscar H. Davis: Well, I think that is clear. I think that is clear, Mr. Justice -- Potter Stewart: Indeed, the Tax -- the Tax Court is the final -- the final court on excess profits tax type to the question of most kinds. Oscar H. Davis: Sir, other kinds. Potter Stewart: Yes. Oscar H. Davis: Now, I think that's clear. The one thing I'm not clear is whether this kind of a -- a claim by a petitioner like this could arise without a deficiency occurring. And -- and in -- in a particular -- Potter Stewart: This claim did, didn't it? Oscar H. Davis: This claim arose as a result of a deficiency. That -- that is the -- the Commissioner assessed additional taxes for the year -- Potter Stewart: Income taxes. Oscar H. Davis: Income taxes and he could have gone to the -- to the Tax Court saying there was no deficiency -- Potter Stewart: But he did not. Oscar H. Davis: -- of the time when it's overpaid. Potter Stewart: He did not. The actual claim filed in the Court of Claims did not result from any deficiency (Voice Overlap) -- Oscar H. Davis: No, because he paid the tax. Potter Stewart: Yes. Oscar H. Davis: Because he paid the tax. Charles E. Whittaker: Mr. Davis. Oscar H. Davis: Yes. Charles E. Whittaker: Do you -- do -- do you have the same understanding of Mr. Weiss' position as I, which is this that with substantive right of the taxpayer here to interest, depends upon form in which of the matter is determined. If in an Article III court, then it's from the date of overpayment, but if it's not in an Article III court, then it's from the date of notice or claim. Oscar H. Davis: I think that is correct. But I would say -- because you mentioned the term Article III court -- Charles E. Whittaker: Yes. Oscar H. Davis: And this is an answer I think also to what Mr. Justice Stewart pointed out at the beginning of the -- of Subsection (e), says, “If the Commissioner determines.” Now I don't think that can be read literally because clearly, if he goes -- if the taxpayer goes to the Tax Court, The Tax Court which is not the Commissioner who determines that there was an overpayment, the interest provisions of -- of subsection (e) would apply. Similarly, if the Tax Court were held against him and he appealed to the Court of Appeals or ultimately to this Court which are Article III courts -- and courts and they held that there was a -- an overpayment which -- for which he is entitled a refund, 3771 (e) would apply. I think his basic argument is not that it's an Article III court versus a -- a non-Article III court, but it's a refund suit versus the -- the Tax Court deficiency rule and I think that his basis. Charles E. Whittaker: (Inaudible) including the word, “judgment” that found 2411 (a) and it's a good common law (Inaudible). And what's behind it and the facts to it is not a judgment. Oscar H. Davis: It's a decision. Charles E. Whittaker: It's as settling an order of an administrative agency. Oscar H. Davis: Yes. But -- but at this -- but on -- on review by the Court of Appeals, if the Tax Court had decided against the petitioner on this repayment and the Court of Appeals had reversed, there would surely be a judgment order. And undoubtedly I think, 3771 (e) would apply in that situation. So, I don't think that any meaningful distinction can be drawn between the two different methods of -- of testing the Commissioner's refusal to pay the -- of that instant. Now, I would like to pay -- Potter Stewart: Go ahead. Oscar H. Davis: I -- I would just like to point out to the Court before my time elapses that this Commissioner has recovered interest from -- I think it's June 1945, through April 1959, when he received the check. So he -- he has recovered interest of -- for 14 years at 6%. William J. Brennan, Jr.: How can the proceeding take 14 years? Oscar H. Davis: I don't really know, Mr. Justice Brennan. They were -- there -- he didn't file his petition in the Court of Claims until 1953. And then because -- unfortunately, the -- the statute of limitations says that he has -- if the Commissioner doesn't disallow a claim, you just go on forever. I mean the statute of limitations doesn't begin to run until the Commissioner disallows the claim. And the Commission never got around to disallowing these particular claims, so he didn't have to bring his suit until 1953 in the Court of Claims and then it proceeded along in ordinary course. But I do want to point out that he has received interest at 6% from that time and he -- what he's claiming --- and this interest is a desirable amount of money that the -- the actual principal involved is I think about $150,000 and he's already gotten $124,000 in interest on this -- on that principal. And he's claiming another $23,000 for the two-year difference between March 31st, 1942 and June 14th, 1945. And to grant interest for this prior period is really to say that the Government should be penalized because he -- he saw his contest through the Court of Claims rather than through the Tax Court. And this is contrary to some -- to -- to all the legislation not only on this field, but in other fields. Congress has never sought to penalize the Government in -- in this respect. And as I -- as I pointed out before, again, because this taxpayer sued in the Court of Claims, he can set -- talk about delay. If he'd gone through the Tax Court mechanism, there may have been the same amount of delay, but he would not have been able to make the claim as -- as he makes here because 3771 (e) would clearly have been applicable. The -- my time has expired. Earl Warren: Mr. Weiss. Bernard Weiss: I would like to take a plot some of these arguments that's been -- been advanced to you on my behalf. Some of the statements, I am alleged to have made somewhere in my brief. If they'll find the page, I want to see it. Now, in the first place, they think that I am saying something in here on Section 2411 (a). I want to call attention to a particular way that they are ignoring, the defendant is ignoring, the word, thereof. That's the most important word in that whole section and they leave it alone. How the taxpayer -- what are you collecting? You're collecting the overpayment thereof when the taxpayer paid and he wants to get interest, he's going to get it from the time -- from the times that he overpaid the tax. Now, when did that period arrive in this particular case? It arrives when the cause of action arises and when does the cause of action arise? Only at the end of the year of a -- excess profits tax year, which gave right to the excess profits credit carry-back. That's the only term, there's no cause of action previous that I found and that's what the taxpayer is insisting on. We're not asking for interest in the time we paid it, why not? Because that wasn't the time that we overpaid it, it's the overpayment that counts. Charles E. Whittaker: Now that -- that factor, I -- I agree with you, but that's determined by Section 3771, isn't it? Bernard Weiss: No, sir. Charles E. Whittaker: Wasn't it? Bernard Weiss: No, sir. The -- the Section 3771 is not the determining to your -- the overpayment. Charles E. Whittaker: No. Bernard Weiss: The -- the (Inaudible) the overpayment is being -- just a minute, the overpayment as being determined by the fact that Section 710 (c) of the Internal Revenue Code allows you a carry-back. That's -- that's the section that allows it and that's the reason that they -- that -- that they're giving it to us. They're not giving us anything here that we're not entitled to receive. Normally, it's the taxpayer requesting it. In this case, we're not requesting anything. Everybody that sues the Government whose -- and recovers a judgment, they're all treated alike. Anytime you have a claim before the -- the Commissioner and if he allows it, he gets the benefits. He can restrict your interest and make a -- and gain by allowing you your claim, which he's refusing to do. For 14 years, he hit those taxpayers by over pillar of boats. They'd -- they went around on there, they did it like -- what they're using in here is using a -- a hatchet and they're trying to tell the man he's got -- that he's smelling beautiful flowers. That's what -- that's what going on here in -- in this particular thing. Now, they pulled all sorts of cases in here that have no applicability whatsoever. Every time they cite a case over here, it's when the cause of action arises. They come in here, they give you Section 7 of the Technical Changes Act of 1949 as if that's got something to do for the proposition that we have before this Court. The taxpayer -- the Section 7 of the Technical Changes Act of 1949, they so -- they cite four cases here with regards. That's -- let's take -- let's care of those four cases. The -- that provision was put in, in order to remedy what appeared to be an outrageous tax that was being illustrated against to the decedent, who was being taxed on a theory that citing property which he had transferred might conceivably come back to him. And therefore, they taxed him irrespective (Inaudible). How minute that refers here -- who -- minute the value was this proportion of re-interest, so they came in and they now put into the Court. They -- they passed an act in which they said that they were going to give relief. So 7 (a) provides that any person who paid a tax on the basis of a reversionary interest which was less than 5% of the value of the property on the date -- on the day before the date of that. That that -- that person could get a -- could a refund of his tax. What? They've put in a further condition that you can -- but you in fact, you'll get your tax back but you wouldn't get interest. Now, why is that? Because in the years to which the tax applied, there was no overpayment, not according to the way the law read. The law read in a given way. This -- this -- the possibility of refutative was just another of -- of a reversionary interest coming back to the (Inaudible), was just enough to be able to tax into that -- state that thing. So therefore, your cause of action didn't arise until 1949, so therefore, when you're giving back people money, you can only stop in the date of the enactment of the act and that's what it says. Now, when they come in here and they're -- they -- they quote a case in here which is odd basic. They -- they're giving you this case called Graham versus Goodcell. Now, just imagine that anybody quoting a case like the Graham versus Goodcell. Now, what is the Graham versus Goodcell case about? The Graham versus Goodcell case where -- goes back to Revenue Act of 1924 in 20 years, at that time, we had a provision in the Internal Revenue Code. If an assessment is placed on the books by the Commission that he has to go out and collect that assessment within five years of the date of the filing of the return. Somebody and a few -- if the Commissioner is now assessing the tax, the taxpayer wants to complain about the facts, they gave him a provision. They put in that he could ask for a -- they could file the claim in abatement of this tax. At the same time, he did that, the -- in most cases, they'd ask you to put up some sort of a bond and at the same time, the taxpayer would go off and get a stay of -- so that the collector of internal revenue wouldn't go and collect this tax. Now, what do these people do? They got the bright idea that they could hold this case long enough. The statute would expire while the stay is on and the -- and the collector wouldn't be able to collect the tax. Now, what -- why -- so they now said, "We don't owe you the tax." And then loads and loads of taxpayers got this -- this marvelous idea of how to beat the Government out of the tax. And so they -- with all these delays that were -- that they -- they just file without paying the tax. Now, there is a section in the law that in this 1928 Code which prove -- at 1928 Internal Revenue Act, which said, “That an overpayment of tax, if you made a payment to the Government with respect to any assessed tax after the statute of limitation arose, you got an overpayment from tax and therefore, if you filed a claim, you will be able to get -- to get a refund.” So everybody had to file. They thought that this was a great idea. When the Commissioner got wise to this thing, what did they do? The Commissioner went out there and they seize people's properties, they foreclosed all the funds. They did all that sort of thing. And on top of that, now, they went to the Congress and they got themselves an act in there which said, “That wherever the Commissioner of Internal Revenue assessed a tax and the taxpayer had filed a -- a claim for credit and had gotten the advantage of a -- of a state, then thereafter, any payment made after the statute of limitations under those circumstances that that constitute an overpayment.” Now, what happens to the taxpayer? He has no -- has no place to go. He can't -- he can't recover because the very act which gave him the right to fit -- fit the payment there for the statute of limitations as a -- overpayment was now destroyed. He -- he -- they took it away from him. Now, what does this got to do with us in this particular case? I don't know. But this is one of the cases that they have used to try to establish their point and they talked about equity. Got to help the people that have to rely on equities, when they took this taxpayer and hit him over the lot and then -- then -- I'm now talking about a -- an equitable piece of legislation. We've got some more or I'd be back here again on -- John M. Harlan II: Now, we will -- if you -- Bernard Weiss: -- on the same subject of interest. John M. Harlan II: -- if you win this case, you want won't have had a bad investment of 6% for 14 years? Bernard Weiss: Oh, I don't think that that's the point, Your Honor. John M. Harlan II: Oh, I thought you were complaining. Bernard Weiss: Well, I -- and then I say, we're don't have time -- and all that I'm saying in here is this. That the taxpayer is entitled to what the law gives him. It's rare enough that we -- that the taxpayer can actually get money from the Government. So when you -- when they -- when they owe you money and the law permits you to receive this money, I think the thing to do is go and collect. And we're not asking for non-reasonable thing here. I think they have tried to present this in a way that if any -- he who runs can understand the case. And I believe that the taxpayer -- the judgment of the court below should be reversed and that interest should be allowed to this taxpayer in the date of the payment to the -- to the date, 30 days before the refund check. Thank you very much.

Warren E. Burger: We'll hear arguments first this morning in three related cases, 75-353, -354 and -55, Piper and others against Chris-Craft and the related cases. Mr. Cutler, you may proceed whenever you are ready. Lloyd N. Cutler: Mr. Chief Justice, and may it please the Court. There are three sets of petitioners in this case, held jointly and severally liable on different combinations of events. I shall argue for Bangor Punta; Judge Peck shall argue for First Boston; and Mr. Pennoyer will argue for the Piper family defendants. This case involves a bid by Chris-Craft to take over the Piper Aircraft Company in January of 1969. The bid was resisted by management, including members of the Piper family. In April of 1969, Piper’s financial advisor, First Boston, invited Bangor Punta to submit a competing bid. Bangor did so and won in the marketplace. Chris-Craft went to court and won a $36 million judgment, the largest ever rendered in a private action under the securities laws and far more than any conceivable difference between the value of the 42% of Piper that Chris-Craft still owns and the 51% that it sought. If you will pick up, Your Honors, the blue-covered Bangor brief and look at Page 9 -- that's our main brief -- you will find that a table summarizing the control contest, of which the clerk has extra copies. Two technical violations of the securities laws were found against Bangor Punta. The first related to Item 5 on that table. When after announcing its intention to make an exchange offer for Piper shares Bangor bought three blocks from institutions in off-exchange transactions, in a first-impression ruling on the application of FCC Rule 10(b)-6, these purchases of Piper shares were held to have violated the rule, even though they were found below to have been made without any manipulative intent or effect. The second violation was found in connection with Item 7 on that table. Bangor’s exchange prospectus did not mention an offer it had received to buy one of its assets, the Bangor & Aroostock Railroad, at a price in cash well below its carrying value on Bangor’s books. In an SEC injunctive suit that was tried together with the Chris-Craft private suit, the District Court found that this submission was made in good faith and without intent to mislead. William H. Rehnquist: Mr. Cutrer, you have referred to both of those as technical violations. Is that a word of art, or do you use it on a particular context? Lloyd N. Cutler: I use it in the sense, Justice Rehnquist, that the violations were, as I just said, found by the District Court to have been made in good faith and without intent to mislead. Potter Stewart: May I ask, Mr. Cutrer, am I correct in my understanding that the question of whether or not either or both of these constituted a violation is not an issue here before this Court? Lloyd N. Cutler: That's correct, Justice Stewart. We argued below and we still believe that they were not violations, but we did not think either issue as to violation was of sufficient importance to raise on certiorari on those particular -- Potter Stewart: So we will see here on the premise that they both did constitute violations. Lloyd N. Cutler: Right. Potter Stewart: Okay. Speaker: Is it your position that the violations, however they're characterized, caused no injury? Lloyd N. Cutler: It is our position that the violations caused no injury to Chris-Craft, the plaintiff in this action, or indeed to anyone else. The court below, the trial court, expressly rejected charges that Bangor had already accepted that offer to buy the railroad or that it had even decided to accept the offer, and they also rejected charges that a loss should have been recorded in Bangor’s financial statements. But the court found that the failure to mention the offer was material, because the offer made the carrying value obsolete, as the trial court said, absolute disclosure, and it ordered Bangor to provide the exchanging Piper shareholders an opportunity to rescind, which none of them accepted. Speaker: So the trial court held that that rendered the valuation obsolete? Lloyd N. Cutler: That carrying value was obsolete was the trial court’s word without some mention of the fact that the offer had been received. It did not say that the carrying value should be changed, but that some mention should have been made of the fact that the offer had been received. Speaker: Now, this is in the SEC action? Lloyd N. Cutler: This was in the SEC action that carried over to -- Speaker: Not in this action. Lloyd N. Cutler: It also carried over to the private action, Justice Stewart, yes. Speaker: Right, I see. Lloyd N. Cutler: As I said, the court ordered Bangor to provide an opportunity to rescind to the accepting Piper shareholders, which none of them accepted because the market value of the Bangor exchange package continued at all times to be higher than the value of the Piper shares that had been offered in exchange. John Paul Stevens: Mr. Cutrer, when was that offer to rescind made? Lloyd N. Cutler: That offer was made in, I believe, March of 1976, Justice Stevens, the delay from the time that cert was denied in this Court on the original order having occurred primarily because the four Chris-Craft directors of Piper representing their 42% were anxious, since Piper had to issue a prospectus or a registration relating to this exchange offer, that independent counsel be retained for that purpose and that updated financials be provided, and that delay was entirely satisfactory to the SEC, the enforcing arm. But it made no real difference, because at all times, as I said, throughout, the value of the Bangor package was higher, and no one rescinded. The Court of Appeals affirmed all of these particular findings and orders relating to the SEC case, and in that action the SEC obtained all of the relief that was appropriate for the exchanging Piper shareholders, none of whom have brought any private damage action of their own. Now, Chris-Craft’s private action has been before the Second Circuit three times, and each time the Second Circuit reversed the District Court on the critical points of law that are now here for review. In so doing, the court created an implied damage action for a non-purchaser under Rule 10(b)-6, in conflict we say with this Court’s ruling in Blue Chip. It created an implied action for a competing offeror under 14(e), in conflict we say with the principles of this Court’s later opinion in Cort against Ash. It held scienter was required, but defined it to equal mere awareness of the undisclosed fact about those railroad negotiations, which we say is in conflict with this Court’s later opinion in Hochfelder, and it found causation on the basis of presumptions, despite findings in the trial court that causal effect had not been proven. It computed damages itself under a theory that wrongly insured Chris-Craft against the later and unrelated decline in the value of the Piper shares, and that confused the value of control with a mere opportunity to compete for control. Now, Mr. Liman is doubtless going to tell you a more colorful tale, in which he'll portray Chris-Craft as a victim of the greatest securities fraud since the Mississippi Bubble; but Chris-Craft’s tale utterly failed to convince the District Court, which as I have said found that Bangor’s technical violations were made in good faith and without intent to deceive. We assume that this Court did not grant certiorari to retry these findings of the experienced trial-judge findings, which the Court of Appeals affirmed. Speaker: Was Judge Pollack the trial judge in each case each time? Lloyd N. Cutler: Judge Pollack was the trial judge in all of the matters of which I have spoken. That was Judge -- Speaker: Judge Tenney was in there earlier, wasn't he? Lloyd N. Cutler: There was an earlier Chris-Craft suit for a preliminary injunction tried by Judge Tenney. I want to turn first to whether Congress intended to create these private damage actions that Chris-Craft is now pursuing. As to Rule 10(b)-6, it seems that to us that Blue Chip just settles the issue. Christ-Craft did not purchase any of the Bangor securities that were offered in distribution, and the violation was not committed in connection with, those words of 10(b), any of the Piper stock that was purchased by Chris-Craft. As to 14(e), whether any private damage action was created under 14(e) should be implied, or any other section of the Williams Act, has not been squarely passed on by this Court. Under Cort against Ash in Wyandot, courts have implied damage remedies only when the plaintiff is within the class for whose special benefit, as the Court says, Congress acted and only when the harm alleged to him is the type of harm that Congress wanted to prevent. On Rondeau, this Court held that target-company shareholders are the class that Congress wanted to protect in the Williams Act, and it indicated that the harm to them from a violation is the only type of harm that Congress wanted to prevent. I think our briefs make clear there is absolutely nothing in the language or the legislative intent of the Williams Act that shows Congress intended in 14(e) to confer rights on anyone other than the target-company shareholders or to prevent any harm suffered by a competing offeror, but not suffered by the target shareholders as a class. As our briefs show, Congress gave no clue that it wanted to, and neither did the SEC draft through the Williams Act or anyone who testified in its favor. Now, Chris-Craft, while it holds Piper stock, is very plainly not suing in that capacity any more than a displaced officer or director of a target company would be suing in his capacity as a shareholder if he was suing to recover the fees and the salaries he lost because the new people in control kicked him out. Potter Stewart: Mr. Cutrer, it is pretty well settled, isn't it, in the Federal courts generally that a competing offeror in a proposed effort for takeover situation can go into Federal District Court and get an injunction? Lloyd N. Cutler: He can go. He may very well be able to go, Justice Stewart, into a Federal court to seek an injunction; but as I will reach in a moment, it seems to us -- Potter Stewart: An injunction against a competing offeror. Lloyd N. Cutler: Right, an injunction against the competing offeror in order to protect the rights of the protected class, the target company's shareholders, and only in all the cases to date in those circumstances. Speaker: You accept that as the law, do you? Lloyd N. Cutler: We do not challenge, that and as I'll show in the moment, when Congress has legislated both expressed private injunctive and private damage remedies, it has frequently granted a wider class the right to sue for an injunction than the class that is allowed to sue for damages to itself. Now, what Chris-Craft is asking for here is the damages for the loss of this opportunity to compete for control, something no other target shareholder can have. It's more than any other target shareholder could collect; and moreover, they're trying to collect it at the ultimate expense of the very target shareholders, the innocent shareholders who accepted the Bangor’s securities in the exchange offer and now hold Bangor stock, and that ironic result is going to occur in every case of competing exchange offers if the loser is allowed to recover damages against the winner. And what we put to you is, is it reasonable to believe that target shareholders, who are the supposed victims of the violation, but who are not complaining themselves, ought to be turned into defendants instead of plaintiffs and are to be injured by the judgment that's supposed to protect them? Yet, the Court of Appeals here said that evidence of legislative attempt was unnecessary and that under common-law tort principles, Chris-Craft should have a Federal damage remedy, simply because it claimed injury from a violation of the Federal statute. But there is supposed to be no Federal common law, and there is no universal statutory principle of a Federal damage remedy, for everyone claiming violation or injury from a violation of the Federal statute. And when Your Honors look at the private remedies that Congress has expressly created in the securities laws and many other laws, you'll find that they've weighed a variety of competing policy considerations and come out with a variety of answers. Sometimes, as if the Food and Drug Act, Federal Trade Commission Act, courts have held that Congress created no private remedies at all. Sometimes, as Water Pollution and the Toxic Substances Act that's now before the President, Congress has created a private injunctive remedy, but not a damage remedy. And as in the Clayton Act and in the opinion in Hawaii, Justice Marshal, where Congress created both types of remedies, the court held that Congress gave a broader class the right to sue for the injunction than the class it gave the right to sue for damages; and that's why, Justice Stewart, the cases that do allow persons outside the protected class to seek injunctions in order to protect the class don't establish that Congress meant to give those same people the right to sue for damages to themselves. Now, in the securities laws themselves, Congress has always created damage remedies on what the opinion in Hochfelder called a "particularized basis" for a limited type of harm and a limited degree of culpability and for a limited class of plaintiffs. That's the principle that Blue Chip and Hochfelder follow and the opinion below does not. Let me come now to scienter. In Hochfelder, the court ruled that scienter is required in a private damage action under 10(b) and also the SEC rule issued under 10(b), and it defines scienter as "a mental state embracing intent to deceive, manipulate and defraud". Speaker: That's a little more than scienter, isn't it? I mean, intent is more than simply scienter. Lloyd N. Cutler: Well, that was the definition of scienter expressly used in Hochfelder with a reservation I'm about to come to dealing with recklessness, a point which was -- Speaker: Which was left open. Lloyd N. Cutler: Right. This decision was issued before Hochfelder, and it held that no such intent was required. As for the 10(b)-6 violation, it seems to us Hochfelder very plainly controls, and the District Court’s findings of no manipulative intent or effect, affirmed on appeal, conclude the issue. The Court of Appeals here recognized that scienter was required, because 14(e) had been modeled on 10(b)-5; but after it affirmed the trial court’s finding that the omission concerning the railroad negotiations had been made in good faith and without intent to mislead, the Second Circuit found scienter in Bangor’s and First Boston’s mere awareness of the negotiations, a standard totally incompatible, we say, with the intent to deceive that was required by Hochfelder. In Hochfelder, Justice Stewart, as you noted, the Court left open the question whether recklessness could ever meet the same requirement. But that, as Judge Friendly had said earlier, was the kind of recklessness that's equivalent to willful fraud, and no such recklessness in that sense could possibly have been involved here. Byron R. White: Is this a point dispositive in itself if we agreed with you? Lloyd N. Cutler: If you agreed with us that this was not recklessness, Justice White, yes, we think it would be dispositive. Byron R. White: Of the entire case. Lloyd N. Cutler: Of the entire case. Every one of the four points I had hoped to argue and cannot get to causation and damages is dispositive. Byron R. White: I understand. And you think this issue is concluded by a case decided here since the Court of Appeals, is that right? Lloyd N. Cutler: Yes, Your Honor, precisely. The omission here was one that was fully discussed between Bangor and First Boston and experienced counsel for both of them. It was deemed appropriate by all of them in good faith. And while in hindsight it may have been in error, that kind of decision, it doesn't seem to us, can possibly fit within Hochfelder’s description of recklessness, especially when the courts below both concluded that there was no intent to mislead and that everything had been done in good faith. Lewis F. Powell, Jr.: May I ask this question? Does the record show what percentage of Bangor Punta’s earnings were derived from the BAR railroad? Lloyd N. Cutler: Practically none. As the record does show, Justice Powell, the earnings I think in the last pertinent year amounted to $60,000, and when the BAR was sold, even prime-rate interest on the $5 million in cash that was later received when it was later sold is obviously far more than $60,000. Lewis F. Powell, Jr.: Is there any evidence in the record that indicates the extent of which the market appraises earning power as distinguished from the appraised value of the stock? Lloyd N. Cutler: Well, there is the objective fact, Justice Powell, as Judge Peck will develop, that when the railroad was, in fact, sold for $5 million in cash after this exchange offer terminated, the price of Bangor Punta stock went up within the succeeding two weeks. Now, I may have missed my lights, Mr. Chief Justice. Have I used … I was supposed to have 20 minutes at the beginning. Warren E. Burger: (Inaudible.) Lloyd N. Cutler: Total, yes. Well, I think then, sir, I had better leave the issues of causation and damages, each of which would also be dispositive to my brief, reserving five minutes for rebuttal, and I may have an opportunity to comment on both then. Warren E. Burger: Judge Peck? David W. Peck: Mr. Chief Justice, may it please the Court. The threshold question in this case as far as First Boston is concerned is what duty it owed to whom in its capacity as underwriter of Bangor Punta’s registration statement and exchange offer, and specifically did it owe any duty to Chris-Craft as a competing offeror. The answer is found in Section 11 of the Securities Act, defining the responsibility of an underwriter on a registration statement, which is a duty of due diligence created by Section 11 and owed only to persons acquiring the securities offered. Now, Chris-Craft was not a member of that class, and there's no suggestion that it had any standing under Section 11. The claim is, but not withstanding the express provisions and limitations of Section 11, First Boston had an implied responsibility under Section 14(e) of the Securities Exchange Act, an Act that makes no reference to underwriters and unlimited as to the persons to whom it might be liable and as to the amount that might be recovered, because the registration statement was made in connection with a tender offer. That fact, that connection, makes all the difference. Now, the untenability of such a claim, we submit, is apparent, both from its conflict with the express language of Section 11 and in necessary recognition of the fact that Section 11 is the source and the only source of an underwriter’s responsibility on a registration statement. John Paul Stevens: Judge Peck, it's my understanding that your brothers on the other side of the podium claim that you were acting here or you may have been acting as a conventional statutory underwriter in the terms of the 1993 Act in your capacity in connection with the registration statement; that in addition, you had a different hat on through a good deal of these negotiations; and that you were the general or the manager or whatever the language is in their brief -- I've forgotten -- of the whole deal, and in that respect you were not a, quote, "underwriter", but you were acting in quite a different capacity. Do I understand that correctly? David W. Peck: Yes, that is their contention, but has been completely rejected expressly and specifically by both the District Court and the Court of Appeals, whose only fault was found as far as First Boston is concerned with respect to 14(e) and it said that it had no directing or responsible connection with any of the other alleged violations; that it acted only in a professional capacity and solely in good faith. Those were the findings of both the District Court and the -- John Paul Stevens: But that's not saying solely as an underwriter. That, I thought, was their point. David W. Peck: Well, cover it as you will there, in the first place the courts below said that it did not participate in these other matters in any respect other than lending professional advice and assistance. Now, I submit that that doesn't make anyone a principal or impose any of the liabilities of a principal. Speaker: This is based on events that occurred before First Boston was in the picture, is that not so? When did First Boston get in in terms of the … David W. Peck: Well, First Boston came in in its first connection after the Pipers rejected … well, the Pipers in the first place asked Bangor Punta to appraise the value of the Chris-Craft offer in the first place, which they did and which they said had a value of $65 a share. The next thing was after the Pipers decided that they didn't want Chris-Craft as a partner, they asked First Boston to participate in finding another offeror, which it did; then Bangor Punta came in. Now, there is nothing in Section 14(e) to imply this cause of action that's been asserted here. There is nothing in the legislative history to suggest any such Congressional intent. Indeed, the whole of the legislative history is perfectly clear that the intent was to protect only investors, the class to whom an offer is addressed, the only persons who can act upon the offer and the only persons who can be mislead if there's anything misleading. There is nothing to meet any of the tests that this Court has enumerated in the past for implied causes of action. Indeed, the very idea of causes of action to a person outside a protected class upon a showing that the class was misled certainly does not give rise to the implication of a cause of action. Now, the anomaly is illustrated here. Not one of the persons who accepted the Bangor offer has ever complained. Not one accepted the offer of rescission by direction of the District Court. And the anomaly is further illustrated by what the Court of Appeals did here about causation. Chris-Craft deduced no evidence that the so-called admission of the BAR -- in that, I refer to BAR as the railroad and the sale of the railroad -- that the omission of that from the Bangor Punta registration statement accounted either for Bangor Punta’s success in the contest or for Chris-Craft’s loss of the contest. And the District Courts therefore held, and I'm going to quote, that "Chris-Craft had failed to establish an essential element of an action for damages, to wit, a causal relation between the deficiency in the Bangor Punta prospectus and the harm complained of". The Court of Appeals, however, faced with the inability to establish causation, solved the problem very simply. It said that proof of causation, injury and damage was unnecessary. All were to be presumed. Now, the presumption that the court had to indulge in to reach its decision is not only impermissible as a matter of law and demonstrative of the lack of proof of causation in this case, but I submit also demonstrative of why such a cause of action as Chris-Craft is asserting here does not exist under the law. Common and statutory law down the years, even in this era of consumer litigation, have been both practical and sensible in not spawning endless litigation between competitors on charges that misleading advertising of one has taken away customers from the other, and Congress certainly didn't intend to launch such litigation by 14(e). Now, the Court of Appeals must have understood all this, for it offered a special theory of imposing a non-existing liability upon Bangor Punta and First Boston alike. It is, as the court expressed it, that 14(e) created, quote, “a broader standing to sue accorded to offerors based on fraudulent transactions” -- in other words, scienter creates standard -- and then it proceeded to say what it meant by scienter, and it was that it meant something more than mere negligence. Speaker: You say that the Court of Appeals said scienter was a substitute not merely for intent, but also for causation. David W. Peck: Standing. Speaker: Standing. David W. Peck: Standing, yes, Your Honor. And then it made its great error conclusive in the light of this Court’s language in Hochfelder. It said that an intent to deceive is not an essential element of the cause of action. In other words, even though you're in a fraud case, you don't need intent to defraud. Anything more than mere negligence as it labeled First Boston’s conduct here would be sufficient. I'm going to come, therefore, to scienter as the way the Court of Appeals worked it out. It said that Bangor Punta was required to apprise the Piper shareholders of the negotiation over the BAR and of the consequent indication that it wasn't worth what it was carried at on the books; and that First Boston had enough information to reasonably deduce that the registration statement was inaccurate in this respect. The particulars given, however, were entirely in the terms of First Boston’s investigation, which it said wasn't sufficient; that it should have undertaken a further investigation. Now, there's no suggestion in the opinion as to what any further investigation of the First Boston would have disclosed or that it would have disclosed anything other than what First Boston, the District Court and the Court of Appeals alike found, that there had been no decision to sell the railroad at the time the registration statement was out. Indeed, the District Court rejected as having no substance Chris-Craft’s basic claim that at the time of Bangor Punta’s exchange offer, it had intended to sell the BAR and delayed the sale to avoid disclosure, and said that it could not even find that there was any probability, reasonable probability of a sale at that time; that there was no purpose for omission of it from the prospectus; and that First Boston acted solely in good faith. Now, the Court of Appeals upheld those findings and agreed that the failure to disclose the sale negotiations was not in bad faith and then adding, however, these faithful words, "that intent to defraud is not an indispensable element in the private action for damages under the anti-fraud provisions of the Federal Securities Law". That is the key sentence and the critical one as far as scienter is concerned in this case, and by this Court’s definition of it in Hochfelder, the Court of Appeals was clearly in error. Of course, it didn't have the benefit of this Court’s decision at that time. Speaker: Suppose we agree with you, Judge. Should we decide that question here or remand it to the Court of Appeals to reconsider in the light of Hochfelder? David W. Peck: I certainly think there's nothing to remand. Assuming standing, any claim under 14(e) would have to establish an intent to deceive or defraud. Not only that hasn't even been attempted here, I would say, but it's certainly the findings of both courts are against it; so there has already been a determination. Speaker: What was the date of Ernst & Ernst, do you remember? David W. Peck: I have the case ... Speaker: March 30th, 1976. Speaker: And we granted certiorari after that, I take it. David W. Peck: Yes, you granted certiorari … Speaker: Maybe it was our mistake. David W. Peck: … that's right, very shortly afterwards. All right. Thank you, Your Honors. Warren E. Burger: Mr. Pennoyer? Paul G. Pennoyer, Jr.: Mr. Chief Justice, may it please the Court. Speaking in behalf of the Piper individuals at a slow gallop for five minutes, I'd like to discuss the issues of causation damages and the issue of scienter and touch briefly on the issue of individual liability and joint several liability. On the question of causation damages -- and I won't repeat the legal points made by my colleagues, but solely the facts -- the sole basis for this $36 million judgment against the Piper individuals hangs on three communications sent by Piper management in January of 1969 in the course of Chris-Craft’s cash-tender offer for 300,000 shares for $65 a share at a time when Chris-Craft needed about 620,000 shares to get control and at a time when it said right in its cash-tender offer that it did not intend by that cash-tender offer to acquire control. Now, the Piper contribution to Chris-Craft’s lost opportunity to get control seven months later hangs in the Court of Appeals’ opinion on a presumption. Chris-Craft tells this Court that but for the acts of others later, it was a sure winner and would have had a 99% chance of getting control; so that against the position of the party, the Court of Appeals nevertheless makes a presumption that the action of the Pipers in communicating as they did in January had caused this lost opportunity seven months later. We say that it is conflict to the lesson of Mills, and I will touch that no further; we've covered it in our brief. On the question of scienter, the District Court as trier of fact construed the two letters that was sent in January -- and I might say they are all reproduced in the reply brief -- construed the statement the management is convinced the offer is inadequate as a reference to the offer as a whole. The Court of Appeals simply disagreed and gave its own construction, concluding that the reference was to price and based on its own construction declared that this letters were materially misleading and therefore, said the Court of Appeals, the Pipers or the Piper management in sending the letters recklessly and knowingly disregarded its obligations to shareholders. Similarly with the other, the third communication, the Grumman press release, the Court of Appeals stated that one of the many terms of the agreement should have been specified in the joint press release put out by Grumman and the Pipers, the term, that is, that dealt with a right to resell the shares to Piper. The Court of Appeals said without that provision in the press release, there was a material omission and therefore, said the Court of Appeals, the Piper management, in issuing the press release, recklessly and knowingly disregarded its obligations to shareholders. Warren E. Burger: You think that might be a relevant factor in a private suit by a shareholders against Piper? Paul G. Pennoyer, Jr.: Yes, we would not question that in a private suit by shareholders, it might be. We do not agree that it was a material omission or that the letters were materially misleading. But certainly it would have more relevance in a suit by a private shareholder. Now, the District Court for Chris-Craft, let me say, would infer scienter -- and this is the only basis of scienter that I've already mentioned -- on the basis of the Piper management’s opposition to its tender offer and to Chris-Craft generally; but we say that opposition to Chris-Craft does not equate with intention to deceive. The District Court heard the witnesses. It heard William Piper; it heard non-Piper family management director witnesses on the question of these communications. Chris-Craft stipulated that the letters were prepared by proxies listed and interviewed by counsel, and Piper testified that counsel advised them as to what needed to be said in the press release. Now, with respect to individual liability, while the whole Piper Board -- Warren E. Burger: We're now moving into the rebuttal time, Mr. Pennoyer. Paul G. Pennoyer, Jr.: Well, then, I will simply close with this statement, that individual liability, a violation of a fiduciary obligation to shareholders, was found on the basis of a single footnote sentence that the Pipers in sending the letters acted in their own interest and not in the interest of the shareholders. Warren E. Burger: Very well. Mr. Liman. Arthur L. Liman: Mr. Chief Justice, and may it please the Court. I'm not going to tell you, as my brother said, a colorful tale or talk flavor; but I think it would be of assistance to this Court if I talk facts, the undisputed facts on which the Court of Appeals' decisions rested. And I think that you'll find that those facts bear little recognition to the presentations that have been made before. As Mr. Justice Rehnquist observed, the issue of violation was not raised in the petitions, and those are given and they were serious violations. And they occurred at every stage of this control contest. At every single state of this control contest, there were violations committed by the petitionist to thwart Chris-Craft, violations which brought forth two SEC lawsuits and one proceeding by the New York Stock Exchange. Potter Stewart: Well, there were two violations. They could hardly have occurred in every stage. There were two, one involving the Bangor & Aroostock Railroad valuation and the other a violation of 10(b)-6, was that it? Two violations. Arthur L. Liman: No, Mr. Justice Stewart, there was a violation in January at the time Chris-Craft made its tender offer, when the Piper family to discourage shareholders from accepting that offer made misrepresentations to them. There were violations when Bangor Punta acquired its shares illegally in violation of Rule 10(b)-6. There were violations when it announced its exchange offer, and there were violations when Chris-Craft’s exchange offer was competing head-to-head against Bangor Punta’s exchange offer. But I really would like to concentrate on the two violations which Your Honor is referring to, because it is also a given in this case that the control that Bangor Punta has and exercises rests on 14½ percent of Piper stock which it acquired illegally, illegally in these two transactions, one the acquisition of 7½ percent for cash, the other 7 percent through a misleading exchange offer, and that without those blocks not only would Bangor Punta not have control of Piper, but at the end of the exchange offers, Chris-Craft would have been leading by 41 to 31 percent, and that was a lead which all experts, including their own, testified was virtually insurmountable. And finally, there is another point that I should address myself to right at the outset, and that is that Chris-Craft didn't come into court for the first time asking for damages; it came into court asking for what my brother Cutler said a tenderer should ask for. It asked for a preliminary injunction in late July of 1969 to preclude, to enjoin Bangor from having the right to vote the illegally acquired cash shares and from consummating its exchange offer. It told the court at that time that if Bangor Punta was allowed to consummate the exchange offer, the contest would be over. And Bangor Punta at that time opposed it. And it said, and I quote from its memorandum in opposition to that preliminary injunction that it should be denied, because even assuming Chris-Craft can prove the allegations in its moving papers at a full trial after Bangor Punta has had the opportunity of properly preparing itself for trial, a money judgment will fully compensate Chris-Craft for any damages. So when -- John Paul Stevens: Mr. Liman, could I interrupt you there? The Court of Appeals when it affirmed the denial of the preliminary injunction didn't rely on that as I read it, but rather relied on the fact that you could have received a permanent order of divestiture, at least as to the 10(b)-6 violation. Arthur L. Liman: Yes. John Paul Stevens: And thereafter, as I understand the case, you waived any equitable remedies and elected to stand on damages. Wouldn't this have not been an appropriate case for going forward on an equitable basis after that point and, if not, why not? Arthur L. Liman: Yes, Your Honor. John Paul Stevens: Microphone, please? Arthur L. Liman: Yes, Mr. Justice Stevens; but we did not abandon the request for divestiture immediately. What happened was that after the Court of Appeals found the violations in Chris-Craft I and remanded to the District Court for relief, Bangor Punta with full knowledge of this proceeded to change the complexion of Piper, brought in a new chief executive officer and took other steps which the Court of Appeals in Chris-Craft II recognized made divestiture unfeasible. But even in Chris-Craft II, we said, "Here we first asked for preliminary relief, they say get damages. Now in Chris-Craft II, they say damages are unavailable. So if damages are unavailable, give us divestiture", and they opposed divestiture there. They have opposed all forms of relief. They want to enjoy the benefits of an illegally gained control. Speaker: Did they oppose divestiture on the ground that it was not appropriate relief or on the ground that they then were disputing the liability issues? Arthur L. Liman: No, they opposed it on the ground that it was not appropriate relief, that Chris-Craft had waived it; and they also, of course, opposed liability, but they opposed divestiture as relief. And the Court of Appeals if you'll note in Chris-Craft II said it really was unfeasible, and I could explain the difficulties with it; but they threw up every obstacle to equitable relief, which is what we were really seeking. We were not seeking, as they suggest in their brief, a bailout. Piper was and still is a most valuable company. Your Honor -- Speaker: Just so I have it sorted out, when did the case finally become just a damage case was after Chris-Craft, the Court of Appeals' second opinion, then? Arthur L. Liman: No. After Chris-Craft I was decided and after they proceeded to make the changes in management, we said to the District Court, "We don't believe that divestiture is practical now, we want damages". When they then opposed damages, we said, "Well, if damages are not available, then we will take divestiture, because an inadequate relief is better than no relief". They opposed divestiture, and when it was remanded finally in Chris-Craft II, the Court of Appeals said divestiture is impractical and unfeasible to award damages. Now, in the early stages of the contest -- and I don't want to dwell on them; that was the period before Bangor came in, and it was a period when Piper committed these violations -- and they tell you that Piper acted in order to oppose Chris-Craft. We haven't disputed their right to oppose Chris-Craft. Speaker: You're talking about the Piper individuals. Arthur L. Liman: The Piper individuals, we never disputed that. That is a false issue here; but they had to oppose it by lawful means, and the president of Bangor Punta, Wallace, testified at trial that when he met them to come into the race, they were espousing a scorched-earth policy against Chris-Craft. Those were his words. Now, Bangor Punta entered in May. It entered by acquiring the Piper shares, and it announced an exchange offer -- Chris-Craft also had a pending exchange offer in registration -- and at that time the contest stood at 33% Chris-Craft, 31% Bangor Punta; so it was nip-and-tuck. And Bangor Punta recognized and the record shows it that the outcome would turn on certain blocks of stock that were held by large holders, principally the fund of funds, the Cornfeld organization. And Bangor Punta was advised that these shares were leaning toward Chris-Craft, they were emotionally committed to Chris-Craft and that unless Bangor Punta could take these shares out from under -- and I'm quoting -- "out from under" Chris-Craft, that Chris-Craft would win and that Bangor Punta’s strategy memoranda show that only by acquiring these shares could it win. Now, there was one obstacle to the acquisition of these shares, and that was Rule 10(b)-6 of the SEC, which as it read and as it was interpreted by the SEC precluded a company that had announced an exchange offer from buying the stock of the target company for cash. Now, this was a matter of real concern to the SEC, because in April it called Chris-Craft and its counsel Kravet down to the SEC, and it warned Chris-Craft that if it bought any of these shares for cash, it would consider it a willful violation subject to criminal penalties. And the counsel for Chris-Craft advised Chris-Craft to comply; Chris-Craft did comply. It cancelled all orders to buy shares for cash, and it didn't buy another share for cash while its exchange offer was pending, even though the opportunities were presented. Now, on the eve of Bangor Punta entering the contest, the SEC published this warning in a release. Bangor Punta stipulated in Chris-Craft II that it read the release; and it not only read the release, but it received a warning from its counsel to comply. Bangor Punta said it relied on counsel. Well, no court here, District Court or Court of Appeals, has found that any of these parties relied on counsel in either the 10(b)-6 violations or the exchange offer. But its counsel testified, and it's what he says and not what's said in a brief in this Court, and he said that while he differed with the SEC's interpretations -- and I'm quoting, and it's in our brief on Page 13 to 14 -- “We felt that under the circumstances we should take a conservative position, and therefore what we instructed management in effect was, or in substance, that in view of that language, we should not involve ourselves in the solicitation of any shares. In other words, we thought that it was proper to buy shares of stock, but only if they were unsolicited and not over an exchange.” And he later went on to testify in accordance with the wording of that rule he instructed his management -- "instructed", these are the words -- not to buy shares from broker dealers. Really, what happened here could be summed up in the difference between the way Bangor Punta reacted to the advice of counsel and the way Chris-Craft did, because Bangor Punta went right out after these instructions and it bought first 40,000 shares of stock from 2 broker dealers, American Securities and Base Securities. It stipulated in Chris-Craft II that it doesn't even claim an exemption on those purchases under Rule 10(b)-6, and in fact its counsel testified that they didn't tell them about those purchases until after they were made; so much for the reliance on counsel. More importantly, they went and bought 80,000 shares from fund of funds, and there they presented an issue of fact, an excuse at trial in Chris-Craft II. They said that these shares were not solicited, and the District Court found against them and it said they solicited them; they actually flew off to the Bahamas to pick them up, and Bangor Punta never even appealed from the finding of the District Court that those shares were solicited. So that, in effect, all 120,000 shares were bought in violation of their counsel’s advice and in violation of Rule 10(b)-6, and it isn't as if Bangor didn't have a remedy if it wanted to contest the SEC’s interpretation, the SEC’s signals and instructions and directions here, because Rule 10(b)-6 contains an exemption provision, which says that if you feel that any particular purchase may not have a manipulative or a proper effect, then you go to the SEC and present your case. Well, if they had done that and if the SEC had agreed with them, then the SEC would have had to give Chris-Craft notice that it, too, could compete for and buy these shares. So, what did Bangor Punta do? It just simply defied its counsel’s advice and went behind the back of the SEC and bought these shares while Chris-Craft was sitting there like a bunch of Boy Scouts. Now, to add -- Speaker: Mr. Liman, may I interrupt you there? You say it went behind the back of the SEC. My recollection of what I read in the briefs is that the SEC had had no communication with Bangor Punta on this issue prior to that time. Arthur L. Liman: No personal … Speaker: They issued a release, what, three days before? Arthur L. Liman: Yes, they issued a release on May 5 … Speaker: Right. Arthur L. Liman: … which Bangor Punta stipulated that it read before it made any of these purchases and which its counsel used to instruct them not to do it. Speaker: Was that the first indication publicly by the SEC of that new interpretation of the meaning of 10(b)-6? Arthur L. Liman: Your Honor, I don't know of any other public ones. It was a matter that was bruited about at the Bar, and it was of a sufficient concern to the SEC that they called Chris-Craft down there and threatened them with a willful violation if they bought. Speaker: Doesn't the record show that Bangor Punta made a public announcement on May 16th that it had made these purchases? Arthur L. Liman: After it had made them. Speaker: Yes. Was that going behind the back, in your judgment? Arthur L. Liman: Well, what was going behind the back, Mr. Justice Powell, was that they did not go for an exemption, which is what the orderly procedure was prescribed by Rule 10(b)-6. Had they done that, then Chris-Craft would have been in the same position as Bangor Punta if the SEC agreed. What was going behind the back was in bypassing the exemption procedure that was established by the SEC, and nobody here challenges the SEC’s right to have promulgated this rule or to have interpreted it the way it did. Speaker: It may possibly be relevant to the issue of intent, might it not? Arthur L. Liman: Well, I think that on the issue of intent, you have a knowing violation here in the sense that they knew of the SEC’s direction, they were instructed by their counsel not to buy, and they went out and bought. And I don't know a case in which the facts quite frame it so strongly as that. Speaker: Mr. Liman, you refer repeatedly to acting contrary to instructions of counsel. I was under the impression that company counsel at least advised Bangor Punta that it was appropriate for it to make these purchases. Arthur L. Liman: No, Your Honor. I have read from the record the only sections that deal with this, in which his instructions were quite clear, don't solicit, and he went on to say don't -- Speaker: Is this inside counsel or company counsel? Arthur L. Liman: This was their house counsel, and this was their house counsel after talking with their outside counsel. And there is no court, as I say, that has ever found that they relied on counsel. Now, they add, really, insult to the injury here by saying that all that they did was run a red light at an empty intersection. Well, Chris-Craft was at that intersection, and it had paid some $44 million to be there, and what had really happened, as I said before, is that while Chris-Craft was stopped at that red light because of the SEC, they went barreling through. Speaker: Mr. Liman, as I understand it and I think I'm correct, there's no question raised in this case as to the fact of the violation of 10(b)-6. So we could assume that everything you say is right, that there was a violation of 10(b)-6 and that your client was injured. The real question, the preliminary question at least, is whether or not given those facts, you have a right of action, an implied right of action, a civil right of action under either 10(b)-6 or 14(e), and that's the big threshold question in the case, assuming everything you tell us is true, isn't it? Arthur L. Liman: That's right, Your Honor. Speaker: So let's get to that. Arthur L. Liman: So let me turn, then, and I'd like to then return to the Bangor & Aroostock Railroad spats, to the whole issue of standing, first under 14(e) and then under 10(b)-6. On Section 14(e), the argument here, the premise of their argument, is that the Williams Act was passed to protect only stockholders and not to establish rules of the game, which would be for the protection of the contestants. I would submit to Your Honors that even if their premise were correct -- and I'll show you that it is not -- that the only way that that protection of shareholders could be enforced is by permitting the contestants to have a right of action, which is the conclusion that the various courts that have considered this have come to. And the reason is simple: Congress recognized that these tender offers always made at a premium above market were of great benefit, great value, to shareholders. Now, who would make a tender offer, who would seek control, if he could be cheated out of it by illegal means? And you were told here, at least Congress was told, by the SEC that the SEC did not have the means to police these controlled contests made by tender offers. The SEC said the time was too short, their resources were too small, there wasn't pre-filing. Senator Williams himself expressed skepticism and pessimism, which I share, about the utility of shareholder actions in keeping these contests honest; and therefore if these rules which Congress wanted to lay down to end industrial warfare were to have any teeth and to have any meaning, then the parties who have the stake in the contest, the contestants, really have to have the power to police each other. Speaker: Was Congress told that? Arthur L. Liman: Congress, it was not; but it was told what I had said before, that the SEC didn't have the manpower and resources to do it. Now, what was in Congress’s mind, because I'd like to address myself to that? In the Blue Chip case, the Court observed that the cause of action under 10(b)-5 was really implied in the absence of any indication by the SEC or Congress that there would be a private right of action. Well, here there was a vast difference. First, it was clear from what was said by both the SEC and by Senator Williams that a principal purpose of this Act was to establish ground rules, a code of fair play, which would protect both sides to the contest, and on the very pages that they cite for the proposition that Congress was concerned only about shareholders. In the Senate hearings, Mr. Cohen said, "I should indicate, however, that the shareholders alone are not the only persons concerned" and noted that if the bill were passed it might serve to help the takeover bidder in certain situations. Speaker: Well, how reliable is that, Mr. Liman? You're talking now about the testimony of a witness, admittedly the Chairman of the SEC, before a Committee. That isn't a very high-grade legislative history, is it? Arthur L. Liman: Well, I think so, because the SEC proposed Section 14(e) here; it wasn't in the original bill. But now let me quote Senator Williams, the Chairman of the Committee. He said, “It is our nation’s legitimate businessmen, as well as the more than 20 million American shareholders, who have the most to gain from this legislation.” Again -- Speaker: You say that remark as supporting the implication of a private cause of action on behalf of one of the tenderers? Arthur L. Liman: I cite that remark and others, such as the desire to avoid tipping the balance, the importance in other parts of the legislative history that the statement in the House hearings that if there were an orderly, supervised process of disclosure and if some ground rules were laid down, not only would the investors be better protected, but everyone would know where he stands. Speaker: Who was that? Arthur L. Liman: That was Mr. Cohen, the Chairman of the SEC, telling Congress that. I cite that for the proposition that Congress was not concerned alone and was not insensitive to the fact that by establishing rules of a contest that you would be offering protection for both sides, just as you have in any contest. More than that, this was a case in which the Act was passed after a long history in the courts of causes of action under Borak under Section 10(b)-5, and Borak was discussed before Congress. Senator Williams was sophisticated; he knew about it. And the SEC in a letter to the House pointed out that the Birnbaum rule was an obstacle to lawsuits against management opposing tender offers and said that because the new language of the Williams Act was rejecting the in-connection-with-sale language, then that obstacle would be removed. Speaker: Now, this again, now, let's see what grade of legislative history this is. This is a letter from the SEC to whom? Arthur L. Liman: To I think it was Congressman Staggers. Speaker: This qualifies as legislative history, in your view? Arthur L. Liman: I think it qualifies as legislative history in determining whether there should be an implied cause of action, because Congress acted on it. Section 14(e) -- Speaker: How do you know Congress acted on it? Arthur L. Liman: I know, because Section 14(e), unlike Section 10(b)-5, does not contain the Birnbaum Blue Chip language about in connection with the sale. It contains language of a much broader nature, and it contains that language after Congress was told that the effect of the language would be to eliminate the Birnbaum obstacle. Speaker: Well, that might mean theoretically that in some future case, somebody might sue in litigation like this who said, "I was deterred from buying Piper Aircrafts stock and therefore, in this kind of case, I'm not barred by the Blue Chip Birnbaum rule". That is the most that that could mean in your submission. Arthur L. Liman: No, it could mean that; and it could go beyond that and say that anybody who's in the target area has a right to sue, because the cases that were coming up in the courts at that time involved the protagonists to these contests. Warren E. Burger: Mr. Liman, as long as you're relying on Mr. Cohen as Chairman of the SEC, when did he use the language that we find in this legislative history, or in the reports, I should say: “We are concerned with the investor, who today is just a pawn in the form of industrial warfare. The investor is lost somewhere in the shuffle.” Arthur L. Liman: He used that on the same page, Mr. Chief Justice, as where he said that the investor is not the only party who's concerned. Warren E. Burger: But then he said also, "The only thing the bill is designed to do is to make effective the purpose of the bill so the information which is to be provided to the investor does, in fact, get to him." Arthur L. Liman: Yes, but he said that the way of making sure that the investor was not going to be lost in the shuffle was by establishing rules of fair play, which would be binding on both sides and which would constitute codes of conduct on which they could rely. And page for page, I think the Court will find in the legislative history, there was more concern expressed about conduct by management than conduct by the tenderer. Now, the commentators at the time -- Speaker: Mr. Liman, before you move on to the commentators, also Chairman Cohen on the same occasion testified, as I understand it, that the Williams Act is not designed to assist the offeror nor designed to assist the management in resisting any plans put forward by the offeror. It is essentially based on a concept that the investor should have the information, so he can arrive at a proper decision. Now, the part you rely on is sandwiched between the part the Chief Justice quotes -- Arthur L. Liman: Oh, I don't think that it's inconsistent. I think, as in the proxy contest, that the only way the investor can get protected is if the parties to the contest can police each other's conduct. Now, when Congress had the bill before it with this broad language removing Birnbaum, there were commentaries, including in The Business Lawyer, all of which construed the fact that this bill was being enacted with this legislative history would confer standing. The SEC, the principal draftsman -- Speaker: Confer standing on whom? Arthur L. Liman: On the tenderer, as well as the target. The SEC, which was the principal draftsman and, as such, this Court has usually said its views are entitled in those circumstances to great weight, went right into court within a matter of months after the passage of this Act and said it confers standing on both sides. And most important, Congress in 1970 amended this Act. It amended the Act after there had been four celebrated cases, which said that there was standing for both tenderer and for management -- Speaker: To collect money damages? Four cases? Arthur L. Liman: Four cases. One of them, Crane, was a money-damage case, Your Honor, and the Congress did nothing to circumscribe these interpretations; it did nothing to diminish this right of action. In fact, acting at the SEC’s request, it strengthened the Act by giving the SEC more rulemaking power. Now, Crane was decided on pre-Williams Act's grounds, giving the tenderer standing; but the Court said squarely that this issue will no longer be with us, because Section 14(e) gives the standing now. Now, the concessions that my friends make -- Speaker: Mr. Liman, before you leave the 14(e) standing issue, would you respond to their argument that even assuming you might have standing in an equity case and so forth, when you get standing in a damage suit, the recovery adversely affects the people who are the principal beneficiaries of the legislation, namely, the general rules of exchange? Arthur L. Liman: Yes. I think that argument that they make first has no applicability to this case, because we did go in for an injunction and they opposed it, and the rule has always been, I think, clear that even if you have a right only to equity, if equity cannot be done, then you can get equity damages, and they certainly did everything to frustrate the granting -- Speaker: But under the facts of this case, apparently there are some Bangor Punta shareholders who exchanged Chris-Craft stock, the value of whose shares will be declined because of the $35 million -- Arthur L. Liman: Now, I want to address myself to that. At the time, that group constituted 4% of the shareholders of Bangor Punta, and when the rescission-offer order was being worked out in the District Court, Bangor Punta made a big issue of the fact that many of these people had sold and that therefore they shouldn't get the benefit of the rescission offer so that there's no indication in this record that there's a single one left. But the argument really proves too much, because what it would say is that it would immunize a party who gains control illegally by making an exchange offer if he had 2%, 3% of his shareholders were former shareholders of the target. Now, look at Chris-Craft. Chris-Craft had more shareholders of Piper accept its exchange offer. Nobody on the other side of the table expresses any concern for them. Their only means of getting any form of restitution and compensation in this case for the injury done is if Chris-Craft has standing to sue. William H. Rehnquist: Mr. Liman, in responding to Justice Stevens’ question, you referred to Bangor Punta as having gained control illegally. Is there any finding of fact either in the District Court or the Court of Appeals that the violations on the part of Bangor Punta were causally or factually connected to their gaining control? Arthur L. Liman: Yes. The Court of Appeals said, and I think it is a matter of mathematics, Mr. Justice Rehnquist, that without each of these blocks, it would have not control. It needed both for control. Their argument on causation is that even assuming they had not acquired these shares illegally, then perhaps they may have on some other day and by some other means acquired them legally. They speculate that. Speaker: There is a factual finding, then, in the record by one of the courts that there was a factual causal connection between the violations and the ultimate acquisition of control? Arthur L. Liman: Yes, the Court of Appeals emphatically states that, and it's a matter of mathematics that their control rests on these illegally acquired blocks. Now, as I say, their argument is that this Court should indulge in the speculation that maybe if they hadn't preempted the shares illegally, maybe they could have gotten them legally. Well, ever since Chief Justice Stone’s opinion in the Bigelow case, I really think that that argument has not been heard. They also make arguments on cause -- Speaker: Don't you think the Court of Appeals also found or had to find that without the control of Bangor Punta that Chris-Craft would have obtained it? Arthur L. Liman: No, the Court of Appeals distinctly did not find that, and it really refused to engage in that kind of speculation. It did find in Chris-Craft III that Chris-Craft’s plurality, which would have been 41 to 31, would have commanded a premium which suggests the value of it, and as I say the experts all testified. I think Bangor Punta’s expert said that with 41 to 31, he doesn't see how Bangor Punta could have overtaken Chris-Craft. But I think the problem is that it's one that was eluded to by Mr. Justice Holland as a former trial lawyer, the problem of trying to prove what somebody would have done years after the event, when actually he now was faced with the decision because his shares were obtained illegally. It's an possible burden of proof, and the court was content here to base its holding on a fact that without those illegal blocks, Chris-Craft would have enjoyed a rather substantial lead. Now, as I say, their concessions to legislative history, including the '70 amendments, are to say that Chris-Craft should have the power to seek injunctive relief. Well, Borak I thought ruled out the distinction between injunctive and legal relief; but in any event, we did seek it, they stopped us; and second, they say, "Well, maybe management or the target company should have the right to sue, because all the courts have agreed that the target company has the right to sue, and if you give the target company the right to sue, but not the tenderer -- Speaker: That is, the courts have agreed that the target company has the right to try to get an injunction. Arthur L. Liman: Yes. And if you give the target company the right to come into court, then what would tip the balance more contrary to Congressional intent than not to permit the tenderer to come into court? I would like to address myself to 10(b)-6 standing issue. The District Court and the Court of Appeals found on 10(b)-6 that there was standing under Birnbaum. In the 1973 petition, Bangor didn't even raise that; in fact, it didn't even raise Birnbaum as an obstacle in Chris-Craft II, and there was a good reason why the courts found that there was standing, because Chris-Craft wasn't the bystander of the Blue Chip case; Chris-Craft was a buyer, it was bidding for the very shares that were illegally preempted here, and it had a resting -- Speaker: You're referring to standing as whether Chris-Craft has a cause of action. Arthur L. Liman: That's right. And here is a case in which we invested 44 million and we're bidding for these shares, and they went and preempted them illegally. The Solicitor General in his amicus brief on cert at Page 17 notes that since Section 14(e) prescribes manipulative and deceptive conduct, that clearly an act that violates a manipulation rule gives standing under Section 14(e), and if you are really contemplate it, I think an analogy suggests itself to all of us. This was as if in a football game the referee blew the whistle, and one player goes while everybody else has stopped play, runs to the unprotected goal, comes back and says it should count, because the referee really shouldn't have blown his whistle; but you'd have anarchy if you could permit that argument, and you'd have anarchy if that kind of argument could be made where somebody really willfully violates a rule of the SEC. Speaker: Mr. Liman, shareholders ultimately pay the bill for these things, strongly supported by what Senator Kuchel said when he introduced the bill and what Senator Williams said and what other witnesses said that their concern was for the shareholder and no one else. How do you protect the shareholders by putting a burden on them into millions of dollars in judgments? Arthur L. Liman: You have two groups of shareholders, of course, here. You have the Chris-Craft shareholders, who have lost what Bangor Punta is being asked to pay, and therefore it's not a matter of shareholder versus some other character; it is a battle of shareholders versus shareholders. Now, Bangor Punta’s shareholders have remedies against their own directors. Directors can get and in almost in all cases do get liability insurance, and really the whole purpose of the Williams Act was to have prevented what happened here, was to have prevented people from going through red lights to get control and then later coming in and saying, “Well, there should be no remedy; we should be able to keep this illegally obtained control. Our victims should have no recourse”. I really wonder whether in the light of what has happened, even with this judgment; but considering the injury that Chris-Craft had whether I would have given the advice that Kravet did, which is to abide by the law. Maybe the soundest advice in these contests is get control by whatever means you can and worry about it later, and that's what they pursued here. Now, on the -- Speaker: Mr. Liman, let me go back to the 10(b)-6 standing. I'm just not quite sure I understand your position. You contend that Chris-Craft was a purchaser within the meaning of the Birnbaum rule or that the Birnbaum rule does not apply to 10(b)-6? Arthur L. Liman: I would contend both, that because 10(b)-6 does not have the in-connection-with language that Birnbaum should not be applied to it; but I contend more than that that Section 14(e) gives us that standing, and that in any event Chris-Craft was not only a buyer here to the tune of $44 million; it was a bidder for the very stock which they illegally preempted. Speaker: I don't understand that relevance of 14(e) to the 10(b)-6 standing issue. Arthur L. Liman: Well, it's because I think that the 10(b)-6 violation has to be viewed in the contest of a tender contest, and Section 14(e) was adopted for the regulation of the conduct of tenders ... Speaker: Oh, I see what you're saying. Arthur L. Liman: … and it does contain language that you shouldn't engage in deceptive conduct, and I contend that what happened here violates that, too. Going beyond that, on scienter, the Court of Appeals has been made out here to have applied some standards that were pre-Hochfelder and that didn't really conform with Hochfelder. Well, in the first place, the violations here were knowing violations. The violation of Rule 10(b)-6 was a knowing violation, the violations by the Pipers were knowing violations characterized by a scorched-earth policy, and the violation on the BAR -- and I didn't get into the facts, though they're set forth in our brief -- couldn't have been more knowing. It had to be judged in a context of competing exchange offers, which were perceived by the public to be identical. Christ-Craft got 112,000 shares; they got 111,600 shares. And here they had an asset at an answer to a question from the bench. This railroad in the first two of the last five years had earned one-third of Bangor Punta’s income. They had an asset which was being proffered to the public as having a value of 18 million on a market-price valuation in a section of their prospectus which was updated to September 1968, and the District Court said that no director of Bangor Punta could have believed that it had that value, and the reason that they couldn't have believed it is that on May 22, the board had received a recommendation unanimously from its committee to sell this railroad for 5 million; the only dissenting voice was that it should be sold at 7 million. They now come into this court and say, "Well, of course we never believed that it had this $18 million market value, and we never contended otherwise." They did, in fact, contend otherwise in the Court of Appeals, and if I had the time I could quote from their brief there. The fact is that they presented this railroad as having an $18 million value; it had a $5 million value. They did not warn or even hint in their prospectus that this railroad was on the block and that this kind of loss could be incurred. The loss would have wiped out the earnings, and you would have therefore had a red number in their prospectus going against the black number in the Chris-Craft prospectus. It would have wiped out 36% of the … Speaker: I had understood that the District Court found that there had been no agreement on the part of Bangor Punta to sell the BAR railroad stock at the time the prospectus was issued and after the sale it could , as I recall, in October. It could have been much later. Arthur L. Liman: Right. The District Court found that there had been no agreement to sell. It found that no director could have believed that it had the value; and, in fact, it found also that the head of the negotiating committee, Hutchins, had reached what he believed to be a conclusive agreement with the buyer, which was memorialized in a memorandum of the buyer which is set forth in our brief and which said that the sale would take place two months after the exchange offer was completed, and it occurred exactly then. But the important thing was that the District Court said they couldn't have believed that it had this inflated value. Now, they say that the Court of Appeals applied improper standards of scienter. Well, Judge Gurfein said that their conduct was recklessness equivalent to willful fraud. Judge Mansfield said, citing Texas Gulf Sulphur, that they ignored red flags and warning signals. Judge Timbers said that their conduct was worse, and their scienter arguments were dismissed in Christ-Craft III where they said it was just negligence and wasn't reckless as being frivolous. That's strong words for the Second Circuit to use unanimously. There was no finding in this record that they relied on professionals. The only advice they ever got from an accountant was that if they sold this railroad, they'd have this enormous loss of $13 million. I observe that my time is finished. My brief covers the other points. Warren E. Burger: Very well, Mr. Liman. Mr. Cutler, you have about five minutes left. Lloyd N. Cutler: Thank you very much. John Paul Stevens: Mr. Cutrer, could I ask you two questions that you covered in your brief? Lloyd N. Cutler: Yes, sir. John Paul Stevens: Number one, would you agree or disagree that the management would have standing under 14(e) that's one question, and the other question, I want you to refresh my recollection. Why is the scienter relevant to our problems here in view of the fact that liability is a given? That covers your -- Lloyd N. Cutler: Your second question was the first one I wanted to take up, Justice Stevens; so if I could, I'd like to answer that first. When I said that the issue of violation was not in the case, even as to 14(e), I should have mentioned that as our certiorari petition itself states and as the questions present state, we raise the question of whether damages are recoverable under 14(e) absent scienter in the Hochfelder sense. So that is an issue in the case. Could you repeat your first question again, Justice Stevens? John Paul Stevens: Okay. The first question is whether management of the other contestant would have standing under 14(e), and logically I'm ... Lloyd N. Cutler: Right. We would concede that the corporation as distinguished from management interested in its perks, its salaries or fees in case it got thrown out, but that the corporation has standing certainly to sue for an injunction to protect the target shareholders and perhaps even to sue for damages for the corporation, which would protect the target shareholders. John Paul Stevens: Now, in your counterclaim in the District Court, was that the same position you took there? Was it -- Lloyd N. Cutler: Piper. John Paul Stevens: Well, it wasn't yours; rather, the Piper individuals took the position, I guess, that they had standing, didn't they? Was there not a counterclaim? Lloyd N. Cutler: There was a counterclaim by Bangor Punta, which was a counterclaim once Chris-Craft had sued us; but our answer to Bangor Punta -- it was a stipulated answer -- specifically raised the question of what we've been calling here their standing to sue, whether there was liability for damages. John Paul Stevens: But then if you should admit that management would have standing in a contest like this, doesn't that make it sort of a one-sided standing rule, that one side has standing, but the other does not? That's what troubles me a little bit about it. Lloyd N. Cutler: I was speaking of the management having standing to sue the -- John Paul Stevens: To sue for the corporation. Lloyd N. Cutler: -- tender offeror. In this case, of course, we have two tender offerors. John Paul Stevens: Yes. Lloyd N. Cutler: But let's say one tender offeror for an injunction or to recover damages perhaps for the benefit of the target shareholders who are all members of that corporation. And I did say in answer to a question from Justice Stewart earlier that perhaps even a competing tender offeror would have standing to sue for an injunction to prevent injury to the shareholders. John Paul Stevens: Right, I understand that. Lloyd N. Cutler: But the test, as I think the Chief Justice’s opinion in Rondeau makes very clear, is, can you show some injury to the shareholders. And while I'm on that point and you have further questions, Justice Stevens, while it is true, of course, that some of the exchanging Piper shareholders owned Chris-Craft stock, it would seem to me, number one, that their injury is not of an injury of the kind we need consider here, because the principal violation is one relating to the Bangor tender offer, the one they didn't accept. They accepted the other offer. Moreover, given a case in which some of the target shareholders are on one side of the damage and some are on the other side, Congress might very well have left that particular issue alone and said no damage remedy, just as the District Court really did here. I'd like to come next to the question of whether the 14½% which Mr. Liman says were involved in the two violations was decisive. You have an express finding on that from the District Court that after both of those violations at the time that the preliminary injunction was denied that neither party has gained control and both are in a position to do so. In fact, the Court of Appeals, when it was affirming that finding, said each side had an equal opportunity to gain control. What the Court of Appeals did was to misinterpret Mills -- and this is a point I don't have time for now, which will be covered in our brief -- to presume both that the target shareholders would have rejected the offer, and of course Mills invokes no presumptions and turns only on the point that the target shareholders were entitled to a clean and accurate prospectus or proxy, whether or not it would have affected their offer; and secondly, he made the presumption, which Mills certainly doesn't authorize because it said damages should be awarded only to the extent they can be proven, that the violation caused Chris-Craft to lose its opportunity for control. Is that all the time I have? Thank you, sir. Warren E. Burger: Thank you, gentlemen. The case is submitted.

John G. Roberts, Jr.: We'll hear argument first this morning in Case 105 on our original docket, Kansas v. Colorado. General Six. Steve N. Six: Mr. Chief Justice, and may it please the Court: Article III makes a clear distinction between the Court's appellate and original jurisdiction, and expressly grants Congress power to make exceptions and regulations for appellate jurisdiction, but Congress is not granted the same power over original jurisdiction. John G. Roberts, Jr.: That's an extremely sensitive clause in Article III. We can decide this case without relying on the distinction you just discussed, can't we? Steve N. Six: Well, I think can you, and the Court certainly can interpret the statute not to even reach the original jurisdiction of the Supreme Court and avoid that constitutional conflict. And I think the stronger reading of the statute arrives at that very result. The statute at issue, the cost provision, 28 U.S.C. section 1920, states: "A judge or clerk of any court of the United States may tax as costs the following. " And it lists six subparagraphs, including subparagraph 3 at issue here, Fees and Disbursements for Printing and Witnesses. The statute has two terms in it that are defined, 28 U.S.C. section 451 that is defined but does not appear in the cost provision, and that is "Justice of the United States". "Justice of the United States" is defined as "the Chief Justice and the Associate Justices of the Supreme Court. " The cost provision says "a judge". III judges. Antonin Scalia: But, on the other hand, "court of the United States" is defined specifically to include the Supreme Court. So you have a contradiction no matter which way you flip it. On the one hand, it says "judge", which does not include the Justices of the Supreme Court. On the other hand, it says "court of the United States", which does include the Supreme Court. So why should we pick one -- one answer to the contradiction rather than the other? Steve N. Six: You don't have to pick. And you're correct, "the court of the United States. " is defined to include the Supreme Court. But the strongest reading of the statute gives meaning to all of the words in the statute, and it says you can be a judge who appears in the court of the United States. And if you think about it, there's a circle of judges that are defined here and a circle of courts that are defined here, and where the two overlap, where you are both a judge and in the court of the United States, the statute should apply. John G. Roberts, Jr.: What about-- Steve N. Six: And that-- John G. Roberts, Jr.: --It also says "clerk". We may not be judges, but we certainly have a clerk. Steve N. Six: --You do, and 28 U.S.C. section 1911, another provision in title 28, specifically deals with the Supreme Court Clerk. And throughout title 28, the Supreme Court is treated differently than the lower courts. Anthony M. Kennedy: Is 1911 a stand-alone provision that would justify relief for you, or do we have to also refer to the general cost statute? Steve N. Six: I don't think the Court would refer to the general cost statute in its original jurisdiction cases at all or any authorization from Congress. 28 U.S.C. 19-- Anthony M. Kennedy: Well, but let's assume that we think Congress can control this -- this issue, this question. Now, I'm asking if 911 isn't a stand-alone section so that you can interpret it without reference to 1920. Steve N. Six: --I mean, I would -- if your assumption is Congress has the power to do it and has done so through 1911, I read 1911 more as simply a grant of the discretion the Court already has. They are turning over to the Supreme Court the power to have the clerk set costs. Anthony M. Kennedy: If I think this case is controlled by 1911, do I have to refer to 1920? Steve N. Six: No. I don't believe you have to refer to 1920. Anthony M. Kennedy: Why can't you rest your case just on 1911? Steve N. Six: Because in the original jurisdiction of the Supreme Court, Congress isn't given power to make exceptions or regulations over original jurisdiction. And in the 219 years of the Court's original practice, they have never referred to a congressional cost provision, and-- Anthony M. Kennedy: Are you saying that 1911 doesn't cover expert witness fees because it's not included within the term "other necessary disbursements"? Steve N. Six: --I believe the expert witness fees in this case were vital to the resolution. They were-- Anthony M. Kennedy: Were they within 1911? Steve N. Six: --I don't believe they were other incidental disbursements. That's not our position. Anthony M. Kennedy: Other necessary disbursements. Steve N. Six: Other necessary disbursements. Anthony M. Kennedy: Incidental to the case. You don't that think that covers expert witness fees? Steve N. Six: If -- if this Court determines that Congress has the power, and it's done so through -- since 1911 -- has the power and done it from 1911, I certainly would accept that position as the result. However, I would point out to the Court that I think the expert witness costs and the work was vital to the resolution of the case here. Samuel A. Alito, Jr.: If your reading of the statute is correct, then I take it we would have the discretion to decide what would be appropriate expert fees. Is that correct? Steve N. Six: Absolutely, and-- Samuel A. Alito, Jr.: And if that were -- if that's so, why shouldn't we exercise that discretion by saying that the expert fees that are available in a case in the original jurisdiction of this Court should be the same as the expert fees that would be available in a district court? Maybe they are too low in the district court, but why should there be -- why should we, as a discretionary matter if we have the discretion, provide for radically different fees depending on the court in which the case originates? Steve N. Six: --Clearly, the Court has the power to make that rule for original cases. However, the original jurisdiction was developed when the States agreed to submit and ratify the Constitution, submit their sovereign immunity to resolution in the original jurisdiction to handle unique disputes between the sovereign States. And as the Court said in Florida v. Georgia in 1854, "The analogies and rules and foundations of law that apply to private parties are not necessarily a good fit for sovereign States. " Anthony M. Kennedy: Well, but Justice Alito is saying we have discretion, we look for guidance, we have guidance from Congress. They have adhered to the $40 a day limit in very important cases; why don't we just say, Justice Alito is suggesting, that this is -- that this is a good guidepost for us and we will follow it? Steve N. Six: Because what Colorado's position is, is they are telling you that the Special Master's hands were tied; that the Special Master couldn't even exercise that discretion in a bright-line rule that would say $40 a day. Anthony M. Kennedy: We are saying it's our discretion, and our discretion is guided by what Congress has suggested so there is uniformity in the system and so forth. Steve N. Six: Clearly, the Court would have the power to do that. However, there has only been approximately 200 original jurisdiction cases in the 219 years of the Court. To suggest that the rules-- Ruth Bader Ginsburg: In all those -- in all those cases has the Special Master ever called a court witness, that is a court expert, appointed a court expert, and if so what is the pay rate for such a witness? I mean, courts of the United States, district courts, occasionally appoint witnesses, court witnesses as distinguished from parties' witnesses. Do you know if that's happened in Special Master situations? Steve N. Six: --I can tell you it didn't happen in this case. I certainly can't speak to whether it's happened in other cases involving Special Masters, so I don't know the answer to that. Certainly 1920 makes a distinction for court-appointed experts rather than the expert witnesses appearing under subsection 3 of 1920. I think the important point to consider, though, is in the original jurisdiction the Court in its 219 years of developing essentially an interstate common law in these cases has never relied on the trilogy of cost statutes that the Court discussed in Crawford Fitting, which is essentially Colorado's position: You have to apply Rule 54(d) first to have the Court even have the discretion to award costs; then you get to 1920, which the Court has said is the arena of costs; and only after that do you get down to 1821, which tells you the limit is $40 a day. Anthony M. Kennedy: How do we -- how do Special Master fees work? The Special Master always has fees, and the parties I think usually divide them. How does that -- how is their authority to order them-- Steve N. Six: Sure. Rule 53 of the Federal Rules of Civil Procedure deals with Special Masters in the lower courts. It has no application here and wasn't used. The Special Master's fees, which total approximately a million dollars, just shy of that, were resolved by the parties after the Special Master was allowed to exercise discretion on that area of cost-- David H. Souter: Well, what if they hadn't -- what if the parties hadn't resolved it? Steve N. Six: --If they hasn't resolved the Special Master's-- David H. Souter: Yes. How would -- how would the Special -- what would be the authority of this Court to make an order that the Special Master be paid X dollars? Steve N. Six: --Well, I think the authority of the Court comes from the order appointing the Special Master to handle the case and to do the specific things that were-- David H. Souter: Okay. We just -- we just regressed one step. Where does the authority come from? Steve N. Six: --To appoint a Special Master? David H. Souter: Yes. Steve N. Six: It's an inherent authority the Court has in original jurisdiction cases. David H. Souter: So that the authority to compensate is inherent? Steve N. Six: The authority to compensate is inherent. In the Judiciary-- David H. Souter: Are you making -- would you make an inherent authority argument here? Steve N. Six: --Yes. The-- David H. Souter: Regardless of original jurisdiction and appellate jurisdiction, would you say that this Court simply has the inherent authority to -- to -- in effect to decree these sorts of things? Steve N. Six: --Well, again there is a distinction between appellate and original. And, focusing on original, I think the Court has entirely the authority. The Judiciary Act of 1789, which gave the Court exclusive jurisdiction over these disputes, didn't set forth any procedures to govern the disputes. That's always been carefully preserved to the discretion of the Court to apply to each unique dispute. John Paul Stevens: General Six, under your reading of the statute, 1911 particularly, would the Court have authority to charge your fees to your adversary, shift attorney's fees? Steve N. Six: Yes. In the original jurisdiction the Court would have the inherent authority to do fee-shifting if the-- John Paul Stevens: Did you make such a request in this case? Why should -- why should attorney's fees be treated differently from expert witness fees? Let me put it that way. Or should it be treated differently? Steve N. Six: --The Special Master should have the discretion to consider all the costs and the unique circumstances of the case. In this case, we chose expert witness fees-- Antonin Scalia: We should have the discretion. Why do you keep talking about the Special Master? He's just -- he's just our amanuensis. Ultimately it's our discretion, isn't it? Steve N. Six: --It is, and the benefit of having the Special Master make a recommendation is we could have gone through these different categories of costs and come up with a recommendation. The Court certainly could have learned-- John G. Roberts, Jr.: I take it the usual practice is for the parties to settle this matter and submit an agreed amount to the Special Master; is that correct? Steve N. Six: --The way it's worked in this case is the Special Master has provided guidance, like on the Special Master's fees. The Special Master suggested it wouldn't be unfair to award them two-thirds Colorado, one-third Kansas. After that the parties resolved it, just like we resolved every other issue of cost where the Special Master was allowed to apply that discretion. John G. Roberts, Jr.: So why didn't -- then why are we here? I mean, we are talking about limited amounts. So much more is at stake on the merits, and why wouldn't the parties just say, well, when it comes to Special Master fees this is what we are going to agree to. It doesn't have to be limited to $40. You can agree as part of a global settlement to whatever you want. Steve N. Six: Well, the Special Master's fees we resolved. The experts fees at issue here, of course that bright-line rule was drawn by the Special Master, and he never was allowed to make a recommendation to the Court to consider that. In balancing -- the remedies in these cases are highly equitable remedies that-- John Paul Stevens: Would you just answer my question of a moment ago? Why should expert witness fees be treated differently from attorney's fees? Steve N. Six: --Well, in this case they should be treated differently because the model at issue that the experts for Kansas developed, the H-I model, was used to prove our claims at trial, which would have-- John Paul Stevens: You used lawyers to prove your case, too. Steve N. Six: --Excuse me? John Paul Stevens: You used lawyers to prove your case, too. Why should they not be compensated? Steve N. Six: Because we considered the special circumstances of the model. It proved the claims at trial. It was adopted by the Court in 2004 in Kansas v. Colorado to monitor compliance in the Arkansas River Basin. It's the water use -- it's applied by the Colorado State water use rule. So it was special features like that that we wanted to present to the Special Master to explain why the fees should be fairly balanced and divided in a way other than he did. John Paul Stevens: I don't understand that to be an answer to why you didn't also ask for attorney's fees. Steve N. Six: Well, in a particular case where perhaps a order of the Supreme Court wasn't followed or some other situation developed, fee shifting may be appropriate. In this case we felt the expert model we developed was so vital that it would be persuasive to the Special Master and fair and equitable to award it to us. Ruth Bader Ginsburg: Do you know whether any other-- Steve N. Six: So that was the distinction. Ruth Bader Ginsburg: --You didn't know, in answer to my last question, what the practice had been, but with respect to expert fees in other original jurisdiction cases, has the Court ever deviated from the $40 or, when it was $30, $30? Steve N. Six: In original cases the Court has never referred to any of that trilogy of cost statutes discussed in Crawford Fitting. Ruth Bader Ginsburg: But have they ever approved a Special Master's recommendation of a rate for the expert witness that deviates from the $40? Steve N. Six: I think the answer to that is yes and I would direct the Court to New Jersey v. New York in 1931, which was a division of the waters of the Delaware River. And the Court pointed out in that opinion that a mass of evidence was presented to the Special Master, and on costs the Court said: "The cost of the cause shall be divided 35 percent to New Jersey, 35 to City of New York. " and so on. The "cost of the cause" I would argue is the cost to get the case to the point where it was resolved. In the boundary dispute-- Ruth Bader Ginsburg: Do you know -- do you know whether there were expert witnesses in that case? Steve N. Six: --It does not say in the published opinion exactly what the cost of the cause is. However, from a fair reading of the -- the water distribution issues, I wouldn't imagine it would be possible to do that without experts. But I would point the Court to the boundary dispute cases where the Court has discussed the costs of surveyors, mappers, geographers, historians, and divided the costs in boundary disputes equally between the States -- not each State to bear their own cost, but divided them equally. And the -- the experts that are involved in resolving a boundary dispute, I think, are no different than the hydrologists and engineers and the type of experts that we used in this case. Stephen G. Breyer: You're right. They -- all different -- they did a lot of work on this. I -- I know they did a lot of work on this. Congress has a statute, and the statute is: We don't care if the witness is Albert Einstein, Steven Spielberg, or the local zookeeper. Okay. We don't care. We don't care if they did a lot of work or a little work. We want them to be paid $40 a day, period. It's too much trouble to figure out how much work they did. That's what we want. That's the law. Now, Justice Alito said: I agree with you for argument's sake; we are not bound by that rule. But I take it his question, which I heard no answer to, is: Assume you are right; we are not bound by the law; still, why shouldn't we follow it? Steve N. Six: Because in the original cases the Court has always tried to reach an equitable balance-- Stephen G. Breyer: Have you any example where Congress had a statute which says every court in the United States must pay da-da-da, whatever that number is; it's $382.50, okay. Now, despite that clear statute, this Court for exactly the same thing paid a different amount. Is there any such case? Steve N. Six: --I'm not aware of that-- Stephen G. Breyer: Okay. Is there anything in the -- in the nature of litigation? And there might be. I'm not asking it as a rhetorical question. Is there anything in the nature of original jurisdiction lawsuits that, as a general matter, would call for higher fees to be paid for witnesses, or to make a distinction between expert witnesses and others, or to do other things that would complicate it? I'm not speaking of your case. You have a wonderfully strong case in your case. I want to know about in general, in original actions. Steve N. Six: --I would suggest the only difference is the parties. And the Court in its 219 years-- Stephen G. Breyer: If anything, the parties are in a better position to pay the money than the average person. Antonin Scalia: Well, I assume -- I assume your answer is that -- that it's our business, and we don't have to agree with Congress; that we -- we may think $40 a day for the zookeeper and for Albert Einstein is ridiculous. And, therefore, if it's up to us, we would adopt a different rule. Isn't that your answer? Steve N. Six: --That's exactly my answer. And if you think -- if Congress can adopt a congressional-- Anthony M. Kennedy: --Well, I'm not sure that answer is -- is at all adequate. Number one, what is there, as Justice Breyer pointed out, that's so different about this case? Let's say one landowner secretly and intentionally is stealing another landowner's water, and -- and he has no legal right to do that. And the only way the injured landowner can recover is to hire a very, very expensive expert, a hydrologist. And by the time he goes to court, he is already going to lose the benefit of the damages. Congress has said too bad. That's the way it is. Why isn't it that way with States, especially, as Justice Breyer said, when States can really afford the -- afford it better than the landowner. What's the difference? Steve N. Six: --The difference is the Court has indicated for original cases: These are such disputes of a serious magnitude that can affect whole populations that the model case for even taking a case is where the acts between the States would be a causus belli, a type of thing that would lead to war. The rules-- John G. Roberts, Jr.: I haven't seen -- I mean the $40 limitation makes absolutely no sense, does it? I mean I never saw an expert who would agree to spend the day appearing in court worth being called an $40. I mean the fact that -- I guess I'm just repeating Justice Scalia's question. The fact that Congress has picked an arbitrary number with no basis in reality doesn't mean that we should do the same. Steve N. Six: --I would agree. The Special Master's fees, for example, for one person -- and he was an excellent Special Master -- were almost a million dollars. The appearance fees for the 22 experts Kansas had amounted to approximately $30,000. So that difference there, I think, demonstrates the very unfairness of the fact-- Stephen G. Breyer: It's not unfair to have a rule which says each party pays his own experts, win or lose. That's the rule, isn't it? Steve N. Six: --I don't think that's the rule in original jurisdiction cases. Stephen G. Breyer: Why? Steve N. Six: At least the Court has never said that. The Court has-- Stephen G. Breyer: If you lose this case, if we were to follow Congress, we would have adopted a rule where, because the $40 is trivial, each party pays his own experts. Is that right or wrong? Steve N. Six: --I think that's correct, but we didn't lose. And the Court found that Kansas proved that Colorado violated the compact for over -- for over 50 years by clear and convincing evidence. But one point I'd like to make-- Stephen G. Breyer: Well, can we do this then? I think maybe in many cases that are technical of nature it might be quite a good thing for the losing party to pay the winning side's lawyers. Steve N. Six: --The Court would have that ability to do that in original jurisdiction-- Stephen G. Breyer: Well, should we do that, too? If we are going to have them pay the experts, why don't we have them, the losing side, pay the lawyers' fees? That would be quite a revolution, but-- Steve N. Six: --Because in the original jurisdiction cases involving prevailing parties or litigious cases, the Court has traditionally and historically awarded the prevailing party costs. And if Congress can make a congressional limitation on cost, Congress could pass a statute that says: You have to take all original jurisdiction cases, or you can't use Special Masters, or you can't use certain Special Masters in cases involving Colorado and Kansas. Antonin Scalia: Could it say that for the lower courts? I mean, you are -- you are trying to distinguish what it can say for the Supreme Court when the Supreme Court is the trial court vis-a-vis what it can say, and has said, for the lower courts. Steve N. Six: Yes, it could say that for the lower courts. Antonin Scalia: Why? Steve N. Six: Because-- Antonin Scalia: You think that, so long as Congress could not create the lower courts at all, once it creates them it can -- it can tie their hands to any sort of absurd rules? Steve N. Six: --I think they could pass a rule like they did, Rule 54 -- 53, which allows for Special Masters, and they could through the Rules Enabling Act pass a rule that says you can't use Special Masters. I think you get into whether that's-- Antonin Scalia: I -- I just don't agree with your assumption that just because Congress need not have created any lower Federal courts, the only Federal court required by the Constitution is this Court, therefore once Congress creates them, it can do whatever it wants with them. I -- I don't agree with that. Steve N. Six: --Well, I would certainly focus more on the original jurisdiction issue here and haven't focused as much on that issue, but-- John G. Roberts, Jr.: When we award the -- the Special Master's fees in original cases, do we specify who will bear those fees? Steve N. Six: --Yes, you do. And -- you do in the cases that have discussed costs. For instance, in boundary dispute cases you have suggested that the cost -- the costs will be divided equally; in litigious cases, that they will be awarded to the prevailing party. John G. Roberts, Jr.: Do we include the Special Master's fees as part of the costs that are allocated? Steve N. Six: Yes, and in this case the parties have agreed to that and never made an issue about that. And there is no-- John G. Roberts, Jr.: Well, why -- why did the parties agree to it if we do it? In other words, if we say in our orders who bears the Special Master's fees, why -- why would the parties agree to it? Steve N. Six: --Well, in this case -- maybe I misheard your question. The order appointing the Special Master did not resolve the issue of fees. John G. Roberts, Jr.: Right. Steve N. Six: And the parties did not agree to that ahead of time. It was an issue to be determined and decided at the end of the litigation. Ruth Bader Ginsburg: Isn't it -- isn't it customary for it to be divided 50/50? I mean, we periodically will approve the fees that the Special Master charges, and then they are divided between the parties. And I thought that they were divided 50/50. Is that not so? Steve N. Six: Well, as the case progressed, the Special Master submitted bills that were divided 50/50. At the conclusion of the case the parties suggested reasons and special circumstances that should allow the Special Master to apply discretion. He then suggested it wouldn't be unfair to award the Special Master fee costs two-thirds Colorado, one-third Kansas because of the unique features of the case. And the parties then settled the Special Master fees with that guidance. Anthony M. Kennedy: Of course, I think you gave the answer earlier. Rule 53 allows for the -- an order to say that one or both parties shall pay the Special Master fee. So if we are going to follow other analogies, we don't have much problem here with expert witness fees -- pardon me -- with Special Master fees. It's under Rule 53. Of course, you say we don't have to follow that as a model, but it is a model if we -- if we were to look to congressional and -- and to other rules. Steve N. Six: It is a model; however, the Court has always carefully preserved its discretion to treat each dispute between the sovereign States as a unique dispute. And the Court never even enacted an original action rule until 1939, so after 150 years. And in 1939 the Court enacted Rule 5, which just set up the bare minimums of commencing the action. And Rule 17 today has essentially the same framework that tells the parties how to start the action but reserves all the other rules to the discretion of the Special Master. It does point to the Federal Rules of Civil Procedure and the Rules of Evidence as guides but not binding, mandatory rules that tie the Court's hand. Antonin Scalia: What is magical about original actions? I mean, what -- what is magical is that we are the only court that is required by the Constitution. But we are -- we are not just the only court for original actions in -- in -- in all appeals. Can Congress prescribe division of costs and expenses in the appeals that come to us from the lower Federal courts? Steve N. Six: Well, the Court has, in 1913, determined that -- excuse me, in 1912, that when a case is affirmed, the Supreme Court can adjudge costs for damages and delay. So they have directed, I think, a -- a regulation at the appellate jurisdiction, but never at the original jurisdiction. John G. Roberts, Jr.: You mean Congress has done that? Steve N. Six: Congress, I'm sorry. I would like to reserve the remainder of my time for rebuttal. John G. Roberts, Jr.: Thank you, General. General Suthers. John W. Suthers: Mr. Chief Justice, and may it please the Court: The Special Master in this case found clear direction from the statutes and rightly so. Section 1821 of title 28 is unambiguous. It provides that a witness in attendance at any court of the United States shall be paid an attendance fee of $40 per day in addition to travel and accommodation allowances. Section 451 of title 28 defines 1948. Because witness fees are only at issue in the Supreme Court in cases of original jurisdiction, it's apparent that Congress intended the limits set forth in 1821 to apply in such cases. John G. Roberts, Jr.: So what if they said, in original actions no fees shall be allowed to any Special Master appointed by the Supreme Court? John W. Suthers: Chief Justice, it would then be up to the Court to decide whether that's somehow an intrusion into your-- John G. Roberts, Jr.: If we allow-- John W. Suthers: --authority-- John G. Roberts, Jr.: --If we allow Congress to regulate fees in our original jurisdiction in that matter, it seems to me that we've given up the principle and we are just negotiating over price. John W. Suthers: --It would not be the first time that you've allowed Congress to legislate some aspects of your original jurisdiction. Congress has told you in what is now section 1251 that your original jurisdiction is not entirely exclusive. Only State versus State is exclusive, and all the rest of your original jurisdiction is nonexclusive. John G. Roberts, Jr.: Isn't this an area, though, where we should be particularly sensitive? In other words, one reason that we were given original jurisdiction in these cases is that the States were afraid of what Congress would do in its own courts, the courts it set up -- might set up under the Constitution. I think it would be surprising if you told the States at the framing that Congress gets to regulate this original jurisdiction where you, for example, can sue the Federal Government, that -- I think that would be surprising. It would not be regarded by them as a significant safeguard. John W. Suthers: Chief Justice, if it was such a sensitive issue, why is it we are now in 2008 and this Court has never decided to enact any kind of rules-- Ruth Bader Ginsburg: But we don't know-- John W. Suthers: --as to actual witness fees. Ruth Bader Ginsburg: --General Suthers, do we know what has happened in past original jurisdiction cases? Maybe it hasn't come up because other Special Masters have said, we'll give the expert witness a reasonable fee for services commensurate with the qualifications and the work that the expert has done. We don't know if that has or hasn't happened in the past, do we? John W. Suthers: Justice Ginsburg, we -- we looked at it very carefully -- and it's difficult to research -- but we could not find an original jurisdiction case where there was an award of witness fees outside the -- this $40 per day limitation. Ruth Bader Ginsburg: Did you find any cases where the Special Master had appointed his own witness as distinguished from the parties? John W. Suthers: No. We did not. But-- Ruth Bader Ginsburg: But you -- but you recognize that if the Special Master appointed a witness, or the Court, that that witness would be paid a compensatory fee? John W. Suthers: --Whatever the Special Master determined was appropriate. That's correct. Ruth Bader Ginsburg: Now, in a -- in a case like this one, where the nature of the work that the expert did seemed to be very helpful to both sides, isn't it odd that if the Special Master chose the court expert, that expert would be compensated fairly, but if you have one party calls an expert who renders great service to the Court, to both sides, doesn't get compensated, isn't that an anomaly? John W. Suthers: The Special Master, Justice Ginsburg, found clear direction from the statute and did not believe that he had an option in the matter. If you're talking about the unfairness of it, number one, this situation here is no more unfair to Kansas than any litigant in Federal court. And, number two, it's an appropriate matter to take to Congress. The last time they changed it was 1990 from $30 to $40. I think it's time to revisit it. But it is, in fact, what Congress has dictated should be the compensation-- Antonin Scalia: It's not a matter of unfairness to Einstein anyway. I mean, you know, the expert witness is going to get his money. John W. Suthers: --That's correct, Justice. They certainly did in this case. Antonin Scalia: The question is-- John W. Suthers: Both sides can vouch for that. [Laughter] Antonin Scalia: --The question is whether one side can get some money from the other to help pay for it. Do you happen to know whether at the time the original jurisdiction of this Court was established, there was such a thing as the charging of expert witness fees? John W. Suthers: Justice Scalia, I do not. We do know-- Antonin Scalia: I don't either. John W. Suthers: --that it's 1853 when for the first time Congress, desiring to have uniform fees, began the structure of expert witness fees. It started at $1.50 a day, in 1853. David H. Souter: Do you -- may I ask you a statutory question, just about the application of the statute? As -- as you have pointed out, if the $40 applies, it's because it is, in effect, a determination of a particular item under section 1920: Judge and clerk of any court of the United States may tax its cost. My question is this: One of the items covered by 1920, one of the items that a judge or clerk may tax, is fees of the clerk. Under section 1911, which relates entirely to the Supreme Court, there is a provision that the Supreme Court may fix the fees to be charged by its clerk. That is totally redundant if 1920 covers the Supreme Court of the United States. Doesn't it follow, therefore, that section 1920 was -- despite its reference to any court of the United States, doesn't it follow that that statute was not intended to apply to the Supreme Court? And doesn't it follow from that that either the Supreme Court's authority is to fix the fees if this is a fee to be charged by the clerk or, in the alternative, that there is no statute on it at all? But the main point is, unless 1911 is totally redundant in -- in referring to fixing the fees to be charged by its clerk, then 1920 must not cover the Supreme Court. John W. Suthers: Justice Ginsburg, 1920-- David H. Souter: I'm greatly flattered. [Laughter] John W. Suthers: --Justice Souter. Justice Souter, sorry. Justice Souter. David H. Souter: You're not the first to have done that. [Laughter] John W. Suthers: 1920 -- there may be some redundancies in it, but it's much more expansive than is 1911. It talks about court reporter fees, printing-- David H. Souter: Oh, we didn't -- no question about that. I recognize 1920 goes a lot further. But there's no -- there's no need in 1911 to say that the Supreme Court may -- may fix the fees to be charged by its clerk if the Supreme Court is already covered by 1920. John W. Suthers: --Justice Souter, I think if you look at the history of it, 1911 was enacted at the same -- there's a separate statute -- statute that applies to the court of appeals and to the district courts. I think it's like 1913 and 1914. So I -- I -- I don't think that you can-- David H. Souter: In other words, if it's redundancy, it proves too much, is what you're saying? John W. Suthers: --Yes. David H. Souter: Okay. John W. Suthers: I think the important thing about 1911, in response to Justice Kennedy's question, it is limited to fees charged by the Supreme Court clerk, costs of serving process, and incidental disbursements. It does not address witness fees. In Arlington-- Anthony M. Kennedy: Do you think it includes printing fees? John W. Suthers: --1911 does not, unless-- Anthony M. Kennedy: You don't -- you don't think that-- John W. Suthers: --Incidental disbursements? Anthony M. Kennedy: --what number here? You don't think that 1911 would allow the clerk to charge for printing fees? John W. Suthers: As an incidental disbursement, it may. But it clearly does not address witness fees. Anthony M. Kennedy: Well, but the reason I ask is because printing -- in 1920, printing and witness fees are in -- in the same sentence. John W. Suthers: And I -- I don't know whether printing would be considered incidental disbursements. Anthony M. Kennedy: So if you allowed printing, then I think you would allow witnesses under 1911. John W. Suthers: I do know that in Arlington Central School District v. Murphy, citing Crawford Fitting, this Court made clear that no statute will be construed to authorize taxing witness fees and costs, unless it refers explicitly to witness fees. Stephen G. Breyer: It is -- I mean, if you want to really get a little complicated, the -- you have -- you have 11, and 11 talks about the Supreme Court fees. And then we have 20 and that talks about all the other fees, right? Okay. So the thing is, you can't pay money in the United States unless have you some authorization, but 1911 gives the Supreme Court some authorization to fix fees. Now, we look back at 1821. And 1821 tells you how much mileage per diem and subsistence will be. It says he will be paid an attendance fee of $40 per day. Doesn't say you couldn't pay him more. Just says that's what he is entitled to. Now, of course, in the lower courts, you can't pay him more because there is no authority to pay him more. But in the Supreme Court, there is authority to pay him more. That comes out of 1911. I mean, I grant you that this is -- what I'm actually doing here is I'm trying to avoid this problem of whether Congress can start legislating the details of original jurisdiction rules and so forth. Just -- there is some desirability here constitutionally to prevent ourselves from going down that road. That's -- I'm deliberately being gimmicky, but what do you think of this gimmick? John W. Suthers: Well, not much. [Laughter] Stephen G. Breyer: That's fair. [Laughter] John W. Suthers: This Court -- this Court has decided three cases regarding the application of 1821. Stephen G. Breyer: Yes. John W. Suthers: Cases in which litigants, like Kansas, were trying to get around, in Federal court, this witness fee limitation, starting with Crawford Fitting. In that case, you held that a prevailing seeks -- who seeks reimbursements for fees paid to its own expert, is limited by the statute unless we're talking about a contract or express statutory authority to the contrary. Stephen G. Breyer: Which part did they think limited it? Was it 1821 they thought limited it? John W. Suthers: Yes. And by the way, there is a contract here. It's the compact between -- the 1949 compact between Kansas and Colorado, and-- Stephen G. Breyer: In an ordinary case, if a witness doesn't -- never does go to court, but just goes to a deposition, that's the only thing, he goes to a deposition, does he get paid the 40 dollars? He goes to a lawyer's office; he's never in attendance at a court. But do they count that as being in attendance at a court? John W. Suthers: --I don't believe so, Justice Breyer. Stephen G. Breyer: Well, where is this-- John W. Suthers: But it is liberally construed. Stephen G. Breyer: --What? John W. Suthers: It's liberally construed. You don't have to-- Stephen G. Breyer: If that isn't attendance at a court, where did these witnesses show up? John W. Suthers: --These witnesses show up for trial. Stephen G. Breyer: Where? Where did they have this proceeding? I don't know. It wasn't here; it wasn't in this-- John W. Suthers: It was in California. Stephen G. Breyer: --Where? John W. Suthers: Pasadena, California, for 272 days. Stephen G. Breyer: In the courthouse? John W. Suthers: Yes. Tenth Circuit Court of Appeals. They show up; they are in attendance; it's not just on the stand; all they time they're there, all the time they're traveling back and forth. It is liberally construed. John Paul Stevens: May I ask -- just to put one thing on the table if I could. How do you deal with the problem that Justice Ginsburg raises: If a court wants to appoint an independent expert and pay him more than $40 a day? Do you say that's flatly prohibited? And if it's not flatly prohibited, what is the authority for doing so, other than 1911? John W. Suthers: Justice Stevens, nothing prevents higher compensation for a court-appointed expert. We are talking about-- John Paul Stevens: But what authorizes it? Doesn't 1911 authorize it? John W. Suthers: --I don't believe 1911 does. John Paul Stevens: Well, then what does? John W. Suthers: The inherent authority of the Court. John Paul Stevens: Well, why don't you have inherent authority to pay expert witness fees a little more money, then? John W. Suthers: Because the statute addresses that. It does not address-- Antonin Scalia: The Constitution says that no money shall be -- shall be withdrawn from the Treasury except by appropriation made by law. I think -- I think you need a law to spend -- to spend the government's money. John Paul Stevens: You're not spending the government's money; you're spending the litigant's money. John W. Suthers: --Well, in the case of the -- of the Court appointing an expert, it is typical at the conclusion of the case as part of the costs for the judge to determine what was an appropriate award the losing party -- what they should pay as part of that expert's expense. But that's not what we are dealing with in 1821. Stephen G. Breyer: Well, what about -- I mean now, as long as I'm starting down the road to outer space, why not -- could we say, look, they were very impressive models these people did; on both sides they had terrific experts, very expensive. And would we have the authority to say to the master, although you didn't treat them as your experts, you should have done, for purposes of paying them. John W. Suthers: Justice Breyer, you are the Supreme Court and if you found that this statute ---- [Laughter] Stephen G. Breyer: I don't want to be unreasonable about this. [Laughter] John W. Suthers: Yes. If you found that this statute was an intrusion which somehow violated your, you know, authority as a Court, you could do that. But why would you want to get into the business -- going to Justice Alito's point -- you have so far refrained from enacting your own rules on this highly procedural matter of expert witness fees. John G. Roberts, Jr.: Well, we would want to get into the business because it's our business; and it seems to me that if you yield on a basic point like this, that you're giving up, who knows how much? John W. Suthers: Justice Roberts, I'm not -- you have done it before in -- in highly procedural matters where you do not -- no one here is doing anything that prevents your exercise of original jurisdiction, that expands your exercise of original jurisdiction. The cases also say that your original jurisdiction is self-executing, doesn't need any statutory implementation; but this is a -- a totally procedural matter, much as -- in fact, I think less of an intrusion, when the -- when the Congress said to you these cases will not be exclusive jurisdiction. Even though they are part of your original jurisdiction. This is a very procedural matter. Antonin Scalia: Could I ask you what -- what are the fees to be charged by its clerk, referred to in 1911. "Supreme Court may fix the fees to be charged by its clerk. " and then the next paragraph says "the fees of the clerk". Is that what the first paragraph refers to, the fees of the clerk? Or does it mean other fees that the clerk charges which could include costs? Are the costs part of the fees to be charged by the clerk? John W. Suthers: I don't believe so, Justice Scalia. Antonin Scalia: They are not? Fees of the clerk -- in 1920 says "fees of the clerk and marshal. " but that's to be taxed as costs. Right? A judge or clerk can tax as costs the following. 1911 says Supreme Court may fix "the fees to be charged by its clerk. " And you say that doesn't include costs. Boy, it's a messy, messy bunch of statutes, don't you think? John W. Suthers: Not -- not a whole lot more so than others I've seen. [Laughter] Antonin Scalia: Well-- John W. Suthers: By the way-- Antonin Scalia: --Well, that's no comfort. John W. Suthers: --it has been pointed out to me in response to this compensation of court-appointed experts that that is specifically addressed in section 1920, paragraph 6, compensation of court-appointed experts is covered there. So there is that statutory authority which you indicated there should be. Antonin Scalia: Yes, but that taxes costs, and it doesn't say the Supreme Court may fix costs. May fix the fees to be charged by its clerk, which you say don't include costs. John W. Suthers: I don't believe they do. Antonin Scalia: So that wouldn't allow to us fix that. Anthony M. Kennedy: Well, except 1911 may do two things: Number one, it may authorize the Supreme Court to fix the fees to be charged by the clerk. And then in the second paragraph it provides for taxing of those fees, the cost of serving process, and other necessary disbursements. So it does two things. Antonin Scalia: Well, it tells you how they are to be taxed. It doesn't say what their level is to be. May be taxed against the litigants as the court directs, but I don't see any authority to fix them -- fix the amounts. It's not a very good statute, really. John W. Suthers: If I may, once again going to the issue of why I think some uniformity is important in original jurisdiction cases, is because so many of the cases are not exclusive jurisdiction, and there is in fact a need for uniformity here. And the fact that this Court has not chosen to issue a conflicting rule, I think, is very significant. If in fact you had set an appropriate fee for expert witness fees in case original jurisdiction, and Congress came along and said, gee, no; it shouldn't be that, you should be stuck with $40, then we might have some kind of a constitutional issue here, but absent that, I simply don't-- John G. Roberts, Jr.: What if-- John W. Suthers: I would urge you not-- John G. Roberts, Jr.: --What if Congress had done nothing? In other words, let's say they haven't addressed costs at all. Would we be able to set what we think are reasonable attendance costs? John W. Suthers: --I would concede that you -- you probably could. But-- John G. Roberts, Jr.: Pursuant to what authority? John W. Suthers: --Your inherent authority over original jurisdiction cases. John G. Roberts, Jr.: Well, if we have inherent authority in original jurisdiction cases, where does it -- how come it disappears whenever Congress decides to legislate in the area? John W. Suthers: Because Congress is entitled -- you've recognized their right to deal with certain types of issues. I find it very interesting that Kansas cited Florida v. Georgia, because that case says Congress has undoubtedly the right to prescribe the process and mode of proceeding in original jurisdiction cases as fully as in other Federal courts, but that the omission to legislate such process does not deprive the Court of its constitutionally conferred jurisdiction. This is something that you have historically-- John G. Roberts, Jr.: Is the substantive level of fees a mode of proceeding? John W. Suthers: --Chief Justice, I would argue that the setting of fees is a procedural matter, and it is -- and has to do with the mode of proceeding in a case. That's correct. John G. Roberts, Jr.: Is there any -- do you think $40 a day for an expert is a realistic assessment of what experts charge? John W. Suthers: Absolutely not, Chief Justice. And in fact, of course, as I think Justice Breyer pointed out, Einstein does not only get $40 a day. We pay them a lot of money, but Congress has decided $40 is what they -- what they get. Congress ought to revisit it. There's no question about it. Ruth Bader Ginsburg: Parties pay a lot -- a lot of expenses, and then they may be -- may or not be reimbursed to the prevailing party, but the prevailing party in our system certainly doesn't get anything like the full cost of the litigation. John W. Suthers: That's correct, Justice Ginsburg. They certainly do not. Experts in this case were paid lots and lots of money, and they don't even get that when the court has -- it's not -- at least the trial courts-- Antonin Scalia: Maybe lawyers get even more. And you don't get that back either-- John W. Suthers: --That's right. That's exactly right. David H. Souter: May I just get clear on your view of inherent power? As I understand it, you're -- when you answered it, in a situation in which the slate is completely clean, we would have inherent power, you're using "inherent power" in effect to be a kind of default power. If Congress hasn't acted, somebody has got to do something. That's got to be us, so -- so we would have the authority. But you are not using the term "inherent power" in the sense of being a power which is sort of essential and indefeasible by Congress in any respect. Is that correct? John W. Suthers: That's correct, Justice Souter, to the extent that there was nothing applicable to this and it came before you, should expert witnesses get compensated some -- some amount, Congress hasn't spoken on it, I would think, as a matter of default, you could say yes. And -- but-- David H. Souter: Do you think there is -- there is any inherent power in, let's say, this Court -- just keep to it simple -- that Congress in effect could not eliminate? For example, if Congress passed a statute saying the Supreme Court of the United States shall not have authority to punish direct contempt, would that statute be constitutional in your view? John W. Suthers: --No, Justice Souter, it would not be because then it's interfering with your ability to do what courts do as a central matter. You-- David H. Souter: Isn't that a pretty slippery slope then that you're on? Because if in fact parties are going to be reluctant to -- to hire the kind of experts that are necessary, unless they think that at the end of the day there is going to be some kind of an equitable disposition of the expense, at that point that starts interfering with the conduct of the kind of business that the Court ought to be engaged in. John W. Suthers: --Justice Souter, it's not telling you how to decide cases. And there is another case before the Court in which Congress reinstated time-barred cases. That's the kind of thing that intrudes on your judicial function. Setting witness fees doesn't come close to doing that. Antonin Scalia: --What if Congress -- really you think Congress could set any -- there's not some point at which it is so destructive of the process here? What if Congress provides that the winning -- that the winning party shall pay the costs of the losing party? Can Congress do that? John W. Suthers: It's -- I think the question would be, Justice Scalia, is that a fundamental interference with the Court's ability to decide cases? I would suggest it might be to the -- that they do something wholly irrational like that. David H. Souter: But that would be a matter of due process, not a matter of inherent power, I take it. John W. Suthers: I believe that's correct. That's correct. Members of the Court, Special Master Littleworth spent a lot of time on this case. He has been fair, competent, and conscientious in resolving all the issues before this Court, including this issue of expert witness fees. It was the plain language of the statute and the clear direction of the case law that led him to his conclusion that the expert witnesses' fees were limited by statute in this case. We would ask you to deny Kansas' exception to the final report, and that the Court should enter the proposed judgment and decree. Mr. Chief Justice, if there are no other questions from the Court, I'll conclude my argument. John G. Roberts, Jr.: Thank you, General. General Six, you have four minutes remaining. Steve N. Six: 1920 didn't appear in 1948 magically. It came from the 1853 Fee Act. And the language in the Fee Act was, "A judge shall tax costs". "A judge" -- it says, "Costs shall be taxed by a judge or clerk of the court. " I'm sorry. And 1920 says, "A judge or clerk of any court of the United States. " In 1853, as the Court has discussed in Alyeska Pipeline, the Fee Act applied to the circuit and district courts. It says that in its title. And 1853 meant a lower court judge. In 1920, we have exactly the same word -- "a judge" who can tax costs -- and we have a definition that Congress tells us it means exactly the same thing. Under Colorado's reading, 451 in title 28 defines "Justices" as a separate group. So that's not-- Ruth Bader Ginsburg: But the Constitution uses the word "judge". A "judge of the United States" is a Supreme Court Justice or a judge of an inferior court. Steve N. Six: --And certainly Congress isn't tied to the way the word is used in the Constitution, no more than the paper I got on my way in here told me not to refer to any of you as "judges". The point, I think, is that the Fee Act was carried forward to 1920, and the language is almost the same. The only thing they have added is a definition of "court of the United States". And if after 168 years, Congress is going to tread on the Court's original jurisdiction, they ought to at least have some express language that they intend to do that -- do so, where the Court could at the very least adopt a clear statement rule that would require Congress to say, "We are going to do this now. " "We've never done it in our history, but now after 168 years we are. " Not only that, Colorado's position relies on the fact that they did this in 1948, and it's gone unnoticed by the Court, any major treatise, or commentary-- Stephen G. Breyer: I'm sorry. I got mixed up on my dates. The words "in any court of the United. " --what the words are now is "in any court". It says "court of the United States includes. " 451 courts. When did that language come in? Steve N. Six: --In 1948. Stephen G. Breyer: In '48? Steve N. Six: Yes. Stephen G. Breyer: So the inclusion wasn't there till then. Now, normally, in the '48 revision, the rule is they intended to make no substantive change. When they did intend to make a substantive change, they said as much. So is there anything in the history of that that suggests they intended to make a substantive change here? Steve N. Six: No, there isn't. And they changed-- Stephen G. Breyer: Nothing? Steve N. Six: --They changed-- Stephen G. Breyer: So, in other words, the language "in addition to the courts listed in section 451 of this title. " that -- those words I just said have no appearance in the statutes before 1948? Yes or no. Steve N. Six: --Yes. Stephen G. Breyer: They do appear before? Steve N. Six: No. Stephen G. Breyer: No, they do not. Steve N. Six: First time in 1948. Stephen G. Breyer: First time in 1948. So they were put in there by a revisor. Steve N. Six: Yes. Stephen G. Breyer: And there is no indication the revisor intended to change the meaning that pre-existed. Steve N. Six: Yes. Stephen G. Breyer: Okay. I got the argument. Thank you. Steve N. Six: And they did change something else. They changed "shall" to "may", and they gave a reason for that change. Thank you, Mr. Chief Justice. John G. Roberts, Jr.: Thank you, General. The case is submitted.

William H. Rehnquist: We'll hear argument next in number 91-1826, William P. Barr, Attorney General, v. Catholic Social Services. Mr. Mann, you may proceed. Ronald J. Mann: Thank you, Mr. Chief Justice, and may it please the Court: This case arises out of the provisions of the Immigration Reform and Control Act of 1986 that granted amnesty to certain longstanding illegal aliens. The case presents two class actions challenging regulations the attorney general promulgated to interpret eligibility requirements under the act. In one case a regulation interpreting a proviso that allowed an alien to gain relief even if he had brief, casual, and innocent absences from the United States, in the other a regulation interpreting the requirement that the aliens' immigration status have been continuously unlawful since 1982. In each case a class of aliens filed suit in a Federal district court in California and secured a ruling holding the challenged regulations invalid. Both of the district courts then proceeded to require INS to grant the benefit of the ruling not only to aliens who filed applications before the program expired, but also to aliens who applied after the deadline in May 1988. The Government appealed and the Ninth Circuit affirmed. Those orders have continued in effect while the case has been pending and INS has been obligated to continue accepting applications for the more than 4-1/2 years since May 1988. It has accepted about 300,000 so far. In our view the decision of the court of appeals is wrong for two separate reasons. First, the district court did not have jurisdiction to review INS determinations regarding whether or not members of the respondent class were eligible for relief under the act. And second, even if it did have jurisdiction it was improper for the district courts to grant relief to aliens who failed to apply before the program expired in May of 1988. On the first question the key factor is the framework for judicial and administrative review set forth in section 1255a(f). On its face that framework bars any immediate judicial review of a decision denying an application. Rather, an alien can seek relief from a court only after deportation proceedings have been instituted and completed and the alien is subject to a final order of deportation. Thus although the statute allowed aliens to seek relief from the agency while retaining their confidentiality and anonymity, they could not obtain judicial review of an adverse agency decision without giving up their fugitive status, either by surrendering-- Sandra Day O'Connor: Well, now did the... did INS, in your view, have authority to determine that the regulations were invalid in a... in an ordinary proceeding brought by an alien? Ronald J. Mann: --No. INS is bound by regulations that are issued by the attorney general. Sandra Day O'Connor: Right. Ronald J. Mann: And so if an alien had filed an application for relief, and many aliens in this situation did, the application would have been denied and undoubtedly the denial would have been affirmed by the legalization appeals unit if the regulation remained valid at the time the appeal was taken. The regulations were withdrawn before the... just before the application period expired, so some of the adjudications would not yet have been determined by the legalization appeals unit. But what that would do is that would place that alien in exactly the same situation as any alien whose application was denied. For example, if the INS determined as a fact that the alien first entered the United States in 1983 his application would be denied. The LAU, if it agreed that the evidence in the record supported that, would deny the... would deny the appeal and the alien could do nothing. If the alien wanted to challenge that, he would have to give himself up and submit to our immigration laws and then challenge it in the court of appeals after deportation proceedings. Sandra Day O'Connor: Well, didn't we have a virtually identical provision before us in McNary against the Haitian refugees? Ronald J. Mann: Yes, in... in... in the relevant respects we believe the jurisdictional provisions in McNary were the same as these, and the difference is that this case involves a different type of claim. The claims at issue in McNary were claims that could not have been reviewed in the court of appeals on the administrative record, but the fundamental claim was that INS was deciding... denying applications on the basis of evidence that was not in the record. And so if the court of appeals had reviewed the administrative record it could not have ascertained whether or not the claim was correct and would not have been able to evaluate it. And if that was the only remedy that the aliens had, they really would not have had effective judicial review. By contrast, the claims here are that INS would have improperly denied applications for legalization, and the only thing that the court of appeals needs to know to evaluate that claim is the core information that's required to determine whether he's statutorily eligible. And that information would be in the administrative record. That's the information that's put on the form I-687, the application that the alien files. He would file the application. It would be denied, probably denied by the LAU. The court of appeals would have that application and it would be perfectly capable of making its own decision as to whether or not those facts were sufficient to justify relief under the act. Sandra Day O'Connor: Well, I guess the operative language in section 1255 (a)(f) is a determination respecting an application. Ronald J. Mann: Yes, ma'am. Sandra Day O'Connor: And it certainly is arguable, anyway, that that means a determination that the INS itself could make. Ronald J. Mann: That's correct, and in our view the determination in this... the determination in this case is the regulation which INS made. INS determined that certain things had to be true for an alien to be entitled to relief. The determination relates to an application of a member of the respondent class because the only claim that the respondents can make is that if they filed an application it would have been denied, or that they did file an application and that they expected that it would be denied. So because they're challenging its effect on them it's a determination respecting each of their individual applications, and that's how we read the statutory language to apply. David H. Souter: Mr. Mann, is there a... is there a different problem with impossibility as a result of the INS's practice... I think it was called front desking, that is to say simply not accepting the applications of those that they were satisfied under the regs would fail? So that as a matter fact, given the front desking procedure, there is... there was no way that a given applicant could get his application to the point of a final determination, subject to review. Ronald J. Mann: Now that goes to the second question, the remedial question, but-- David H. Souter: It does go to that. Ronald J. Mann: --Yes. David H. Souter: Doesn't it also go to the question of the appropriateness of applying McNary here on... in effect on an impossibility of review theory otherwise? Ronald J. Mann: No, we don't really think it does. In our view the jurisdictional question is... this case was filed in November of 1986 several months before the application period started. The district court is presented with a complaint and the question is whether it has jurisdiction over that complaint. Now, at that time there were 18 months, more or less, maybe 17 months left before the application period was going to expire. And we don't think that there's any way that the district court could have determined at that time that there was no way these people could file, particularly if you look at the... so I don't think that's really relevant to the jurisdictional question. The jurisdictional question, it seems to me, turns on whether this is a... whether the determination they challenged, which is the regulation, is a determination respecting an application in light of the way that this Court interpreted that phrase in McNary. Now-- David H. Souter: With respect to the possible application or, in your view, extension of McNary, in McNary what if the... what if the... what if the action in this case had been filed after the 1-year period began and the period... and the practice of front desking was known and, in fact, was... was pleaded, would that affect the appropriateness of a McNary kind of jurisdictional determination? Ronald J. Mann: --Well if you're... if you're filing a suit challenging INS's practices of accepting applications... for example, if the complaint isn't that INS has an improper regulation for determining whether you are eligible for relief, but instead that INS... INS officers are refusing to accept applications, it seems to me that that is a... that is a type of claim that arguably might be covered by McNary, but that's not the claim that's before the Court in this case. The only people with respect to whom INS appealed in this case are people who did not apply for relief under the act. I mean if you look at... and if you look in the record you can see where the district courts defined the groups to whom they extended relief. But we didn't appeal with respect to the people who applied for relief. And it's our position, INS's position, that if you went into an INS office and if you attempted to apply for relief and they refused to accept your application... which, as we mentioned in our reply brief, would have violated INS's policies as set forth in the legalization manual... if you did that, we believe that you have, in fact, applied. The statute doesn't say that in order to meet the statutory time deadline you have to force INS to accept your application and put a stamp on it. What the statute says is that you have to apply. David H. Souter: Okay. Ronald J. Mann: And it's our view that if you walk into INS's offices and you attempt to apply, it's one thing if they say we don't think you're going to get relief and so you shouldn't waste the money. But if they say no, we refuse to accept your application, we will not take it, you have applied. And there are cases that are cited in both parties' briefs in which INS did similar things and INS has granted relief to those people. For example a person-- --On the second question, which is what I was talking about with Justice Souter, whether or not it was proper for the district courts to accept jurisdiction over these cases in the first place, it certainly was improper for them to grant relief to individuals who did not satisfy the requirements for relief that Congress articulated in the statute. The first of the four statutory requirements for relief is set forth in section 1255a(a)(1), and that requirement is that the alien have filed an application during a specified 12-month period. Because the Government did not appeal the district court's judgments with respect to aliens who filed applications, as I just mentioned, none of the respondents before this Court satisfied that requirement and thus they are not eligible for relief because of section 1255a(a)(1). The provision that they're seeking to avoid is not a statute of limitations. This is not an individualized filing requirement that can be subject to equitable tolling. What they're seeking to evade is one of a series of statutory deadlines that Congress put in the statute to determine exactly which group of illegal aliens were going to get relief. The first requirement was that the alien have been here since 1982 and that his status had been unlawful. The second requirement was that the alien-- John Paul Stevens: Mr. Mann, could I just ask one... the statute's kind of long and I forget one point in it. I know the statute provides that this timely application... the attorney general shall adjust the statute if there's an application filed within a year and so forth and so on. Does it ever say that he shall not adjust the statute... the status if an application is not timely filed? Ronald J. Mann: --It does not expressly say that, but it's our view-- John Paul Stevens: It's a negative application. Ronald J. Mann: --That the only... the only basis that INS would... all of the people in the class are, by definition, people who are illegally here. John Paul Stevens: There's no statutory... at least no express statutory prohibition against the attorney general granting an extension of time. Ronald J. Mann: I don't... I don't think the attorney general views it that way. The problem is that the only basis that the attorney general has for allowing these people to have any lawful status in this country is if they meet each of the four requirements in 1255a(a). If they don't meet those requirements, he... he doesn't really have a basis for allowing them to stay here lawfully. He has... as I mentioned to Justice Souter, if... if for example, there's a case where a person came in on the last day and attempted to apply and the person said no, come back tomorrow, you don't have an appointment, he determined that that person had applied and... and granted relief to that person because they came in and did everything they did and an INS person wrongfully-- John Paul Stevens: Well, where does he get the authority to do that? Ronald J. Mann: --Because the statute requires a person to apply, and the attorney general has interpreted the word apply to include a person who comes into the office and attempts-- John Paul Stevens: But you think he has no statutory authority to simply say we will... we will... because our offices are crowded and overloaded and everything, we will grant a 30-day grace period or something like that. Ronald J. Mann: --I don't think the attorney general would have had the authority to do that. I think he would have just-- John Paul Stevens: But there's no statutory prohibition against that, though. Ronald J. Mann: --There's no express statutory prohibition on that. Antonin Scalia: Mr. Mann, can you tell me if the provisions of the regulations that are under challenge here could have been adopted, instead of by regulation, through adjudication? That is to say could... could the... the INS, instead of having a regulation that said when you leave the country, you know, it breaks the chain of your... of your residence, could the INS simply have decided in the first case that came before it involving that, that indeed, this individual did not have proper residence and... and then could have continued to apply that precedent in later cases. Could it have done it that way instead of by regulation? Ronald J. Mann: Yes, we think he could have. I would... I would say the attorney general was obligated under section 1255 (a)(g) to implement... to pass regulations and he did that before the application period commenced. But obviously some cases, no matter what the... how specific the regulations are, are going to arise and it will raise legal questions that are not explicitly discussed in the regulations. And what would happen in those cases is the application would be decided by the legalization appeals unit. Antonin Scalia: Right. And I gather that if this hadn't been included in the... if this detail had not been included in the regulations and had been decided in adjudication, there'd be no doubt that this provision of the statute did not cover it. So whether the... you know, whether the statute covers it or not, on the... on the respondents' theory, depends upon whether it was adopted by rule or by adjudication. Ronald J. Mann: I believe that respondents would probably take the same position even if this was adopted by a legalization appeals unit decision. Antonin Scalia: Is that right? Then... then what conceivably would the statute not cover? Ronald J. Mann: I believe that their view is the only thing the statute does not cover is if an individual... particular individual files an application and it is denied, on I'm not sure what particular basis. I guess if it's denied on the basis of something that... that would not deny anybody else's application. A... a-- Antonin Scalia: It's hard to think of something that would. Ronald J. Mann: --Well, in most cases I believe that's true because the requirements for relief are fairly generalized; you have to be here since 1982 unlawfully and you have to have not left since 1986. The brief, casual and innocent absence actually is one of the most soft provisions in the statute, because there obviously is some play in that particular phrase could mean, but being here since 1982 is a clear provision. But there are a lot of things that... legal questions that arose under the act and some of them... most of them were decided by regulations, but some of them were decided by the LAU. Talking about the second question again, as I mentioned the statute has three different time deadlines that aliens have to meet to fall within the class of aliens who are eligible for relief. They have to have been here continuously and unlawfully since 1982, they have to have been here continuously since the act was passed in 1986, and they have to have sought relief within the first 18 months after the act was passed in 1986. Now, under that scheme respondents' failure to seek relief before the statute expired cannot be justified on the basis of their individual circumstances. They just didn't make themselves eligible for relief, any more than a person who didn't come to the United States until 1983 would be eligible for relief. The seriousness with which Congress viewed this particular requirement, the timely filing requirement, is particularly clear from section 1255a(f)(2). Although subdivisions (3) and (4) of 1255a(f) require judicial review and a level of administrative appellate review generally for determinations about eligibility, they expressly bar any judicial or even any administrative review with respect to an application that's denied as being untimely. Now in light of that, we think it's particularly inappropriate for a court to believe that it's empowered to extend the deadline, when Congress has attempted to put the... that particular question beyond judicial review entirely. Sandra Day O'Connor: Well, Mr. Mann, I guess we said in Irwin that at least there is a rebuttable presumption that statutory time limits incorporate principles of equitable tolling. Ronald J. Mann: Yes, Justice O'Connor, that's correct. But we don't believe that Irwin substantially changed this Court's jurisprudence on that issue. What... what Irwin says is that generally Congress believes that statutory filing deadlines should be equitably tolled. Now, there are clearly certain types-- Sandra Day O'Connor: Well, do you think this is a time limit that could be equitably tolled? Ronald J. Mann: --In our view this is not the type of time limit that this Court was talking about in Irwin, and I'd like to address that for a moment. There's a distinction to us between an individual filing deadline and a statute of limitations, for example, which will say you have to file for relief within 6 years after your cause of action arises. And that type of deadline turns on an individual's fact circumstances; when did the cause of action arise? And that's the type of deadline that we believe is at issue in Irwin. Now sometimes it may be a statute of limitations, sometimes it may be called something else, but that's one type of statutes to which we think equitable tolling generally applies. This case and Pangilinan, however, involve something different. In these cases Congress has established a program and says the program is over. The program in the Pangilinan case ended shortly after World War II. The program in this case ended on May 4th, 1988. And we don't think that that type of deadline should be subject to tolling, because it's... it's a requirement for relief. Now, even if it is subject to equitable tolling, it seems to us that the... that this is not remotely the type of case as to which equitable tolling would be appropriate. What... what INS and the attorney general did that is offered as a justification for equitable tolling is that INS issued regulations explaining the circumstances under which it believed people would be eligible for relief. It said if you were gone from the United States without advance permission, you're not eligible. Now, whether that was right or wrong, that's just a regulation explaining the circumstances in which you may or may not be eligible for relief. And what respondents should have done and what anybody who wants a benefit that's offered by the United States Government should do, is you apply for the benefit and if you don't agree with the agency's interpretation you challenge it. And these people had exactly the same opportunity for judicial review as everybody else under the act, and they chose not to apply and so they're not eligible for relief. I would point out that quite a number of the people who were in this situation did apply for relief and they've already gotten relief. And even if this suit had not been filed in the district court, they would have gotten relief when the injunction... when the regulations were withdrawn, because INS would have had to given the relief sooner or later. When the person got to the court of appeals they could not have deported them because the court of appeals would have ruled that they were entitled to legalization based on the fact that INS had withdrawn the regulation. The real reason respondents are unable to secure relief is that they declined to take advantage of the 12-month opportunity Congress offered them. You have to remember this was an extraordinary statute. Congress was faced with a huge problem involving a very large number of undocumented aliens, all of whom were illegally here in violation of our immigration laws. And we had... Congress had tried for years to deal with the problem, and they decided that the best way to deal with it was to enact a program that was going to allow these people in a... for a short time period to seek relief, come forward, become lawful members of our community, and join this country's polity. And they... in order to get people to apply they took the extraordinary step of allowing them to apply for relief without giving up their right to remain here as anonymous fugitives if the agency denied them relief. They could apply for relief, and under the confidentiality provisions INS could not use that information to deport them. And the information on the legalization application, if it was sufficient for relief, would almost certainly make them deportable because, by definition, they had to be here illegally. And they allowed you to apply to the agency anonymously and then you'd get a level of administrative review, appellate review within the agency, but they stopped short of allowing you judicial review while you remained a fugitive. If you wanted to go to court and burden the Federal courts, which have plenty of things to do at the district court level, you had to make a choice. And the choice was that you thought you were entitled to legalization and you wanted to come forward, submit to this country's laws, and join its citizenry and see how... whether the courts believed you were eligible. And if they said that you were eligible, you would win. There'd be one judicial proceeding and you would win and you would get to stay here lawfully. And if you lost, you would have to leave. And that's the scheme that Congress enacted. It is a strict limitation on judicial review, but it's a strict limitation on judicial review that's coupled with a remarkably generous program granting amnesty to a very large class of unlawful residents. And the suggestion that INS implemented the program very harshly really isn't borne out by the historical facts. If you look, INS went with their publicity programs. They received many more applications than Congress anticipated; under this program alone more than 1.7 million... and about 3 million under the two programs together, the SAW program at issue in McNary. And then they granted 94 percent of the applications they received. That's more than 1,600,000 people have already received lawful temporary resident status under this particular provision. And I think that although the administration of the program did have some problems, it's not fair to say that INS went about this with an eye towards granting relief to the smallest number of people that it possibly could. Sandra Day O'Connor: Certainly the proposed regulations would indicate as much. Ronald J. Mann: I... I-- Sandra Day O'Connor: They're a little counterintuitive. To say that an alien who is here by presenting false documents is to be presumed legally here is a bit counterintuitive, isn't it? Ronald J. Mann: --Well, actually, if you compare that provision of the... of IRCA with a corollary provision about exclusion, I think the regulation actually comes pretty close to... to being correct. What you have to remember is that if the person entered with a false... with false documents in that manner it would be fair to say the person entered by fraud, and a person who enters by fraud is excludable unless he can secure a waiver from the attorney general. And so what the regulation effectively did is by saying that the people can't come in at all, it should have said the person is ineligible for relief unless he can secure a waiver for the fraud from the attorney general. And that regulation was overbroad. Now, I would also point out that the regulations had to be drafted with some haste and INS made some mistakes. But the fact that INS made some mistakes in the regulation does not excuse individuals from seeking relief and making themselves eligible. In our view that's just like Schweiker v. Hansen. In that case, you'll recall, a disabled individual went into an HHS office and said, I would like to get disability benefits. And the person said, you're not eligible for relief. Incorrectly... it was conceded that that advice was incorrect, and the person, relying solely on that advice, didn't apply for relief. About a year later they discovered it was incorrect and they went back and applied. And because they had not applied... there was a substantive requirement that you apply... they had forever lost... forever lost the monetary disability benefits that they could have gotten if they had applied initially, and they could not get that money back. It was... it was forever lost to them because they failed to apply at the right time, and their sole basis for failing to apply was that a Government person misinterpreted the eligibility requirements. That's very much like this case, in our view, and that's why we believe it's a fundamental principle of administrative law that you can't just accept a Government agent telling you that you're not eligible for relief and then decline to make yourself eligible. It would be like if INS had told these people they weren't eligible and so they decided, well, we'll leave after 1986 and go to Mexico for 6 months since we can't get legalization, then when the regulation is invalid come back. It's certainly clear that a court would not order INS to grant relief to such a person, and we really don't see any difference between that case and this one. If there are no further questions, I'd like to reserve the rest of my time. William H. Rehnquist: Very well, Mr. Mann. Mr. Abascal, we'll hear from you. Ralph S. Abascal: Chief Justice Rehnquist, and may it please the Court: Like in McNary, there is no dispute in this case. The regulations adopted by INS violated the two respective statutes. The merits of those regulations are not before the Court. The merits of the regulations and the order invalidating them were not appealed to the court of appeal. Byron R. White: Do you think the Government concedes that they were invalid? I didn't think so. Ralph S. Abascal: The argument that was being made earlier by Mr. Mann attempting to justify at least the LULAC regulation suggests that they have an argument to make to justify that regulation. But that argument was not made to the court of appeal. Byron R. White: Well, I know, but they don't concede the invalidity. Ralph S. Abascal: No. But the issue-- Byron R. White: That is all I wanted to know. Ralph S. Abascal: --No. The issue is not before the Court. Similarly with respect to jurisdiction, jurisdiction was not raised in the court of appeal by the Government. The court of appeal itself, sua sponte, raised jurisdiction after oral argument and then withdrew submission of the case when it learned of the grant of certiorari in McNary. After McNary came down the Government conceded jurisdiction. It is not disputed either that IRCA provided very-- Antonin Scalia: Excuse me. That's not something that can be conceded, of course. Ralph S. Abascal: --No, no. I'm not suggesting that the Government tried to concede jurisdiction. They tried, they attempted to concede-- Byron R. White: And now decided that they were wrong. Ralph S. Abascal: --Yes. It is not disputed that IRCA provided very very important benefits, beginning with, at the foundation of it, an extensive education and outreach program mandated by Congress so that aliens could learn the requirements to obtain legalization through the program. Also, Congress provided for a stay of deportation and work authorization pending the determination made in the administrative process on an application, a very important provision because at the same time Congress enacted a prohibition on the employment of undocumented aliens, so work authorization was particularly important. And it's not disputed that legalization is a very important benefit to this class. With legalization they would no longer need fear reporting crime when they were crime victims. They would no longer need fear reporting violations of labor laws and a myriad of other things that we take for granted in the United States, because contacting Government would no longer have that fear of deportation. And ultimately the most priceless benefit that was to be provided through legalization is U.S. citizenship, because after a period of time as temporary resident aliens they could acquire the opportunity to ultimately become citizens of the United States. Now, the Government said that 300,000 applications have been filed. That is not precisely correct. The stay orders that have been issued have allowed, in essence, people who believe that they're class members to opt in and demonstrate under the particular standards that they are class members. INS has agreed that 78,000 of the 300,000 plus who have sought class membership are preliminarily class members, and have granted them work authorization and a temporary stay of deportation pending the outcome of appellate review. Let me turn first to jurisdiction. The issue in this case involves precisely the same text involving judicial review, a determination respecting an application, that was involved in McNary. Thus it raises the same narrow question that was raised in McNary, whether Congress intended to preclude truly meaningful judicial review and truly meaningful judicial relief in these two class actions, raising generic, statutory, and constitutional claims for which an abuse of discretion standard of review that is in (f)(4) is particularly inappropriate, as this Court held in McNary. Secondly, as in McNary, the holding that special review applies only to judicial review of individual denials of applications is the second issue in this case. It applies with full force here. These cases did not seek judicial review of individual applications, nor did the aliens in these cases seek orders granting them legalization or that would entitle them to legalization. They only sought to have corrected one... in each particular case to have corrected one standard among a myriad of standards that would be applied to their applications. Sandra Day O'Connor: Well, Mr. Abascal, I guess there is the difference here that whether the regulations are valid or not presents just a question of law-- Ralph S. Abascal: Yes. Sandra Day O'Connor: --that at some level a court, a district court or a court of appeals, could address and decide without the necessity of a factual record of some kind. Ralph S. Abascal: But there were... there were important, if you will, corollary issues in this case. The manner in which the regulation was utilized in the application process... there were also... discovery was very valuable in this particular case, and also, in addition to discovery, the value of having the opportunity to introduce evidence from people other than the applicants, the nature and the manner in which the application... excuse me, the regulations were utilized, was very very important to us in the litigation of this case. So that the same issue-- Speaker: Well, can you-- Ralph S. Abascal: --that arose in McNary, the limitation, the type of evidence that could be introduced in the administrative application process, existed here with full force. David H. Souter: --At the time you began this suit what were some of the details of the manner... as you put it, the manner in which the regulations were applied that was significant in stating your claim for relief? Ralph S. Abascal: One case, the first case... Catholic Social Services is a bit more complicated than the other, and it began earlier. It began very early after Congress enacted the statute because aliens were being apprehended on a daily basis. The very important benefit that existed prior to the application process was a stay of deportation and work authorization for prima facie eligible individuals. Now the statute was enacted November 6th. At the same time-- William H. Rehnquist: Of what year, Mr. Abascal? Ralph S. Abascal: --1986, Your Honor. At the same time, simultaneous with the adoption of the legalization program, was adopted the prohibition on the employment of undocumented aliens. So at that moment it was crucially necessary for potential applicants to obtain a stay of deportation and work authorization, because they were subject to deportation unless they could show prima facie eligibility. 8 days after the enactment of the statute we sought, initially in this case, to compel INS to adopt some standards defining prima facie eligibility so that stays of deportation and work authorization could be sought. David H. Souter: Well, couldn't... couldn't the issues that you thereby wished, really, to short circuit, have been raised in the course of a given application and the litigation of that application when the time came, when the 1-year period began to run? Ralph S. Abascal: Well-- David H. Souter: In other words, I can understand your... your desire to... the convenience, indeed, and the utility from your standpoint of raising it this way. But were you precluded from raising these kinds of issues in the normal course of application, adjudication, denial, or grant? Ralph S. Abascal: --Justice Souter, the application period didn't begin for 7 months. David H. Souter: Well, that's right. And I... I realize that you couldn't... you couldn't thereby raise the issue until the attorney general designated the... the point at which the 1-year period began. But when it began, is there any reason that you could not have raised these issues in the course of an application proceeding by a given individual applicant? Ralph S. Abascal: In subsection (e)(1) of the statute, that statute-- David H. Souter: Well, I don't want to be short with you but I may get lost in the forest here. What's the answer, yes or no, and then tell me... tell me why... if the answer is no, why you couldn't have raised it in the normal course. Ralph S. Abascal: --An individual could have raised the question in the application process. David H. Souter: Okay. Ralph S. Abascal: The answer is yes, I'm sorry. But in subsection (e)(1) the statute provided for stays of deportation and work authorization for prima facie eligible individuals. And if they were apprehended, then they were to apply within 30 days after the beginning of the application process. So if they were apprehended the... in the Catholic Social Services case the bureaucratic terminology is advance parole. A brief, casual, and innocent absence was defined initially in a telegram as an absence that had INS prior authorization. That is to say that an undocumented alien who wished to depart from the country and return should first go to INS and seek permission to do so, an interpretation that was substantially contrary to a... to the doctrine of brief, casual, and innocent absences that had evolved over a 20-year period that was struck down in 1984 in INS v. Phinpathya. But then the Congress overruled that decision with respect to the statute that decision applied to, and then utilized the same terminology in this particular provision of IRCA. So that if a person was apprehended without prior permission to leave the country, then they were subject to deportation and ouster from the country if they did not have advance permission from INS to depart the country. That standard, that criterion and that requirement was embodied in a telegram, in a telegram only. William H. Rehnquist: Mr. Abascal, I have a little difficulty hearing you. Ralph S. Abascal: I'm sorry. William H. Rehnquist: Perhaps if you could raise the mike a little, or perhaps keep your head a little closer to it. Ralph S. Abascal: I'm sorry, Your Honor. The case suffers a bit from the fact that the merits are not before the Court. The merits of these regulations, the validity of the regulations and an understanding of how they operated were raised in the merits, so that it was important... that was the initial... the initial objective in Catholic Social Services. When the telegram issued, then, containing the interpretation of brief, casual, and innocent that it did, the complaint was amended and that was challenged. The district court issued a temporary restraining order 18 days after the statute became effective, a nationwide TRO that was appealed by INS to the Ninth Circuit. And then 6 months later the Ninth Circuit vacated its opinion so that it precluded litigation in the district court for that period of time that the case was before the Ninth Circuit. William H. Rehnquist: What did the Ninth Circuit determine with respect to the appeal of the TRO? Ralph S. Abascal: The... the Ninth Circuit held that the district court had abused its discretion in issuing the TRO. Its conclusion was that INS had good arguments on its side and that... that we, the plaintiffs, had good arguments on our side, and therefore it was abuse of discretion to have issued the TRO. The TRO was stayed throughout the period of appeal. McNary's holding that special review applies only to judicial review of individual denials... excuse me, I made that point earlier. This case, just as in McNary, is a case in which Congress had readily at hand far broader language of section 1331 preclusion that it could have used. McNary gave examples of preclusive language that would have precluded a challenge to a regulation, as this was. McNary... McNary involved policies and practices that was... that were engaged in by INS. I believe that the argument that INS is making in this case is that the distinction between McNary and this case is that there was a regulation that was promulgated through the process of notice and comment rulemaking, as opposed to the policy and practice. That is, the principal distinction between the policies and practices that were... not the substance of them, but the policies and practices that were engaged in McNary were nationwide policies and practices but they were not formalized into a regulation. The Government's argument is that a regulation is a determination. That is the key... the key to their argument, that it is a determination. But this Court held in McNary, in the United Auto Workers v. Brock, in Bowen v. Michigan Academy of Family Physicians, that a determination is the application of a rule to a set of facts. It is like two versus... two times five equals ten. Ten is the determination; it's the application of rule to fact. Antonin Scalia: So if... if... what would your answer be to the question that I asked Mr. Mann earlier? Suppose this particular rule had been adopted not by regulation but by adjudication, so that the INS-- Ralph S. Abascal: Well-- Antonin Scalia: --regularly... regularly applied this rule, but... but did not adopt it by regulation; that would make no difference to you? Ralph S. Abascal: --Well, if the rule were in the form of instructions to field offices-- Antonin Scalia: No, no, no. There are no instructions to field offices, just... just the first case that's decided applies the principle that if you leave the country it breaks the chain. Ralph S. Abascal: --Well-- Antonin Scalia: And then all the later cases simply follow the same rule. Ralph S. Abascal: --There's a practical problem with respect to the question in that there was only a 12-month application period and the form of judicial review occurred pursuant to an order of deportation, so that the first case that would arise, if there was no regulation, would be some time after... or some time after-- Antonin Scalia: I'm not talking about a court case. I'm talking about the administrative case. The first administrative officer to be confronted with this adjudicates in a certain fashion, gets... it gets... there is one appeal within... within the INS. Ralph S. Abascal: --Within the INS, yes. There was something-- Antonin Scalia: Okay, so that is... that case is appealed within the INS. The appellate officer says, no, it was rightly decided, and all of the lower officers follow that... follow that adjudicative ruling. Now what would that be under your-- Ralph S. Abascal: --Well, part of the practical problem with that is that there's a 12-month application process. If... if there was no regulation which operated to discourage applications and if the entire class here had not confronted statements at INS offices or at their agents; there was a group, 980-some-odd organizations that contracted with INS to perform the application... they could process it. Antonin Scalia: --No, they... they would confront those statements because the INS would say look it, we... you know, we don't have a rule on the subject, but I'll have to tell you our adjudicative precedent is, and we follow it, that... that if you've left the country it... it breaks the term of your residence in the country. Ralph S. Abascal: Well, I think if that decision arose after the 12-month period of time, then the problems would be much less... if that decision arose-- Antonin Scalia: Within the 12-month time you treat this-- Ralph S. Abascal: --Within the 12-month period of time. Antonin Scalia: --Yeah. Never mind all the practical difficulties. Assume it's there; how do you treat it under your theory? Is it the same as a regulate... it is a determination with respect to a case or not? If you say it isn't, then all this is going on just so the INS should... should have done it by adjudication instead of by rule, which-- Ralph S. Abascal: But it is hard... I'm sorry. I don't mean to avoid your question. It is hard for me to avoid the question, though, other than in practical terms. If... if I may respond with a question... or not a question, but a hypothetical or two. If the LAU, the legalization appeals unit, arrived at that decision, let's say 6 months after the application period began, and then applicants who came to INS thereafter were told you're not eligible, we are rejecting your application. We're not accepting your application and then denying it; that is critical to an understanding of this case. They did not accept all applications, but rather they had a standard that existed in an unpublished manual. David H. Souter: --Was this, by the way, clear at the time you began... at the time the litigation began, or is this a fact that... that emerged later during the 12-month period? Ralph S. Abascal: Your Honor, we did not learn of the existence of the legalization manual until just weeks before the application period closed. David H. Souter: So that this was-- Ralph S. Abascal: We did not know it existed. David H. Souter: --So that the Government was correct that this is no part of your case. Ralph S. Abascal: The... the manual is particularly important in the practice that was followed pursuant to that manual with respect to relief. David H. Souter: No. What... all I'm getting at is at the time these two proceedings were begun, you did not allege, because you did not know, that as a result of a so-called front desk policy you would not either be allowed to or you would be deterred from litigating in the normal course. You didn't know that and you didn't allege it; isn't that correct? Ralph S. Abascal: No, we didn't. No, but what... my response is the knowledge of the manual itself. The policy we knew of, but the... what is relied upon by the Government in the manual is that a rejection should have been met by an insistence to file. The very first telegram, it's called legalization wire number 1-- David H. Souter: All right, may I interrupt you-- Ralph S. Abascal: --Yes. David H. Souter: --and just go back to one thing that bothers me? Did you so allege and was this part of your claim, that you had no effective means of litigating these issues in the normal course of individual determinations because of the front desk policy? Ralph S. Abascal: But the front desk policy... front... there's a close relationship between the-- David H. Souter: No, whatever the relationship is, did you know of this and did you so allege it at the... when you began? Ralph S. Abascal: --We knew of the policy of rejecting applications very early on. The very first-- David H. Souter: Did you allege that in... in your petition? Ralph S. Abascal: --In LULAC, the second case... the second case was filed midway through the application period, and the second cause of action directly addressed the policy of deterring and discouraging applications. David H. Souter: So you alleged that as the means... as the reason that you could not litigate individual... these issues on individual determinations. Ralph S. Abascal: We alleged that as the basis for rejecting applications, turning applicants away before they filed an application. David H. Souter: Okay, but you did not allege that, I take it... or the applicants did not allege that in the first action. Ralph S. Abascal: They alleged it, but the court did not reach that question. That was in another cause of action the court... that case is still pending. The court only reached two questions-- David H. Souter: Okay. Ralph S. Abascal: --of four... four claims. Antonin Scalia: Can I come back to my question-- Ralph S. Abascal: Yes. Antonin Scalia: --which I don't think you've gotten to the answer of yet. Well, why... I don't see any relationship whatever between front desking and the issue of whether what you have when there's an adjudication is a determination... or whether what you have when there's a rule, for that matter, is a determination respecting an application for adjustment of status. Front desking has nothing to do with that. It... it simply has to do with the issue of whether you have an effective means of challenging it, that's all. Ralph S. Abascal: No. The very first-- Antonin Scalia: It is not converted from a determination-- Ralph S. Abascal: --The very first-- Antonin Scalia: --respecting an application into not a determination respecting an application simply because of front desking. Ralph S. Abascal: --In Catholic Social Services the telegram that was issued to all offices 8 days after the enactment of the statute interpreted brief, casual, and innocent as requiring a request for authorization to depart the country. That was invalidated. That... that was later incorporated into a promulgated regulation pursuant to the APA, but the policy existed in that telegram. In addition, the telegram said that persons who have not had advance parole, prior permission to depart the country, are deemed to be ineligible to apply. And because they are deemed ineligible to apply, then the front desking policy followed from that. Moreover, the regulations that were adopted finally, or the policy finally incorporated into regulations that were public, the preamble defining those eligible classes began, and it said: The following categories of aliens are eligible to apply... eligible to apply. And the negative inference is that if you do not fit into the categories that follow, you're not eligible to apply. That regulation is section 245(a).2(b). The very first subparagraph that began after that described these two classes. The following categories are eligible to apply: those who have continuous residence between November 1st, 1982 and the enactment date of the statute. The regulation interpreted that statute in the manner suggested by Justice O'Connor earlier, that if a person came through with fraudulently obtained documents, that the facial validity of their entry then converted their residence into lawful residence and it broke the continued period of unlawful residence. The second parenthetical phrase in that particular subsection said people who have continuous physical presence within the United States. Other regulations interpreted continuous physical presence as... and the only requirement... as obtaining advance parole, permission to leave. So therefore the very beginning of the eligibility section says that these aliens are not eligible to apply. Now, when they went to either an INS office or, as a matter of law, the agents of INS, the QDE's, the qualified designated entities, the non-- Antonin Scalia: But you say when they went. The Government has already conceded that anybody that went is home free. Ralph S. Abascal: --Well, the Government's position-- Antonin Scalia: They are not challenging anybody-- Ralph S. Abascal: --is a very important concession. Antonin Scalia: --who presented themselves. Ralph S. Abascal: It's a very... no, no, the Government's position is that a person... I believe, my understanding from their brief, is that a person must submit an application, a written document, submit that application, be told that it will not be accepted because they are statutorily ineligible because the facts of their particular case give rise to those two regulations. And then-- Antonin Scalia: I didn't understand him to say that this morning. I... I don't recollect precisely how they said it in their brief-- Ralph S. Abascal: --Well, I-- Antonin Scalia: --but they certainly didn't say that this morning. Ralph S. Abascal: --Frankly, Justice Scalia, I'm very very confused by the extent of their concession. I think it is a critical concession with respect to remedy. I think it is a critical concession. It is first made in the reply brief. Let me turn to what I understand to be the Government's position, or... excuse me, complaint... that a person must submit a written application, have it rejected, and then insist upon its acceptance. The insistence rule, again, is contained in this manual that is under the front desk. We, counsel in the case, did not become aware of that manual; the insistence policy, we were very aware of. Excuse me... we were very aware of the policy of deeming the classes to be ineligible. That's the way we pleaded the case. We did not know that there was some insistence policy whereby a person who tried could, at the final stage of a plank, insist that they not be shoved off, and under those circumstances they would accept the application. Antonin Scalia: Don't... haven't you asserted in this complaint that even people who never presented themselves are entitled to the relief you've requested? Isn't that what you've asserted? People who never went to the INS offices at all; they never got near that desk. Ralph S. Abascal: We do. And we think-- Antonin Scalia: That's what I thought. Ralph S. Abascal: --We do, and let me explain the difference between that. Now, the... the Government's concession is that, as I understand it, someone must fill out a piece of paper with all of the evidence necessary, with medical examinations, must tender a... the Government says in their brief, must tender the application fee... between $185 and $420... must tender that fee, and then when they refuse to accept it, insist that it be filed. I believe that the appropriate... that the appropriate standard to apply is that if someone contacts INS or the thousand agencies with which they contracted, indicates their desire to apply, are told that it's futile because this regulation will mean that you will be denied, that that is an application. The necessity for paper ought to be... under these circumstances 90 percent... by the Government's own statistics, 90 percent of the applicant pool was not represented by counsel. This is not a population that is familiar with either judicial review and its requirements nor is it familiar with the institutions of Government in the United States. If they go to what appears to be an authoritative source... I want to apply, you're not eligible... for the Government to insist, then, that they persist in the filing of all the necessary documents, pay and offer the money, it seems very difficult to accept that as a reasonable view of reality. This Court... this Court in Teamsters v. the United States in 1977, a title VII case, defined discouragees. They said: If an employer-- Antonin Scalia: Discouragees? Ralph S. Abascal: --Discouragees, yes, sir. Antonin Scalia: Defined that... that is a word. Ralph S. Abascal: They... I'm not sure that they used discouragees. Let me explain the context of that. This Court said in 1977 in Teamster v. the United States that if an employer hangs a sign on the front gate, no blacks need apply, no Irish need apply, if the policy is well-known, that it is not necessary for a title VII claimant to actually go to the personnel office and seek a job. That the failure to go to the personnel office and seek a job is not necessary to raise a claim under title VII. That, I think is a-- William H. Rehnquist: Your time has expired, Mr. Abascal. Ralph S. Abascal: --Thank you. William H. Rehnquist: Mr. Mann, you have 6 minutes remaining. Ronald J. Mann: Thank you, Mr. Chief Justice. I'd like to clarify... I didn't really realize there was much that needed to be clarified... what our position is on the so-called front desking. There are several points about this. The first is I don't really think that has anything to do with the jurisdictional question. The district courts in this case concluded that they had jurisdiction over claims that certain INS regulations regarding eligibility requirements were invalid. We believe that is incorrect and that's what the first question in this case is. The second question in this case is even if we're wrong on that, was it proper for the district courts to grant relief to people who did not file in a timely manner? Now, it's our understanding that the front desking argument is relevant to that, on the idea that that establishes some sort of affirmative INS misconduct that might justify equitable tolling. As I mentioned earlier, we don't believe equitable tolling applies to this type of statute, but even if it does we don't believe this is the right type of conduct. What... what we have conceded, though, is... we did not appeal from the district court with respect to people who applied for relief largely because they were going to get relief sooner or later anyway, so there's no reason for us to appeal. If we withdrew the regulations the people would eventually secure legalization, and so there's no reason for us to continue to litigate about it. It is our view that there are... there are some sets of fact patterns where the person did not force INS to accept his application that will constitute applying for relief under the act. People who never went to an INS office, in our view, cannot conceivably fall into that fact situation. John Paul Stevens: Well, what's your response to his definition of discouragee? Why is it different from hanging the sign on, no blacks allowed? Ronald J. Mann: Well, for one thing, because I think that title VII is violated by a discriminatory practice that the... is violated by discriminatory practice that poses a considerable headwind to blacks getting employment. John Paul Stevens: But this is a discriminatory practic that imposed considerable headwinds to these people applying for the relief under the statute. What's the difference? Ronald J. Mann: But I don't believe... I don't believe that title VII contains a provision saying... that says that you have to apply for a job in order to have standing under the act, and that if you don't courts cannot... have no jurisdiction over the case. John Paul Stevens: But neither does this statute. Ronald J. Mann: Excuse me? John Paul Stevens: Neither does this statute. Ronald J. Mann: Well-- John Paul Stevens: It specifies a period in which you may apply, but it doesn't have the other language in it either. Ronald J. Mann: --But the only people-- John Paul Stevens: It's a fair reading that you must, because... but it's also a fair reading that if you're going to seek relief for being denied a job, you ought to apply for the job. That's a... that would be your normal view. Ronald J. Mann: --I think that's quite a different case involving title VII as a remedial statute directed at private employers. John Paul Stevens: Is this a remedial statute? Ronald J. Mann: This is a statute giving a very important immigration benefit to private individuals from the Government, and in light of the customary requirements that people apply for relief from the Government-- John Paul Stevens: What if you did have a sign up that... on the site that said don't apply unless such and such, apply, and then they didn't apply. Would then... would they then be discouraged or would they have to come in and file the application? Ronald J. Mann: --I think if the... if the sign said we will not accept applications from people who are in the following fact situations, period, I believe that would be different. But I think if-- John Paul Stevens: Then you'd apply the same rule as in title VII. Ronald J. Mann: --No. I think that if the person... I think that if the person in that case came into... if the person came in and the sign was there and the person refused to file because of that sign, they would have applied. I'd like to point out, though-- John Paul Stevens: They would or would not have applied? Ronald J. Mann: --They would have applied. John Paul Stevens: Okay. Ronald J. Mann: But what... what's going on in this case is, if you look at the legalization manual and last... we've lodged with the Court the entire part of the legalization manual that's at issue here. If you go into an INS office it costs you $420 to apply for a family. Most of these people are not dramatically wealthy, and that is quite a bit of money to them. That if they come into INS's offices and the person looks at the application and they're statutorily ineligible, the clerk says you're not going to get relief. If the person still wants to pay the $420, the manual is quite clear that the person can and should take the application. It's very clear about this, that the person is supposed to take the application. Anthony M. Kennedy: And I take it there's no finding that this policy was violated. Ronald J. Mann: There is no finding-- Anthony M. Kennedy: I take it there's no finding that applicants were... that applications were rejected. Ronald J. Mann: --There is no finding that this policy was violated. With all candor, I would be willing to suspect that there are members of the respondent class with respect to whom the policy was violated. These were not highly trained people and some of them may have made mistakes. But I can say that INS does not know of a specific named individual that has been identified to us respondents with respect to which that is the case, but there were a lot of people and INS may have made mistakes. That's why you have administrative appellate review, so that INS can correct its mistakes. A few other things I wanted to mention. One of the most important things, I think, from the argument of respondents is that he... he agreed that there was really no reason he could not have raised these claims in the administrative process. In connection with that he talked about the telegram that the Government issued as if this is some short, casual statement. This was a 20-page, very detailed document setting forth all of the criteria to get the program going, and INS got that out only 8 days after the statute was passed. I also wanted to mention that it appears that it is not in the record at the place we discussed in our brief. If anyone wishes to look at it, it's attached to an affidavit of Joseph Brandon, which is at docket entry 7 of the record in the Catholic Social Services case. William H. Rehnquist: Thank you, Mr. Mann. The case is submitted.

Earl Warren: Mr. Davis you may continue. Oscar H. Davis: Mr. Chief Justice may it please the Court. In deciding whether petitioner is the type of party member who was deportable under the 1952 provisions of the Immigration Act, I think we and the Court have to bear in mind that this was not a new statute. That it was a combination of the statutes which had began in 1917 and that was a long history of -- of judicial and administrative interpretation of that statute and that this Court itself has passed upon that issue in various cases. Going to this Court's decision in the Harisiades case, that case involved three different people, Harisiades, a Mrs. Coleman and the Mr. Mascitti. The record of relationship to Mrs. Coleman which is summarized by Justice Jackson in his opinion for the Court and which is of course more fully set forth in the -- in the record before the Court indicates that she was a rank and file member with far less if you want to call it activity than the petitioner in this case. When you get to the Galvan case, he had no more activity, no more what you might call awareness of the theoretical underpinnings of the Communist Party than the Petitioner in this case. The fact is, that the statute and its predecessors have not been interpreted judicially and certainly not by Congress nor administratively from 1917 on to require any knowledge of what you might call Communist Party theory, Marxism-Leninism. This deportation statute of course is what I'm talking about. Rather, Congress has been -- has been trying to deport people who were party members in the ordinary sense who were active in the party and the day to day work of the party who were the doers of the party as were whether they were Theoreticians or not. Galvan was not a Theoretician, Mrs. Coleman and Mascitti in the Harisiades cases were not the theoreticians. Mrs. Coleman didn't purported not even to know who Joseph Stalin was. “He is a Russian”, she said. “Is he a Russian?” And the answered to the question, “Do you who Joseph Stalin is?” The important thing as far as Congress has been concerned, as far as this Court is concerned, why is that person, a member of the Communist Party, as distinguished from some other organization. And was he or she a member of the Communist Party in the ordinary sense in which somebody is a member of the party, knowing that it is a party and that of course, we believe is what -- what petitioner did here. Speaker: How many people have been deported under this statute overall, do you know? Oscar H. Davis: It's hard for me to know all the figures Mr. Justice Harlan, but between 1920 and 1950 there were 200 we know that. I've only gotten the figures for the last three years for the years 1955 to 1959, the fiscal years, 42 were deported. They are now pending 246 cases administratively and 16 are in the courts, so that 42 were actually deported. The Court had in the Nestor case at the last session case of a man who was actually deported, There were 42 actually deported in the years 1955 to 1959. There are now pending 246 administrative cases and 16 cases in the courts. Tom C. Clark: You mean a Communist Party membership deprive to determine the extra stay, is that what you're talking about? Oscar H. Davis: Prior to the time this Act, yes. Yes, that's what I'm -- I'm talking about. Tom C. Clark: That's what the figures you will give. Oscar H. Davis: No, to figure -- the 200 figures were not that. The 200 figures include both the 200 from 1920 to 1950 include both present members and past members. That those figures -- Tom C. Clark: How are they divided? Oscar H. Davis: I don't know that Mr. Justice Brennan. Tom C. Clark: What was the Thirteenth? Oscar H. Davis: Pardon me? Tom C. Clark: What are your figure -- Oscar H. Davis: 42 or -- have -- were actually deported in the fiscal years 1955 to 1959. Felix Frankfurter: You mean they were the 200 figure contends those who now were found to the communists at the time of the determinations were found to be members as against those who would comply to have had it. Oscar H. Davis: Not exactly Mr. Justice Frankfurter. Felix Frankfurter: Then (Inaudible) Oscar H. Davis: Yes. As you know that until Kessler against Strecker was decided in 1939, the service believed that the statute applied to past people -- Felix Frankfurter: Yes. Oscar H. Davis: -- past time as party membership. The 200 includes both those who were determined to have been members in the past and those who were determined to be members at the time the deportation proceeding was instituted. That 200 from 1920 to 1950 includes both categories but the later category that I gave afterwards includes only members who were in the past. Felix Frankfurter: That's what I meant to ask. Oscar H. Davis: Yes. William J. Brennan, Jr.: So how many were -- Felix Frankfurter: -- only include those at the time of the deportation decision were found to be members, correct? Oscar H. Davis: Which figure are you giving Mr. Justice? Felix Frankfurter: The 240 includes both -- Oscar H. Davis: 200 -- 200 includes both. Felix Frankfurter: Includes both those who at the time of the deportation determination were found to be members. Oscar H. Davis: And also -- Felix Frankfurter: And whereas -- Oscar H. Davis: That's right. Felix Frankfurter: -- those who have some previous one the -- Oscar H. Davis: Yes, and I have no breakdown on it. Felix Frankfurter: All right. Tom C. Clark: What (Inaudible)? Oscar H. Davis: The 42 are people who have been actually deported in the four past fiscal years, 1955 to 1959 for past membership in the Communist Party. That is precisely the same as this petitioner. Tom C. Clark: Have there been pending -- Oscar H. Davis: Pardon me? Tom C. Clark: There are cases pending (Inaudible) Oscar H. Davis: 246 are pending administratively. And 16 are in various courts. Felix Frankfurter: I take it, we don't have to determine. We don't have to determine whether those deportations enhance the security (Inaudible) Oscar H. Davis: No. If -- if I would have a chance to reargue the constitutional question I would of course say that that is the function as this Court has said of Congress and not of the Court. But the Court as I said in the Harisiades and the Galvan case as well as the lower courts have indicated that the type the -- the membership of this -- the type of membership which this petitioner had was sufficient for -- for purposes of the act and the lower courts have construed the statute both before the Rowoldt case an after the Rowoldt case. In our brief, we refer to several decisions of the Court of Appeals after the Rowoldt decision. And if the Court will read the opinions of those cases they will see that the type of that activity which those aliens engaged in was no different in substance or in some cases it was little more -- there was some case that was greater in point and some cases are less in point than they -- than this -- this petitioner here. Earl Warren: What distinction do you make Mr. Davis between the Galvan case and the Rowoldt case on the facts? Oscar H. Davis: The distinction I made Mr. Chief Justice is that in the Rowoldt case where the Court had only Rowoldt's own statements before them and nothing else; that it was not satisfied that Rowoldt joined the Communist Party has a party, as a political party. It wasn't satisfied that he hasn't joined it -- that he didn't join it solely for -- for -- to gain his own livelihood, as if he were a -- a method of obtaining a necessities of life. Now, that was not true of Galvan and it is not true of this petitioner here. This petitioner was an active party member. He was a -- a member of the executive board of his branch -- of the executive board of his branch, he went to this Plenum in -- in Aberdeen, Washington and on page 12 of the supplemental record, the witness Wilmot testifies went on at the Plenum in summary. And what went on was a discussion of the activities of the Communist Party particularly he say -- he said, “In relation to promoting the party in the lumber industry.” In other words, they were carrying on the activities which the Communist Party was carrying on as a party in that region at that time. To us it makes no difference whether petitioner here was a theoretician or understood Marxism-Leninism. Congress wanted to get those who were the supporters, the doers, the -- the active helpers as well as those who were might call the party theoreticians. In fact, when Congress passed the statute in 1940, which overruled Kessler against Strecker it didn't overrule, it changed the law which had been laid down in Kessler against Strecker. As the Court will remember Kessler and Strecker, the court held that until they said, Mr. Justice Roberts for the Court said, ‘Unless we are given a more specific indication by Congress, we will not hold that a man who has been a member of the Communist Party no matter how far in the past or for how shorter time will be portable under the statute and may held that the statute related only to present the membership in the party.” In 1940, Congress changed that and the -- and the committee reports are explicit. They say in obvious reference to the language of the Kessler against Strecker opinion that a person is deportable for no matter how for membership, for no matter how shorter time or how far in the past so long as it was after the date of entry. No matter how far in the past or how short the time and in the Harisiades case, the Court have reported three aliens one of whom left the party in 1929 and the other two in 1939. I might say that the leaving of the party in 1939 may have some other significance, we don't know because as the Court pointed out on the Harisiades case, the Communist Party at that time gave instructions after Kessler against Strecker had been decided, that all aliens were to leave the party so they would no longer be subject to deportation. And there been a large number of cases involving leaving the party in 1939. I think more cases involved that one year than any year that I'm familiar with and of course, this petitioner left the party according to the record in 1939. As I've indicated, it makes no difference how shorter time under a congressional mandate the man was a member of the party. And of course, as the Court has twice held upon the Harisiades and Galvan and I think quite correctly under the history and stretcher statute, it doesn't require any knowledge by the alien of the unlawful or objectives of the Communist Party that advocates the overthrow the Government by force and violence. Congress has been so insistent upon the deportation of present and past members of the Communist Party that in 1950, it refused to apply the suspension provisions to persons in this category at all. They were not suspendable at all. In 1952, in one of the perhaps few alleviating portions of the McCarran-Walter Act suspension was granted to people in this category. But Congress retained for itself the final say and it required a 10-year period of good conduct before it took a man to even be eligible to deportation. What I mean by that is this; Congress provided with respect to certain types of deportable aliens. That if the Attorney General certified that the man was -- should be -- should have his deportation suspended that went into effect unless one House of Congress affirmatively acted contrary to it. And in some cases, and most to those cases they provided only for a five-year period of good conduct to just doing of the act which require the deportation. But with regard to the so-called ‘subversive aliens“ including past members of the Communist Party, it required a 10 year period of good conduct and provided that there should be no suspension of deportation unless both Houses of Congress affirmatively vote to suspend the deportation otherwise, the statute says, the Attorney General shall deport the alien. So, Congress has been strict. It has been very severe and it has reserved to itself the alleviating, the merciful power. Felix Frankfurter: Have you -- have you any figures as to the rejections by Congress as to suspension by the Attorney General? Oscar H. Davis: No, Mr. Justice, but I can get them if -- if -- Felix Frankfurter: Well, I was just curious. Oscar H. Davis: No, I don't have those. Of course, as was pointed out, the question of suspension is not here -- Felix Frankfurter: I understand -- Oscar H. Davis: -- because it was not raised in its present litigation. Felix Frankfurter: -- just general interest for the problem. Earl Warren: You know whether or not there have been any, I -- I have no knowledge on this thing. Oscar H. Davis: I think there have been some but I -- I really cannot say whether they've been many or not. Felix Frankfurter: Yes. But isn't too difficult, just as a matter of interest. Oscar H. Davis: Yes, I --I will try it again. Now -- Felix Frankfurter: Don't take too much time it isn't worth it for me at least. Oscar H. Davis: Petitioner lacks his own to a suggestion inaccurately stated I think by petitioner's counsel which the Government made in a totally different area in the Smith Act criminal prosecutions relating to criminal prosecution for knowing membership in the Communist Party. That of course is a totally different statute subject to different constitutional restrictions with the totally different background. I would not think that -- that in the light this -- the history of this statute going back as I say, at least till 1920, well documented is the Court has indicated on the Harisiades and in the Galvan cases that there would be any possibility of carrying over into this statute which after all is about the latest modification of a whole series, a position applicable to a new statute never before judicially or not as far as the Membership Clause is concerned, never before judicially construed by this Court and resting on an entirely different constitutional basis. In any case, I would say that I venture the judgment that the standard which the Government gave in the Scale case would be met by this petitioner who was active, who was active in the party discussions and I won't repeat the all the things that I've said, he was an active party member, he was not a merely normal member. He was not an unconscious or an artificial or accidental party member. If I might take -- Earl Warren: Only thing there Mr. Davis that bothers me is that as I understood you in this case there -- there is nothing to indicate what kind of party activities it was he was engaged in? Now, they did have some -- some economic activities to -- to secure employment and so forth and would you make any distinction if he had been able to establish that those were the only party activities that -- that he knew about or participated in? Oscar H. Davis: If he were a regular member who attended close meetings every week as this man did, and who participated in general discussions of the Communist Party program in the city of Portland, I would not make a distinction that the only -- the only particular activities that he personally participated in might be only of -- of some kind of economic program. On the other hand, if that was all that he did, if he was not a regular member, this man was a regular, weekly attending meeting perhaps even more than weekly, we don't know that because the record isn't explicit, but we do know that he attended party meetings weekly. We do know that he -- he did go to this meeting in Aberdeen and that I -- I would like to qualify the answer I gave to you before lunch, Mr. Chief Justice, to refer to the statement of what went on at the Plenum in Aberdeen because there it does indicate more explicitly what kind of activities they carried on and one of them was relations promoting the party in the lumbering industry. Now, we know that what the Communist Party did then and what probably is doing now is an effort to infiltrate into various activities, economic, industrial activities in order to promote its program. And as the witness said here, this being a lumbering state, most of our activities were directed at that industry in that meeting and though record isn't explicit as to -- to what this man did with respect to that, he was participating in this meeting which was just set before the program and we think that's sufficient. Earl Warren: Well, bearing on that same -- same thing Mr. Davis, I understood you to say there were -- there were -- you recognized two kinds of membership. One that doesn't carve against the man particularly because probably isn't -- it isn't a knowing membership in all of the activities, and the other is where he is really a member of the party. Now, in this case as I understand it, there are no definite, there is no definite evidence against him that he -- he participated in -- in what were subversive activities and what he did was not defined and on the question of his membership, it apparently wasn't such a very important membership because he was paying dues at the rate of 25 cents a week. That was the criteria for his being in the organization and when he failed to pay his 24 cents a week, they dropped him for non-payment of dues. Now, would that have any bearing on whether he was of one of the other types of membership? Oscar H. Davis: No, Mr. Chief Justice. The membership this man had in the party was no different perhaps stronger than that of the Galvan case. There was no showing that Galvan have participated in subversive activities. There was no showing that Mrs. Coleman or Michitti in the -- of two or three in the Harisiades case participated in subversive activities. Earl Warren: If I remember correctly in Galvan, Galvan was the Chairman of the educational committee of the party. Oscar H. Davis: Of --of a particular little unit. And this -- this man is a -- was a member of the Executive Board of the same type of unit and more than that, he was a top fraction member who attended the -- this Plenum that I've been describing. But there was -- there this, in most of these cases -- Earl Warren: Now, is there -- is there testimony in here that he -- he is positively or was positively a top fraction member? Oscar H. Davis: Yes. Earl Warren: Where -- where do we find that? Oscar H. Davis: 11 and 16 of the supplemental record. Earl Warren: Supplemental. Oscar H. Davis: The word -- the word top fraction is actually used on page 16. Earl Warren: 16? Oscar H. Davis: 16. Earl Warren: Let's see. Who -- what witness is that? Oscar H. Davis: This is Wilmot. Earl Warren: Wilmot and what did he say? Potter Stewart: Page 13, the word top fraction is used. Oscar H. Davis: Yes, you are right Mr. Justice. Earl Warren: Where -- where did -- Oscar H. Davis: First is on 13. This is still the witness Wilmot about the middle of the page and we're still talking about this -- Felix Frankfurter: At the middle of the page? Oscar H. Davis: May I make the point clear if you want to know that these are the anointed people, when I show up there, Mr. Mackie, they knew who we were. Then is it your contention of Mr. Mackie wasn't an ordinary communist, but that he was one the big wheels, is that correct? He belonged to what we called “the top fraction”. Question, “He is one of the top fraction in the Communist Party? Answer, “With the exception of what related to the waterfront activity” and it's repeated on page 16. Hugo L. Black: Any evidence here as to what this part of the top fraction, if he ever made a speech? Oscar H. Davis: No, there's no evidence that he made a speech. Hugo L. Black: Did the evidence -- did he ever discuss any terms? Oscar H. Davis: Yes. There is evidence that he discussed, there is. Hugo L. Black: Where is it – Oscar H. Davis: what? Hugo L. Black: What did he particularly discuss? Oscar H. Davis: Oh! Except for the -- except for the discussion with relation to Aberdeen that is at the Plenum which is on page 12 there is no specific reference to what he discussed except to test party activities in that area. Hugo L. Black: Now, would you -- is there any place in here whether you defined what this Plenum is? I understood what you said. Oscar H. Davis: Yes. It -- it -- Hugo L. Black: Where is it defined? I want to see it.[Laugh] I'm curious about it like some of the other justices. Oscar H. Davis: On page 8 in the middle. Did you ever -- did you ever attend any meetings communist party outside the city of Portland which Mr. Mackie attended. He attended one in Aberdeen. What kind of a meeting was this? It was they called the Plenum. It was merely the port work that was carried on, plenum are fullness literally, it was the port work that was carried on by people in the northwest and then, there is further discussion on pages 12 and 13 of what this plenum and 14 of what this plenum was about and who attended it. Felix Frankfurter: Mr. Davis, before you go on, I shouldn't interrupt you, you traced a little while ago the history of the legislation from the beginning at page -- to the interest of labor and (Inaudible) myself in words, did I find that history in In or where would -- is there any confirmation that is the whole -- Oscar H. Davis: Well, it -- Felix Frankfurter: (Inaudible) Oscar H. Davis: Well, but -- Felix Frankfurter: -- the answer probably is no. Oscar H. Davis: Well, I think it not. I would say that it is in the Government's briefs in -- in the Harisiades and Galvan, and Rowoldt cases. On the reargument in Rowoldt, we reprinted a compilation of our briefs in Harisiades and Galvan. So, I think that from our point of view, an appropriate history is in this -- in our supplemental brief for the respondent on reargument in the Rowoldt case. Felix Frankfurter: Thank you very much. Oscar H. Davis: And it's also contained in -- in large part in -- in that opinion of Mr. Justice Jackson in Harisiades and in your opinion to the Court in the Galvan case. Felix Frankfurter: And they rely on that? Oscar H. Davis: Yes, yes. I think -- I think that it's both accurate and authority. On the -- on the issue of -- of constitutionality the Court of course, knows that the issue has been here with respect to this statute twice before, once in Harisiades case which involve the statute which different in only one particular. It was precisely the same as this except that the statute there did not refer names of the Communist Party but only to the -- to an organization advocating to overthrow the Government and that proof had been introduced on that subject, and it was not contested but in all other respects, the past membership, the type of membership and so forth, the -- the case was precisely the same. In the Carlson case Carlson against Landon, decided the same day on March 1952 as the Harisiades case, the Court upheld the statute, this statute, the one naming the Communist Party with relation to present membership in the Communist Party. That case involved present membership and the Court upheld the statute with relation to present membership in the Communist Party. In -- in the Galvan case, in 1954, the Court upheld this statute with relation to past membership in the Communist Party. In the Rowoldt case, the majority of the Court do not reach it, the dissenters reaffirmed the validity of the statute as there applied. In the Bonetti case, though case went off on a -- on a non-constitutional on a statutory ground, there is a statement in the opinion of the Court by Mr. Justice Whittaker that if Bonetti had been a member of the party after entry, he would have been deportable under Galvan against Press decision. Five petitions have been filed since the Rowoldt, five petitions for certiorari have been filed in this Court, raising a constitutional issue since Rowoldt and they have all been denied and that does include the present case. It does include the prior petition on behalf Niukkanen. Felix Frankfurter: I suppose the temptation was too strong for you not to refer to those five denials. I thought -- I suppose the temptation is too strong not to refer? Oscar H. Davis: Well -- Felix Frankfurter: Not at the certiorari even though there were five of them. Oscar H. Davis: Perhaps -- Felix Frankfurter: It goes on to study your facts. Oscar H. Davis: Yes. The only issue that I really have time to discuss again, I think, the only one that perhaps needs in this discussion is the issue of bill of attainder. I think, it is important to point out to the Court, two cases in which it was claimed that a Congressional Deportation Act was a bill of attainder or free cases. The first one was the Chinese -- the first Chinese Exclusion case which was upheld in 130 U.S. in the Chinese Exclusion case, Chae Chan Pan. The briefs in that case indicate that a strong argument was made that that statute was a bill of attainder. In the Fong Yue Ting case, which involved none exclusion of Chinese but deportation, the brief both of the eminent lawyers Joseph. H. Choate and Maxwell Evarts and Mr. Hubley Ashton both raised the issue of bill of attainder which was rejected by the Court on the ground which it has followed ever since -- ever since the deportation is not punishment and -- and therefore, the bill of attainder does not apply. It was raised in the -- Hugo L. Black: If it were punishment, would it be a bill of attainder? Oscar H. Davis: If it were punishment, I think not. Because, I think a bill of -- of attainder relates to punishment for past conduct by Congress and I think that this is not punishment for past conduct, but a decision by Congress that this type of person is not someone whom the country wants to -- to maintain. Hugo L. Black: Well, then it wouldn't be punishment -- Oscar H. Davis: Well -- Hugo L. Black: -- you argue. I ask you, does an alien of this kind have a right to invoke any of the constitutional provision than if they had? Oscar H. Davis: Well, I think that as far as -- as sending him out of the country is concerned classes which Congress can determine for sending out that he does not have the right to invoke as is has been authoritavely determined the Due Process Clause, the Bill of Attainder Clause, the ex post facto clause. Hugo L. Black: Outside of that, is an alien barred from claiming the benefits of the Due Process Clause? Oscar H. Davis: No. An alien in the country is not barred with respect to the procedure in determining his deportability or in respect to his life while he still remains here. Hugo L. Black: I suppose Congress could not -- under that pass of law which would take away the man's (Inaudible) without a trial even though he's an alien. Oscar H. Davis: Yes. That is been held in the Wong Wing case one of the early Chinese cases where they -- Hugo L. Black: (Inaudible) liberty? Oscar H. Davis: Pardon me? Hugo L. Black: How could they -- Oscar H. Davis: -- that they could not -- they could not -- that is -- Hugo L. Black: Yes. That's right. Oscar H. Davis: You said they could not and I said -- Hugo L. Black: Yes. Oscar H. Davis: -- it's been held in Wong Wing. Where -- Hugo L. Black: Suppose the Government would provide that suits for civil damages against aliens that could not be tried by jury, could they do that? Oscar H. Davis: No. I don't think they do -- could. But -- Hugo L. Black: (Inaudible) the jury trial. Oscar H. Davis: That's right. But the Court has consistently maintained for 70 years that with respect to the -- to consistently, on many occasions with the respect to the classification of what type of alien shall be sent out of the country and deported that is the matter for Congress. It's been replied to people on racial ground, Chinese. It is been applied to people in offensive other that through sickness people who could -- Hugo L. Black: I think it's -- I'm -- I'm not -- I think that is correct, but that's why you have to get to -- to -- is that they have a right to send an alien off with or without a trial and with or without any proceedings if Congress decides to do so. Oscar H. Davis: No. Mr. Justice, this Court does not said that they can do it without any procedures, or that they -- all that I'm talking about here is about what's involved (Voice Overlap) -- Hugo L. Black: So, what about the (Voice Overlap) -- Oscar H. Davis: It -- Hugo L. Black: What about (Inaudible) Oscar H. Davis: That was a -- a special kind of case. Hugo L. Black: What's said now? Oscar H. Davis: Yes. But in certain cases they could do. They -- they hadn't said that all aliens can be deported without any procedure. I'm talking only about the one issue, which is the only issue here there was nor procedural issue here. No -- Hugo L. Black: When they raised on it but the bill of attainder. Oscar H. Davis: No. But there's no issue as to the procedure in the -- in the deportation process. No constitutional issue about the procedure and -- in the deportation process. Hugo L. Black: And just the bill of attainder is perhaps, it designed as much to protect people in the right, procedural rights of any other part of the country. Oscar H. Davis: Well, yes, yes. Excepting that Mr. Justice, I -- I meant yet that there is no claim that -- the trial here, the hearing here was on favor. They do raised the issue of bill of attainder. I think, it is been rejected by the Court at the beginning of the great series of cases on deportation legislation. It was reject to -- I think with relation to this particular statute in the Galvan case where it was argued and -- and briefed. And we think that the whole course of history goes against it, because the Court has consistently said, until the -- this very day that deportation is not punishment and the bill of attainder requires much more. Earl Warren: Mr. Forer. Joseph Forer: If the Court please, I think, Mr. Davis's version of the facts suffers from giving an unwarranted and wholly sinister interpretation to little pieces of irrelevant evidence that do not -- are not justified in bearing such an interpretation, if I may give one or two illustrations. Mr. Davis mentioned as a great significance the fact that Wilmot testified that -- that this alien, the petitioner knew where he was going. Now, if you look at page 15 of the supplemental record, you'll see the testimony on that and this is on cross examination of Wilmot and the lawyer asked me, “You say, you knew where you were going, do you think either Mackie, that's the petitioner, knew where he was going?” Answer, “I think, Mr. Mackie knew where he was going.” Question, “You just assumed that because you know he was a member of the Communist Party, is that right?” Answer, “He would have been permitted in the meetings.” It's perfectly clear that by Wilmot test anybody who went to Communist Party meeting knew where he was going. Felix Frankfurter: Not when it was permitted to be present which is different. Joseph Forer: Or was permitted to be present -- Felix Frankfurter: Well, that's a -- Joseph Forer: -- as a member -- Felix Frankfurter: -- can you go. Joseph Forer: What? Felix Frankfurter: I -- I sometimes had been -- as a kid, I was present at political meeting -- Joseph Forer: I'm talking about close meeting. Wilmot's testimony makes perfectly clear that he thinks that anybody who was a member of the Communist Party ipso facto knows where he is going. Now, I don't know what he means by that, but whatever significance it has, it has no more significance than factual testimony that the man was present at meetings of the Communist Party. Now, let's look at where he says about the top fraction? On page 13, question, “Then it is your contention that Mr. Mackie wasn't an ordinary Communist but that he was one of the big wheels, is that correct?” Answer, “He belonged to what we call the top fraction.” But he never says, leaving aside that he doesn't say what he means by the top fraction, he never says on when he faced the opinion that he belonged to the top fraction and the -- Felix Frankfurter: Well, did that cause argument clause? Joseph Forer: What? Felix Frankfurter: Was he asked that question in cross examination? Joseph Forer: No. He wasn't asked that question on cross examination. He never says what he means by top fraction. As far as I can tell, but if your read over his testimony, he thinks that anybody who was a member of the Communist Party was a -- an anointed person and very important. Now, let's go back to page 15 on the question of the paper, and he's asked whether ever had any discussion with Mr. Mackie and the only discussion he remembers, he says, “I remember about the paper and its distribution.” Question was that, “Do you know where your newspaper office? Answer, “Yes.” Question, do you -- question, “Do you remember what was said about what's done in that particular occasion?” Answer, “Well it had to do largely with circulation.” That was a perfect place for people to come and sit and I don't attribute any great sinister significance to that. And I also attribute no particular significance to this plenum and I'm coming to that in a moment which is more than Mackie -- than this witness' testimony that 12 years before, somebody -- it saw this man at a Communist Party meeting. But if you look at page 8, where he mentions the plenum, he's asked, whether or not he ever attended any Communist Party meeting outside of Portland that Mackie attended? And he says, “Yes, one in Aberdeen.” They said, “What kind of meeting was this?” And this is -- this -- I don't, this -- as it seen to me to be terribly sinister important. Answer, “It is what they called a plenum.” It was merely your report of the work that was carried on. A plenum means of fullness literally, it was the report work that was carried on by people in the northwest. And then if you look at page 13, where it goes over it again, not 13 – 12, the only thing they could -- they asked in the purpose of meeting and he repeats in a rather colorful account that he says, everybody would get up and give -- give a glowing account of what they had done, there were more or less fabricating he says, and the only person he can remember, is a man by the name (Inaudible) speeches. There is no evidence that the petitioner made speeches. The evidence amounts to the fact that he went to party meetings if you accept that evidence. Now, let's take a look of the man that knew him, that really knew him and was a member of his -- his unit according to his testimony, what he said about him and you have a very different picture than what Knight said, look at page 29. Question, “Did Mr. Mackie in your presence ever advocate to overthrow of Government by force of violence or the use of the illegal means.” Answer, “No he never did.” Question, “Would you say to your knowledge that Mr. Mackie was one of those people who was more particularly interested or concerned with the problems that faced the country during to the depression such as unemployment and relief?” Answer, “I think very much interested than top of 29.” Question, “Was he what you would call one of the party intellectuals?” Answer, “What do you mean by that?” Question, “Was he very much on theory, political discussion?” Answer, “No.” Question, “He is more interested in bread and butter topics at the day, what to do for unemployment relief?” Answer, “I would say so, yes.” Question, “Was most of the activities (Inaudible) branch toward these specific problems?” Answer, “Yes they were,” Now look at the summary on page 30, in which the attorney asked the witness, if this the correct summary of Knight's testimony? Question, “You saw Mr. Mackie the number of meetings that you claim were close meetings to the Communist Party that he was not functionary of the party, that you yourself thought members the works of the Soviet Union is the educational chairman of that group but that Mr. Mackie did not participate any of the discussions that you held in that connection, that Mr. Mackie did not distribute literature and the Mr. Mackie never served under you -- under your direction in any capacity, and that as near as you know, Mackie never attended any Communist Party conventions, is that correct?” Answer, “Yes, that's right.” And then later on, “Is that correct summary of your testimony as far as I went?” He says, “Yes that's right.” Now, these are people who were testifying 12 years after the events and you're now always little pieces of unexplored odds and ends and I think the principal reason it wasn't explored was because the Rowoldt case had not been decided and people didn't understand that the nature -- of the activity and the significance of the membership was as important as Rowoldt later made clear. But the least the Board of Immigration Appeals could have done is before they had hatched to these little grids and drafts, as soon as they're kind of sinister significance that Mr. Davis gives to it, I think, completely unwarrantedly would be to reopen the record so they -- people could try the issue with some knowledge of what the issue was about at the time they took this testimony from Knight, from Wilmot at the time the petitioner testified. They didn't know what the interpretation is going to be that was given in Rowoldt. Felix Frankfurter: Well evidently in Rowoldt, they knew what kind of facts to elicit which was the basis for the decision, wasn't it? Joseph Forer: I -- I'm afraid, I didn't follow you. Felix Frankfurter: I say in Rowoldt itself -- Joseph Forer: No. Felix Frankfurter: -- which preceded the Rowoldt decision the facts were elicited on the base of which there was a decision. Joseph Forer: No. That is -- that is not the -- that is not quite so, because Mr. Justice Frankfurter, in Rowoldt itself --. Felix Frankfurter: (Voice Overlap) written that opinion. Joseph Forer: No. I know, Your Honor, in Rowoldt itself, the facts which led you to write that opinion for the Court were not elicited by Rowoldt counsel, they weren't elicited at the deportation hearing. They were elicited at an interview prior to the hearing which the immigration service at which the immigration service questioned Rowoldt, and all they were tying to get form Rowoldt really was matters on which to deport him, they did not have any understanding that member, the word “member” was limited in the sense that the Rowoldt decision itself limited it and it's really a happenstance that evidence came out in Rowoldt. Felix Frankfurter: I don't care what their legal interpretation was, that's for this Court and other Courts. What I'm saying that the facts were in the Rowoldt record and therefore, the argument that they're not in this record it's to me not very impressive. Joseph Forer: Except that I say that the burden of proof is -- Felix Frankfurter: Well, that's a different story -- Joseph Forer: Well -- Felix Frankfurter: -- I understand that. Joseph Forer: -- that the story I'm giving here is that the only facts you have in this record if you read them fairly is that you have a -- and disbelief the petitioner that you have rank and file enacted person who went to meeting -- Felix Frankfurter: And where is this argument? Joseph Forer: -- paid dues have no political interest other than on the bread and butter matters. Now, I say that's a fair version of the facts and I say that his version to the contrary is not a fair version of the testimony. Felix Frankfurter: I understand that argument -- Joseph Forer: And I say -- Felix Frankfurter: -- but I do not follow the argument that these alleviating or mitigating or minimizing factors couldn't have been brought by counsel because they didn't know what questions to ask. Joseph Forer: They could have been brought up but they weren't. Felix Frankfurter: All right. Joseph Forer: And they couldn't have been brought out in this case because the witness testified (Voice Overlap) -- Felix Frankfurter: You said because they didn't have Rowoldt. Joseph Forer: No, they -- they couldn't have brought it out -- Felix Frankfurter: -- understand, didn't you? Joseph Forer: Yes and let me explain it now. They couldn't have brought it out from the witness because here the witness denied from the petitioner because here the petitioner denied he was a member. They -- if they had known Rowoldt they might have done a better job of cross examining the Governments -- Felix Frankfurter: You mean they -- Joseph Forer: That's all I'm driving at. Felix Frankfurter: -- you mean that he might then have confessed that he was a Communist, but -- Joseph Forer: No, I don't mean that all. I don't meant Felix Frankfurter: Is that what you mean? Joseph Forer: No, I don't mean that at all. I mean that they -- if they had been aware about Rowoldt, they could oriented their cross examination of the Government witnesses in that direction, I don't see anything particularly startling about that. Felix Frankfurter: I didn't say it was startling. I just didn't follow your argument. Joseph Forer: Well, I'm -- I'm sorry if I wasn't clear but that's all I meant. Thank you.

Warren E. Burger: We will hear arguments next in Marsh v. Chambers. Mr. Cronk, I think you may proceed whenever you're ready. Shanler D. Cronk: Mr. Chief Justice, may it please the Court: This matter is here on petition for certiorari to the Eighth Circuit Court of Appeals. It derived from an action brought by Respondent, a member of the Nebraska legislature, over three years ago by which he sought to challenge the legislature's traditional method of opening each legislative day's sitting with a brief invocation offered by a cleric chaplain, a non-legislator officer of the legislature. The basis of that challenge was that legislative prayers employed by the legislature in that manner per se violated the establishment clause of the First Amendment. Warren E. Burger: On the basis of his claim, would it make any difference whether it was a paid or an unpaid clergyman? Shanler D. Cronk: Senator Chambers' precise claim was that the prayers, apparently definitionally being a per se violation of the Constitution, by practical operation obviated the necessity for compensating anyone to provide them, obviated the necessity obviously, again, from practical considerations of even having a prayer book, and in that way the compensation of the chaplain would fall. It's pretty clear from the record that his case focused exclusively on the proposition that prayers, at least the prayers offered by the then chaplain, the only ones that we have any evidence of in the record, themselves violated the Constitution, so obviously we now would have no reason to compensate anybody to give them, at least Reverend Palmer. I do not believe and I do not think the record reflects any independent basis for invalidating the compensation of the chaplain, and I think that the Court of Appeals realized somewhat of an incongruity in declining to rule the legislative prayers per se unconstitutional and at the same time finding a fault with their compensation, in the absence of any independent basis. I think it is pretty clear that the Court of Appeals attempted to link the compensation problem with the tenure of Chaplain Palmer. Harry A. Blackmun: Does the record show what the compensation was, how much it was? Shanler D. Cronk: It changed from time to time. At the time of filing the action, it was approximately $320 per month. The legislature sits in biannual sessions, the first year four months, the second year three months. Harry A. Blackmun: So it is seven months, $320. Shanler D. Cronk: Roughly, seven months per two-year session. As I mentioned, I think it is pretty clear from the Court of Appeals decision that the per se challenge initiated by the Respondent was rejected by the court and instead, surprising in view of the case that was presented at trial, the Court of Appeals singled out principally an additional factor, and that was the retention and compensation of a particular chaplain for an extended period of time, without any indication of what constituted an extended period of time. We are to conclude from the opinion that 16 years at least is such an extended period of time. There are some particular facts in the record that should be briefly alluded to because they bear directly on what facts and circumstances at all appear in the record relevant to that basis for the court's decision. The chaplaincy practice has existed in Nebraska since 1855, 12 years before statehood. At the time of filing the action, the chaplain, along with three other non-legislator traditional officers, the other three being the clerk, the assistant clerk and the sergeant at arms, were recommended at the beginning of each biannual session by the legislature's Executive Board, its administrative oversight body, for the legislature's full approval. These individuals were essentially treated as employees of the legislature. They were compensated as part of the usual process by which the legislature compensated its employees. And the evidence I think is quite clear, although it's not overly abundant, that the legislature itself had never considered over the course of time the post of chaplain or any particular individual's retention as chaplain as an issue of substantive importance in the legislative process. We have not one hint of any controversy, of any complaint, any concern about either the post of chaplain or any particular chaplain whatsoever prior to the time that Respondent, as a member of the Executive Board in 1979, attempted to get that body to recommend that the post be totally eliminated and, as he put it, failing that at least compensation. Thurgood Marshall: Well, Mr. Attorney General, you never had a non-Christian chaplain, did you? Shanler D. Cronk: We don't know that, Your Honor. The only thing we know about-- Thurgood Marshall: Well, I was going to ask you, if you said so, name him, because I'm sure there's not... I thought that was admitted. Shanler D. Cronk: --No, I don't believe it was, Your Honor. We never had any evidence at all in the record about the denominational affiliations, even the identities, of any chaplains prior to Palmer. Thurgood Marshall: Well, you have the prayers are in the record, aren't they? Shanler D. Cronk: On three occasions during chaplain-- Thurgood Marshall: Aren't the prayers in the record? Shanler D. Cronk: --Certain of them are. Thurgood Marshall: Do you have any prayer in there that doesn't invoke the guidance of Christ, C-h-r-i-s-t? Can you show me one? Shanler D. Cronk: I believe there are prayers that make reference to deity identifiable to the Judaeo-Christian heritage, as Chaplain Palmer put it. There are certain prayers that expressly mention Jesus Christ. I think the record reflects roughly half, a little less than half of the prayers, in addition to making reference to deity, that might be identified in the Judaeo-Christian heritage, do mention Jesus Christ. Thurgood Marshall: But you don't admit it, do you? You don't admit it? Shanler D. Cronk: Don't admit what, Your Honor? Thurgood Marshall: That they're all Christians, all of the chaplains have been Christians? Shanler D. Cronk: We simply have no idea, Your Honor. Thurgood Marshall: You have no idea? Shanler D. Cronk: Absolutely none. Thurgood Marshall: I see. Shanler D. Cronk: The only thing we know about any prior chaplain is that Chaplain Palmer himself became a candidate for the post because of the death of his predecessor in office. One of the important facts relevant to the Court of Appeals' basis for this conclusion is simply the fact that over the entire some 130 year history of the Nebraska chaplaincy, in keeping with the fact that the legislative post and any particular individual had never caused any concern from the public or from the legislature, the practice developed that the chaplain, as well as the other non-legislator traditional officers, would be reappointed. Both Respondent Senator Chambers and Executive Board Chairman Lewis indicated that it simply was the common practice that the four incumbents to the office would be slated again, unless there was an objection from somebody. All that was needed in order to have the Executive Board recommend an incumbent for an ensuing session of the legislature was a five to four vote. There simply had never been any objection to that process, which I think is reflective of the fact that it had never engendered any controversy or concern whatsoever up to this point, up to the filing of the action. Chaplain Palmer, who has served since 1965, clearly indicated that he became a candidate for the vacancy at that time as an individual, not as a representative of his church. His church allows him to become involved in civic activities to the extent his time permits. It's in that capacity that he has served. The only evidence that is in the record concerning Chaplain Palmer's own individual retention comes from the Executive Board Chairman, Frank Lewis, who had been a member of the legislature since 1972 and was Chairman of the Executive Board at time of trial in 1979, that Palmer had simply been reappointed because he had done a good job, very much consistent with what the usual process was. Sandra Day O'Connor: Mr. Cronk, is there evidence in the record that Chaplain Palmer ever refused to allow any guest chaplain to appear? Shanler D. Cronk: There is no evidence in the record that there was any such refusal. In fact, the record makes quite clear that on frequent occasion he solicited clergypersons of other denominations to fill in for him. It was frequently the occasion that a member of the legislature, because of a special occasion, the death of a friend or what-not, would suggest that a particular chaplain fill in. No such request was ever denied. Chaplain Palmer indicated there were other denominations and religions represented, mentioning clerics of the Jewish faith in particular. I might add-- Sandra Day O'Connor: Does the record disclose when the prayers were recited and at what point in the orders of the day that that practice occurred? Shanler D. Cronk: --The record does, Your Honor. The prayer was essentially the first step beginning each legislative day's sitting. The legislature typically was called to order at 9:00 in the morning, sometimes 10:00. That would be the first matter of business, depending on when each day's starting time was scheduled. The Petitioners have always maintained that, on the basis of this particular record and on the basis of any record that could have been developed by any different approach to this establishment clause challenge to the legislative practice, that it stands in its entirety, and is not changed by specific analysis on any one of its several components, as essentially a tradition of the legislature, more steeped in ceremony than actually any substantive import, by which the legislature has sought to begin each day's business in a solemn tone, hopefully setting an attitude of high purpose, although Chaplain Palmer quite readily admits that he would be hard pressed to admit that happens on all occasions. And the fact that Chaplain Palmer has served in his post does not change that fact, the fact that he served for some 16 years. Fundamental, we believe, in this analysis is recognition of several historical considerations which clearly are relevant because of the fact that legislative chaplaincies substantially, if not virtually, identical to that in Nebraska have a rich history in our national heritage. I think the importance with regard to certain activities that are interpreted under the religion clauses today that have such a history, of an investigation into that history and of a taking into account in the establishment clause analysis of that history, has been clearly indicated by this Court in cases such as Walz versus Maryland... Walz versus Tax Commissioner and McGowan versus Maryland. And I believe the factors that were singled out there and that played a substantial part in the decisions in those Courts are also existent here and were totally ignored by the Court of Appeals, which fundamentally flawed its analysis. We do have the benefit of examining an activity today that not only existed at the time the framers were drafting the First Amendment, but was actually practiced by them at the very time the First Amendment was drafted. The existence of evidence contemporaneous with the drafting of any particular amendment which we are today attempting to interpret was recently underscored by this Court in the Minneapolis Star and Tribune case. I think the record before the Court quite convincingly indicates that three days before the final wording of the First Amendment was settled on, including the religion clauses, the very same framers enacted legislation compensating the officers of both of their houses, including chaplains. Even some 15 years prior to that time, the First Continental Congress employed or utilized a cleric to begin its legislative sessions. He was compensated at the end of his tenure and his tenure was for a number of years. Subsequent to the drafting of the First Amendment and the convening of the first Congress under the Constitution, the federal practice has been virtually identical to that that has been employed in Nebraska. Equally important is the fact that the same activity, the same practice in substantially identical form, has enjoyed widespread acceptance throughout the states. The amicus brief filed by the National Conference of State Legislatures reaffirms what had previously been noted in the decisions of a few courts construing cases such as this, that legislative bodies in every state traditionally have opened their legislative daily sessions with prayer, that over half of them have compensated the individuals performing that service, and-- Thurgood Marshall: Mr. Cronk, in this case did the chaplain do anything other than give a prayer? Shanler D. Cronk: --I think the record indicates that his only service is the provision of the morning prayer, and that's provided for by legislative rule. Thurgood Marshall: Yes, but I mean that was actually true? Shanler D. Cronk: This is true. John Paul Stevens: May I ask you if you think the result would be the same if the rule had provided that every committee hearing shall open with a prayer? Shanler D. Cronk: It's difficult to assess whether the result would be the same in any particular situation, because this, like most establishment clause cases, has to be determined on the basis of its own facts and circumstances. We would simply have to know, we would have to inquire, we would have to find out, what the reason for requiring-- John Paul Stevens: The same reason here, to have a solemn beginning and get everybody in the proper mood to start their deliberations. Shanler D. Cronk: --It doesn't strike me that we necessarily would conclude that that, such a practice, moves us more toward the impermissible. But there could be a number of explanations for why such a requirement would ever be evolved in a particular legislature, just as there could be a number of explanations as to why specific state legislatures employ legislative prayer practices or retain particular individuals. What we know here is that there is nothing inform in the way that the Nebraska legislature has done so over the past 100 years. John Paul Stevens: Would you have any trouble with the Nebraska rule if it said... if 16 years ago they passed a rule that said, for the next 16 years the prayer shall be conducted by a Presbyterian minister? Shanler D. Cronk: I think that that moves us more toward... the suggestion in your question is that that singles out a particular denomination officially. John Paul Stevens: Well, that's one of the things that apparently troubled the Court of Appeals. I was just wondering if, instead of looking at it in hindsight, we looked at it in advance, would it bother you at all? Shanler D. Cronk: I think that that would cause more problem than has been caused by this situation that we actually have before us. I think clearly it would be good cause for an inquiry as to what the purpose for the requirement was. All that we know now... and it draws back to the unique circumstances of this case... all that we know now is that Chaplain Palmer was retained simply because he did a good job, considered as a traditional, relatively unimportant ceremonial functionary of the legislature. Byron R. White: How was his appointment... how often was his appointment made, did you say? Shanler D. Cronk: The sessions, the actual process, is every two years. Byron R. White: Is it for every... is he reappointed every session? Shanler D. Cronk: Every two-year session. So at the time of trial it was 14, he would have been in his sixth or seventh reappointment. Byron R. White: And who designates him? Shanler D. Cronk: The Executive Board recommends to the full legislature for approval. That approval has essentially been a rubber stamp. Byron R. White: Is that one of the early... is that one of the first things a new session does, is to-- Shanler D. Cronk: The Executive Board? That's not clear. In fact, it's not clear... well, the session begins the first of the year, I believe, about the second or third week in January. So this action has to be taken by the Executive Board prior thereto, within a reasonable amount of time. And I would presume that selecting the officers is one of the first orders of business. The provision that requires the selection of these officers is the-- Byron R. White: --Does he, does the chaplain, have an office? Shanler D. Cronk: --No, he does not. He travels-- Byron R. White: He just comes in every morning-- Shanler D. Cronk: --Yes. Byron R. White: --for a few minutes? Shanler D. Cronk: Yes. Byron R. White: So he has no place to hang his hat? Shanler D. Cronk: As far as I know, and the record is silent on whether that's the case. My personal knowledge is that he does not. In fact, I believe it can be gathered from his testimony. He indicated that he usually prepares the prayers in his church before getting in the morning to the legislature to give them. This Court I think is aware that in attempting to define the limits of the permissible accommodation-- Byron R. White: Excuse me. Do you know whether anybody else has ever applied to be the chaplain? Have there been lots of... down through the years, has every session... have there been several every session who are applying, and they've always chosen him? Shanler D. Cronk: --We don't know. There is evidence in the record that in 1979 there was some confusion between the outgoing Executive Board and the incoming Executive Board prior to the session that began in January of 1980 as to which Board was to select or to recommend the officers. As to how frequently clerics apply, if they even apply at all, the record is simply silent. Thurgood Marshall: Well, what about the Lutheran minister that applied? Shanler D. Cronk: I have been asking myself the same question, Your Honor. Thurgood Marshall: Well, I know, but the record said that at least one did apply. Shanler D. Cronk: The record says nothing about the denominational affiliation of any other chaplain except Reverend Palmer. Thurgood Marshall: I said applicant, not chaplain. Shanler D. Cronk: There is an indication that in 1979 the outgoing Executive Board recommended another cleric-- Thurgood Marshall: That's what I thought. Shanler D. Cronk: --denomination unknown. The new incoming board, feeling that it was authorized or not knowing that the outgoing board had already taken the action, recommended Chaplain Palmer. When that inconsistency was brought to a head, the confusion was cleared up on the floor of the legislature. John Paul Stevens: General Cronk, let me ask you one other question. I'm a little puzzled about it. The Court of Appeals relied on the publication of the prayers at state expense. But yet, as I understand it there was no... the district court's order which held that invalid, I believe, was not appealed. What is the status of that part of the case in your view? Shanler D. Cronk: I wish I knew for certain. John Paul Stevens: Kind of puzzling. Shanler D. Cronk: The Plaintiff, Respondent here, challenged the expenditure of state funds for the prayer book. He specifically requested relief that the expenditure of funds be enjoined. The district court judgment I believe purports to enjoin not only the expenditure of funds but the printing of the prayer book. Being of the view that the printing of the prayer book has never been an official part of the legislative chaplaincy anyway, that matter was not appealed to the Court of Appeals. We have been of that view for the reason that in three years during the latter portion of Dr. Palmer's tenure individuals on the floor of the legislature, not pursuant to any legislative rules, apparently toward the end of the session got up and said: I think it would be a good idea if maybe we had some of these printed up for our own use. It is indicated on page 32 or 33 of Reverend Palmer's deposition, Exhibit 5 on the record, that the request was that these books be prepared for the legislators' use. Apparently some of them felt that it had been somewhat inspirational and they thought it would be nice to have copies of the thing. Evidence of the fact that it was intended primarily for their use is quite clear from the print runs of the book. The 1970 book, there were 100 copies that have been made. This chain of events at the time the action was filed was not at all guaranteed to occur in the future. We had no idea whether anybody was going to get up and order that or not. It simply wasn't, a part of this case as we viewed it, and for that reason we didn't appeal it. Because the Court of Appeals changed the analysis that the district court had undertaken and insisted that it had to consider the challenge against something called a prayer practice in its entirety, whatever the court meant by that, the prayer book issue was kind of dragged back into the fray. Our position is that it is distinct from the legislative chaplaincy, it is distinct from the principal controlling factor by which the Court of Appeals decided this case, but even if it is considered on its merits, that the district court and the Court of Appeals were wrong to the extent that their decisions stand as a judgment that on an independent analysis those prayer books transcend the establishment clause. I think that the record, portions of the record I have just cited, indicate there was a secular enough purpose for them. To say that 100 of these books given to the legislators for their own personal use amounts to a direct and immediate effect advancing religion, notwithstanding the fact that there were a few odd copies left over and somebody among the public found out about it and requested it and they were given to them, we think stretches the meaning of the primary effect test. I think at this point I would like to reserve any remaining time for rebuttal, Your Honors. Warren E. Burger: Very well. Mr. Friedman. Herbert J. Friedman: Mr. Chief Justice and may it please the Court: I'd like to make it clear what this lawsuit is about and what it's not about. It's about a very narrow question that was presented by the Petitioners, drafted by their counsel, and accepted for review by this Court. The question presented is this: whether the Nebraska legislature's compensation and retention of a single individual as chaplain for an extended period of time renders its legislative prayer in violation of the establishment clause? Harry A. Blackmun: Mr. Friedman, would you still be here, however, if the compensation weren't in the case? Herbert J. Friedman: Yes, Your Honor. Harry A. Blackmun: I thought so. So the compensation is irrelevant, then, to this issue that's presented. Herbert J. Friedman: No, Your Honor, I think the compensation is part of the issue. Warren E. Burger: Well, your response to Justice Blackmun? Herbert J. Friedman: I'd still be here, but certainly the compensation is part of this issue. They're using public funds for a religious service. Byron R. White: I take it you would also be here even if they changed chaplains every session? Herbert J. Friedman: I think so. William H. Rehnquist: You'd be here, but your case wouldn't be as good? [Laughter] Herbert J. Friedman: I wish I'd said that, Your Honor. Warren E. Burger: What if, Mr. Friedman, as is often the case, you had a clergyman who was a member of the legislature and as an economy measure they drafted him to give the invocation every morning? Herbert J. Friedman: Same clergyman every morning? Warren E. Burger: A member of the legislature, yes. Herbert J. Friedman: I understand that. It poses a problem, but it's not the issue before the Court. Warren E. Burger: Well, we ask hypothetical questions very frequently. You'll get many of them today, I'm sure. What would you think about that? Herbert J. Friedman: We would disapprove of it. Warren E. Burger: Well, disapprove. Would you say it's unconstitutional? Herbert J. Friedman: We'd say it would be unconstitutional if there was prayer in the legislature. Warren E. Burger: All right. Now, a non-clergyman member of the legislature, a Nebraska farmer, cattleman, lawyer, gets up and has an invocation. Herbert J. Friedman: The same religion every day? If it's the same religion every day, we think it's unconstitutional. Warren E. Burger: All right, let's change it, then. You have a lot of members of the legislature. They rotate it alphabetically. Anderson starts off, Babcock next, and Cronk after that. Herbert J. Friedman: Certainly less unconstitutional-- Warren E. Burger: Why? [Laughter] Herbert J. Friedman: --but in our view still unconstitutional. Warren E. Burger: Why? Herbert J. Friedman: Because it still mixes religion with government. Warren E. Burger: You said less. Why is it less? Herbert J. Friedman: Because it makes it less obvious that one religion is singled out as being the official religion. Warren E. Burger: Well now, the Congress of the United States, or the Senate, I believe, for about... until recently had, by coincidence, a Presbyterian chaplain for about eight or ten years. You would have thought that was unconstitutional? Herbert J. Friedman: I would think so, Your Honor. Warren E. Burger: How about our invocation that the Marshal announced this morning when he concluded calling the Court and said at the end, "God save the United States and this honorable Court? " Herbert J. Friedman: I don't think this lawsuit is asking this Court to take a judicial hammer and chisel and do away with all of the terms of religion, including the opening ceremony by Marshal Wong. That's not what we're trying to do. I think Marshal Wong's ceremonial opening has probably lost any religious significance it may have had, and Marshal Wong is not a chaplain, he's not a clergyman. Warren E. Burger: Well then, we go back to the members of the legislature. If that's your view, then members of the legislature could get up and individually give opening prayers every morning. Herbert J. Friedman: We'd prefer that they didn't. We think that-- Warren E. Burger: We're not here on preferences, Mr. Friedman. We're here to discuss a constitutional issue. You have claimed that the conduct is unconstitutional and for my part I just want to see how far you'll carry that. Herbert J. Friedman: --Your Honor, it seems to Senator Chambers that any time you have a prayer in the legislature it's probably unconstitutional. That is mixing religion with government. Senator Chambers' view is very simple. He's elected to represent his constituents and he is exposed to a religious prayer each morning that's against his religious values and he doesn't think he should have to be exposed to that. Warren E. Burger: Then it would follow, I suppose, that the Constitutional Convention engaged in an unconstitutional practice by having a prayer to open each session in Philadelphia. Herbert J. Friedman: They were certainly inconsistent, Your Honor, and there's no question that that matter was never raised at that particular time. I think there are some unique distinctions as to the historical argument. This matter has really never been addressed by this Court. It would appear that that was unconstitutional then, too. John Paul Stevens: You mean even before the First Amendment was adopted? It wasn't retroactive. [Laughter] Herbert J. Friedman: No, Your Honor. This case does not deal with-- Byron R. White: Well, wasn't there opposition to the prayer in the First Congress? Herbert J. Friedman: --Yes, there was, Your Honor. Byron R. White: Well, so it was brought to it... it was put on the table, but that was just by a minority. Herbert J. Friedman: It was debated. Byron R. White: Yes, and the people who raised it didn't prevail. Herbert J. Friedman: At that time they didn't. Byron R. White: Yes. Then the... do you think that Congress would have, if it thought the First Amendment barred that, would have continued having prayer? Herbert J. Friedman: Well, I don't know that-- Byron R. White: Well, isn't that a pretty decent inquiry, though? Herbert J. Friedman: --As to what the First Congress-- Harry A. Blackmun: Yes. Herbert J. Friedman: --Your Honor-- Byron R. White: Well, I just wonder, isn't it a relevant inquiry as to what the framers intended? Herbert J. Friedman: --It's an interesting historical inquiry, but I think it's more important-- Byron R. White: None of it... it has no legal significance? Herbert J. Friedman: --I don't believe it has the legal... I don't believe it has binding legal significance, Justice White. I think that our nation has changed significantly in the past two decades... past two centuries, I should say. And what the framers did then was not what the Nebraska legislature is doing now. They had a completely different approach to the chaplaincy. In the first place, they rotated chaplains. The chaplains of the House and the Senate were of different denominations, and they weren't even officers. Byron R. White: They paid them, though. Herbert J. Friedman: They did pay them. Three days before they passed the First Amendment they voted-- Byron R. White: To pay them. Herbert J. Friedman: --To pay them. Byron R. White: Yes. Herbert J. Friedman: And it's an inconsistent... perhaps one of those inconsistent things that's come down through two centuries, and we have never brought it to this Court before. The Court has never had an opportunity to rule on it. Byron R. White: That's... you're just assuming it's inconsistent. It may not be at all. That's what the lawsuit's about. Herbert J. Friedman: I suspect that's what the lawsuit's about, Justice White. I think the elements of the Nebraska legislative prayer practice must be gone into in some detail. The chaplain, first of all, is an officer of the legislature. He is an official. He may not have a desk. I don't know that he has a desk. But he does have a title. He's an officer. His only function is to deliver prayer. He has a uniquely religious function. It's part of the legislative day and you open up the legislative day with that prayer. The chaplain is compensated. He receives a salary each month. His prayers are published. And perhaps the most problem here is that the chaplain has inevitably been a Christian. There is a place in the record, to answer Justice Marshall's question, by cross-examination on Senator Lewis, who was Chairman of the Executive Committee. And the question was: "Would you agree that really the only clergy in the history of the legislature-- " William H. Rehnquist: Where are you reading from, Mr. Friedman? Could you tell us? Herbert J. Friedman: --Yes. Page 69 of the Joint Appendix, Justice Rehnquist. "Would you agree that really the only clergy in the history of the legislature has always been a Christian clergyman? " Answer: "To my knowledge, that's correct. " That's an admission by the Chairman of the Executive Committee of the legislature. Quite frankly-- Byron R. White: Well, doesn't that just mean "as far as I know"? Herbert J. Friedman: --That's true, Your Honor. Byron R. White: And how long has he been in the legislature, seven years? Herbert J. Friedman: Seven or ten years, something like that. Sandra Day O'Connor: Mr. Friedman, is there any evidence, apart from the symbolic evidence that you just referred to, that the tenure of Reverend Palmer has had the purpose or the effect of favoring one particular religious viewpoint? Herbert J. Friedman: I think the fact, Justice O'Connor, is that it's always been a Christian and it's always been a mainstream Protestant Christian. Same way with the Congress of the United States. It's always been a mainstream Protestant Christian. Sandra Day O'Connor: Well, what I was asking was, is there anything other than that rather symbolic evidence to demonstrate that a particular religious viewpoint was being advocated? Herbert J. Friedman: Other than the fact that the symbolic inference here is that one religion stands out, there isn't. This case deals with symbolism. I think that's the crux of this lawsuit in many respects. Sandra Day O'Connor: Could you also address exactly what effects the practice in Nebraska has had on Senator Chambers with some precision? Herbert J. Friedman: The record is clear on that, Your Honor. Senator Chambers testified to that. Harry A. Blackmun: Is that what you call your members of your unicameral legislature, "senator", all of them? Herbert J. Friedman: Yes, Justice Blackmun. I'm trying to refer the Court to the record. On page 44 of the transcript, Senator Chambers testified: "Well, by the simple fact that the legislature, the chaplain is, and I believe always has been, a Christian, there is some sort of, it seems to me, some sort of general tendency to approve of a particular perspective or point of view in religion, and perhaps to disapprove of others. " "The religious belief of the chaplain is probably representative of the religious belief of the legislature. " And then he goes on to testify that that is contrary to his own religious beliefs and has caused some friction between Senator Chambers and the other senators when he has to get up and he leaves. William H. Rehnquist: Didn't the chaplain make some adaptation to Senator Chambers' feelings, though, after he learned of them? Herbert J. Friedman: He did not. William H. Rehnquist: I thought that he omitted the reference to Christ. Herbert J. Friedman: That was after Senator Fellman, a Jewish Senator, came up to him and commented. William H. Rehnquist: Well, then he, the chaplain, did make some adjustment after receiving a comment from another Senator who didn't like the Christian aspect of the prayer. Herbert J. Friedman: He devoided himself of the uniquely Christian aspect. But of course, Senator Chambers doesn't believe in God at all, so the prayers themselves were offensive to him. They were contrary to his spiritual beliefs, or disbeliefs as the case may be. William H. Rehnquist: Well, he simply not only didn't believe in God, but prayer as such bothered him, I take it? Herbert J. Friedman: Prayer in the legislature bothered him. I think it should be made clear right now that this is not an anti-religious lawsuit and Senator Chambers is not questioning the right of people to pray, only to pray on the floor of the legislature. Warren E. Burger: It wouldn't do him much good to question the right of people to pray, would it, with the First Amendment and the religion clauses? Herbert J. Friedman: Of course not. William H. Rehnquist: And no one requires him to pray. Herbert J. Friedman: Oh, I think that's quite true, Justice Rehnquist. He doesn't have to be there, but I don't think that's the question. Even in the school prayer cases, the children didn't have to be there, but nonetheless they were there and there was certain peer pressure. And in this case there's even a certain amount of peer pressure within the members of the legislature. The fact is that the legislative rule, although it's not obeyed to the letter, says he must be there. He must be there for the opening prayer. And that he finds constitutionally offensive. Warren E. Burger: What if before the legislature met they announced throughout the state that every clergyman in the state would be invited to... or every clergyman in Lincoln, Nebraska, to eliminate the travel problem, would be invited to come and give one day in rotation? And then they would pull them out of a hat in order. You still think that raised a constitutional question? Herbert J. Friedman: We think it would, Your Honor. But again, it's not-- Warren E. Burger: Well, then the Presbyterian factor is irrelevant to your argument, isn't it? Herbert J. Friedman: --The fact that Dr. Palmer is a Presbyterian? Warren E. Burger: Yes. Herbert J. Friedman: The fact that Dr. Palmer is a member of a mainline Protestant faith is not irrelevant. Warren E. Burger: But you say the result would be the same if you had all the clergymen in Lincoln, and I suppose there must be 50 or 60 of them, maybe more. Herbert J. Friedman: More than that. Certainly-- William H. Rehnquist: Mr. Friedman, you've used the term "mainline Protestant faith" a couple of times. What do you include within that definition? Herbert J. Friedman: --Mr. Justice Rehnquist, I think that basically deals with the Protestant sects who have the most members. I would include in that basically the Lutheran-- Thurgood Marshall: Be careful, now. You might leave out one. [Laughter] Herbert J. Friedman: --I'm treading on thin ice, Mr. Justice Marshall. William H. Rehnquist: Is that based on a church membership approach? Herbert J. Friedman: Basically. Here I think if you look at the Congressional history you can find that in the Senate, for example, of the 62 chaplains that they have had since the inception of the Senate, about a third of them have been Presbyterian, a third Episcopalian, and a third Methodists, and a half a dozen other assorted religions. The same thing goes with the House. They've been basically those three or four denominations that we've talked about. There have never been representatives in the Congress of the United States of the smaller religious sects, such as Seventh Day Adventists, which is a strong sect in Lincoln. There has never been any kind of... there has never been any type of representation of the smaller groups. There's never been a Jewish individual, there's never been a Muslim. And I suppose the problem here is really one of symbolism. That may be the major problem that we have here. Aside from the compensation issue, I think the symbolism issue is very important. Symbolically, one individual who represents one religious point of view is inevitably an officer in that legislature. Warren E. Burger: But you've said several times that even if you had chaplains picked at random one day at a time, you'd have the same objection. Herbert J. Friedman: I think that's true, Your Honor. We must... I think I must stick with the facts of the case and the issue presented and accepted by this Court for review. But I think it's still a problem, even if you had a mix, even if you had somebody each day, even if they were not paid. But that's not the issue that really is before the Court and that's not the issue that Senator Chambers is litigating at this juncture. But if you're asking what Senator Chambers' opinion is or what my personal opinion is, I think it would still be unconstitutional. I don't believe that you should have any prayer in a legislative setting. Warren E. Burger: You seemed to make a difference earlier in your argument between legislatures and courts. Do you think an extended prayer, as distinguishes from the very brief invocation, would be unconstitutional in a court? Herbert J. Friedman: I would think so, Mr. Chief Justice. Warren E. Burger: Then how about this very short version that the Marshal uses to summon the Court? Herbert J. Friedman: I suppose that's the... that's the one question I suppose that I knew was going to be asked, and the one I have been dreading answering, I suspect. I don't suppose anybody looks forward to telling this Court that perhaps the opening ceremony may be unconstitutional, and I'm certainly-- [Laughter] William H. Rehnquist: Well, you don't have to go that far, do you, to make... to win this case? I mean, certainly there could be degrees of secular kind of absorption of something. Herbert J. Friedman: Mr. Justice Rehnquist, we believe that the opening ceremony of this Court, as well as the name of God on public buildings and God on the currency, have lost all religious significance. Senator Chambers makes no issue about that. They have been reduced to rote and they're not religious at all. But that's not the case with the chaplain's prayers in Nebraska. Those are definitely religious prayers. They're constructed differently each day. They invoke the name of God. Most of them invoke the name of Jesus. They were definitely religious prayers and you can't get around that. You can't compare-- Lewis F. Powell, Jr.: Mr. Friedman, do military units still have chaplains? Herbert J. Friedman: --Yes, they do, Justice Powell, and we don't quarrel with that. Lewis F. Powell, Jr.: Why? Herbert J. Friedman: We feel that people who are in the military service are taken away from their normal place, they are oftentimes overseas, and to deny them some sort of religious inspiration would probably be a violation of the other part of the clause, the free exercise clause. Sandra Day O'Connor: Don't you think legislators are called away from their home counties and are in need of some guidance and inspiration as well? Herbert J. Friedman: That may be true, Justice O'Connor, but I don't think that that's the same, what we're talking about. And the same with prison chaplains. Prison chaplains of course are provided. But that's not the case here. I think-- Lewis F. Powell, Jr.: If you have a military unit stationed at some foreign post, remote generally from other people, are you suggesting the chaplain has no opportunity to influence them? Herbert J. Friedman: --I'm sorry, Justice Powell, I didn't understand the question. Lewis F. Powell, Jr.: I said, military units are stationed all over the world and they're often quite isolated. You are suggesting that it's not appropriate for a chaplain to have an opportunity, by example or otherwise, to influence other people. Do you think the chaplain has no influence whatever in a military unit? I don't know. I'm asking your opinion. Herbert J. Friedman: I think they do have some influence, and I guess the answer is I don't know, either. William J. Brennan, Jr.: Well, in any event, Mr. Friedman, I gather what you're suggesting is that in the case of the military chaplain or the prison chaplain there's a tension between the free exercise and the establishment clauses, and the free exercise clause in this instance, and the interests, override the establishment complications. Herbert J. Friedman: That's correct, Justice Brennan. That's what I'm trying to say. Warren E. Burger: There's a tension in every application of the religion clauses, a tension between the two branches of the religion clauses. And all of our cases have indicated that, have they not? Herbert J. Friedman: That's correct, Chief Justice. But I think this case is really a very strong case. It probably goes to the very outer limits. The Nebraska chaplaincy is a paid religious official doing a religious service on the floor of the legislature, and those other cases don't go that far. Even in establishment clauses cases that ruled against the plaintiff, they never had anything that came close to the factual pattern in this case. Sandra Day O'Connor: But Mr. Friedman, that comes back, of course, to the practice of Congress and the practice in Congress at the formation of this nation and at the time of the adoption of the First Amendment. Herbert J. Friedman: Justice O'Connor, at the time of the First Congress I believe most of the members sent their children to segregated schools. At the time of the passing of the Fourteenth Amendment in 1868, they all sent their children to segregated schools. But times have changed. As Chief Justice Warren said, I believe it was... in one case-- Thurgood Marshall: Might be named Brown, Brown versus the Board of Education. [Laughter] Herbert J. Friedman: --I think you had something to do with that case. We can't turn the clock back to 1868. We simply must recognize the fact that our civilization has changed. And our civilization has changed, Justice O'Connor. It's changed completely. Two centuries ago our forefathers knew religious differences primarily among the differences of Protestant sects. Preparing for this argument today, I went through the Washington telephone book and I noticed the difference of the various religious points of view right here in the nation's capital. We are a pluralistic society. We weren't a pluralistic society two centuries ago. The Congress of the United States represents all of the people. It represents the Muslims and the Hindus and the Bahais and the Jews. And unfortunately, the Congress of the United States has not kept time. William H. Rehnquist: Well, certainly Congress in 1789 had... represented and realized it represented Catholic constituencies, certainly some Jews, some deists. Weren't both Jefferson and Madison deists? Herbert J. Friedman: That's correct, Justice Rehnquist. William H. Rehnquist: So to say it's pluralistic now, it was pluralistic then, too. Herbert J. Friedman: It was not nearly as pluralistic. William H. Rehnquist: Well, but does that change in degree really mean that we can't accept the meaning that was intended by the people who drafted the amendment as applicable today? Herbert J. Friedman: I can't believe that the framers of the Constitution today would accept the practice in Nebraska. They may have accepted it two centuries ago, but when they looked at the change of our society, the change of our culture today, I'm sure they would not approve of this practice. In fact, James Madison, who was the drafter of the establishment clause, later in life changed his mind and said that it was clearly unconstitutional from his point of view. William H. Rehnquist: Well, should we take Madison at the time he drafted the amendment or as he recanted many years later? Herbert J. Friedman: I think what we have to do is take-- Byron R. White: What he said is that he had made a mistake. Herbert J. Friedman: --That's correct. We think he made a mistake, too, when he voted-- Byron R. White: That's like saying, well, I know the First Amendment means so-and-so but I wish it meant it something else. Herbert J. Friedman: --Justice White, this matter really has never had the opportunity to be presented to this Court. Back in 1922-- Byron R. White: Well, you have the opportunity now. Herbert J. Friedman: --That's what we're trying to do, Justice White. And I think one of the problems is that there was no procedural avenue to get the matter to this Court's attention two centuries ago. The procedural avenue is open now through virtue of the Civil Rights Act, which is the suit... which is the statute under which this case was filed. And we ask the Court to take a strong look at this, because symbolically this is extremely important. I think the Nebraska practice hits square on with the neutrality theme that this Court has always maintained in most of the establishment clause cases, going through Everson and McGowan, Abbington, Walz and Epperson. All of the establishment clause cases, irrespective of whether they held for the plaintiff or for the defendant, the one rule that this Court has always had is that when it comes to government, when it comes to religion, government must remain strictly neutral, neither endorsing or appearing to endorse one religion over another or religion in favor of non-religion. And it seems to me that the record in this case supports the conclusion that one religion is in fact better than others. In the record, for example, there is the testimony of Dr. Palmer, who said... would you agree that by having a uniquely Christian chaplain in the legislature it adds an air of officialdom to the Christian faith? And he says, it could be perceived as such. But the other witnesses also agreed to that. Reverend Stevens, who is a Unitarian minister, testified as an expert on behalf of the Plaintiff, and he said it certainly adds an air of officialdom to one religion. And of course, Senator Chambers said the same thing. And that probably is one of the key problems that we have here. The whole concept of having one religion that stands out in a very pluralistic society seems to cause some problems. Lewis F. Powell, Jr.: Mr. Friedman, you have to support the position, don't you, that the primary effect of what has been done in the legislature is to promote the establishment of religion? Do you not? Herbert J. Friedman: That's correct, Justice Powell. Lewis F. Powell, Jr.: What evidence is there of that? Herbert J. Friedman: Circumstantial evidence and symbolic evidence only. I can't stand-- Lewis F. Powell, Jr.: Well, what is the circumstantial evidence? Have the number of mainline Protestant churches increased since 1955 in Nebraska? Herbert J. Friedman: --No. Lewis F. Powell, Jr.: Have the number of parishioners in Protestant churches? Herbert J. Friedman: Absolutely not. Lewis F. Powell, Jr.: Well, in what way has any establishment of religion been enhanced or furthered? Establishment, now. Herbert J. Friedman: I understand what you're saying, Justice Powell. And the only thing I can tell the Court is that this practice of having one uniquely religious figure who belongs to one religion is just like having a small statute or a small pennant on the flag with a religious symbol on it. It may be small, but it's there and you can see it and everybody knows that it's there. And that's the problem here. Everybody knows that the officer of that court or the officer of the legislature is a Protestant Christian and always has been, and I submit always will be. Byron R. White: And that is an establishment, you say? Herbert J. Friedman: I perceive it as an establishment problem. Byron R. White: Like the... well, you have to say that that is the establishment, like the symbol on the flag. Herbert J. Friedman: That's correct. Byron R. White: That would be the establishment, wouldn't it? Herbert J. Friedman: I think 40 years ago in another establishment-- Byron R. White: You must take that position or else you'll have to then prove that that symbol on the flag or the symbol before the legislature had some real consequences, which you don't care to undertake to prove. Herbert J. Friedman: --I can't prove that. Lewis F. Powell, Jr.: May I ask this. Was that the type of establishment that the framers had in mind when they included the establishment clause in the Bill of Rights? They were thinking about what had happened, indeed, to many of them and to their ancestors in Western Europe. Herbert J. Friedman: That's correct, Justice Powell. I think-- Lewis F. Powell, Jr.: There you had a true establishment, that the church and state were essentially the same. Herbert J. Friedman: --I think that a legal historian could probably make a good argument that one of the reasons they called it "establishment" was that many of the states had their own established churches at that time and they didn't want the Federal Government to get involved in it. It wasn't until 1940 that the establishment clause was held applicable to the states. Thurgood Marshall: Mr. Friedman, before this case was filed, in your own estimation how many people outside the legislature knew about the chaplain? Herbert J. Friedman: Oh, I think the whole state did. Thurgood Marshall: The whole state? Herbert J. Friedman: He was an official-- Thurgood Marshall: You mean the same state that don't know their own legislators would know that there was a chaplain there? Herbert J. Friedman: --Oh, I think they knew there was a chaplain. I don't think they paid much attention to him, Justice Powell... Justice Marshall. Warren E. Burger: Now, this has been going on for more than 200 years, right back to the Confederation. Would you say that we are closer to having an established church, such as England and Sweden, for example, today than we were 200 years ago? Herbert J. Friedman: I can't say that, Mr. Chief Justice. Warren E. Burger: Then where is the establishment of a religion? Herbert J. Friedman: Symbolically, one religion appears to dominate through government. A number of years ago Mr. Orwell wrote a very poignant satire called "Animal Farm" and he penned the words: "All animals are equals, but some are more equal than others. " And I suppose if one would go to the Nebraska legislature every legislative day during its session or go to Congress every legislative day and hear the opening ceremony, one would walk away with the distinct impression that all religions may be equal in this country, but one is more equal than others. We believe that the Eighth Circuit should be affirmed. Thank you. Warren E. Burger: Do you have anything further, Mr. Cronk? Shanler D. Cronk: Just briefly, Mr. Chief Justice. If there's one thing that the Court should have pounded into the heads of anybody attempting to discern the proper establishment clause analysis, it is that these are very difficult cases and they depend essentially on facts and circumstances. And if there's one thing that is conspicuous about the symbolic argument that is now advanced by the Petitioners, and that seems to be essentially the core of their position, it's that there is not the slightest shred of evidence to support it in the record. And there's a reason for that. This case started out essentially championing the proposition that prayers per se violate the Constitution. The tenure of a particular chaplain, the identity of Chaplain Palmer by denomination, played no part in the trial of this case. That's the reason that the record is absolutely devoid of any relevance on this particular question. The tenure, even the compensation, were not even listed in the pretrial order as controverted issues. If there's any merit at all in the symbolic argument, this is not the record that can support it. This case stands in stark contrast to the-- John Paul Stevens: Mr. Cronk, do you take the position that you never could prove an establishment clause violation without proving that the membership of the favored church had increased over the period that the challenged practice was in effect? Shanler D. Cronk: --No, I wouldn't take that blanket position, Your Honor. I think clearly the Court-- John Paul Stevens: In other words, say you had a... that Nebraska passed a law saying that for the next 100 years we want a Presbyterian minister. Nobody knows whether that will ever make any more people Presbyterians or not. Wouldn't that be plainly unconstitutional? Shanler D. Cronk: --I think inquiring as to the impact, attempting to determine some evidence as to what's going on out there, clearly would be in order. That clearly didn't happen here, because this was not the essence of the case. John Paul Stevens: You think in the hypothetical I gave you you'd have to have a Gallup Poll kind of inquiry to decide whether it's unconstitutional or not? Shanler D. Cronk: No, Your Honor, I think that there are-- John Paul Stevens: There are some cases... I'm not suggesting this is one, but there are some cases where you can just look at the practice and say it favors one religion over others, can't you? Shanler D. Cronk: --Well, I would have to know a little bit about-- John Paul Stevens: Maybe this isn't such a case. I didn't mean that. But I don't think you're really arguing you have to go out and prove what the membership of the churches is in order to identify some practices as violating the establishment clause. Shanler D. Cronk: --Absolutely not. That some practices might manifest some identification with a particular religion or a particular religious view is clear. The question is, in the totality of the circumstances does that really advance religion in the manner that the Court has attempted to explain for us as is contemplated by the establishment clause. The reason that we don't have a leg up in answering that question here is because this case, this record, was never tailored to address this question. Warren E. Burger: Thank you, gentlemen. The case is submitted.

Earl Warren: Number 262, Goodall-Sanford, Incorporated, versus United Textile Workers of America. Douglas M. Orr: May it please the Court. Earl Warren: Mr. Orr. (Inaudible) Douglas M. Orr: Mr. Mahoney argued this case in the lower courts and was to have argued it here, but his health is deemed very poor. So, I apologize that you must take up for a substitute. Earl Warren: Yes, sir. Douglas M. Orr: The petitioner here is Goodall-Sanford, Inc, a Maine corporation that did have a very substantial textile business at Sanford, Maine. The respondent is AFL local 802 -- 1802 now AFL-CIO Local 1802 and United Textile Workers of America CIO. The parties entered into a collective bargaining agreement in 1951, which was renewed in 1953 and which expired in July 1955. That agreement provided among other things that management of the business was to be vested exclusively in the company. That an employee's service continued until it was terminated. An employee's service could be terminated for any of three reasons, a voluntary quit, a discharge for cause, or a layoff for a period of 18 months. The contract also provided for the customary four steps of grievance procedure which were not followed in this case, but which were deemed to have been waived by the District Court. Following those four steps, contract provided for arbitration. It also provided for the usual no-strike clause except on a question of a general increase in wages. Now, the contract also provided for certain benefits to the employee and those benefits are what are in issue here. One is vacation pay for employees who are on the payroll on June 1st of any year and who had 900 hours of service since the previous June 1. Secondly, it provided for certain hospitalization, Blue Cross, and life insurance benefits. And the application of those benefits to employees on layoff was somewhat different from those who were terminated in that they could continue paying a reduced premium and keep them alive during the layoff period. Thirdly, the contract provided for pensions to employees who had 20 years service of $20 a week upon reaching age 65 and of $25 a week -- a month -- thank you, for those who had 25 years of service upon reaching age 65. Now, the general background on this case, Goodall-Sanford, Inc.had sales for the fiscal year ending June 30, 1954 of approximately $50 million and a loss before taxes of about $4.5 million. Consequently, sometime in the spring of 1954, liquidation of a substantial part of the operations was contemplated and plans were made for it. Incidentally, during the summer of 1954, Burlington Industries, Inc.made a public tender for the common stocks of Goodall-Sanford and is now an owner of substantially all of it. The liquidation of the --of the company's plants at Sanford, Maine continued. And by the end of May 1955, it had completely gone out of business there and all of its employees had been terminated. Now, Goodall-Sanford, Inc.as a corporation is still alive and it still operates two plants, one at Hot Springs, North Carolina and another at Reading, Massachusetts. Felix Frankfurter: And in any event, Burlington, Inc.is taking it over? Douglas M. Orr: That's right, sir. Now, in January of 1955, some 1100 hired employees who were then on layoff status, were notified that they would be terminated because the departments in which they worked was completely shut down and would not reopen in any event. In February 1955, some 255 more employees were also terminated. In March of 1955, the Union asked the company to arbitrate the issues involved in whether they had a right to terminate these employees. And this request was refused by the company on the ground that it was a prerogative of management to close the business for economic reasons. And that it also had the right to terminate employees incidental, thereto, if there was no hope of ever re-employing. So, I will say that in this case of the three that are here before the Court today, the decision of the Court is of very material importance aside from the principle involved. Because a fairly substantial amount of money is involved and the question of whether they are entitled to vacation pay, whether those who were terminated and thereafter would have gotten pensions would be entitled to them and certain incidental insurance benefits which they might have been deprived of prior to the termination of the union contract, July 1955. Now, following the -- William J. Brennan, Jr.: You mean -- you mean it is important -- Douglas M. Orr: -- the refusal but -- William J. Brennan, Jr.: You mean it's important that those issues were lost in arbitration if arbitration is directed? Douglas M. Orr: Yes. And it's important if -- if they won, too, sir. I mean -- William J. Brennan, Jr.: No. Well, I mean -- Douglas M. Orr: -- a material amount of money involved if it goes to arbitration and the arbitrator decides it either way. Speaker: This -- Douglas M. Orr: Now, the -- William J. Brennan, Jr.: But the -- but the fact of the amount involved has no bearing in what the -- Douglas M. Orr: No sir. It does not. Following the refusal to arbitrate -- Speaker: What was the ground of the company's refusing to arbitrate? Douglas M. Orr: Because it was a prerogative of management to close the plant and if the employees had no hope of re-employment, that they could also terminate the employment of the employees. And that therefore, it was not an arbitrable issue under the terms of the contract. Charles E. Whittaker: In other words, whether they should go on or quit was wholly a management problem. Douglas M. Orr: Yes, sir. Whether the business should be continued. Charles E. Whittaker: And not an arbitrable one, that's your position? Douglas M. Orr: Exactly, sir. And the complaint -- Felix Frankfurter: That's not the question here, though, is it? But that is not the question here? Douglas M. Orr: No, sir. Felix Frankfurter: (Inaudible) Douglas M. Orr: No, sir. Felix Frankfurter: Now, that's not a corruption. Douglas M. Orr: Now, the complaint filed by the union upon the refusal of the arbitration asked for two things. It asked for a temporary restraining order against the termination of some 1800 additional employees who were still on the payroll and who would not be terminated, at least, until the end of the contract period according to the union, but which the company had already given notice would be terminated. So, they asked through injunction against their termination and also asked for a --a specific decree ordering arbitration of the company's right to terminate anybody. The District Court granted the temporary restraining order. And then after a hearing, the temporary injunction was granted but then dissolved. But the District Court did, upon a motion for summary judgment, ordered the matter to be arbitrated. A motion to dismiss made by the company on the ground of Westinghouse was denied. Charles E. Whittaker: Then I don't understand your answer to Justice Frankfurter's question that the issue of arbitrability of this thing is not now an issue here. And you -- Douglas M. Orr: No, sir. Charles E. Whittaker: Is it not -- Douglas M. Orr: The -- the issue of arbitrability was put in by the Circuit Court. We asked for certiorari on that question but the -- this Court denied a review of that question. Yes, sir. Now, the District Court held that this -- that it had jurisdiction under Section 301 and it decreed specific performance of the agreement to arbitrate. It also, as I mentioned a while ago, held that the issue was arbitrable and sent it to an arbitrator to determine two questions. Did Goodall-Sanford violate its agreement by terminating these employees on the ground that business operations were such that it ceased in, completely, in continuing operations and terminated the employees because of it? And secondly, if the company had violated the contract, what must it do to remedy the wrong to the employees? It also said that the decision of the arbitrator was to be final and binding upon the parties and did not specifically reserve any jurisdiction in the Court -- Felix Frankfurter: May I ask -- Douglas M. Orr: -- as many as award. Felix Frankfurter: May I ask you, Mr. Orr, whether the late Judge Clifford went on the law of Maine or some federal law (Inaudible) Douglas M. Orr: He did not go on the law of Maine because it seems to have been conceded even at that time,that the law of Maine would not permit the arbitration of a future dispute. Felix Frankfurter: What did he go on? General (Voice Overlap) -- Douglas M. Orr: His opinion was pretty general. I think he went mainly on the American Trade case. Felix Frankfurter: Massachusetts law or -- Douglas M. Orr: Yes. [Laughs] Felix Frankfurter: Well, that in -- Douglas M. Orr: While federal law was interpreted by Judge Wyzanski. Felix Frankfurter: Judge -- Judge Wyzanski went on for federal law. Douglas M. Orr: That's exactly -- is the answer. Now, in the First Circuit Court of Appeals, Judge Magruder, at the same time had reversed another District Court in the General Electric case applying the late Judge Clifford's decision in this case. And he said first, that the order of the District Court was appealable since it was a final order. That's a question that's unique to this case of the three and also a question, incidentally, which was not raised in the District Court. But he held that it was appealable, nevertheless. Second, he said that the Court had jurisdiction under Section 301 but it could not grant an injunction under that section compelling arbitration because this -- the substantive common law of the federal courts would not permit it. However, and he said incidentally that the substantive federal common law would have been applicable and not the state law because it wasn't a diversity case. Thirdly, he raised for the first time, U.S.Arbitration Act in this case which wasn't considered either by the respondent or the District Court. And he said under the U.S.Arbitration Act that it was, the Court did have jurisdiction to compel arbitration both because this was not in a form of the contract and it was a transaction -- a -- contract governs in a transaction in commerce. He also considered the Norris-La Guardia Act and held it inapplicable. And finally, he decided that the dispute of whether the company have the right to terminate employees was inarbitrable. He also volunteered the suggestion in the General Electric case that the question of the very arbitrability of the contract might be passed on to the arbitrator if the parties have worded their contract so that the arbitrator had that power. So, we view the legislation that Judge Magruder enacted as almost a complete application of the general jurisdiction of federal courts in this entire hearing. Felix Frankfurter: Why do you call it application instead of absorption? Douglas M. Orr: [Laughs] I think that might be a better word. But he held that they could -- the courts would compel the submission to arbitration. He further held that in this case the very wide discretion given to the arbitrator to determine what remedies were proper was correct and the arbitrator's decision was to be final and binding. And finally, he even suggested that the decree of the Court might not be appealable. Now, this Court granted certiorari because of the conflict in the Lincoln Mills case. Now, I'm going to touch on only those points that I think might have some material bearing on this dispute. Now, the first one is what federal question is involved? And I think that question has been decided by the (Inaudible) case in the Fifth Circuit. In that case, the complaint by the union was that the company had breached an agreement to pay certain welfare benefits through a commission. And it asked for past damages for its past failures and an injunction against discontinuing to make those payments. And the Court noted that the contract was made in Texas, was to be performed in Texas, and was breached in Texas. And it stated and has the language that it said -- said it here and I think it's very apt. The crucial problem is the degree to which federal law affects the decision of the controversy. In the instant case, federal law does not affect it at all on its merits. I think the same thing is true in this case. I think that if I had read the statutes at large from the beginning to the end I could not have found the federal law. I think that was Mr. Wernick's job and I don't think he will point one out to you either. That same decision was reached in Amalgamated Association versus Southern Bus Lines in the Fifth Circuit. In that case, the union brought suit on behalf of its members against a bus line to compel arbitration of changes in the employment contract. And the plaintiff apparently alleged these grounds for jurisdiction but the suit was based on facts arising out of interstate commerce on the contract involving interstate transportation. And therefore, arises under the laws of the United States. Now, I assume that it was so and it was construed as an argument an allegation that it was a question arising under the Interstate Commerce Act. In any event, the Court said what is here involved is merely a controversy between the parties as to the construction of a contact which allegedly arises out of the laws of the United States, respecting collective bargaining between employers and employees in interstate commerce. But the right of action asserted does not arise out of those laws, but only arises from the subsequent contractual relations of the parties. The wrongful breach of such relations does not confer federal jurisdiction unless there is diverse citizenship. Felix Frankfurter: May I (Inaudible) you, Mr. Orr, what are you reading from? What (Voice Overlap) -- Douglas M. Orr: That is 189 F.2d page -- Felix Frankfurter: What's the name? Douglas M. Orr: -- 219. Amalgamated Association versus Southern Bus Lines. Felix Frankfurter: Thank you. Douglas M. Orr: Now, it may be said that if none of these questions arise under a federal law, then how could a 301 case come at -- up at all? And in my opinion, it is quite remote and it's even remote in the case of a cause of action simply for damages either by a company against a union or by a union against a company because there is no federal statute under which it arises. Now, there could be cases and I think the cases, Mr. Justice Frankfurter, were mentioned in a note you made to Westinghouse. For example, suppose a contract contained a provision that the union members would not engage in partaking -- in picketing the premises of a customer. Well, that might be a secondary boycott question which is covered by section 303 and therefore, you might say that that case arises under a federal law. Or you might have a provision that the company agrees that it will not overtly or otherwise, make any payment to any representative of the union and there you might have a case that comes up under section 303 which forbids that. Similarly, you could have provisions in a contract which involve unfair labor practices which would thereby give the jurisdiction -- give jurisdiction to a federal court under section 301. It's our position you should not go further than that. The second point I wish to cover is that assuming the Court does have jurisdiction, can it compel arbitration? Now, our view is that the Fifth Circuit in the Lincoln Mills case and the Steelworkers case in the Seventh Circuit decided last month are right on that question. Both of them followed the same reasoning. The Steelworkers case, in fact, just sprung along with the Fifth Circuit in the Lincoln Mills case. But they -- the -- the Court in the Galland-Henning Manufacturing Company case which was the Steelworkers case said, "That a reading of the plea on an ambiguous language, however, forces us to review that no substantive rights will create." The -- the Lincoln Mills majority opinion said, "There's no federal substantive law out of which to fashion such a remedy. And there's no state law out of which to fashion such a remedy. So, there can be none assuming the U.S.Arbitration Act is inapplicable." Now, if this question turns on whether arbitration would substantially affect the outcome as has been mentioned in some cases, while whether this is a diversity case or not, we think that it does substantially affect the outcome. Incidentally, I should like to mention a recent Article in 66 Yale Law Journal at page 167, which points out that the common law rule against enforcement of future disputes for arbitration has been abrogated in only 15 States out of the 48 and that of those 15, only seven specifically permit the application to an agreement in a labor dispute. An example for example, is Massachusetts which provided that the parties to a contract may submit future -- agree to submit future disputes to arbitration, but then it went further and said specifically, that an arbitration agreement in a union contract is valid and enforceable. I think that if you -- if -- if arbitration did not seriously affect the outcome of these cases, we wouldn't be here today. The union, I'm sure, has selected arbitration much if a very drastic change from the view, they took of it many years ago because they believe they will come out better by a decision of an arbitrator unfettered by the judicial protection that a court puts around this issue. In 1929, the union took a different position and this is mentioned in the petitioner's brief in the General Electric case, where in their bulletin they said that arbitrators won but sometimes for appeal and they would do so even more if they knew that Courts where going to judicially enforce these agreements. Felix Frankfurter: Do I understand you (Inaudible) only in 15 States may an agreement that -- that in all but 15 States, an agreement to arbitrate may be spoken without being enforced? Douglas M. Orr: I -- I'm forced to take the word of the author of the Yale Law Journal Article on that. Felix Frankfurter: It's not for me to question the Yale, I'm certain. Douglas M. Orr: Well, I think there might be very good grounds for it, Your Honor. [Laughs] But I -- I say this and incidentally, there's a recent case in Mississippi which is to the contrary where there was no statute at all but which nevertheless, I must call this attention to mind. They haven't seen it but they said it's a public policy of the State is such that they would enforce these specific agreements without the statute. But, again, turning to the question of whether the submission to arbitration will seriously affect the outcome of this case. I would like to point out a comment that was made in petitioner's brief in the Lincoln Mills case in which he said there are two theories of the function of an arbitrator. One, he interprets the language of the contract, and the second is that he tries to reach some mutually acceptable decision. Now, here there's no continuing relationship between the parties. So, there's no motive to reach a mutually acceptable decision. But I submit to you that this arbitrator may be one of those who believe that he doesn't have to interpret the contract even if there's a provision in there that says he may not modify or vary and we would therefore, come out pretty bad. As matter of fact, I would -- William J. Brennan, Jr.: I -- I don't follow what -- what the relevance here, of this argument to the issue. Douglas M. Orr: Well, there has been some comment, Mr. Justice Brennan, that if it is a substantive question should -- which should turn on the law of the State if it substantially affects the outcome. Now, the law of the State of Maine has been conceded to forbid the issuance of a decree in such a case. William J. Brennan, Jr.: Yes, but the fact -- the fact that your client voluntarily, I suppose, signed an agreement to arbitrate something. And the only problem before us is whether your client shall be required to arbitrate that something? Douglas M. Orr: Yes, sir. But I submit that that contract was entered into under the laws of Maine which would not require it unless the partners wouldn't do it. William J. Brennan, Jr.: Well, that's something -- that's something else again. But what may be the outcome of an arbitration if you are required to arbitrate? It doesn't seem to me to bear at all upon the question whether you shall be required to arbitrate. Douglas M. Orr: Well, I -- I'm just making the point -- Speaker: Wouldn't that be a relevant question that you're relying on diversity jurisdiction here? This 301 has good -- a good federal question jurisdiction, what relevance to all these stuff? Douglas M. Orr: Well, now that is a point, Mr. Justice Harlan. If you say that a law of United States is concerned and involved, it may well be that you couldn't look to -- to state law at all. But some of the Circuit Courts have -- Felix Frankfurter: Yes. Douglas M. Orr: -- commented in -- along that line. Felix Frankfurter: But some of the Circuit Courts had said even if arbitration is to be directed, you have to enforce state arbitration. Douglas M. Orr: Yes, sir. That's the point I'm making. And the -- William J. Brennan, Jr.: Well, perhaps you have a point -- Douglas M. Orr: Turning back to your -- William J. Brennan, Jr.: -- but I still haven't caught it. Douglas M. Orr: -- your question. Some courts have said that if the question involved seriously can affect the outcome of the case, then it is a substantive question which must be decided under state law and not a procedural questions which would be decided on federal law. Felix Frankfurter: Although you are in the federal court out of -- on federal jurisdiction and not diversity. Douglas M. Orr: Have I answered your question? William J. Brennan, Jr.: I don't think so, but go on. Douglas M. Orr: Well, as the law of Maine is quite clear that a -- an agreement to arbitrate a future dispute cannot be enforced in the courts. And I say that if you have time to start with Maine law because this is -- this is a substantive question, then the answer is clear. William J. Brennan, Jr.: Yes. But the point -- the only point I'm making is that you made an agreement to arbitrate. Douglas M. Orr: Yes, sir. We did. (Voice Overlap) -- William J. Brennan, Jr.: (Voice Overlap) -- Well, now did you make it with an understanding that it was never enforceable under the law of Maine? Douglas M. Orr: If the law, the Maine law, if Your Honor please, I think it's a logical assumption that it was to be made if the parties wanted to agree to it and if they didn't, they didn't have to. William J. Brennan, Jr.: Yes. But now having agreed to it, your point is nevertheless Maine law says it's unenforceable? Douglas M. Orr: Yes, sir. William J. Brennan, Jr.: Well then, now what importance is it how it may come out if in fact you're required to arbitrate it -- Douglas M. Orr: But if we required -- William J. Brennan, Jr.: -- under federal law? Douglas M. Orr: -- it doesn't make any difference at all, but if it's a -- such a substantive question as distinguished from procedural that you've got to apply state law. William J. Brennan, Jr.: Well, a state law is and it's unenforceable and we have to enforce state law then you're not to be required to arbitrate. Douglas M. Orr: That's exactly our -- William J. Brennan, Jr.: Well, then what difference does it make? How it may come out if you are required to arbitrate? That's what I don't follow. Douglas M. Orr: Because if it -- it makes a lot of difference how we come out, then it makes a lot of difference where the state law ought to be applied according to the comments in some of the circuit law. William J. Brennan, Jr.: Well, that's why you're lose. Douglas M. Orr: (Voice Overlap) -- William J. Brennan, Jr.: Well, that's why you're losing. Douglas M. Orr: [Laughs] Well, that that very language was used in the -- Felix Frankfurter: May I suggest that it doesn't do losing but still on the decisions of the Courts. Douglas M. Orr: Yes, sir. It -- it has been now. Now, the petitioner in the Lincoln Mills case has gone to great pains to say that the arbitration provision is a consideration for the no-strike provision and if the company can sue for damages because of violation of the no-strike agreement, then you've got to let the union sue to compel specific performance. I don't think that's true if it were every agreement could have a no-strike clause would also have to have an arbitration clause. And furthermore, as pointed out by the General Electric Company, the no-strike clause is actually the inducement to the entire contract on the part of most companies because without it, there would be very little advantage to them in entering into a collective bargaining agreement at all. I say the no-strike clause is consideration for the wages, workloads, seniority provisions and everything else. And you can't segregate it that way. And incidentally, if you follow that argument to its conclusion it said in -- in the present situation that our agreement to arbitrate is consideration for the union's agreement not to strike, you end up very foolishly because all the work is gone. I would like to remind, Mr. Justice Clark, of his comment in the Cutter Laboratories case. Black versus Cutter Laboratories was decided last summer which involved the question of whether a woman who is a member of the Communist Party was discharged for cause. And the Supreme Court of California said that she was and this Court said in confronting the California Supreme Court, the decision involves -- and this was a -- a union contract case. The decision involves only California Construction of a local contract under a local law and therefore, no substantial federal question is presented. Now, I believe if it is local for the California Supreme Court, it is local also of the United States Supreme Court and the federal courts. Turning just a minute to the Norris-LaGuardia Act and I'm not going to spend any time on it because this particular statute is the most frustrating to argue about. Speaker: Yes. Douglas M. Orr: In my opinion there is. If a statute says you can't issue an injunction any place, anywhere unless you conform strictly to the following rules. To argue that nevertheless, where you got an arbitration case you don't have to conform to those rules. You can issue it anyways. Where the plain -- where the language is so plain that you don't have to turn any place else to see what it means, it's our view that you've got to follow the language. You shouldn't have to go back into what the legislature said or anything else. Charles E. Whittaker: Mr. Orr, I'm -- Douglas M. Orr: Section 1 of that Act provides, "That no court of the United States shall have jurisdiction to issue any injunction in a labor dispute except in strict compliance with the provisions of the Act." Charles E. Whittaker: Is a decree to enforce a common garden variety of covenant an injunction? Douglas M. Orr: I submit it most certainly is whether it's a mandatory injunction, whether you're saying in effect that we will enjoin you from continuing not to arbitrate -- Speaker: Yes. Douglas M. Orr: -- or whether we will issue an injunction compelling you to arbitrate are one and the same thing. Charles E. Whittaker: I can see if it arose in anyway under an equitable right as distinguished by the enforcement specifically of a covenant that you would be right. But it's hard for me to see why we should in truth call a simple specific performance of a covenant an injunction, a mandatory injunction. Douglas M. Orr: Well now, if Your Honor, please. On that reasoning you could enjoin the union's covenant not to strike because they have agreed in this contract that they would not strike. And you could say, “Well, I'm not enjoined the -- enjoining the employees from striking. What I'm doing is enjoining the Union from permitting to strike.” Well, I think the Union would have to take a long time to go along with that. They -- they wouldn't (Voice Overlap) -- Charles E. Whittaker: Well, I would -- Douglas M. Orr: -- in -- with the police. Charles E. Whittaker: I -- I will agree, there are -- there's no virtue in labels. But if something just rebels in me to consider a contract to -- a -- a suit to specifically (Inaudible) a simple covenant as an injunction? Douglas M. Orr: Well, may I ask you, Your Honor. Would you consider a -- a decree enjoining the union from failing to perform its agreement not to strike, which is a simple covenant not to strike. Would that be prohibited by the Norris-LaGuardia Act? I believe the Mead case has held it is forbidden because it involves possible -- it's within -- Speaker: Norris -- Douglas M. Orr: -- the specific provision of Section 4. Anyway, if I may just repeat the one point I wish to make that section 1 provides, "That no court shall issue any injunction in a labor dispute except in strict compliance with the provisions of the Act." And section 7, similarly says, "That no court of the United States shall have jurisdiction to issue an injunction and a labor dispute except after hearing and findings of fact that unlawful acts are threatened and the public officers won't furnish the needed protection." Now, just because they can't bring themselves within that exception, the respondents are forced to say that the Act is not applicable at all. Felix Frankfurter: Can we get the judgment, the actual judgment in this case in the record, Mr. Orr? Douglas M. Orr: Yes, I'm sure you could. Felix Frankfurter: Where is it?. Don't -- don't take it up yet. Douglas M. Orr: Yes, yes. Felix Frankfurter: (Voice Overlap) -- on page 49. Douglas M. Orr: Yes, sir. Felix Frankfurter: Thank you very much. Douglas M. Orr: Turning now for a moment to the United States Arbitration Act. I would like to borrow what I consider a right, apt phrase used by Judge Wyzanski in the Boston Printing Pressmen's Union case. Would Congress ever have dreamed that section 301 driven in tandem with the United States Arbitration Act would be used to specifically enforce an injunction -- to specifically enforce an agreement to arbitrate? The dilemma that this has thrown some of the Court's standards indicated, I think, even by Judge Magruder's language in the General Electric case below because he has to argue inconsistently with himself. And this has been pointed out in the Steelworker's case which is to be here also on grant of certiorari. In other words, he says, in saying that this is not a contract, evidencing a -- this is a contract evidencing a transaction in commerce, he has to say this, “The collective agreement sets the terms and conditions under what, which not one, but hundreds or thousands of workers are employed." That's when he's arguing that it's a contract evidencing a transaction in commerce, but then he at the same time concludes that it's not an employment contract under section 1. Now, as all of you (Inaudible) the average textile mill worker at least has nothing to evidence his contract of employment except he's put on the payroll and where there is a union contract, it covers practically all of the rest with the terms and conditions if it's as broad in scope as the contract which we have under consideration here. Speaker: What do you think the legislative history indicates as to whether Congress considered that these agreements would be specifically enforced or not? Douglas M. Orr: The -- the legislative history of the U.S.Arbitration Act? Speaker: No, no. Douglas M. Orr: Of 301? I don't think they considered it at all except when, as Mr. Justice Frankfurter has pointed out, they had up before them the question of whether a breach of contract should be an unfair labor practice. Speaker: Well, that's -- Douglas M. Orr: And they -- Speaker: As (Voice Overlap) -- Douglas M. Orr: -- decided not to include that. They -- and they -- there was specific comment, I believe, in that discussion as to whether a failure to abide by covenant to arbitrate should be considered an unfair labor practice. And they didn't include that either. Felix Frankfurter: What you're saying is if -- if breach of a contract, the collective agreement had been an unfair labor practice were included among the unfair labor practices, then you would have a statute of the United States? Douglas M. Orr: Yes. Felix Frankfurter: And relief under it would be relief under -- arising under the law, a law of the United States -- Douglas M. Orr: Exactly. Felix Frankfurter: -- deriving a law of the United States means a statute, doesn't mean a hodgepodge philosophy. Douglas M. Orr: But I -- I still agree that, that would have been so, had they done it, which they didn't.I think that the petitioner in the Lincoln Mills case is so -- hung himself in persisting so earnestly in his argument that a collective bargaining agreement is something vastly and entirely different from a commercial contract. And therefore, the fact that there's no substantive law allowing this specific enforcement of a contact to arbitrate in a commercial dispute, has no application whatsoever to a labor dispute. You've got to consider that something entirely different. Now, if that is so, I think he's hung on the U.S.Arbitration Act because everyone conceives that at least primarily it had as its purpose nothing more than commercial contracts, agreements to arbitrate in commercial contracts. Felix Frankfurter: Well, that doesn't foreclose. That doesn't -- in fact, what -- what Congress had in mind, or so we find that, it doesn't contract the appropriate scope of the language of the statute to something larger than what they predominantly had in mind. Douglas M. Orr: That's right. Felix Frankfurter: And you have the common place in legislation -- Douglas M. Orr: Yes. Felix Frankfurter: -- a specific evil or specific concern, gives rise to legislation but the language of the legislation may not be restricted to that -- Douglas M. Orr: Yes. Felix Frankfurter: -- historical source. Douglas M. Orr: Now, section 4 of the Arbitration Act provides that a litigant can come in and enforce arbitration under section 4 if the United States Courts had jurisdiction except for the agreement to arbitrate. Well, I think that -- and I'm coming to this in just a moment, except for the agreement to arbitrate, you don't have anything here but a Westinghouse case. But he gets around that by saying, “Well, we will use sections 1 and 2 of the Arbitration Act to say that this is a valid and enforceable contract. But we elect not to use section 4 because we can't use it." Now, as this Court knows there's been several interpretations of section 1. That the definitions in section 1 of U.S.Arbitration Act are applicable to the entire Act. It's an integral statute and I submit very earnestly that you cannot use Sections 1 and 2 and then because you can't comply with section 4 that we will rely on general equitable jurisdiction to let us enforce it even though we can't comply with it. And I want to specifically mention two things in section 4 that are very material on that point. One is that a party may ask for a jury trial if either there is an issue on whether the agreement to arbitrate was made or whether the agreement to arbitrate was breached. And I might mention that the petitioner here did not have that election because the U.S.Arbitration Act was never mentioned at all. We didn't have the choice of a jury trial. And although it wasn't a substantial issue in the court below, it might have been if we felt we could have got a jury rather than the judge. Now, coming to the underlying merits of the case aside from the agreement to arbitrate, you have nothing in the world here but the Westinghouse case. In Westinghouse, the union asked for a declaratory judgment that 4000 employees were entitled to one day's pay in April. Here, you have a request for arbitration that some 1400 employees should be entitled to vacation pay, should be entitled to pensions where they have length of service sufficient to warrant them, and that they should have certain money payments under the group insurance provisions of the group insurance contract. So, absent, the agreement to arbitrate, you don't have anything in the world here but a Westinghouse case and I submit that an agreement to arbitrate and specific enforcement of that agreement is practically the same as a declaratory judgment on the part of the union asking for the same thing. Now, if in -- a declaratory judgment is granted under section 2202 or maybe -- 2202. The federal court may go further and grant whatever relief it -- it feels may be warranted on the basis of the declaratory judgment. Here, if this Court enforces specific arbitration, the arbitrator is at liberty to grant whatever relief might be warranted. But I might point out that if the arbitrator says that the Union is entitled to no relief, I believe that 1400 employees are not barred at all in any way from going into a state court and suing on their particular contract of hiring, the company has got to start all over again. Coming finally to the appealability of this case -- Felix Frankfurter: But you -- I -- would you mind repeating that last point, individuals? Douglas M. Orr: Well -- Felix Frankfurter: I just didn't -- (Voice Overlap) -- Douglas M. Orr: -- it seems to me that if the -- this is submitted to arbitration at the request of the union. And the arbitrator says, “We don't -- I don't think you're entitled to anything.” I don't think that's res judicata for the individual employees. I think they may later go into a state court and say, “Well, I -- I'm entitled to this vacation pay and I want damages because of it and I don't believe that the arbitrator's award would follow that.” The individual employee is not -- having been appointed to it all. Speaker: What's the use of the arbitration? Douglas M. Orr: Well, if they win, I assume that we're stuck but if they lose, then they're not. [Laughs] That -- one-sided situation, I'm afraid you -- Felix Frankfurter: I-- I don't know anything about it. But I suppose if the arbitration, if the award, the arbitral award -- it's the normal thing, is it not, that the arbitral's award requires enforcement in the courts? Douglas M. Orr: Yes, sir. That's so. Felix Frankfurter: And therefore, I suppose that subject that I (Inaudible) really to thinking that the test may be too much if the arbitrator merely did hand down an award and nothing happened. I suppose res judicata as you say would not apply. But I don't know. Douglas M. Orr: I'm thinking of the reversed decision. Felix Frankfurter: Pardon me? Douglas M. Orr: I'm -- I'm thinking of the revised situations. Felix Frankfurter: Yes, I mean the other way around? Douglas M. Orr: Yes. Felix Frankfurter: He -- he throws them out. He throws them out. Douglas M. Orr: Then they not barred. I don't see anywhere you could bar them at all. In coming to the last question, the -- Speaker: Yes. Douglas M. Orr: -- the appealability which as I mentioned before was raised in the first instance by Judge Magruder and he raised it and then knocked it down as being a strong man. He said that he believed that if -- if the petitioner who had requested arbitration was refused arbitration, there wouldn't be any question of what -- what he should have the right to appeal. Therefore, he granted it. The losing party should similarly have a right to appeal. But I -- I would like to point out, and I -- I don't think this is a very serious issue even on the part of the respondent in this case. That there's no question whatsoever that this proceeding is not ancillary to either an action at law or an action at inequity. It's a completely independent proceeding. And the award that's made is final in every sense of the word within the meaning of title 28 of the code. It's also an injunction within the meaning of the title 28 of the code. And I'm happy to announce that the Second Circuit has finally straightened itself out on this question which it seemed to be having quite a good deal of difficulty in -- in the recent case of Farr & Co.versus Intercontinental De Navegacion De Cuba, decided February 4, 1957. They went back and said that within this Bernstein case, that should be distinguished because it was a continuous proceeding in which an award have been made and which a request have been made to vacate the award and to resubmit it to arbitration. So, they said it was interlocutory in character. But when they had the actual case of an independent proceeding on all fours of this one, although that was a maritime case in which damages were asked for -- damages to sugar on a vessel. It distinguished the previous case and said, where you have an independent proceeding, where the only relief asked has been granted or denied, it is appealable. Speaker: Would you mind giving me the name of that case? Douglas M. Orr: Yes, sir. That's Farr, F-A-R-R, and Co.versus Intercontinental and so forth, Second Circuit, February 4 of this year. Felix Frankfurter: Does the Steel case been reported Mr. Orr -- Earl Warren: Mr. Orr -- Douglas M. Orr: Yes. Earl Warren: Justice Frankfurter asked you question. Felix Frankfurter: Does the Steel case of the Seventh Circuit -- the Steel case been reported in the -- in the federal before you? Douglas M. Orr: This case -- no, sir. I believe we had to look for it upstairs in our -- Felix Frankfurter: All right. That's -- is this to be (Inaudible) not in federal employees. David E. Feller: It's not in the federal side -- Felix Frankfurter: That's -- that's -- (Voice Overlap) -- David E. Feller: -- in labor -- labor employee -- Felix Frankfurter: (Inaudible) Earl Warren: Thank you. Mr. Feller, you may proceed now. David E. Feller: I -- I might add, Mr. Justice Frankfurter, the petition for certiorari will be filed any day now. So, that we'll have printed copies of the opinion in that case. I think in the eight minutes -- Felix Frankfurter: Do not look, but do not be lost in the race of these cases (Inaudible) David E. Feller: Well, I hope that it will simply be held and disposed of as these cases are. We -- we don't want to litigate another case but we are faced with the final order in the Seventh Circuit -- Felix Frankfurter: Yes, of course. David E. Feller: -- involving the same question. I think in the eight minutes or so that I have, Your Honors, I can best occupy myself by instead of engaging in a formal -- beginning of a formal presentation, attempt to answer a few of the questions which have been raised in the prior arguments on this case. And so doing, I would like to address myself first to Mr. Justice Whittaker's question as to the nature of the grievance here. I gather that he's a little concerned that the union was trying to keep this employer in business. I want to make it clear, that when we filed a grievance against the termination of these employees, we were not contending for a minute that the employer had to keep them on the payroll in the sense of paying them and giving them work. In labor contracts, there is a difference between laying a man off and terminating. You terminate him when you fire. Then you discharge him. On the other hand, when you don't have any work for him, you lay him off. And this distinction is carried out in this contract, laid-off the employee. That is employees who are on a layoff status are entitled to vacation pay if they have worked enough in the prior year. They've accrued of the employment. The same light goes to their certain pension rights and certain insurance rights to employees who are laid off. The question in this case was whether in a contract which provided that employees could be terminated after they've been laid off for 18 months or they would be terminated if they quit or they were discharged. The employer, when he decided that there wasn't any work for them and that there wouldn't be any work for them had the right to terminate them, cutting off their rights or that they stayed on the layoff status and accrued whatever rights the parties agreed in their contract, laid-off employees should have. And that's the -- that was the only question which the union sought to arbitrate. We didn't want to keep this fellow in business. We recognize that these are perfectly right on the management clause to shut up anytime he wants. All we want to do is have our employees continue to have the rights they would have had if he laid them all off and said, "I have no work for you for 18 months." Charles E. Whittaker: That that must be the result to the end of the contract term? David E. Feller: That is correct. These are accrued rights which laid-off employees have and which we think these employees were entitled to. Now, the next question I'd like to address myself to is the question which arose in many of the prior arguments as to the -- of relationship between -- we'll put it this way, perhaps. What Congress was trying to do in section 301 as far as we can determine it from the authoritative legislative materials. And the relationship between the agreement to arbitrate and the agreement not to strike. Preliminary to that comment, I think, it's perfectly plain that not only are there only 15 States as far as we know which enforce executory agreements to arbitrate. But I don't think only seven of them applied that to -- to labor contracts. So that in the great majority of States, it's a matter of state law, and I can't say that I read the cases in all these States. I'm just citing a secondary authority but in most of these States. With the exception of seven, agreements to arbitrate future disputes are not enforceable. What this means is, that a union which agrees not to strike, and typical language in a collective bargaining agreement, now there -- there are simply hundreds in which this -- this occurs. The union agrees that the employer has the right to manage the business. He takes the actions. He pays the wages. He schedules the work. He tells the people what they have to do and you have to do it if you work in the plant. You can't say this is contrary to the agreement. You have to do it. And the only protection which the union has in these cases is to either you can shut it down. You have a strike on the issue. That's the old fashioned way. That's the way it used to be done. That was the kind of case you had in Westinghouse. That was the kind of contract you had. You could strike on a question of interpretation and application of the agreement. The employer didn't pay as he was supposed to in the collective bargaining agreement. If he didn't schedule the people, if he didn't provide safe conditions, if he didn't do any of the things which the collective bargaining agreement required him to do, the Union could call a strike. Today, in better than 90% of collecting bargaining agreements have their differences. They have a contract which says there shall be no strikes during the term of this agreement. But all questions of interpretation and application of the agreement shall be settled in accordance with the grievance procedure. The Lincoln Mills case, as a matter of fact, they put a right on the same clause. It says no-strikes arbitration. That was the clause. No-strike arbitration. Now, we come to 301. Irrespective of what the Congress intended, the federal courts to device seniority law or overtime law, and I don't think they did. There is one thing that I think they clearly, and that is that if you have one of these clauses in a contract and there was a strike, the union ought to be sued for damages and ought to collect in the federal court, irrespective of state law. I could wish it were otherwise. I'm sure all unions would prefer it otherwise. But the Senate Committee was particularly explicit on that. It said the whole purpose of a collective bargaining arrangement is to ensure industrial peace for the life of the agreement. And they repeated that again and again. And then they said, now, one of the problems here is suing unions. That's what they were faced with. But this problem was a procedural problem basically. Though I will say it's not only a procedural problem, it's a substantive problem in some States. Therefore, we said we'll not be able to allow you to sue these unions as entities. And this was provided in 301 (b). That when you get a union in court, you'll treat it as an entity. You can -- you have jurisdiction over it where its offices are. They provided how they should be served what I -- but then they said, “How you're going to get them in court? You've got to have a federal cause of action.” And they pointed out in the Senate Committee and I'm paraphrasing the Senate Committee report, I think, that it would -- extreme faithfulness as far as I can. They said there are no federal laws giving either an employer or even the Government any right of action against the union for a breach of contract. Thus, there is no, their own quote, "substantive right" to enforce in order to make the union sueable as such in the federal courts. Then they proceeded to the proposition that if to get them into the federal courts, they would have to make this a federal statutory cause of action and they said that's a fine thing, anyhow. They said statute -- and this is again a quote from the Senate Committee report, “Statutory recognition of the collective agreement as a valid, binding, and enforceable contract is a logical and necessary step. It will promote a higher degree of responsibility upon the parties to such agreements and will thereby promote industrial peace.” Well, this is from the Senate Committee report on section 301, which is virtually the statute which the Senate version was adapted by the House and which was virtually what statute we have. Now, concededly, they focused entirely on the cases where unions broke these promises. That the method of policing the contract would be through the grievance machinery and not by a strike. Obviously, if the strike says, you can strike, you can strike, if the contract said so. Earl Warren: We'll recess now.

William H. Rehnquist: We'll hear argument now in No. 97-1943, Karen Sutton and Kimberly Hinton v. United Air Lines. Mr. Hughes. Van Aaron Hughes: Mr. Chief Justice, and may it please the Court: Because this matter was decided by the lower court on a motion to dismiss, for purposes of today's argument, United cannot dispute the nature of the discrimination that occurred here. Petitioners have gone to great lengths to make themselves eminently qualified to fill the piloting positions at issue here, but were excluded from those positions by United based not upon their actual abilities, but based only upon its preconceived notion of what a person who shares their impairment can and cannot do. Now, United contends that even if it discriminated in just this manner, it cannot be liable under the Americans with Disabilities Act because, as a matter of law, the ADA can never protect one with severe but correctable myopia. United's intuition that myopia is somehow distinct from other correctable impairments does not withstand serious scrutiny. Petitioners here are actually disabled within the meaning of the ADA or, at a minimum, they were regarded as disabled with respect to the ability to work by United. William H. Rehnquist: Is that raised in your petition for certiorari, whether they were regarded as disabled? Van Aaron Hughes: Yes, Your Honor, it is. William H. Rehnquist: Whereabouts? Van Aaron Hughes: The... I believe it was the third question presented in our petition, read as followed: Is a commercial pilot regarded as disabled by a major airline that refuses to employ her as a pilot for that airline due to her poor vision? Antonin Scalia: As far as actual disability is concerned, let me ask the same question that... that we put to counsel yesterday. If myopia, correctable myopia, which requires nothing more than eyeglasses, is included within the definition of disability, how do you account for the fact that the act itself estimates there are some 43 million disabled people in America? Van Aaron Hughes: Justice-- Antonin Scalia: There would be many, many, many more than that if... if you are counting people who have to wear eyeglasses. Van Aaron Hughes: --I agree, Justice Scalia, that there are more than 43 million Americans who wear glasses. It has never been our position that the mere fact of wearing glasses or, indeed, the mere use of any corrective measure is in itself a disability. Our position is that Congress intended not to identify bright line categories of what are and are not disabilities, but rather to require courts to evaluate the severity of each person's impairment on a case-by-case basis. Speaker: How do you find in the text of the statute? Where do you get that in the statute? Van Aaron Hughes: The statute-- Antonin Scalia: It's a nice idea. Maybe they could have done that. How did they do it here? Van Aaron Hughes: --The statute requires that... that each impairment be substantially limiting with respect to a major life activity, and moreover, the definition requires a substantial limitation of the major life activities of such individual. I read that as not requiring the court to define each impairment and state each impairment in every case is a disability or is not a disability. That's a different approach that Congress could have followed, but Congress didn't follow that... that approach. Congress required each person's impairment to... to be evaluated. There is no dispute in this case-- Antonin Scalia: I'm not following you. You're saying it's not substantially limiting if you use some eyeglasses, but it is... if it can be corrected with some eyeglasses, but it... it is substantially limiting if it can be corrected with other eyeglasses? Van Aaron Hughes: --That's correct. The substantial limitation-- Antonin Scalia: I mean, the only limitation of putting on eyeglasses is putting on the eyeglasses. I mean, you know, whatever the... the corrective prescription is, the only limitation involved is putting on the eyeglasses, whereupon you see as well as anybody else. But you're saying some eyeglasses are different from others. Van Aaron Hughes: --That's correct. I don't... I respectfully disagree that putting on the eyeglasses as the substantial limitation is identical for each person who wears eyeglasses. The substantial limitation is that some persons cannot see without eyeglasses. William H. Rehnquist: What's... what's the difference between someone, say, with 20/40 vision who puts on eyeglasses and is corrected to 20/20 and someone who has 20... 20/200 vision and puts on eyeglasses and it's corrected to 20/20? So far as their corrected state, they're both the same. Van Aaron Hughes: In the corrected state, that's true. They're both the same, just as any person who... who swallows a pill once a day and is able to function by taking that medication is in the same boat. But it does make a difference whether you're swallowing the pill to avoid mild headaches in the afternoon as opposed to swallowing the pill because you might have an epileptic seizure. Stephen G. Breyer: Could you address the question of why you should look to the uncorrected state rather than the corrected state in order to determine whether the person is disabled? At some point, would you... are you going to get to that? Van Aaron Hughes: Yes, Your Honor, and I'll address that right now. Our reading of the statute is that the inability to perform a major life activity without the use of corrective measures is itself a substantial limitation. Now, respondent United reads the statute differently and says, if you can perform the major life activity by the use of a corrective measure, then by definition you're not substantially limited. Now, those are two alternative readings of the statute. I believe this Court has already gone a great distance toward answering that question in Bragdon v. Abbott when this Court instructed that the act deals not with utter inabilities to perform a major life activity, but substantial limitations on that. Ruth Bader Ginsburg: Mr. Hughes-- --I-- --this seems to be a rather abstract categorization. We have, as I understand it, a test that's... what is it? 20 over 120. That's how the airline draws the line for the... so-- Van Aaron Hughes: 20... 20 over 100, Justice Ginsburg. Ruth Bader Ginsburg: --Oh, 100, yes. Would you put all people who, without the correction... go from 100 to 400... all those people would fit within the disabled category? Because there's something different between a mere impairment and a substantially limiting one. Van Aaron Hughes: That's correct. And some persons who don't have perfect vision, 20/20 vision, may not even be impaired if they're within the norm. Some persons will be impaired. Some persons will be impaired but not substantially limited. Ruth Bader Ginsburg: I would... I'd like you to address what the standard is in this case. It's 20 over 100. Everyone who flunks that test would meet your definition of substantially-- Van Aaron Hughes: I... I can't say that as a matter of fact. It will require a case-by-case determination. I know that in this case the allegations are that these particular plaintiffs cannot see without glasses. United has conceded-- Ruth Bader Ginsburg: --But what difference does that make in terms of who is being protected? Here's a standard. A number of people, all of whom are visually impaired, can't make it. Why would... and they're equally correctable. Why would Congress want to say for the ones who are, say, 200, they are protected by this act, but the ones who are only 100 are not? Van Aaron Hughes: --Congress clearly did intend to draw a line where not everyone would be covered, and I believe substantial limitation requires that we analyze the severity of each person's impairment. I know-- David H. Souter: Does substantial limitation take into account the job market, or is it substantial limitation in the abstract because this definition covers all the titles in... in the ADA? Van Aaron Hughes: --As far as whether substantial limitation covers the job market-- David H. Souter: In other words, what I'm getting at is it might make... I don't... I'm not... I don't think we've got this, but it might make sense to say your limitation is substantial if you can't do the job without putting the glasses on even though your eyesight is imperfect. And... and so, we draw a pragmatic line. But I'm guessing that... that even on your theory, that is not how we would judge what is substantial because I think we're dealing with a general definition here which is not limited simply to the employment category. Van Aaron Hughes: --That's correct. Substantial-- David H. Souter: So... so, that leaves us then at sea as to... as to what the criterion for substantial should be, and I take it you're not saying that substantial is anything which is different from the uncorrected average in the population. And substantial, we've just said, cannot be determined in relation to what is necessary to do the job. So, what does it mean? Where are we? Van Aaron Hughes: --We're at the point of having to analyze on a case-by-case basis the severity of each person's impairment which certainly doesn't create the... a bright line test that-- Speaker: No, but that... that doesn't take-- --How do you judge severity? You say you don't judge severity by ability to do the job. Then what do you judge it by? You pick a number? 100, 200, 300? Van Aaron Hughes: --You judge it by the person's ability to perform that life activity. Here we're... we're looking at seeing. So-- Antonin Scalia: I thought you said no. I thought you said it's not judged by the ability to perform the job. Van Aaron Hughes: --It's not judge by the ability to perform a job, unless we're talking about the major life activity of working. If we're talking about the major life activity of seeing, it's judged by can you see, can you do the things that a person with normal eyesight can do. David H. Souter: Well, but... there again, I don't know where that gets us to draw the line. I have difficulty reading restaurant checks in dim light. [Laughter] Does... you know, there is... there is an activity... a life activity of reading in which in some circumstances I have difficulty. Substantial? Van Aaron Hughes: That is a limitation. It's certainly not a substantial limitation. David H. Souter: Why not? Van Aaron Hughes: Well, on a case-by-case-- David H. Souter: The waiter thinks so. [Laughter] But why not? Seriously. Van Aaron Hughes: --Well, because I believe if you can see for most contexts, if there's one particular, isolated context where you have some difficulty, like reading a menu in dim light, I would anticipate that a court would not find that to be a substantial limitation on your ability to see. Antonin Scalia: Oh, but... but being... not being able to read at all... I mean, I cannot read without reading glasses, and I would not be able to function in this job or in any job I've ever had. You know, I've been a teacher. I've been... all jobs that required reading. Now, there are a lot of Americans like that whose job requires reading, maybe 100 million. 100 million anyway. Are they all covered by the Americans with Disabilities Act? Van Aaron Hughes: The inability to read without glasses would be one example of a limitation of your ability to see. Whether that's a substantial limitation is open to question. Anthony M. Kennedy: If you have substantial limitation-- --What's your answer to the question? --that's on a... on a case-by-case basis, that seems to contradict the finding of and the purpose of Congress which is to say there is a discrete and insular minority here who are subjected to stigmatizing treatment in society. That whole concept seems to drop out of your reading of... of the statute. Van Aaron Hughes: I don't... I don't believe so, Your Honor, because I believe that the number of people who honestly can't perform life activities without corrective measures... I don't assume that that's a staggering number. We'll never know because most of those people never experience discrimination. And certainly this case does not violate Congress' intentions with respect to the ADA. Anthony M. Kennedy: Well, I think one of the things that's bothering the Court is that we assume that a significant number of legislators and Congressmen had severe myopia and we can't imagine that they thought they were disabled when they enacted this law. I think that's something that's in the back of... of our minds as we're asking these... these questions today and yesterday. Van Aaron Hughes: I don't agree with that for two reasons. One is what I've attempted to articulate, which that... is I think the severity of a person's impairment is critical under the statute. Secondly, this is a... a case where at a minimum petitioners were regarded as being limited in the ability to work, and so it's difficult for me to conceive that this isn't-- Sandra Day O'Connor: Well, were they regarded as limited in their ability to do a single job, to wit, as a pilot for United? Van Aaron Hughes: --I don't believe so. I believe they were limited in the ability to perform a class of jobs, all of the jobs requiring the same skills, training, and ability. Sandra Day O'Connor: Well, a class of jobs for United? They... they were working as regional airline pilots, were they not? Van Aaron Hughes: That's correct, Justice O'Connor. Sandra Day O'Connor: Are they still? Van Aaron Hughes: One of the two is still working for a regional airline, yes. Sandra Day O'Connor: So, what we're dealing with here is a specific job as pilot for United, are we not? Van Aaron Hughes: No, I don't believe that's the case. What we're dealing with is specifically United's perceptions. United's perception was that these petitioners were unfit-- Sandra Day O'Connor: Well, I'm looking at EEOC's regulation which attempts to define whether one is substantially limited in the major life activity of working, and it says, the inability to perform a single, particular job does not constitute a substantial limitation in the major life activity of working. Is that what we have here? Van Aaron Hughes: --Your Honor, with respect to the actually disabled prong, which is what that... that language goes to, yes, it is the case that petitioners are not actually disabled with respect to the ability to work because they're able to work in other positions in the same class of jobs. Sandra Day O'Connor: So, that's not your claim and that's not the... the complaint. Van Aaron Hughes: That's correct. Sandra Day O'Connor: It... it is instead a substantial limitation on the ability to see? Is that... or what is it? Would you explain? Van Aaron Hughes: Yes. We have... we have two independent arguments. One is that we were actually... that my clients were actually substantially limited in the ability to see. The second is that they were regarded by United as being substantially limited in the ability to work. And in the regarded as prong, it's the employer's perceptions that are at issue. That's-- Sandra Day O'Connor: Well, but on the regarded as prong, it again is related to a single, particular job, pilot for United. Van Aaron Hughes: --Your Honor, we're not... I don't believe we're talking about a single job. If United had said you can't fill this position or these particular positions, but you can fill these other positions, that would be a different example. Or if-- Sandra Day O'Connor: Well, the only job applied for was pilot for United. Now, is that a... a single job within the meaning of the EEOC reg? Van Aaron Hughes: --Let's not misunderstand, Justice O'Connor. We're talking about thousands of jobs at United within the entire spectrum of the relevant class of jobs. So, United barred us... barred my clients from all such jobs, and there's no distinction between United's jobs and piloting positions with any other airline. Antonin Scalia: Well, the question isn't what United barred them from. The question is how did United regard them. Van Aaron Hughes: That's correct. Antonin Scalia: Did United regard them as unemployable by any major airline? It certainly didn't. United acknowledged all through this that we have set higher standards. How can you say that United regarded them as disabled in that meaning? Van Aaron Hughes: I don't believe that that's the appropriate inquiry, whether United recognized that there might be other employers who didn't share its perceptions. If that were a defense, one could never bring a claim for being regarded as disabled-- Antonin Scalia: Oh, sure. Sure, it could. I mean, somebody would... would turn someone down who has HIV, for example, and... and because of the... what... what is the phrase that's used in connection with the regarded as clause? Because of myths and shibboleths? No, it isn't shibboleths. What... there's-- --Stereotypes. Stereotypes is the word. [Laughter] Because of myths and stereotypes, United thinks that a... that a person with HIV can't function either at United or anywhere else, and then bang, you have them for regarding you as being disabled even though you're not disabled. But this is not that case. United says, you know, you're welcome to go to other airlines, but we're a cut above other airlines. We hire people only with really good vision. Van Aaron Hughes: --I have a hard time understanding why United couldn't make the same argument in that case and simply say, we have a high physical standard. It doesn't include people who are HIV positive, but other airlines will hire you. So, therefore, we aren't regarding you as disabled. Antonin Scalia: Well, if they could, it'd be hard to convince a jury of that, but... but if they did have that view, they wouldn't be regarding you as disabled. They'd be regarding you as just not good enough for United. Van Aaron Hughes: I think you're right, and I think you've put your finger on it, that you've got to convince a jury of that. This is a factual question whether... what United's perceptions were, how United applied its perceptions. We've alleged that... my clients have alleged that they are not limited in their ability to perform the relevant work, but that United believes that they are, that there's a legitimate, job-related safety requirement that prevents them from being airline pilots, not just-- Sandra Day O'Connor: Wasn't there-- --You... you told me before, though, that you were not relying on the major life activity of working. Are you or aren't you? I'm confused. Van Aaron Hughes: --We are relying on the major life activity of working with respect to the regarded as disabled prong of the disability definition. Our claim and our allegations are that United perceived these two people to be unsuited for the positions of flying and not just particular-- Sandra Day O'Connor: For positions that United-- Van Aaron Hughes: --Well, that's all that United could do. United doesn't have the power-- Sandra Day O'Connor: --Well, they have other jobs too presumably. Van Aaron Hughes: --Certainly United has administrative positions or teaching positions, and at a minimum it's an issue of fact whether those types of positions involve the same training, skills, and abilities as piloting positions. And I don't believe one could say that a person who's been trained to be a pilot is limited... is not limited in the ability to work if they're told they can't be a pilot any more than one who's been trained to... to be a lawyer is not limited in the ability to work if they're told they can't practice law. Antonin Scalia: What do you-- --Your... your opponents claim that... that below, and until you got to this Court, your claim of regarding the job category was not all airline pilots, but only pilots for global airlines. Van Aaron Hughes: That's correct, Your Honor. Antonin Scalia: Is that... that is correct. Van Aaron Hughes: We stated a more narrow definition of the relevant class. The Tenth Circuit disagreed and defined the class more broadly. We accept the Tenth Circuit's definition because our allegations still satisfy that definition. With the Court's-- Ruth Bader Ginsburg: Suppose the employer's point of view is the reason I don't accept this corrective is this is a risky business. Glasses can be broken. Contact lenses can be lost. Glasses can become foggy at an urgent moment. Under which notch would that defense fit? Van Aaron Hughes: --That will either be a demonstration of a job-related requirement or a direct threat to safety. Either of those would be a factual showing. It's contrary to our allegations. Ruth Bader Ginsburg: That's for the employer to show; whereas, basic qualification is for the would-be employee to show? Van Aaron Hughes: Basic qualifications are for the employee to show, but the... the employer can still show that it has a job-related physical standard. Thank you, Your Honor. William H. Rehnquist: Thank you, Mr. Hughes. Mr. Kneedler, we'll hear from you. Edwin S. Kneedler: Thank you, Mr. Chief Justice, and may it please the Court: Respondent argues that although it made its employment decision precisely on the basis of the limitations imposed by petitioners' impairment without mitigating measures, the ADA requires a court to ignore those very same limitations and look only to petitioners' ability to perform with corrective measures. We submit that the ADA does not require that anomalous result. The agencies charged by Congress with implementing and interpreting the ADA-- William H. Rehnquist: Say again what you conceive the anomaly to be, Mr. Kneedler. Edwin S. Kneedler: --The... the anomaly in this case is-- William H. Rehnquist: Speak kind of a little bit slower. Edwin S. Kneedler: --I'm sorry. The anomaly is that respondent United made its decision not to hire the petitioners precisely on the basis of their uncorrected vision, but they are claiming that the ADA requires a court to look only at their vision in its corrected state. And we believe that... that is-- Anthony M. Kennedy: Do you think... do you think that the statute should be interpreted so that it depends on how the particular employer looks at the applicant? In case one, if the employer looks at the applicant in the uncorrected state, the act applies there? If it looks at it in the corrected state, the act applies there? Edwin S. Kneedler: --No. I'm not... I'm not submitting that. Anthony M. Kennedy: All right. Then... then United can't really be chastised for creating an anomaly. All... all it's saying is that the act means one thing or the other. Edwin S. Kneedler: No. My... my only point is, to use this case as an illustration why the... why it makes sense for the act to look to the... to the impairment in its uncorrected state, that has been the interpretation of the agencies which is entitled to Chevron deference under this Court's decision in Bragdon. And that's also supported by the text of the act which only mentions the impairment and the substantial limitations that flow from that impairment. There's no mention of mitigating measures and-- William H. Rehnquist: How about the 43 million figure? Edwin S. Kneedler: --The 43 million figure, Your Honor... there's no indication what Congress was referring to when it looked at that. When one traces it back... and the... the respondents... or petitioners' reply brief addresses this in some detail. You trace it back to reports of the National Council on Disabilities, pages 9 and 12 and 13-- William H. Rehnquist: Well, but 43 million is in there as a fact. Edwin S. Kneedler: --Right, right. As to that point, we are certainly not saying that everyone who is nearsighted as a disability under the act. And let me explain why. The... the statutory phrase is whether someone is substantially limited, and the way that the implementing regulation sensibly defines substantially limited is whether the individual is significantly restricted with respect to that major life activity as compared to the average person. So, it is necessary... substantially limited is... is a relative point. You have to be substantially restricted as to the average person. William H. Rehnquist: But where do you get that out of the statute, that-- Edwin S. Kneedler: From... from the phrase substantially limited. In order to-- Sandra Day O'Connor: --Yes, but it doesn't answer whether you view it corrected or uncorrected. I mean-- Edwin S. Kneedler: --No, no. I'm-- Sandra Day O'Connor: --it just is not apparent from the face of the statute-- Edwin S. Kneedler: --I... I was responding-- Sandra Day O'Connor: --that we wouldn't look at the corrected-- Edwin S. Kneedler: --No. I was simply-- Sandra Day O'Connor: --vision. Edwin S. Kneedler: --responding to the Chief Justice's point that 43 million speaks to that question, and I think it does... does not. Here we have people who so far depart from the norm that they are alleged to be legally blind. Stephen G. Breyer: If you use... what's worrying is if you say it should be uncorrected. Edwin S. Kneedler: Yes. Stephen G. Breyer: And then you read out of the statute people who have glasses like this. I borrowed them from Justice Scalia. [Laughter] But I need them too. That's not true. I need them too. And I couldn't function without them. All right. Now, are you reading all people like me out of the statute? Well, what's the answer? Edwin S. Kneedler: And our... yes. And our-- Stephen G. Breyer: All right. Now-- Edwin S. Kneedler: --position-- Stephen G. Breyer: --Now take a person just like me except that person has the same vision I have without glasses with glasses. That person is now read out of the statute too. Edwin S. Kneedler: --Well, it... it depends. That person might have-- Stephen G. Breyer: He can't wear glasses. Edwin S. Kneedler: --That person may have-- Stephen G. Breyer: He has a defect because he can't wear glasses. There are a lot of people who could be like that. Edwin S. Kneedler: --That person-- Stephen G. Breyer: And wouldn't those people be handicapped? Edwin S. Kneedler: --That person may have... have a-- Stephen G. Breyer: Disabled. Edwin S. Kneedler: --In... in that particular case, but that... but in the ordinary case, a person whose vision is not fully corrected to 20/20 may have a very, very severe uncorrected impairment. In fact, that may... that may well be the more common situation. Stephen G. Breyer: But I don't know all the disabilities in the world, and it might be that people are disabled in ways where most people can correct, but they can't. Edwin S. Kneedler: Well-- Stephen G. Breyer: And now I'm concerned about what your definition will do to those people. Edwin S. Kneedler: --Well, as to those people, certainly if an employer acts on the basis or... or anyone else covered by the act acts on the basis... treats that person as disabled, then the regarded as prong would... would protect that person just as... as it alternatively protects that person here. Sandra Day O'Connor: Why doesn't the regarded as prong serve as the backdrop and so you... you have no problem looking at the corrected condition of the person? Edwin S. Kneedler: Well, the regarded as prong, properly construed, does afford a great deal of protection. We're not... we're not disputing that, although we are quite concerned about the manner in which it has been construed by the lower courts and the way it's suggested here. And if I could just address that for a moment, just to make sure our position is understood. When someone... the allegation here is that United... and the regulatory definition, I should make clear, as to the regarded as is whether the person is treated as disabled by a covered entity, treated as being substantially limited. In this case the allegation is-- William H. Rehnquist: What's the difference between treated as and regarded as? Edwin S. Kneedler: --Well, let me explain perhaps by illustrating in this very case. The allegation is that United said that these petitioners are not qualified for any piloting position with United, and it further alleges that there is no difference between United's piloting jobs and other commercial piloting jobs. So, if one looks at the class of piloting jobs, United says, as to those people within that class who we employ, you are not... you are not qualified. Therefore, United is treating them as disabled for... for that entire class of piloting jobs. Antonin Scalia: Well, that's not true for that entire class. The example given in one of the briefs in these... in these cases of, you know, Ted Williams had... had 20/10 vision in both eyes and a... you know, a ball club manager has a perfectly good outfielder whom... whom he could have played instead of Ted Williams, but he chooses Ted Williams. Edwin S. Kneedler: Well-- Antonin Scalia: And this other... this other person is very good and could well be fine in another team. Now, because he chooses Ted Williams and rejects the other fellow because he has only 20/30, does that mean he's treating the other... the other fellow as disabled? I think that's ridiculous. Edwin S. Kneedler: --Well, first of all, in that example, I think the manager is going to choose the person who hits the best and not who has the best eyesight. [Laughter] Antonin Scalia: No. This is a manner... this is a manager who plays the odds. It's when Ted was on the way up. [Laughter] Ted was on the way up. Nobody knew how great he was at the time. Edwin S. Kneedler: No, but... but-- Antonin Scalia: You know the way managers play the odds. Edwin S. Kneedler: --No, but... but-- Antonin Scalia: They'll put in a left-hand batter and all of that. Edwin S. Kneedler: --I'm... I'm... our position isn't... isn't that it's automatically so, but... but our position is that when you have an employer who has jobs that we have to take as a given, according to the allegations in the complaint, are the same as piloting jobs elsewhere, the employer is essentially necessarily making a judgment about the class when he's making a judgment about the particular employees-- Antonin Scalia: He's not. He's... that's just absurd. It's just simply not true. I want Ted Williams. I'm not saying this other... this other fellow isn't a perfectly good ball player, but if I have an opportunity to get Ted, I'm going to take Ted. I'm going to turn this guy down. Edwin S. Kneedler: --This came... this case comes up on a motion to dismiss, and... and certainly it is... it is relevant if the employer is making a judgment about what is safe to drive an... or pilot an airplane, which is what this employer is doing-- Sandra Day O'Connor: Just certain airplanes, global-- Edwin S. Kneedler: --No. The allegation in the complaint-- Sandra Day O'Connor: --piloting positions. Edwin S. Kneedler: --The allegation in the complaint is United regarded them as unable to drive any... pilot any airplane. Sandra Day O'Connor: Any... any airplane. Edwin S. Kneedler: Any airplane. Sandra Day O'Connor: Even though they were, in fact, at the time pilots of a regional-- Edwin S. Kneedler: The regarded as looks at how the... what particular employer treats the employee. And that is consistent with-- Sandra Day O'Connor: --And that was the allegation. Edwin S. Kneedler: --Yes. Sandra Day O'Connor: So, you say a motion to dismiss should not have been granted. Edwin S. Kneedler: Yes. No, we're certainly not saying that the... that the record... there is no record... establishes that the plaintiffs prevail here. Sandra Day O'Connor: And the regulation says the inability to perform a single, particular job, to wit, a pilot for United-- Edwin S. Kneedler: Right. It's-- Sandra Day O'Connor: --is not-- Edwin S. Kneedler: --No. Sandra Day O'Connor: --a substantial limitation on work. Edwin S. Kneedler: A single job doesn't mean pilot with United. What... that's... that's elaborated upon in the explanatory guidance of the EEOC which serves to distinguish between a specialized, particular job and a... and a class of jobs. And it doesn't look to whether it's one... a job with one employer or a number of employers. You look at the job content. You may have... if United had a Concorde and said, you can't fly the Concorde, that might... that would be the sort of particular, specialized job that the regulation is referring to. David H. Souter: So, for purposes of... of the reg, you assume that every other airline will do exactly what this airline is doing for determining whether you meet the class criterion. Is that-- Edwin S. Kneedler: In general, yes. That's-- Antonin Scalia: --What happens to myths and stereotypes? What happens to myths and stereotypes, which was supposed to be the whole purpose of this provision? Edwin S. Kneedler: --Well, that is... that is the driving force behind it, but that-- Antonin Scalia: It isn't the driving force at all. United knows very well that other airlines don't apply this standard. They're not following any myth. They're just saying, we want to higher standard. Edwin S. Kneedler: --It is following a... a stereotype in... in the sense that United is saying we don't regard you, treat you as qualified to fly our airplanes safely. That is... or... or as safely as we would like. Antonin Scalia: That's not a stereotype to say that I don't like this particular type of thing. A stereotype is... is a view that, you know, a lot of people have, and if... if United had said, you know, all airlines regard you that way, it would be something else. Thank you, Mr. Kneedler. Mr. Englert, we'll hear from you. Roy T. Englert, Jr.: Thank you, Mr. Chief Justice, and may it please the Court: In 26 years of interpretation of the Rehabilitation Act and the ADA, no appellate court has ever held that any person with fully corrected nearsightedness is disabled or handicapped. Several appellate courts have reached a contrary conclusion and so has the EEOC itself in a decision rendered the very same year the ADA was passed. Sandra Day O'Connor: Do we owe deference to the EEOC on this point of how you view it? Roy T. Englert, Jr.: On the corrected versus uncorrected-- Sandra Day O'Connor: Yes. Roy T. Englert, Jr.: --absolutely not. Sandra Day O'Connor: And why not? Roy T. Englert, Jr.: For a number of reasons. One is the EEOC's own reversal of position, 180 degree reversal of position from the position taken contemporaneously with the passage of the act. Another reason is that this position is taken only in interpretative guidance, not in a regulation, which under this Court's cases is treated quite differently. A third reason is that the particular language on which the EEOC and petitioners rely was added after the comment period. Now, that doesn't invalidate it under the APA and we've never argued that it's invalid under the APA, but it does affect the level of deference under the Skidmore test. Ruth Bader Ginsburg: What was the status of that prior case, the Kienast case, in 1990? Was that... did the EEOC ever explain why it was rejecting the position that it took in that early case? Roy T. Englert, Jr.: No. The Kienast case, as far as I know, has been completely ignored by the EEOC up to and including today. Stephen G. Breyer: Would it make sense... earlier this term we decided a case involving a handicapped child. You know the one I'm thinking of. Roy T. Englert, Jr.: Garret F.-- Stephen G. Breyer: Cedar Rapids. Roy T. Englert, Jr.: --Yes. Stephen G. Breyer: And I think in there we had some language in respect to the agency might want to deal with this and fully consider it and so forth. Would that make sense here on the question of when or whether you take corrected or uncorrected into account? Roy T. Englert, Jr.: I think not on corrected versus uncorrected, Justice Breyer, because I think the statute is clear. The phrase... the phrase substantially limits... substantially limits one or more major life activities of such individual-- Stephen G. Breyer: Yes, but it doesn't say whether corrected or uncorrected or whether corrected always or some circumstances. Roy T. Englert, Jr.: --It says none of those things because that's not the concepts of the statute. The concept of the statute is, does it or doesn't it substantially limit? Present indicative tense. Stephen G. Breyer: All right. If we get by the present indicative problem, you see, I would be concerned in terms of the statute of many people who might have prosthetic limbs, who might be taking enormous amounts of medicine, who might... you know-- Roy T. Englert, Jr.: Of course, Justice Breyer. Stephen G. Breyer: --be the very victims of the prejudice and myth that the statute is aimed at. Roy T. Englert, Jr.: Of course. Stephen G. Breyer: And... and they wouldn't even get in the door. Roy T. Englert, Jr.: No, that's... that's not correct, respectfully, Justice Breyer. All it takes to be actually disabled under the Americans with Disabilities Act is a limitation of one or more major life activity... a substantial limitation... excuse me... of one or more major life activity. It is virtually inconceivable to me that those people would not have even a single limitation on even a single... single substantial limitation on even a single major life activity. One doesn't need to-- Stephen G. Breyer: It would produce enormous litigation on that point, and this is an unusual statute I take it; whereas, our other discrimination statutes are open to everyone to come in and say I'm discriminated... I am a member of the protected class discriminated against, and you know, I'm black, I'm a woman. I'm discriminated against unjustifiably. Roy T. Englert, Jr.: --Well, the key words-- Stephen G. Breyer: Here you don't get in the door. Roy T. Englert, Jr.: --The key words... excuse me. Stephen G. Breyer: You go ahead. Roy T. Englert, Jr.: The key words are member of the protected class. Stephen G. Breyer: Yes. Roy T. Englert, Jr.: This statute is not like title VII which protects black people, white people, men and women, and people who are neither black nor white. It protects everybody in other words. This statute defines a protected class and in that regard it's exactly like the Age Discrimination in Employment Act, not title VII, in limiting its protection to a particular class. If we have a 39-year-old who is replaced by a 22-year-old with very strong evidence that age was a motivating factor, he has no cause of action under the Age Discrimination in Employment Act because the statute was drawn not to solve the entire societal problem of age discrimination, but to define a protected class and say, once you get through that threshold, then we will make the employer justify its decisions. Here we have the same thing. This statute was absolutely not designed to make every employer disregard every physical criterion. It was designed to protect the disabled from being the victims of physical criteria that can't be justified. Stephen G. Breyer: This... this is what I'm... this is the question I'm trying to get to, which is think of the 44 million. If I say 44 or 43 million, that calls a whole argument to mind. Roy T. Englert, Jr.: Yes. Stephen G. Breyer: The following occurred to me, that if you open the door to the myopic people by looking only at uncorrected state, 100 million people will not walk through that door. Hardly anyone will walk through that door, and the reason that hardly anyone will walk through that door is that discrimination against people who are easily correctable rarely exists. A handful of employers take things like that into account. So, it isn't opening the statute to 150 million people. It is opening the statute to 43 million people, plus 10,000-- Roy T. Englert, Jr.: No, Justice Breyer. I-- Stephen G. Breyer: --or a few thousand, or at most a million. And therefore, it is totally consistent-- Roy T. Englert, Jr.: --I-- Stephen G. Breyer: --with the legislative history to look at uncorrected state. All right. That's my question. Roy T. Englert, Jr.: --I must respectfully disagree with you with respect to both the text of the statute and the legislative history. With respect to the text of the statute, the finding of 43 million people is that there are 43 million disabled Americans, not that there are 43 million disabled Americans who have been or are likely to be discriminated against, but that there are 43 million disabled Americans. Having been discriminated against or being likely to be discriminated against is not a criterion by which that number was derived. With respect to the legislative history, the number can be traced back through Representative Coelho's comment to the report of the National Council on the Handicapped, On the Threshold of Independence. And this is a very interesting study that in turn draws on a census study, Disability, Functional Limitation, and Health Insurance Coverage 1984-'85, which asks functional questions, and the functional question it asks about vision is do you have trouble reading ordinary newsprint even with glasses? We have... for those who are inclined to consider legislative history, we have a very powerful indication that Congress had a view on this subject. Congress relied on Census Bureau studies, the recommendations of the National Council on the Handicapped, which actually drafted the ADA. In fact, a draft of the bill is in here and it closely resembles what was in fact first introduced in Congress in 1988. So, I think both the text and the legislative history don't allow that distinction, Justice Breyer. Antonin Scalia: Mr. Englert, can I get back to deference to EEOC? I'm... I'm not persuaded by the two reasons you gave for not giving deference. One is that they've changed their position. So what. I mean, in the old days, you know, before Chevron we used to put great weight upon a change in position, but I thought that we said in a number of cases the... I mean, that's... that's why you elect different Presidents because there's a lot of wiggle room in the statutes and each administration is... is entitled to wiggle the way it wants to wiggle so long as it's within the scope of the ambiguity contained in the statute. Roy T. Englert, Jr.: Well, but... but first of all, it has to be an ambiguous statute. Antonin Scalia: That's true. Roy T. Englert, Jr.: Second-- Antonin Scalia: That's a different argument. Roy T. Englert, Jr.: --Second, you referred to Chevron deference. This is not a case calling for Chevron deference. This is a case calling for Skidmore deference, which is a much lower standard. Antonin Scalia: Why? Why... why not-- Roy T. Englert, Jr.: Because it's interpretive guidance. Antonin Scalia: --Why not Chevron deference? Roy T. Englert, Jr.: Because it's interpretive guidance and not regulation, and in General Electric Company v. Gilbert, this Court said, EEOC interpretive guidance gets-- Antonin Scalia: What was the date of General Electric? Roy T. Englert, Jr.: --It predated Chevron. I don't know the exact date. Antonin Scalia: Yes. I mean, that's old, old stuff. I don't even know Skidmore deference anymore. It's not that old. [Laughter] Roy T. Englert, Jr.: Justice Scalia, I... I would suggest that there are different levels of deference. Whether one refers to them as Skidmore deference and Chevron deference or not, there are different levels of deference for agency pronouncements of different formality. Antonin Scalia: Why? Roy T. Englert, Jr.: Because-- Antonin Scalia: We give deference to agencies who have... who... whose position is not enunciated except in litigation so long as it wasn't made up for this particular case. Roy T. Englert, Jr.: --You can give some-- Antonin Scalia: If an agency has... has consistently taken a certain position in... in legislation, we've given deference to it. Roy T. Englert, Jr.: --Consistently. Consistently. There are levels of deference. There are gradations of deference. Consistency is one of the factors to consider. Antonin Scalia: What a wonderful world this is. Roy T. Englert, Jr.: Formality. Antonin Scalia: There are all sorts of gradations? I mean, if I accept that argument from you, I'm going to accept the argument about, you know, all different levels of myopia that... that your opponent makes. It's about just as imaginative. Roy T. Englert, Jr.: No. I think the case law pretty firmly supports-- William H. Rehnquist: Bragdon certainly suggests... last term talks both about Skidmore deference and about Chevron deference, does it not? Roy T. Englert, Jr.: --Yes. And... and the Court's opinion, as I read it, said we need not resolve any of these vexing deference questions because here everything points in the same direction. Sandra Day O'Connor: Mr. Englert, even if we were to agree with you, that you look at vision in its corrected state under the statute, there is a regarded as feature of the statute. And this case was resolved on a motion to dismiss, and was there no allegation that the respondent regarded the petitioners as disabled? Roy T. Englert, Jr.: Those words were used but there is no allegation sufficient to withstand a motion to dismiss on regarded as. No. The... the allegations of the complaint are actually quite interesting. The petitioners-- Sandra Day O'Connor: Where... where do you want us to look? Roy T. Englert, Jr.: --Pages 24 and 25 of the joint appendix. In paragraph 38a, which I'll proceed to read, they... they assert, United asserts that its requirement for uncorrected vision is a rational, job-related, safety requirement. United thus believes that plaintiffs' physical condition limits their ability to perform the type of work at issue here. Well, that's a very interesting allegation, the type of work at issue here, and they admit in their own complaint that United thinks it's a rational, job-related safety requirement. In paragraph... subparagraph e on page 25, on information and belief, United's policy originally was modeled on military requirements for pilot training, without independent supporting basis. Well, they want to get into the absence of an independent supporting basis, but they admit where our standard came from. It didn't come from myth and stereotype. It came from lots of other standards for uncorrected vision for pilots. The Navy requires to this day 20/30 uncorrected vision for pilots. The Air Force requires 20/50. Sandra Day O'Connor: Well, but in d, they allege that United... its position is based on stereotype, myth, or unsubstantiated fears, that they have no data or evidence indicating that the plaintiffs' visual acuity and use of corrective lenses presents safety concerns. Roy T. Englert, Jr.: Well-- Sandra Day O'Connor: I mean, that's... that's also alleged, isn't it? Roy T. Englert, Jr.: --It's also alleged, but intoning the words, myth, stereotype, and unsubstantiated fears, isn't enough when we have-- Sandra Day O'Connor: Well, we don't require that much on a motion to dismiss-- Roy T. Englert, Jr.: --No, but-- Sandra Day O'Connor: --on the face of a complaint. Roy T. Englert, Jr.: --The court does not require that much. But these plaintiffs put in, to their credit, some very honest allegations about where United's standard came from. They want to say... their key allegation is United cannot substantiate its 20/100 standard. But that's quite a different allegation from saying that United's standard amounts to regarding everyone who doesn't have 20/100 or better uncorrected vision as disabled. Being regarded as not suitable for employment as a pilot for United Air Lines is quite different from being regarded as disabled. Stephen G. Breyer: That's exactly what's bothering me, that if... you might be right. If you are right, then the regarded as prong is not really going to be a way to get a lot of disabled people in the door, and if you are right on that, then when you look to the first prong, there might be a lot of deaf people, for example, deaf people with hearing aids, who just can't even get through the door because they will be said, well, you're not disabled because that hearing aid works well enough. And then met with totally irrational, say, reaction on the part of some other employer, they will then lose because that employer just regarded them as not good enough to work here, but perfectly good enough to work somewhere else. Roy T. Englert, Jr.: Well-- Stephen G. Breyer: And it's that kind of interpretation possibly that's worrying the EEOC. Roy T. Englert, Jr.: --Justice Breyer, to some extent this gets back to our earlier colloquy about defining a protected class and... and then invoking the protections of the statute. Just as not all age discrimination is outlawed by the ADEA, not every irrational discrimination involving a physical impairment is outlawed by this statute. Sandra Day O'Connor: Well, how... how do you read this regarded as prong? I mean, they've alleged that United's position is based on stereotype, myth, or unsubstantiated fears, and that it blocks plaintiffs from an entire class of employment and so on. Now, how could they have been more specific in their allegations? This is a motion to dismiss. Roy T. Englert, Jr.: Well, they were... they were-- Sandra Day O'Connor: Why is this not sufficient under the regarded as? Roy T. Englert, Jr.: --Because they were even more specific. They... the class of employment that they allege was global airline pilot, and even they concede now that that's not a class of employment. So, that's one of the facial defects in their complaint. Another facial defect in their complaint is that although they talk about myth, fear, and stereotype, their own complaint makes it very clear, Justice O'Connor, that what they are complaining about is that United has not substantiated standards that it derived from somewhere else. The FAA had a 20/100 standard until 1990... 20/100 uncorrected standard until 1996, and the briefs, by the way are slightly in error. They say 1994 but it was 1996. William H. Rehnquist: Mr. Englert, what in your opinion would qualify? What would be an example of something that would be... someone who would be regarded as disabled by an employer? Roy T. Englert, Jr.: There are many examples. One of them would be, Mr. Chief Justice, if... if it is rumored that someone is HIV positive but that person is not in fact HIV positive and the employer takes adverse action on that basis. The employer is regarding that person as disabled. William H. Rehnquist: Well, what about someone, say, who has an artificial leg and... but, nonetheless, is perfectly able to drive and can drive as well as... meet any driving test? Yet, the... the employer says, you know, I just don't want to take a chance with you. Is... is he regarding that person as disabled? Roy T. Englert, Jr.: He may be. The first question is, is that person actually disabled? Because all that person has to show is any one major life activity that is impaired... that is substantially limited by his impairment. William H. Rehnquist: Well, but this... this thing works great for him. I mean, he can do... he can do... he passes all those tests. And yet, this particular employer says, well, you know, I know you do, but I... I just want really grade A people, not meaning any disrespect to the guy, but I just don't want to take a chance. Roy T. Englert, Jr.: Mr. Chief Justice, in the hypothetical situation where a person with a prosthetic limb actually has no substantial limitation in any major life activity, none at all, I would-- William H. Rehnquist: Supposing I have an artificial finger and he's afraid I can't honk the horn. [Laughter] Roy T. Englert, Jr.: --Well-- William H. Rehnquist: So that there wouldn't... wouldn't be any obvious major disability. Roy T. Englert, Jr.: --That does sound like a case for regarded as. But... but let me... let me suggest why this is not a case for regarded as. Anthony M. Kennedy: Yes, and particularly in... in this case, one of the stumbling blocks is that United did treat the applicant in its uncorrected condition for the regarded as prong. It regarded these people as being uncorrected. Roy T. Englert, Jr.: Well, the question is whether it regarded them as having an impairment that substantially limits one or more major life activity. Anthony M. Kennedy: That's... that's the next question, but you... you admit that it, of course, regarded them in their uncorrected state. Roy T. Englert, Jr.: No. I think it's sort of a metaphysical statement. United-- Anthony M. Kennedy: Well, this whole act is metaphysical. We've been here for 2 days. [Laughter] Roy T. Englert, Jr.: --But... but until 1996, Justice Kennedy, no Government authority had... that I'm aware of had ever said don't look at people in both their corrected and their uncorrected state. If these people... if the plaintiffs had corrected to 20/30 but were 20/50 uncorrected, they would be ineligible to be pilots for United or even to get an FAA certificate. Sandra Day O'Connor: Okay, but let's take this case. They... they are corrected... in their uncorrected, they're 20 over 100. With glasses, they're 20/20. And United says you aren't disabled because when you wear glasses, you're 20/20, and then they say we don't... but when we regard you as eligible for the job, we're not going to take you because you're actually 20 over 100. Why isn't that regarding them as disabled? I think that's the problem we're having with your position. Roy T. Englert, Jr.: For just the reason that some of your own earlier questions suggested, Justice O'Connor, which is that eliminating someone from a single job is not regarded as. Everyone agrees on that. Now, the question is how much do you have to go beyond a single job to make out a regarded as claim, and we... we get into questions about the level of generality of class of jobs. Sandra Day O'Connor: Well, we didn't take that question here in this case, did we? The single job issue or not? Roy T. Englert, Jr.: I believe the grant of cert in this case was unrestricted, Justice O'Connor. John Paul Stevens: May... may I ask in that connection if the... if the evidence or the allegation was that United is just like 10 different... all 10 major airlines have the same rule. Would... would then it satisfy the regarded as job classification for you? Roy T. Englert, Jr.: No, not if it's limited to major airlines and... and not if it's limited to pilot positions. Those are two things that-- John Paul Stevens: You don't think being ineligible for... an otherwise qualified pilot being denied the opportunity to work as a pilot for the... all the blue ribbon airlines would be a... disabling in a major life activity? Roy T. Englert, Jr.: --Not if it's limited to just the blue ribbons, no. Justice-- David H. Souter: Didn't you quote a reg more or less supporting your position? What is it... can I just finish this for a second? No. I'm sorry. What is it? They have to be... no airline at all would hire them? Is that your view? Roy T. Englert, Jr.: --No. They have to be substantially... if they're relying on substantial limitation of the major life activity of working-- John Paul Stevens: It's sort of a market share antitrust test? Is this what it is? Or how... how do you define the... when it's enough in your view? I just want to get your position. Roy T. Englert, Jr.: --They... they must be excluded at... at the minimum from a class of jobs. Speaker: Well, the class of jobs-- Roy T. Englert, Jr.: The EEOC's own-- John Paul Stevens: --is being a pilot for all major airlines. Roy T. Englert, Jr.: --No. Your Honor, the EEOC's own interpretive guidance actually addresses-- John Paul Stevens: I'm not... I'm interested in your view. I'm trying to understand your position. Roy T. Englert, Jr.: --In my view, being disqualified from a position with every major airline is not enough, and the EEOC-- John Paul Stevens: But you want us-- --So, it has to be every airline. You want us to defer to EEOC interpretive guidelines on this-- Roy T. Englert, Jr.: --No. Sandra Day O'Connor: --but not on the other. It comes from the same interpretive guideline. Roy T. Englert, Jr.: Well, you... you shouldn't defer to it, but I think it is probative, for purposes of argument, to note that the EEOC does give as an example of something that is too narrow to be a class of jobs, commercial airline pilot. Let me ask the Court... the Court's indulgence to think about this example. Doug Flutie is a football player who is short, and he has been a controversial football player throughout his career because a lot of people don't think you should have short quarterbacks in the NFL. Now, if these plaintiffs were regarded as disabled because United wouldn't hire them as pilots, then I would respectfully suggest we have to hold that Doug Flutie is regarded as disabled if the Washington Redskins and every other team in the NFL won't hire him as a quarterback. He does not have an impairment, in fact, because being short, especially short compared to pro football players, is not an impairment. But he is regarded as not suited for employment with that particular employer because of his impairment or because... because of his height, because of his physical characteristic. Not having an impairment is a classic example of not being disabled and yet being regarded as being disabled. Speaker: Mr. Englert, are these-- --How much broader would it have to be? You say at some point just everybody thinking he's too short does... does constitute regarded as. It's just not hiring in the NFL. What else is it? I mean-- Roy T. Englert, Jr.: Well, in the example, Doug Flutie played in the Canadian football league for many years, and I would suggest that in and of itself, that is enough to defeat a regarded as claim. But... but, Justice Scalia, my position is broader than that. Antonin Scalia: --But what if all... all professional football... all professional football leagues though he was too short? Roy T. Englert, Jr.: Then he could be a coach. [Laughter] And coach is a position for which he is suited by ability, skill, and training, which is the language in the EEOC's regulation-- Speaker: Well-- Roy T. Englert, Jr.: --its interpretive guidance. William H. Rehnquist: --like saying putative pilots could gas planes. They could but that's not what they're trained for. Roy T. Englert, Jr.: It is something that is suited to their experience, skills, and abilities which is the language-- Ruth Bader Ginsburg: Can we go back to eyesight and this simpleminded view of it, without getting into categories of jobs? Do you agree that these plaintiffs without their glasses would fit the definition substantially... what is it... restricted or limited with regard to sight? They can't see in front of them without their glasses. Would... just let's take them in their uncorrected state. Are they... do they fit the definition of being disabled? Roy T. Englert, Jr.: --They probably do, but even that's not crystal clear, Justice Ginsburg, for this reason. One has to compare them functionally and not just on the basis of numbers, like 20/400 or 20/100, to the average member of the general population. Ruth Bader Ginsburg: Yes, well, it is functionally. They can't do anything. They can't see in front of them. It isn't safe for them to go out on the street. Let's... but this... this is my basic problem and it's been brought up in... in the briefs. You take this person in their corrected state on your analysis, but then the employer says, I don't accept the correction. In other words, the question I asked Mr. Kilberg yesterday I think, if these women had had laser surgery so that they could be 20/20, that would be a corrective that United Air Lines would accept. But isn't it the case that what's really going on here is they are disabled if their correction is not accepted and United is not accepting the correction? Roy T. Englert, Jr.: No. No, that's... that's quite the wrong way to look at it I would respectfully suggest, Justice Ginsburg. You cannot make the actual disability prong turn on the employer's perception. You can get into the employer's perception in regarded as, as we have been discussing, but in the actual disability-- Ruth Bader Ginsburg: That's why I mean to get into it. I say, as they are... from the employer's point of view, people who don't have glasses to correct their vision-- Roy T. Englert, Jr.: --But... but that's... if I may, Justice Ginsburg, that's not correct either. The... the vision standard, which is derived from a longstanding FAA standard, from the International Civil Aviation Organization standard, even from an AMA recommendation that the FAA rejected when it changed the rule... the vision standard requires that both corrected and uncorrected be certain levels, 20/20 corrected, 20/100 uncorrected. So, it's not a matter of the employer rejecting the corrected measure and saying we have no interest in that. It's a matter of the employer saying, our view of what it takes to be as safe a pilot as we believe we should have on this airline is both of these things. So, to conceive of it as rejecting the correction I think is neither factually accurate nor to me consistent with the way the statute operates. David H. Souter: --All right, but... what... it seems to... what your argument is driven by and what your answer to Justice Ginsburg is driven by is you want to make sure that, at the end of the day, United is in a position to hold out, for very good reason, for what it believes is the very safest pilot regardless of what these definitions may be. You want the airline to be in the position of saying if there's a 400 hitter out there, I don't have to hire the 200 hitter. But isn't it the case that the airline would be in the position to hold out for the best, just as you want it to do, even if we take your... your opponent's view of regarded and get these people in under the statute, because if holding out for the very safest, the 400 hitter of airline pilots, is in fact a... a reasonable qualification for an airline or if it is a reasonable approach to the... to the safety and health circuit breaker in the statute, you'd still be able to do that even though these people were regarded in the first instance for getting into court as... as being disabled? Roy T. Englert, Jr.: I would hope so, Justice Souter, but I can't have a lot of confidence that we would win that because the EEOC takes the position that you have to show a direct threat to safety. I disagree with that position. But having-- David H. Souter: Well, it's... you're right. The... the regs refer... I think they finally get down to substantial risk. And... and you're quite right. My question is assuming that what is a substantial risk is a function not only of the likelihood of something going wrong, but the... the extent of disaster if something does go wrong. So, you're right. I'm assuming that on that criterion, you... you would have a reasonable argument for holding out for the... for the 400 hitter-- Roy T. Englert, Jr.: --And we should win, Justice Souter, but... but the confidence that we will win is what I'm lacking. Reasonable people disagree about the right standard for pilots. I... I mentioned that the AMA suggested 20/200, and the FAA rejected that suggestion in favor of looking just at corrected. Are we going to have a battle of the experts at which United's... United's view is put into question because it won't hire nearsighted pilots? This... this ultimately is a safety issue. John Paul Stevens: --May I ask a question going back to the first issue, the disability? I know it's not an eyeglass hypothetical, but I've been thinking about it. Supposing a person needs a drug in order to... to avoid whatever the uncorrected condition is. He has to take a pill of some kind, and he wants to be a truck driver. But he can't afford to buy the pill. Do you look at him as uncorrected or corrected? Roy T. Englert, Jr.: Uncorrected. John Paul Stevens: You look at an uncorrected even though if he got the job, he then would be able to pay for the pill. Roy T. Englert, Jr.: Yes. Our position is that the verb substantially limits is meant to make an actual and not a hypothetical-- John Paul Stevens: And you can take into account the economics of the particular applicant then. Roy T. Englert, Jr.: --You take into account the state you find the person in. Anthony M. Kennedy: Does a reasonable accommodation require that you buy the pills or by the eyeglasses? Roy T. Englert, Jr.: In general, according to the EEOC, personal use items are not reasonable accommodations. John Paul Stevens: If these pilots don't... didn't have their glasses at the time they applied for a job... they had just been broken. They couldn't have... they hadn't had a chance to make an appointment with the eye doctor. They'd be uncorrected... they'd be disabled at the time of their application. Roy T. Englert, Jr.: No, Justice Stevens. The... the uniform interpretation of the statute is that the impairment must be of long duration and not temporary for it to qualify as... as a disability. Stephen G. Breyer: Is... is it... do we have the only choice? If we accept your view on eyeglasses corrected, do we then have to say in the case of every other condition, you also look corrected, or is there an intermediate position? Roy T. Englert, Jr.: Justice Breyer, I think you do have to accept that position but I... I certainly would not dismiss out of hand the possibility that the Court might think otherwise and that the Court might-- Stephen G. Breyer: What would be the best intermediate position? Roy T. Englert, Jr.: --The best intermediate position would be that corrected versus uncorrected would be based on the legislative history and that such conditions as it appears were meant to be considered in their uncorrected state according to the legislative history should be considered in their uncorrected state. David H. Souter: What in particular in the legislative history do you point to? Because I said yesterday in an argument... and I thought I was right... that the legislative history seems to point in each direction. The... the House and Senate Judiciary reports don't seem to be very clear one way or the other. My recollection is that the... of the two Labor reports, one favored the corrected view, one favored the uncorrected view. What do you point to? Roy T. Englert, Jr.: The same sources and they do point in both directions. And I... I agree with what Justice Scalia I believe suggested yesterday, which is it's all or nothing. But if one were to draw an intermediate position, one could derive some of that from the legislative history. Thank you. William H. Rehnquist: Thank you, Mr. Englert. Mr. Hughes, you have a minute remaining. Van Aaron Hughes: Mr. Chief Justice, may it please the Court: Mr. Englert's statement that this ultimately is a safety issue speaks volumes about what is at issue in this case. This Court held in Arline and again in Bragdon that... that parties must produce objective evidence as to whether there is a basis for a safety concern. We've alleged that United perceives my clients to be limited in the ability to fly any aircraft, whether it's piloting, co-piloting, passenger routes, courier routes. They can't do any of it under United's views. Many other employers share the same view. Not all employers. If they all shared the view, we'd have a good claim under actually disabled, but United regards as... as disabled for that reason, and we've alleged that there is no basis for this belief, that it's based purely on stereotype, that there is no limitation between... there is no relationship between uncorrected vision and a pilot's safety. The FAA has always taken the same view. Even when it had a 20/100 requirement, one could obtain a waiver if... if one's vision were correctable. And it's only stereotype that states otherwise, and whether there's a basis-- Ruth Bader Ginsburg: Why does that... where... how do you get that? When one could just... there wasn't any trial here. One could think it could be. They think glasses fog up. They get lost. Contact lenses get lost all the time. People forget to take pills. That's not stereotype, is it? Van Aaron Hughes: --Your Honor, we've alleged that it is and we believe that's so because the objective evidence is that there has never been a problem associated with pilots with correctable vision. United apparently believes the same. Our understanding is they have pilots in their own fleet with the same vision. William H. Rehnquist: Thank you, Mr. Hughes. Van Aaron Hughes: Thank you very much. William H. Rehnquist: The case is submitted.

William H. Rehnquist: We will hear argument first this morning in No. 85-1226, Commissioner of Internal Revenue versus Robert P. Groetzinger. Mr. Lauber, you may proceed whenever you are ready. Albert G. Lauber, Jr.: Mr. Chief Justice and may it please the Court, the question here is whether a person who spends his full time gambling at racetracks for his own account is engaged in a trade or business for federal income tax purposes. This is a question on which the Commissioner, the courts, and gamblers have gone back and forth over the years, depending largely, it seems, on whether it was good or bad taxwise for a gambler to be in a trade or business at the particular tax year involved under the relevant tax provisions. The provision that gave rise to this case was a minimum tax provision that was in effect from 1976 until 1982 under which gambling losses generally were items of tax preference that could give rise to a minimum tax liability. The way a gambler could avoid minimum tax would be to argue that his trade or business was gambling, so that his gambling losses were not garden variety itemized deductions, but rather were trade or business deductions that were exempt from minimum tax. The Court of Appeals below accepted this argument, persuaded in large part by the seeming inequity of imposing a minimum tax on somebody who had net gambling losses for the taxable year, as Mr. Groetzinger did. Congress has eliminated that inequity for years after 1982 because it amended the minimum tax law in that year to remove gambling losses from the minimum tax base. Now that Congress has fixed that, the IRS cannot really tell whether it is better for us to win or lose this case from a revenue point of view prospectively because, as I said, it can be good or bad for a gambler to be in or not to be in business. William J. Brennan, Jr.: Do you have any idea how much is at stake? Albert G. Lauber, Jr.: It is impossible to tell, Justice Brennan, because there are so many different numbers on the tax return that can go up or down depending on whether you are in business. It affects the adjusted gross income which is a floor beneath your casualty loss deduction and your medical deduction, the ceiling on your charitable contribution deduction. It can enable you to take home office expenses deductions. It can also make you liable for self-employment tax if you are in a trade or business. It is like the FICA tax employees pay. So, depending on whether the gambler has gains or losses for the year and whether he has medical expenses and so forth it can be good or bad and you simply can't program a computer to figure out what the net will be, so the reason we sought certiorari here was to get a clear answer to the question to resolve the conflict in the circuits and get an answer we hope will be consistent with the overall structure of the-- Sandra Day O'Connor: Mr. Lauber, will the decision we make have any consequences under the new tax code to take effect next year or are the definitions changed enough for that that it doesn't have an impact? Albert G. Lauber, Jr.: --The new tax code preserves the post-'82 treatment for gambling losses. They are still carved out from minimum tax and so forth. I would think the one possible effect the decision could have... I haven't read the new tax law from cover to cover but the new tax law does put a 2 percent floor underneath investment type expenses. You can't deduct expenses of investing, of getting advice from brokers, investment, valueline, that kind of stuff except to the extent it exceeds 2 percent of your adjusted gross income, and that basically puts a floor under the Section 212 deduction now in the Code, and there may be some greater incentive for investors to try and say they are in a trade or business under the new tax law to avoid that 2 percent floor. Sandra Day O'Connor: By virtue of Section 212 are there any consequences if this case were affirmed outside the context of full-time gambling? What are the real risks of an affirmance in other areas in your view? Albert G. Lauber, Jr.: The greatest risk to affirmance would be if the Court did anything to impugn the rule of Higgins versus Commissioner, which held that investors are not in a trade or business. Sandra Day O'Connor: Well, it could be affirmed, I suppose, without doing that, depending upon what the elements were of the test to be employed. Albert G. Lauber, Jr.: That's right. William H. Rehnquist: Of course, to speak of the rule of Higgins against Commissioner is to give that case the benefit of a good deal of doubt since you tell me what rule it is other than that the government won it. Albert G. Lauber, Jr.: Well, one might say that very well. Harry A. Blackmun: Mr. Lauber, you argued the slot machine case last year, didn't you. Albert G. Lauber, Jr.: Unfortunately, I did, yes. Harry A. Blackmun: You are getting to be an expert on gambling devices. Albert G. Lauber, Jr.: I have quite a bit of knowledge about the different subjects now. That is true. Speaker: Does this definition, what amounts to a trade or business, it will have some general applicability, won't it? Albert G. Lauber, Jr.: It will because the term is used in 50 different sections of the code. Speaker: And do you think that... I guess you don't need to know, but is it supposed to mean the same thing in all these sections? Albert G. Lauber, Jr.: Well, it has a number of special purpose definitions and special sections that define it-- Speaker: I see. Albert G. Lauber, Jr.: --like the unrelated business income tax defines it for purposes of one section. That is true-- Speaker: But at least for some other sections the way this is defined it will be-- Albert G. Lauber, Jr.: --The majority of them it is the same definition. Section 162, Section 62.1, all of those we generally think have the same meaning of trade or business. The Court of Appeals below held that a trade or business should be defined as any activity that can fairly be characterized as a person's livelihood, occupation, or means of earning a living, so that the only requisites of a trade or business from that point of view are that you carry on an activity on a regular and extensive basis with the intent to earn a profit or livelihood from it. We think this definition has some obvious intuitive appeal but we think it incorrect under the code as we actually know it. Speaker: --Has that been the consistent position of the Tax Court over the years? Albert G. Lauber, Jr.: The Tax Court is one of the courts that has flip-flopped on this question. When it first came to the Tax Court in 1976, Judge Tannenwald defined the term much more narrowly and adopted what we call the goods and services test of Justice Frankfurter's concurring opinion in Deputy v. DuPont to hold that a gambler was not in a trade or business, and the gambler there did not want to be in a trade or business because he was trying to be hit with self-employment tax. And then after Congress put in the minimum tax provision that was bad for gamblers, the Tax Court reversed itself, overruled Judge Tannenwald's opinion, so they have not been consistent. They have kind of sided with the gambler, depending on the equities of the particular tax provision involved for the relevant tax year. Speaker: You mean they have been on the side of equity? Albert G. Lauber, Jr.: Right. We are not contending that there are any equities on our side in this particular case. We are simply out to get a definition of trade or business that does not damage the entire structure of the revenue code. The code itself regularly distinguishes between trade or business activities and other activities carried on on a regular basis with the intent to earn a profit. Particularly in the landmark case of Higgins, that I mentioned before, this Court held that a full-time investor is not in a trade or business even though he devotes the bulk of his time to managing his securities portfolio and even though he was engaged in a regular course of activity with the intent to earn a profit or livelihood from this portfolio. Speaker: He was trying to deduct the salaries of his employees, wasn't he, in that case? Albert G. Lauber, Jr.: Mr. Higgins had a very, very large investment portfolio as well as a very large real estate activity apparently, and he did hire people to work for him, bookkeepers. He made all the investment decisions himself, I think. He gave the-- Speaker: Didn't Congress later decide that he should have been able to deduct these expenses? Albert G. Lauber, Jr.: --It did, and then it enacted Section 212, but it is important to note that Congress thought that the problem with Higgins was the Court had defined trade or business too narrowly to exclude his kind of expenses. They respond to that not by expanding the definition of trade or business but by enacting a new section, 212, to allow deduction of non-business expenses incurred to produce income on management investment property. Speaker: Mr. Lauber, does a casino offer goods or services within the meaning of the term as you understand it? Albert G. Lauber, Jr.: The casino itself does, and a bookie would. Speaker: And what are the services? Albert G. Lauber, Jr.: Well, a casino is running a-- Speaker: Say a casino where you have, say, just a dice table. Albert G. Lauber, Jr.: --They are offering roulette, the services of a roulette wheel or a blackjack dealer that gamblers can avail themselves of to gamble. I guess they are not really offering goods but they are offering services. They serve drinks while you are at the gaming table, and a bookmaker-- Speaker: At the slot machines, too? Albert G. Lauber, Jr.: --Pardon me? Speaker: At the slot machines, too? Albert G. Lauber, Jr.: I think that is providing a service in that they are making available to gamblers a facility to... it is like an amusement park type of service. Speaker: It is certainly not gambling because gambling is a game of chance, and the casinos don't take chances. 0 [Generallaughter.] Albert G. Lauber, Jr.: But if you think of this being like an amusement park and they take their cut and they provide fun for people-- Speaker: What if this man provided his own dice and he went to a dice game every day and he brought the dice, played with a bunch of friends and they gambled every day full-time but he is the one who supplied the dice? Would that be enough? Albert G. Lauber, Jr.: --I don't think that would be enough to make him-- Speaker: Why isn't that the same as a casino supplying the dice? And it is always at his house. Albert G. Lauber, Jr.: --Well, I think... well, if he did it on a regular, continuous basis and got paid, and got money for it. Speaker: Well, he gets money when he wins, of course; he doesn't when he loses, just like-- Albert G. Lauber, Jr.: But he is the one who is providing the facilities. Speaker: --And they use his kitchen. Albert G. Lauber, Jr.: That is different from being a gambler. Speaker: If he used his kitchen, he had a permanent poker game or dice game, then he is like a casino. Is that right? You don't really want us to hold that, do you? Albert G. Lauber, Jr.: Well, we don't want you to tell people to hold gambling games in the kitchen as a trade or business. No, we don't want that. Speaker: I didn't think so. Albert G. Lauber, Jr.: But I think it is different being the vendor or the provider of the facility and the consumer of the services like the respondent here. He was just a gambler who was coming in to play, and we think that Higgins really controls this case, because we can see no real distinction between somebody who engages in a regular course of profit-seeking investment activity and somebody who engages in the regular course of profit-seeking gambling activity. Speaker: What about real estate development? That is like a person with an investment portfolio? Albert G. Lauber, Jr.: We have an amicus brief filed on behalf of real estate developers, and we think that question is not presented here. There is a particular doctrine that has come up in the tax shelter area called the doctrine of pre-opening expenses that kind of takes care of when a real estate developer... a real estate investment partnership is in the business of renting apartment units. A developer himself would be in a business all the time because he is engaged in the regular course of developing, improving property. Speaker: Mr. Lauber, the case of the full-time stock trader seems to me rather analogous to the full-time gambler-- Albert G. Lauber, Jr.: Well, I think the-- Speaker: --and the stock trader is treated as having deductible. Albert G. Lauber, Jr.: --There is a line of cases in the lower courts that have held that a stock trader as opposed to an investor is engaged in a trade or business but I think-- Speaker: Do you think that is incorrect, that that shouldn't be the rule? Albert G. Lauber, Jr.: --I think one can find analogies both between the investor and the trader to the gambler. Let me say a little bit more concretely about how they are similar. Speaker: How would you treat, how would you treat the full-time stock trader under the rule you seek? Albert G. Lauber, Jr.: The position of the IRS is that the full-time stock traders who do rapid turnover of investments are in a trade or business, and that goes back to-- Speaker: I think that is really close to this case. Albert G. Lauber, Jr.: --I agree, it is very close to this case, and I think that is what makes this case difficult. If we didn't have that line of cases, I think this case would be easy after Higgins. Speaker: Well, all right, if you were to develop a rule that said if it is a profit-seeking activity, if it is activity that is intensively engaged in over a period of time with personal effort of the taxpayer, and you are not structuring in the preliminary costs of getting into business, I mean, would that take care of your concerns with the investor? Albert G. Lauber, Jr.: I don't think it would, because then you have to ask why did Higgins come out the way it did. If you are right, why wasn't Mr. Higgins, who spent all of his time running around managing his investments and giving buy and sell instruction, picking stocks. Speaker: Well, it is hard to pay that much reliance on Higgins, which was effectively overruled by statute shortly thereafter. Albert G. Lauber, Jr.: It was only overruled insofar as the result, but Congress did not overrule the holding that he was not in a trade or business. The Congress preserved that holding and enacted a new provision to allow non-business deductions to be taken. Speaker: What element is missing out of the list I gave you? Albert G. Lauber, Jr.: The element we would say is missing is, he does not hold himself out as offering to sell goods or services to others, and I think that a gambler does not do that, and there are other... there are some illegal activities, for example, embezzlers. You may have an embezzler who spends his days casing houses and looking for... trying to find new ways to get money from his employer and tries to make a living doing that, but the courts have held he is not in a trade or business. Speaker: What about an embezzler that sells shoddy goods and services, misrepresents them and gives you not what he said he would? Albert G. Lauber, Jr.: Well, an embezzler who just takes money out of his-- Speaker: Never mind embezzler. I mean, it is not embezzlement, but a con man who-- Albert G. Lauber, Jr.: --I think a con man or a drug dealer is in a trade or business because they are selling something. It may be illegal, but if they file the tax return they could claim cost of goods sold. Speaker: --Right, so that sort of takes some of the force out of the fact that an embezzler would be included because under any definition you are going to get some strange people included. It seems to me no more desirable to include con men than it does embezzlers. So no matter what definition you get you are going to get some strange people included as conducting a trade or business. Albert G. Lauber, Jr.: But I think the advantage of Justice Frankfurter's test is, it explains why people like embezzlers and investors and gamblers are not in a trade or business. Speaker: But the only difference between Higgins and the stock trader is that Higgins didn't move his stuff as fast as a stock trader would? Albert G. Lauber, Jr.: That is what the courts have held, that he-- Speaker: Well, and the government agrees, I take it. Albert G. Lauber, Jr.: --We agree. We feel we are stuck with that line of cases and don't wish to abandon it. And frankly, if the Court decides that it is impossible to rule in our favor here without disapproving the stock trader cases, my orders are to say that you should affirm the decision below because the service believes that the stock trader cases have become so firmly entrenched in the law, going back to 1918 rulings of the IRS, that they can't be... they came before Higgins in a way and they can't be abandoned, but we think that the two lines can be reconciled. Speaker: Mr. Lauber, let me ask you another case. Supposing a person were engaged for his own account in buying and selling old coins or other old artifacts of some kind but he never offered them to the public, he always just kind of gambled on the market and would buy from dealers and sell to dealers. Would he be engaged in a trade or business? Albert G. Lauber, Jr.: I would say he is not. He is a coin collector who is trading-- Speaker: The same sort of thing a stock trader would be. That is even closer to a stock trader, it seems to me, because he is buying and selling something for which there is a market, but he is always doing it just on his own account. Albert G. Lauber, Jr.: --The rationale of the stock trader cases is that the trader is trying to take advantage of the kind of short-term swings in the market, like to get... much as an arbitraguer would, to get a little eighth here, an eighth there, because of market swings, and that requires extremely heavy trading. I don't think a coin investor-- Speaker: How about gold bullion, large quantities of gold bullion always trading on your own account? And you know, there are changes in the market every day on that. Albert G. Lauber, Jr.: --Well, I think that the service would agree that a person who dealt in gold bullion in a fashion similar to a stock trader who is held to be in a business would also-- Speaker: It would have to be a short swing situation. Albert G. Lauber, Jr.: --It would have to be a very short swing situation, I think, and very, very frequent trades. Speaker: Am I correct that the Congressional overturning of Higgins only overturns it as to whether a deduction can be taken. Albert G. Lauber, Jr.: That's correct. Speaker: And that there are other elements in the Tax Code which continue to apply the Higgins rule to someone who is managing his own investments, detrimentally or, for that matter, favorably to that individual as not considering that a trade or business for purposes of other provisions of the code. Albert G. Lauber, Jr.: That's right. Section 212 allows someone to deduct expenses incurred in managing his investments, but it would not allow him to deduct, say, home office expenses, and that is why full-time investors continue to try and seek trade or business status to be able to take other deductions outside of 212 under Section 162, and the like. But I think it may be helpful to consider in a kind of concrete way what a full-time investor does, resembles what a full-time gambler does. A full-time investor presumably spends much of his time reading the Wall Street Journal and becoming knowledgeable about where to put his money. He reads Value Line, follows the Dow-Jones ticker, reads corporate 10K statements, consults with brokers and people in the industry trying to figure out what the best companies or commodities are, and once he has gotten educated he places a bet essentially on a particular corporation or commodity by buying a securities contract, and he thereby expresses his hope that that company will do better than all the other companies on the stock exchange. If he is right, he will get a payoff many times his investment. If he is wrong, he may become worthless. Now, a gambler who gambles full-time is very similar. He presumably spends his days becoming knowledgeable about where to put his money. He reads the newspapers, racing programs, racing forms. Speaker: He only reads the Morning Telegraph. Albert G. Lauber, Jr.: Excuse me? Speaker: xxx he only reads the Morning Telegraph? Albert G. Lauber, Jr.: Excuse me? Speaker: xxx maybe he reads. Albert G. Lauber, Jr.: Well, he probably reads the racing columns in all the newspapers. That may take a couple of hours in the morning. And then he goes down to the track and he talks to jockeys and other bettors and tries to get a sense of what the best horses or dogs are, and he then places his bet on the horse or dog he thinks is going to do best by buying a betting slip, and both the full-time gambler and the full-time investor are taking some risks, but basically they hope they can beat the market because of the superior information and sophistication they have by doing what they do full-time. We think that neither of them, despite the fact he uses some skill in what he is doing, is in a trade or business, and the reason is, the reason Justice Frankfurter gave in his concurring opinion in Deputy v. DuPont, a case a year before Higgins which likewise involved an investor, and he said that an investor is not in a trade or business because he does not hold himself out to others as engaged in the selling of goods or services. The same we think is true of a gambler who does not act as a bookie or casino operator or sell tips to other people, but rather gambles solely for his own account. We think the goods or services test is a useful tool for differentiating the world of trade or business activities from a somewhat larger universe of activities undertaken with the intent to make a profit. It explains why investors are not in a trade or business no matter how extensive and busy they are about their investments. It explains why gamblers of all types, whether they play roulette, poker, bingo, keno, or horse races, are not in a trade or business. It explains why housewives or house-husbands who sit home and cut the tops of cereal boxes and enter contests all day are not in a trade or business. And it explains why people like embezzlers and burglars are not in a trade or business. Each of these people may spend a lot of time all day trying to-- Speaker: But not why con men are not in a trade. Albert G. Lauber, Jr.: --I think... well, a con man, he has to be offering goods or services, and if he is selling deficient products I would say he is in a trade or business. If he is simply trying to-- Speaker: That really does not make the best of all possible worlds, even this test, right? There are still some strange things that are going to be-- Albert G. Lauber, Jr.: --There always will be strange cases, that's true, that are hard to categorize one way or the other. We think the Frankfurter formula is also useful as an administrative device because it allows whole categories of taxpayers to be classified and thereby avoiding the ad hoc and arbitrary line drawing approach that the respondents' approach would require. For example, under the approach that respondent would urge the Court would have to figure out how much time one needs to spend on gambling to make it a trade or business, and there probably are millions of people in the country who gamble, many of whom, one suspects, are not in a trade or business, and the Courts would have to draw really arbitrary lines between casual and truly dedicated gamblers. The courts might also have to draw arbitrary lines between different types of gambling activities. The respondent probably himself would agree that a retired person who lives in Las Vegas and plays slot machines eight hours a day is not in a trade or business. I think that would have to be... that would be correct. And respondent might try and distinguish between gambling like bingo and slot machines and roulette from activities like poker, horseracing, and dog racing on the theory the latter involved more skill and are not purely, purely games of chance, and that also, I think, could require difficult line drawing problems depending on how much time the gambler spent on each type of gambling. Speaker: --Where would you put numbers? Albert G. Lauber, Jr.: Where would I put? Speaker: Numbers? Oh, you don't know anything about that? Albert G. Lauber, Jr.: I don't think I know much about that. Speaker: That's gambling. Lottery. Yes, where would you put that, where somebody buys a lottery ticket for ten cents every day? Albert G. Lauber, Jr.: I think that would be like bingo. Well, our position is, all gambling, all gamblers don't qualify, and I think that clearly is on the end of pure chance. There is not much skill involved, I guess, in buying lottery tickets. It is like, you know, again like the houseperson who just enters contests and sends off jingles to cereal companies. And the problem is, because it can be good or bad to be in a trade or business, depending on the gambler's particular facts, whether he won or lost money for the year, what he is trying to deduct. Gamblers can pull all these factual levers and pulleys involving how much time they spend and what kind of gambling they are doing trying to get the best result for that. Speaker: What is the difference between sending in a bunch of jingles in a contest and sending a bunch of short stories to a magazine editor? Albert G. Lauber, Jr.: Well, again, it would depend on the amount of time and seriousness spent. If a person seriously was writing advertising copy for corporations I think that would be a trade or business, because you are offering services. Someone who just sends off jingles that get put in a bin and they spin around and pick one out would not be. That would simply be entering a contest. That would not be-- Speaker: Yes, but don't they sometimes publish the winners of those and use the jingle in their advertising? Albert G. Lauber, Jr.: --Well, maybe if you then became established as a good copywriter you could wind up later on being-- Speaker: Suppose he just wrote one story and it is published. What about one jingle that is published on some nationally advertised product and millions of people see it on television? Albert G. Lauber, Jr.: --Probably in either event just doing it once wouldn't be enough besides selling goods you have to also do it on a regular basis. Speaker: An author who writes 100 stories and only one gets published isn't engaged in a business, and a guy who writes 100 jingles and one gets... I don't understand the difference. Albert G. Lauber, Jr.: I think the difference is that the jingles have an element of entering a contest in them, and that-- Speaker: They provide a service. I think... maybe I am wrong, but it is my understanding they use these things in their advertising if they hit one that is particularly, you know, attractive to the audience. I don't know why that is any different than writing a short story. Albert G. Lauber, Jr.: --It might also be hard to show a profit motive if you are writing jingles like thousands of people. Speaker: If you did it full-time. We are assuming this is full-time activity, and it is the only way he gets any money, like this man. This one only involved $2,000 a year. Albert G. Lauber, Jr.: Well, it only involves $2,000 a year. That is absolutely right. And we had no desire to subject Mr. Groetzinger to-- Speaker: 0 xxx. Albert G. Lauber, Jr.: --Well, the reason we had to seek certiorari was because there was a circuit conflict on the question and the Commissioner couldn't simply change his position because either way he went it would be good or bad for some gamblers. We had to have a clear answer from this Court, and we tried to keep it out of the Court for a long time, and finally we couldn't avoid it any longer and here we are, and we need to have an answer. Speaker: But the Higgins case was decided in about 1940 or '41, and in all this time nobody has ever asked Congress to help you but in this problem. Is that right? I suppose they can decide some of these issues. Albert G. Lauber, Jr.: Well, Congress did help gamblers out in that it took care of the minimum tax problem that created this litigation, but I think Congress has simply decided to leave to the Courts defining this term, because it has been a judicial term for a great many years, and-- Speaker: xxx any legislation defining it? Albert G. Lauber, Jr.: --Not generally. There have been proposals to find but particular purposes. Speaker: But has the Commissioner consistently taken the position that trade or business means what you now urge it means? Albert G. Lauber, Jr.: Well, except for the first gambler case to come to the Tax Court when he argued that the gambler was in business so he could be hit with self-employment tax, that, I think, is the only departure that I am aware of from the consistent position that the Frankfurter formula is correctly part of the test for trade or business. And we took that position in the Show case which involved the research, R8D expenses in this Court, and the Department of Justice determined not to appeal that first Tax Court case where the Commissioner lost, and the Commissioner agreed with the no appeal decision. Speaker: But he never wrote any regulations on the point, either. Albert G. Lauber, Jr.: There are no regulations that define trade or business for all purposes. It may be that the reason that... the term does appear in so many different parts of the code that it may be that there is a reluctance to have a regulation define it for all purposes for fear of having something being whipsawed in some context, but it is a term the courts have tried to define, and I think that both the Commissioner and Congress have left it to the Courts to do that. Speaker: You don't mind us giving a general definition like that that will whipsaw everything? It is tough for the Tax Commissioner because he doesn't know what he is doing, but we do, so we can just come up with it. 0 [Generallaughter.] And if you don't like what comes out of here you will be-- Albert G. Lauber, Jr.: Then we can go to Congress. Speaker: --you will be over across the street right away. Albert G. Lauber, Jr.: Yes, then we get two bites of the apple that way. William H. Rehnquist: Thank you, Mr. Lauber. We will hear now from you, Mr. Baymiller. Carroll Baymiller: Mr. Chief Justice, and may it please the Court, I am a little surprised at the government when they likened the professional gambler to the investor. Anybody that says placing bets at the racetrack is an investment has another think coming because he doesn't have a chance unless he knows what he is doing, unless he studies, unless he works 60 to 80 hours a week as Bob Groetzinger does. Otherwise he has no chance. It is not an investment. Now, the difference between an investor and the active trader according to the courts is that the investor is letting his money earn a living for him. He isn't doing the earning. His investment is doing the earning. He buys stocks and bonds and he puts them in his vault and every so often he gets a check for a dividend or for interest, so he is not working. The active trader is working practically every day of his life. Now, a trader who goes to the brokerage office maybe once a week or two or three times a month and buys and sells a few stocks or commodities certainly is not in business because it isn't a frequent activity. That is one of the things that all of the courts have said, that the activity must be frequent and regular. The government says that the active trader is engaged in holding himself out to others as selling goods or services, and they justify it by saying that he is buying and selling stocks and commodities. Now, that is a joke. We all know that the active trader is gambling. He is betting that the price of a stock will go up or go down. When he buys stock he doesn't take delivery-- Speaker: Counsel, that may well be, but it doesn't matter. It seems to me that what the government is saying is, it is all right to gamble, and you can still qualify as being a trade or business, but you have to gamble on the purchase and sale of goods and services. So long as that is what you are gambling on, you are still in the realm of goods and services. You can gamble on the buying and selling of goods and services. That is what the trader does. He gambles that if he sells it a couple of years from now it is going to be... he is going to get more money than if he sells it today. It isn't the fact of gambling that makes the difference. It is what you are gambling on. The government says, so long as you are gambling on the purchase and sale of something you are still in a trade or business, whereas the person who places a bet on a dog race is not gambling on the purchase and sale of goods. Carroll Baymiller: --But, Your Honor, he is betting with every other patron at the track, the same as the active trader is buying and selling with every other active trader all over the country. Speaker: That's right, and he is pitting his wits, or if you like his luck perhaps against theirs, out what determines who wins or who loses is ultimately the purchase and sale of goods. Carroll Baymiller: I say the active trader is not buying and selling goods at all. The active trader today is betting on the rise or fall of the Dow-Jones averages. That is what the active trader does today. He buys futures. He is not buying goods at all. He goes in and he says, I will bet that the Dow-Jones average will go up too points today. If it goes up he wins. If it goes down he loses. Speaker: That may well be. I mean, ultimately when he buys a stock he is buying a share in a company, but even if you don't, look on it that way, and you simply say he is buying a piece of paper, which some people will pay more for today than they may pay for tomorrow. He is still buying or selling something. What is the bettor in a dog race buying or selling? Carroll Baymiller: He is buying part of a dog to win. Speaker: I don't see that. You can say that, but is it true? Carroll Baymiller: He is making a bet. They say that the casino operator is in business because he is offering bets to the customer. It takes two to gamble, and the man that goes into the bookmaker's office is offering to make a bet with the bookmaker. Now, it is different with the track. The government says in the reply brief that the gambler is making a contract with the track. Now, that just is not true. The track is not making bets. The track is a bookie, is a broker the same as a stockbroker. The track is merely handling the bets of everybody that goes to the window and determining how what is left is to be divided, because the track and the state take about 20 percent first. The Frankfurter test has been used to deny business status only in the gambling cases. They did not use that test to deny business status in Higgins. Justice Frankfurter was on the Higgins Court. Justice Reed concurred with Justice Frankfurter in the DuPont case and wrote the decision in Higgins and never mentioned the Frankfurter test. That test has never been mentioned by this Court since. Speaker: How about the Courts of Appeals? Carroll Baymiller: The Courts of Appeals, three circuits, three circuits have used the Frankfurter test which-- Speaker: And the Commissioner has. Carroll Baymiller: --The Commissioner has. Counsel says that the Tax Court has flip-flopped. That is not true. In one case, Gentile, they decided that the full-time gambler was not in business, and every case since that time, even in view of being reversed by the Second and Sixth Circuits, they adhered to the proposition that the full-time gambler is in business and that the Frankfurter test should not be used and should not be adopted by the courts in determining whether a full-time gambler is in business. Speaker: Well, is that the definition of trade or business that the Tax Court regularly uses in other contexts? Carroll Baymiller: I don't know that they have. Speaker: What about... how about the investor? Carroll Baymiller: The investor-- Speaker: What do they say about that? Carroll Baymiller: --They don't say that the investor... well, they follow this Court's decision about the investor. Speaker: Higgins. Carroll Baymiller: Higgins. But they do not say that Higgins was not in business because he did not offer to sell goods or services. They did not use that as the test. They said he wasn't in business because he was making investments, which is the same as all of us do, at least to some extent. We all are investors, even if we do nothing more than put a $5 bill in a savings account every week. That is what this Court held, but they didn't do so because in Higgins the man did not offer to sell goods and services. Now, there are many, many other situations that we have cited in our brief where the courts have held a person to be in business where he didn't offer to sell anything. Take for instance the tennis pro and the golf pro. The government says that he is offering... he is selling entertainment. That may be true for the McEnroes and the Lendis and the Nicklauses and those people, but I am talking about what may be termed the cannon fodder that go to these tournaments week after week, pay their own expenses, pay an entry fee to get in. They aren't paid anything to come there. Pay an entry fee to get in. And if they win a match they win some money. Now, what have they sold or what are they offering to sell? There can't be any question but what they are in business. We have cases, there are cases in the Circuit Courts, some of them even in the Second and Sixth. Here is a man who decides to be an inventor, and he works on it day in and day out, never gets anything invented, never sells a thing, but the Court said that he was in business. Here is a lawyer who spent-- Speaker: Of course, he has to get income, doesn't he, before he can deduct any of it, so an inventor who never sells a thing isn't going to have any income tax problems. Carroll Baymiller: --He could still be subject to minimum tax. Speaker: I guess in this case, Mr. Baymiller, the tax is imposed on a gross loss, not income at all. Carroll Baymiller: That is absolutely true. Absolutely true. Here is a case that the Tax Court recently decided. I don't know whether it is on appeal or not, it hasn't reached the appellate division yet, a fellow by the name of Meridith, he bet $294,000 in one year and lost $310,000 That is a $16,000 loss for the year. And the government assessed him a minimum tax of over $16,000. So that he had an economic loss for the year of $32,000 and paid a tremendous amount of tax to the State of Colorado and commissions to the track so that we say that the active gambler, the professional gambler does not get for himself equal protection of the law. The law says that the casino operator can... is in business. Why isn't the man on the other side of the fence in business? Now, a district judge out in Reno-- Speaker: Mr. Baymiller, how can you... can we agree with you and stand by Higgins? Let's talk about the investor as opposed to the trader, a person who has extensive investments and really spends his whole day managing those investments full-time. He does nothing but look over this investment and see if this company is indeed still worth investing in, what are its prospects over the next five years, and so forth and so on, full-time occupation. Why isn't that as much a trade or business as gambling if we agree with you that you don't have to be engaged in the business of buying or selling goods or services? Carroll Baymiller: --I think it is. I personally think that the full-time investor is in business, and Congress apparently has thought so, too, because-- Speaker: Well, I agree with you. It seems to me that to agree with you we have to disagree with Higgins. Carroll Baymiller: --Higgins... but Higgins did lay down the rule that you examine all of the facts and circumstances surrounding a person's activity to decide whether he is in business. Speaker: If you call that a rule. Carroll Baymiller: Well, it is the best we have. It is what this Court has said in the past. Speaker: It is not a rule. It is a throwing up of the hands, isn't it, essentially? Carroll Baymiller: That probably is true. That probably is true but it is like courts have said many times. We can't define obscenity or pornography but we know it when we see it. And I think that is exactly what the courts should say. We know when a man is in business and when he isn't in business. Now, the full-time gambler is in business-- Speaker: The problem with that is that there are 600 district judges in the country and they may not know when we know when he is in business. 0 [Generallaughter.] Carroll Baymiller: --I agree with that, but you just can't... I don't think you can have a very specific limiting definition of when a person is in business. Justice Frankfurter, if he were here today, I am sure that he wouldn't say that a full-time gambler is not in business. At the time he laid down this rule we knew nothing about partmutuel gambling. Speaker: How long have gambling losses been deduction, or are they, for the purposes of the federal income tax? Carroll Baymiller: They are deductible only to the extent of winnings, specifically. Speaker: Well, historically, for a long time they weren't deductible at all, were they? Carroll Baymiller: I think they have been. Speaker: Always? Carroll Baymiller: I think so. Speaker: But just not against... just not against other income? Carroll Baymiller: That's right. Speaker: But if a gambler loses every bet he ever places he is not going to have a minimum tax. Carroll Baymiller: That is true. That is true, because... well, he-- Speaker: You have got to-- Carroll Baymiller: --He will soon be out of business. Speaker: --Yes. Well, so will the inventor who never sells an invention. Carroll Baymiller: And about... we had the author. Here is the author, who spends hours and hours gathering material and writing a book. Never gets it published, never sells a thing, never offers to sell a thing, but the courts have held he is in business. Speaker: But it doesn't do... I don't see how it does him any good to be in business if he never gets any income. Carroll Baymiller: He deducted... he is not the same as gambler where his deductions are limited to his winnings. Speaker: But what does he deduct it from? Carroll Baymiller: Well, in the particular case that I refer to the man was a lawyer. And he spent 30 hours a week working on a book, taking pictures and gathering materials to publish a book. Speaker: So he claimed he was in business for writing a book at the same time he was a lawyer? Carroll Baymiller: Yes, and the Court held he was. Speaker: Oh, is that right? Carroll Baymiller: The Court absolutely held he was, even though... and what did they say? How did they justify it? They said-- Speaker: Which court was this? Carroll Baymiller: --Pardon me? Speaker: Which court was this, one of the 600 judges? 0 [Generallaughter.] Carroll Baymiller: I think I can find it, Your Honor. Speaker: Well, that is all right. Was it a Court of Appeals? Carroll Baymiller: Yes, it was a Court of Appeals. I think it was either the Second Sixth, which didn't follow that same reasoning when they got to the gambling cases. Speaker: I don't know how they could have done that if they simply took account of the simple rule to take all the facts and circumstances into account. 0 [Generallaughter.] Carroll Baymiller: They said that he worked at it, that he hoped to make a profit some day, but not during the tax year in question, but they said he worked 30 hours a week gathering materials for a book that he hoped to write. And the Court said, well, he is in business. He went to see some publishers to try to get it published but he never offered, he never had anything to offer for sale. That is the reason I say that Justice Frankfurter's test does just not stand up, and if he were here today I am sure he would not say that the full-time gambler was not in business. Speaker: 0 xxx. You have mentioned it ten times. Why waste my listening to hear that over and over again? Carroll Baymiller: I am sorry, Your honor. Speaker: That if he were here he would do this? Mr. Baymiller, this certainly has no bearing on the case, but out of curiosity is Mr. Groetzinger still in full-time gambling? Carroll Baymiller: Yes, he is. In fact, he is missing the day at what he calls his office this day. If there are no other questions, thank you. William H. Rehnquist: Thank you, Mr. Baymiller. Mr. Lauber, do you have anything more? Albert G. Lauber, Jr.: I might make one point in response to your questions, Mr. Chief Justice. It is possible, the courts have held, for a person to be in more than one trade or business at a time, and what often has happened is, people have tried to use a hobby loss like raising horses or operating a winery on the side as in effect a tax shelter to shelter their professional salary income by using the losses from the second supposed business to deduct against income from the first. Speaker: Mr. Lauber, it is clear from the code that something can be a profit-making activity but not be a trade or business. Albert G. Lauber, Jr.: Absolutely. Speaker: It is very clear that you have to draw some distinction between those two. Albert G. Lauber, Jr.: The depreciation-- Speaker: But is it necessary to draw a... wouldn't it be enough to support that distinction simply to say that it has to be a profit-making activity that you engage in regularly as opposed to an isolated piece of profit? Would that suffice to make the code distinctions make sense? Albert G. Lauber, Jr.: --It still would not explain Higgins though. Speaker: No, it wouldn't explain... well, that's true. Albert G. Lauber, Jr.: He was doing it very regularly. William H. Rehnquist: Thank you, Mr. Lauber. The case is submitted.

William H. Rehnquist: We'll hear next in argument No. 89-1647, Carnival Cruise Lines, Inc., v. Eulala Shute. Mr. Willard? Richard K. Willard: Mr. Chief Justice, and may it please the Court: The first question in this case is whether a State long arm statute constitutionally can reach a nonresident defendant in a case involving an out-of-state accident based on the defendant's advertising and promotional activities within the State. Now this is not a general jurisdiction case. Both courts below found that Carnival had not engaged in the kind of continuous and systematic contacts with the State of Washington that would support an assertion of general jurisdiction, and the plaintiff has not chosen to raise that issue before this Court. Antonin Scalia: Mr. Willard, you say this question you're about to discuss is the first question in the case. Is it necessarily the first? Would we ever have to resolve this if we resolve the other one preliminarily? Richard K. Willard: Each question, Justice Scalia, is independent and the Court could certainly resolve the case in our favor by deciding the second issue, the second question presented-- Antonin Scalia: And this one's a constitutional question, isn't it? Richard K. Willard: --That is correct. Antonin Scalia: And the other one is not. Richard K. Willard: And the other one is not a constitutional question. Antonin Scalia: We'd normally do the other one first then, wouldn't we? Richard K. Willard: The Court has certainly indicated that that is appropriate. I would propose, if the Court pleases, to go ahead with the first question presented, although I understand that they're both independent issues. Antonin Scalia: Please do so. Richard K. Willard: The court of appeals, although it rejected generalist jurisdiction, found specific jurisdiction, because it said there was a sufficient nexus in this case between the Carnival's advertising activities in the State of Washington and the resulting... and the ultimate accident. They applied a test of but for causation. The court said that but for Carnival's advertising and promotional activities, Mrs. Shute would not have gone on this cruise and but for going on the cruise, of course, she would not have been injured. We submit that this connection is too tenuous to support the assertion of jurisdiction. And we recognize the State of Washington has an interest in providing a forum for its residents who may want to pursue claims for injuries they have suffered while traveling out of State. But this Court has never held that that kind of interest is sufficient to support an assertion of jurisdiction over a nonresident defendant. No matter how strong the State's interest in providing a convenient forum for its plaintiffs to pursue claims, those claims still must arise out of or relate to contacts with the forum State by the defendant in order to support an assertion of long arm jurisdiction. This Court has been mindful of the territorial limits on State power in connection with the assertion of personal jurisdiction, and those territorial contacts here are pretty close to their nadir. Here we have a nonresident corporation that does not have continuous and systematic contacts in a case involving acts of negligence which occurred out-of-state and which caused injury out-of-state. Thus, this case is readily distinguishable for situations where a defendant, for example, may send a libellous publications into a State or may send a defective product into a State where it causes injury. In this case, all of the acts on which liability is based and all of the injuries that support the claim for damages occurred out-of-state. The sole contact of the defendant with the State involved the advertising and promotional activities and the relationship between these activities and the allegations of negligence and failing to maintain a safe passageway through the galley are so slight as to create really a virtual fiction. This case is many ways like the case of Kulko against Superior Court. In that case, as the Court recalled, you rejected an assertion of jurisdiction in a case where, admittedly, the marriage of the parties had originated in California during a brief visit, but thereafter they moved to New York. Later, the wife moved back to California and the Court held that California could not assert long arm jurisdiction over the husband, who had remained in New York. Now it could be said that the marriage in that case was a but for cause of the subsequent lawsuit to establish a divorce decree, since but for a marriage you do not have a divorce. But the Court did not devote much attention and found it unnecessary even to seriously consider the thought that the prior marriage in California, even though that sort of a but for cause could form the basis for the establishment of long arm jurisdiction over the husband in a lawsuit involving, among other things, child support and establishment of the marriage decree. So, for those reasons, we would submit that the contacts here were too tenuous and unrelated to the cause of action to support an assertion of personal jurisdiction. Anthony M. Kennedy: The complaint alleges negligence, does it not? I'm not sure that that's necessary for the cause of action, but the complaint alleged negligence. If the plaintiff here were... had shown that she relied on the advertising to find the safe and reliable ship line, could you say that there's some connection between the negligence cause of action and the advertising that she saw? I recognize that those aren't shown in the case, but just to test whether or not it's arising out of or related to. Richard K. Willard: Well, certainly, Justice Kennedy, if she were to sue on the basis of fraudulent or false advertising, that would be like the Keeton case in which the contact with the forum gave rise to the cause of action, because the advertising itself would cause the injury. In your hypothetical, though, the advertising would not be a necessary part of the cause of action. She might allege that the advertising promised a safe ship. But of course she could sue for negligence whether the advertising promised a safe ship or not. Anthony M. Kennedy: Well, but the context... do the context have to be necessary to the cause of action under your test? It has to be related to I thought our cases say. Richard K. Willard: In our view it has to have a substantive relationship. That is, it should relate to the substance of the cause of action and not just a sort of a narrative relationship in which it's something that is part of the story that's told. And so, although she could have drafted her complaint in a way that might have indicated that the advertising somehow contained a promise of a safe ship, unless she were actually suing for a breach of warranty or something like that, it would be necessary to a cause of action for negligence. Antonin Scalia: Mr. Willard, what if you... I understood your brief to suggest that the outcome here would be different if the cause of action had been for breach of contract. Suppose they'd simply claimed that there was a warranty of safety implicit in the undertaking so that instead of suing in tort, they are suing in assumpsit. Richard K. Willard: Well, that would be certainly a stronger case for the assertion of specific jurisdiction where the act took place in the forum. And in our view, however, this is not an issue that could be resolved simply by clever pleading. In other words, simply putting a paragraph in the complaint that talked about the advertising as somehow containing an implied representation would not be enough unless it were actually a lawsuit based on that theory. In our view, there's no basis for asserting that kind of theory in this case. John Paul Stevens: May I ask this? This accident took place in international waters, as I understand it. So is it correct that under your view of the proper causation, the only places in the United States where the defendant could be use would be where general jurisdiction would be available? Richard K. Willard: That would be our general view, although it's certainly possible that there would be a situation where some act of negligence in another case would have taken place... correct. John Paul Stevens: No, I'm talking about this case, where the act of negligence allegedly was she slipped in what she... visiting part of the ship, as I remember. Richard K. Willard: That's correct, Justice Stevens. John Paul Stevens: So that even if the ship had docked in Seattle but still not often enough to support general jurisdiction, but she had gotten on board the ship and sailed, and so that still would not justify it then? Richard K. Willard: That would be our position here, because there's no allegation of an act of negligence on the land portion of the journey. John Paul Stevens: Right. Richard K. Willard: The allegation is that water was spilled on the galley during the cruise, and so all of the acts occurred outside of any State. William H. Rehnquist: Well, didn't the cruise ship operate out of Los Angeles though? I mean, might there not have been sufficient jurisdiction in the superior court of Los Angeles County or the central district of California? Richard K. Willard: Our view is, Mr. Chief Justice, there would not be, although there would certainly be a stronger tie there. But in our view where the... all of the acts of negligence occur out of State and all of the injury occurs out of State, that the mere fact that the cruise began and ended in the State would not be enough. Byron R. White: Well, where could the plaintiff sue? Richard K. Willard: Well, it could sue-- Byron R. White: Anywhere? Nowhere? Richard K. Willard: --The plaintiff could sue anywhere where she could obtain general jurisdiction over the-- Byron R. White: Well, where is that, for example? Richard K. Willard: --In this case, it's Florida which is where Carnival has its principal place of business and also where, in the forum selection clause in the ticket, it is implicitly consented to jurisdiction. Byron R. White: For the purposes of our analysis and yours on this part of the case, would it make any difference if she could not have sued in Florida, if she would have had to go to a foreign country? Or is the analysis the same? Richard K. Willard: In our view the analysis is the same. The... Congress has never provided a special rule of service for foreign defendants in this kind of a case, and so as long as Rule 4(e) provides that the State long arm statute is the basis for service of process, this Court's decision in the Omni case indicates that that would be the form of analysis. We certainly don't suggest Congress is constitutionally required to adopt that, and it could if it chose adopt a special rule for service of foreign defendants. But it has not done so in this situation. I had indicated that there is one place for sure where Carnival could be sued, and that is Florida. And that's because it has its principal place of business there, and as the second issue in the case indicates, there is a provision in the passenger ticket requiring litigation to take place in the State of Florida. Now the Ninth Circuit and the respondents in this case make two arguments as to why this clause should be not enforced. The first argument is a very broad one, which apparently is that ticket conditions of this nature are never enforceable, because passenger tickets are preprinted. They're contracts of adhesion. They're offered on a take-it-or-leave-it basis. And then their second argument is that even if this kind of a clause is sometimes enforceable, here in this particular case it's so unreasonable and burdensome that it should not be enforced. Antonin Scalia: Mr. Willard, before you get into those two arguments, is it clear to you and should it be clear to us that this is a question of purely Federal law and it doesn't matter how the State of Washington would have treated this forum selection clause? Richard K. Willard: Yes, Your Honor. This Court has regarded this issue as one of Federal admiralty law, and I see no-- Antonin Scalia: When did we do that? Richard K. Willard: --Well, The Majestic, which of course, predated Erie was a decision on a passenger ticket condition. Antonin Scalia: What about post-Erie? Do you know a case where the point was argued where we've decided that? Richard K. Willard: I don't believe this... well, under Bremen, the Court viewed that-- Antonin Scalia: It wasn't argued. Richard K. Willard: --If it wasn't argued in the Bremen, then this Court hasn't decided it. But I don't see any reason why it should be a doubtful proposition when you're dealing with a question within the Court's admiralty and maritime jurisdiction. Almost every other aspect of admiralty law is viewed as Federal law, and in fact the Court did indicate in the Bremen the importance of having uniform Federal law for admiralty and that certainly was one of the reasons the Constitution made that an item of Federal jurisdiction. Sandra Day O'Connor: Even if the agreement is entered into within a particular State where jurisdiction is asserted? Richard K. Willard: Yes, Justice O'Connor, that's our position. Is it still a question of Federal Admiralty law, and I think... I'm not aware of any line of cases that would indicate that that would be questionable. Antonin Scalia: So you'd say Washington has to follow us. You'd still achieve uniformity, but instead of our following the State of Washington, the State of Washington, had this suit been brought in State courts, would have to follow our view of the effectiveness of the forum selection clause. Richard K. Willard: Well, that raises a slightly different question as to whether a suit brought under the Savings to Suitors Clause in State court, whether the state court would be required to apply Federal admiralty law. I think there are a couple of decisions from the early part of the 20th century that indicate that that would be the case. And that's generally thought to be true, but again that's not specifically prevented... presented here. I think the better view would be that the State court would be required to follow Federal law on the enforceability of a forum selection clause in that kind of a suit. Sandra Day O'Connor: Is that somewhat at odds with the Erie principle? Richard K. Willard: In our view it's not at all at odds with the Erie principle, because this falls in the area of admiralty and maritime law where there is a very strong need which the framers of the Constitution recognized to have a uniform body of law. It certainly would be strange to think that the States would be empowered to make up their own rules of admiralty law and very burdensome to the orderly conduct of maritime business to have different States having different laws that would apply here. The... with regard to the broader issue of whether, as a matter of Federal Admiralty law, this kind of provision should ever be enforced, there's a longstanding body of case law that holds that ticket conditions are valid if they're reasonably communicated. And in this case the respondents do not challenge that these conditions were reasonably communicated within the meaning of that body of law. Their argument is, instead, that they just should never be enforced. In this regard, there is a statute, the Limited Liability Act, that regulates but does not outlaw ticket provisions in steamship passenger tickets. The law says the ticket condition of this nature cannot-- William H. Rehnquist: This is a Federal statute? Richard K. Willard: --Yes, Mr. Chief Justice. The Limited Liability Acts, sections 183(b) and (c) which is cited in the briefs, provides that ticket conditions cannot disclaim liability for negligence. They can't require arbitration. They can't require less than 6 months' notice, and they can't require a lawsuit to be filed in less than a year. But they do not say you can't have a forum selection clause in a ticket. In our view, when Congress chose in this particular area to regulate ticket conditions to a certain extent, but chose not to prohibit forum selection clauses, this Court should not go further and on its own outlaw forum selection clauses, or for that matter, particularly on a theory that ticket conditions are products of contracts of adhesion. To the fallback argument in this case that petitioners make is that even if forum selection clauses are generally all right, that Florida is an unreasonable and burdensome forum in this case. But their argument here really confuses what would be a proper forum, non conveniens-type analysis with the question of whether or not the contractual forum choice should be enforced. The question here is not is Florida the most reasonable forum, but is the... Florida such an unreasonable forum that the contractual choice should be disregarded. In our view, however, even if the question were what is the most reasonable forum, the answer would be Florida. In fact, if Carnival were to designate in all of its tickets that all lawsuits had to be litigated in the State of Washington, that would be far more unreasonable than what we have here. Florida is where Carnival has its principal place of business. Its... most of its ships arrive and depart at one time or another from Florida. The headquarters, the books, records, and other information is available. Antonin Scalia: Well, it will be the most reasonable if you have to pick one place, but it could have designated on all its... you know on its tickets that all suits brought by citizens of Washington shall be brought in Washington. You're insisting on one forum for everything. Maybe that's unreasonable. Richard K. Willard: Well, one reason why it is reasonable to have a single forum is that the time a cruise occurs it's difficult to know where all of the witnesses in evidence will be months or years later when a lawsuit occurs. For example, the respondents seems to suggest that if the designated forum had been the place where the ship departed and returned, that would have been more reasonable, by analogy to the Hodes case which designated Naples. John Paul Stevens: But doesn't that indicate Miami as unreasonable? To assume all suits should be brought in Miami. Richard K. Willard: Well, the reason-- John Paul Stevens: You suggest that you don't know where the witnesses will be. Richard K. Willard: --That's correct and so Miami is chosen, because that's where the company is headquartered. And so that is more likely to be a forum where at least some documents, some witnesses will be available. The company's records are there. Its ships frequently land and take off there, so employees of the shipping line may be thought to be more readily available there than they would be somewhere else. But back to the question, if I may, of whether it's reasonable to select one forum rather than saying every passenger can bring a lawsuit in their own home city. Many situations can arise in which an incident involves passengers from all over the country. Carnival carries hundreds of thousands of passengers from all of the states and many foreign countries. And if each of them could go home and file a lawsuit about an injury, there would be a litigation on these conditions all over the country, maybe arising out of the same incident. We cite the California... the Williams litigation in California in our briefs. And that case, which Carnival has sought a stay from this Court and announced an intention to file a petition for certiorari, involves this same forum selection issue. There, over 200 passengers from a number of different States filed a lawsuit claiming to have been injured in an incident of rough passage on the same cruise from Los Angeles to Puerto Vallarto. Now, if all of them could go home and litigate the same issue in different State courts or Federal courts, that would be very inefficient and burdensome. And so by designating a signal forum in the passenger ticket, Carnival's designation serves the interest of judicial efficiency as well as reducing its costs by providing that all the litigation should take place in one place. John Paul Stevens: Don't the Federal rules have some kind of provision for consolidating all these cases when you have a large accident like this? Richard K. Willard: That's certainly true if they file in Federal court, Justice Stevens, but under the Savings to Suitors Clause, they can file in State court. And-- John Paul Stevens: Can't you remove? Richard K. Willard: --If there is not complete diversity, you cannot remove. But it was-- John Paul Stevens: But you're talking about individual suits by 200 different plaintiffs, and each one of those, I suppose, there would be complete diversity? Richard K. Willard: --Well, it depends on who else they name. In the California case I was just mentioning that we cited in our briefs, they named some in-state defendants as well-- John Paul Stevens: I see. Richard K. Willard: --in order... and some John Doe defendants under State practice in order to defeat diversity and prevent removal. So there would be some cases where that could happen. So, in summary, our view is that it makes sense in a situation where a cruise line operates with passengers from all different States as well as different countries to designate in the ticket a single forum. And certainly if a single forum had to be designated, Florida is the most reasonable forum that could have been selected in this case. And therefore, it's our position that the clause should be enforced. Unless the Court has further questions, I would reserve the balance of my time for rebuttal. William H. Rehnquist: Thank you, Mr. Willard. Mr. Wall, we'll hear now from you. Gregory J. Wall: Mr. Chief Justice, and may it please the Court: This is a case brought in admiralty in the western district of Washington dealing with an injury to a Washington resident which occurred in international waters. The question for this Court is whether that case can be brought where the plaintiff purchased her tickets, where she resides, where the witnesses mainly reside, or will she have to travel 3,000 miles to probably the farthest point in the continental United States from where she resides to try this case and to do so in a State where there are no witnesses which are relevant to this lawsuit and which, in effect, have very little to do with this lawsuit. The petitioner has taken the position, both in oral argument and in its brief, that due process only allows it to be sued where its corporate headquarters are currently located which is in Miami, Florida. We take the position that due process, based upon their contacts with the State of Washington, allow them to be sued in Washington. And the forum selection clause I will address a little bit later, but we take the position that it essentially shouldn't be enforced in this case, because it is unreasonable under the facts of this case. Counsel's correct that the contacts with the State of Washington are primarily promotional and advertising in nature. However, many of these... some of these promotions took place in the State of Washington... these seminars for travel agents. He left, however, the very important ones which are the sales of these tickets in the State of Washington which occur there, and in addition, the purchasing of travel agents' services, essentially, by paying a commission. These are significant contacts, and they are systematic and they are continuous. While the Ninth Circuit did not feel they were sufficient for the exertion of general jurisdiction, we've never taken that position. But in any case, we feel that a specific jurisdiction is warranted here. This case has already been to the Ninth Circuit and the Ninth Circuit, because of a question... because State laws play such a large part in jurisdictional questions involving the Long Arm Act, certified a question to the Washington Supreme Court which specifically asked them if the long arm statute would encompass this case if the conduct of the petitioner was sufficient in order to invoke long arm jurisdiction. Specifically, does this accident arise out of their contacts with the State? In a unanimous decision, the Washington Supreme Court decided that as a matter of State law-- Byron R. White: Do you agree that the accident must be said to have arisen out of the acts of the defendant in the State? Gregory J. Wall: --Yes, Your Honor. If we are relying on specific jurisdiction, it has to arise out of-- Byron R. White: Well, that's all you're relying on, isn't it? Gregory J. Wall: --That's the Ninth Circuit decision. Yes, Your Honor, and that is what we're relying on in this case. And it does... according... that is a matter of State law, since it-- Anthony M. Kennedy: Now, did you argue general jurisdiction at any point? Gregory J. Wall: --We did in the Ninth Circuit, Your Honor, and the Ninth Circuit disagreed with us. They felt that there were enough contacts here for the exercise of specific jurisdiction but that we did not meet the threshold necessary for general jurisdiction. The-- Byron R. White: Mr.-- --The act out of which this accident you say arose was the sale of tickets? Gregory J. Wall: --It arose out of the minimum contacts of the defendants with the State of Washington, one of which was the sale of tickets. Byron R. White: The solicitation in Washington and the sale of the ticket to this person? Gregory J. Wall: That's correct, Your Honor. Antonin Scalia: Mr. Wall, I thought as far... maybe I got my facts mixed up... but I thought as far as Carnival Cruise Lines is concerned, the sale took place in Florida. But your client bought it... bought the ticket from a travel agent, but the travel... but the sale by Carnival Lines was made in Florida. Am I wrong about that or is that right? Gregory J. Wall: I suppose it's a matter of one's view, Justice Scalia. One is... my client paid her money to a travel agent and received her money... received her ticket from the same travel agent, who was an agent paid a commission by Carnival. Carnival's assertion is that, because the ticket is printed in Miami and that it is... the money is eventually received in Miami, that the sale took place there. Our contention is is that's a rather illogical way of looking at it, because cars are made in Detroit and the money finally... usually winds up there, too, but that doesn't mean the sale occurs there. It occurs where you pay your money and where you receive the product. And in this case my client paid her money in Washington and received the ticket in Washington from the agent of the defendants. And so we contend that the sale and numerous sales... other sales take place in Washington. And I should point out the travel agent in this case was specifically trained by Carnival at seminars in the State. Antonin Scalia: Well, it's clear that her purchase occurred in Washington. It may not be clear that Carnival's sale occurred in Washington. I mean, I don't know what the arrangements were. Maybe the travel agent stood liable for the money. I mean, the travel agent may buy and resell these things. I don't know what the arrangement is. Gregory J. Wall: According to her affidavit, which is in the respondents' appendix, she forwards the money to Carnival. They forward the ticket to her. She gives it to my client. At least from the consumer standpoint, the sale took place in the State of Washington. And I think the fact that they are receiving money from citizens of the State and that they are providing a product or a service, depending on how it's related, certainly shows a business or a commercial presence in the State of Washington in addition to advertising. And we've never taken the position that the advertising alone is sufficient. Byron R. White: Well, how did they advertise? Just through magazines, national magazines, or did they have specific advertisements on radio, or television, or in newspapers or-- Gregory J. Wall: The petitioner advertises both in the national media, Your Honor, and also in the local media. Byron R. White: --In newspapers? Gregory J. Wall: In newspapers, magazines, as well as providing brochures, and in fact, then... the record indicates that they regularly run large ads in the largest newspapers in the State of Washington. Byron R. White: Travel agents have their brochures? Gregory J. Wall: That's correct. And the travel agent in this case attended seminars in the State where she was provided with brochures and essentially trained by Carnival to sell their product, and those were conducted inside our State of Washington. Byron R. White: Do you know exactly how this particular purchase took place? Did your client want to go on a trip and come to the travel agent and say, what have... have you got any suggestions? Gregory J. Wall: That is precisely how it occurred and the record would... has her affidavit. Harry A. Blackmun: And has the travel agent suggested this? Gregory J. Wall: That's... the affidavit of Mrs. Shute is part of the record and she says she went to the travel agent. She had never been on a cruise before. She discussed with the agent-- Byron R. White: So she didn't see any of these advertisements in this... she just... the whole thing happened with the travel agent? Gregory J. Wall: --The travel agent is certainly the largest part of it. And I don't know whether she saw the ads in the newspapers or not, quite frankly. William H. Rehnquist: Does her affidavit indicate that she did? Gregory J. Wall: No, Your Honor, it does not. It indicates that her principal source of information was the agent itself. In any case, much is made by petitioner on the question of whether we should... "but for" should be adopted as the Ninth Circuit and two other circuits have adopted it, the Fifth and the Sixth, I believe. But it's our position in this case that that question, whether this arises out of the activity of Carnival in Washington State, is a question of State law based upon Civil Rule 4(e). And the only question really before this Court is whether that interpretation of Washington State law violates due process. This Court's earlier decisions have shown that... particularly the Burger King v. Rudzewicz case... have said that once a substantial connection with the State is established, once we show that they have substantial minimum contacts, and we establish that this arises out of the accident, then it becomes a substantial... the burden is upon the petitioner, the person resisting jurisdiction to come up with the evidence to show that there... this is not... this is a substantial burden or unreasonable burden upon them in the area of jurisdiction. Byron R. White: Burger King was a contract case, wasn't it? Gregory J. Wall: It was a contract case, Your Honor, in which the... in fact it was a contract case in which a choice of law section was imposed. However, the Keeton case is also one in which substantial contracts, once established, puts the burden upon the person who's contesting jurisdiction in order to show that it is unreasonable as applied to them. Sandra Day O'Connor: Well, if the forum selection clause is enforceable, it doesn't matter whether there was special jurisdiction. Gregory J. Wall: If the forum selection clause is enforceable, Your Honor, you're correct. We're going to Florida. And so it really doesn't matter if Washington has jurisdiction or not. I plan to address that as the second portion of my argument, but I can address it now if the Court desires. But with the Court's indulgence, I will discuss the last part of my jurisdictional argument. The Burger King case talks about the proximal relation between the action itself and the contacts with the State. Proximal generally means but for, at least the jury instruction we give people in Washington does. And we've taken the position that commercial reality in light of modern commercial practices have to be considered when you look at in personam jurisdiction. This is not a case in 1940 or 1949 when International Shoe was decided. This is a case now. And with the modern state of telecommunications and computers and communications is not necessary for Carnival to have an office in our State, to have an exclusive agent in our State, or to physically even be in our State in order to do a substantial amount of business. Consumers who deal with people who are doing a substantial amount of business in the State expect that they should be able to use the court system with these particular businesses. Businesses which are doing a substantial amount of business in the State should reasonably expect that they will be hauled into court if there is something arising out of their activities. That's our position in this case in a nut shell is that people... if Carnival comes to Washington to do business, sells its product... and it is really a product... and pays commissions to travel agents and induces people there to take voyages on their vessels, then it should also be willing to stay in Washington and to let the Washington courts operate in particularly this case of Federal-- Antonin Scalia: But that's general jurisdiction... I mean it sounds like general jurisdiction you're talking about. You say induces people in general, therefore they ought to be liable. You didn't say induce this person, because we really don't know whether this person was induced by the advertising. Gregory J. Wall: --Well, we know she was induced by a travel agent who provided with the advertisements, Your Honor. And so I think their efforts obviously are related to this. This is... Shute didn't get the idea to go on their... this particular cruise line by herself. She was shown that by a travel agent who was trained and had emotional materials available from Carnival Cruise Lines. Byron R. White: So you say at least it says specific jurisdiction? Gregory J. Wall: It is at least specific jurisdiction, because it arises out of their contacts with the State. Now the argument is made that the "but for" analysis that has been applied by the Ninth Circuit and by the State of Washington, essentially is open ended. And we would say that it is not open ended, because in most of the examples given, particularly in petitioner's brief, they leave out the first step of the "but for" test, which is there must be substantial business contacts with the State. In this case there are substantial business contacts with the State. John Paul Stevens: Why do you... why do you say there must be substantial business contact? The Washington statute doesn't say that, as I read it. It says there must be some act or some transaction in the forum State and then they say they... actually they say that in the second part, either arise from or be connected with the action. Gregory J. Wall: Correct. John Paul Stevens: But where do you get the requirement of a substantial business in the State? Gregory J. Wall: Because the Court... this Court's decisions in the area of due process have said that you must have some substantial business connection. The Burger King case in particular uses that language. It says there must be a substantial relationship between the defendant and the State, even for specific jurisdiction. The Washington statute does say the transaction of business is one of the enumerated-- John Paul Stevens: Yes. Gregory J. Wall: --things that operate the long arm statute, but then it also says it must arise out of the transaction of business. Antonin Scalia: What if this company had never sent any other advertising into the State... in fact didn't even send in this advertising. But this travel agent happened to be in Florida and picked up this brochure from Carnival Cruise Lines, takes it back to the State. However, shows that brochure in the State of Washington to this plaintiff. You think that would not be enough then? Because that's certainly not a substantial business contact. Gregory J. Wall: No, and I would agree that it is not enough. I think in that case that's a random and a fortuitous sort of connection with the State, much as if a relative of Mrs. Shute had mailed her a brochure from Florida. In that case, there would not be jurisdiction. It would be unreasonable to ask a corporation which is not doing business in the State to be hauled into court there. And in this case... if that hypothetical were the case, or if... in fact if all they had done was advertising on a national media, we would take the... we would not be taking the position that there was-- John Paul Stevens: Well, I wonder if you mean that. Supposing that the travel agent is a full-time employee, for the moment, that came to Washington to deliver the ticket or something, and while delivering it, the person picked up a ride and they got in an automobile accident together to the negligence of the agent. Couldn't you sue the parent? Could you sue the corporation there? Gregory J. Wall: --We would sue the corporation if she were in the course of her employment. John Paul Stevens: Yes, I'm assuming she is. Gregory J. Wall: But probably not under this particular statute. It would be because the accident occurred in the State of Washington, which is another portion of the long arm statute. John Paul Stevens: I see. But suppose... all right. But I was thinking... well, say they drove across into Oregon. He picked... I don't know. That's too hypothetical. Gregory J. Wall: Yes, I understand the Court's position. If it was a transitory-type of presence. For instance, if the president or the resident agent of Carnival Cruise Lines happened to be at Sea Tack Airport and I happen to be there with a summons in my hand, in that case, yes, I think there would be jurisdiction based upon the court's decisions in that area. But in this case, I think the key factor is is that they're actually doing business in our State and there is a large scale... fairly large scale commercial presence. The last factor I'd like to talk about... the substantive relevance is a term that's used often in there in their particular argument. It's a term essentially that has no place in the cases of this Court as far as I can tell. Rather than giving a certain amount of judicial economy, I think... and our position is is that in effect it gives the defendants another tool and another fact-specific type of thing to argue with the courts about. And if it's adopted, it essentially is going to limit long arm jurisdiction in cases like this to contract cases, and I think that's not the intention of the long arm statute or of the Court's prior decisions. John Paul Stevens: Mr. Wall, can I review my ignorance in a question to you? I know it's fairly common in State court decisions, but have we ever had any opinions in which we discussed the two categories, specific versus general jurisdiction? Gregory J. Wall: Helicopteros discusses it. John Paul Stevens: Helicopteros does it. Gregory J. Wall: Particularly, Justice Brennan's dissent discusses it, and it is discussed to some extent in the Burger King case, too, I believe, Your Honor. John Paul Stevens: It seems to me that you're kind of asking for sort of a middle type... and I'm not saying it's an impermissible argument, but it's not the classic specific jurisdiction case, and it's not the classic general jurisdiction case either. Gregory J. Wall: We've... in our brief we've talked about a sliding scale-- John Paul Stevens: Right. Gregory J. Wall: --whereas if they have a lot of activity but it's not quite enough for general jurisdiction, then perhaps it should be a somewhat more liberal arising out of-- John Paul Stevens: Does this sliding scale notion originate in that same law review note that the Washington Supreme Court relied on or is that-- Gregory J. Wall: --I don't know exactly what they relied upon, Your Honor, but I suspect that it may come from that, yes. John Paul Stevens: --They say the whole thing started in some Georgetown student's law review note as I remember it. Gregory J. Wall: It could be, but I think they looked at it in this case in the sense that if you're really there doing business, there's no requirement in any case I know of that says that the type of contact and the type of injury have to be identical, which is what the petitioner is arguing here. And we think that's unreasonable to a large degree. Thurgood Marshall: Is there anything in the record about the contract between the agent and the... and the line? Gregory J. Wall: Only that it is acknowledged by the petitioner that they pay a 10 percent commission on all sales. Thurgood Marshall: But there's no responsibility or anything on the record? Gregory J. Wall: There's nothing to that extent, Justice Marshall, other than the commission and the fact that they are not the exclusive agent. There are other agents in Washington also. The... if I can I would like to move on to the forum selection clause, with the Court's indulgence. I should point out that there are several ways that we feel this clause can be invalidated in this case. It's not our position that-- Sandra Day O'Connor: Well, what law governs do you think? Gregory J. Wall: --Justice O'Connor, that is a question which occurred to me when it was asked by I believe Justice Stevens here or Justice Scalia. The... ordinarily passage contracts are matters of admiralty law. However, under the Erie Rule, procedural matters are generally matters of whatever the local law is. Now, in this case we're in the United States district court and I think it's going to be Federal admiralty law regardless. If this case were brought in State court-- Sandra Day O'Connor: Is that what was applied, do you think, by the Ninth Circuit? Gregory J. Wall: --Yes, Your Honor, I do. I believe they have applied Federal Admiralty law. Sandra Day O'Connor: I didn't get that impression at all from the opinion. Gregory J. Wall: As I say I didn't really address this in the brief because I didn't realize it was that much of a question, but I think they did apply Federal maritime law, since I don't recall them citing any particular Washington State cases of California State cases. There is not a great deal of law on this issue. And I should point out that the Ninth Circuit's decision was not that these clauses are per se unreasonable because they are not bargained for. They are... this particular clause is not bargained for, and in fact the petitioners admit that and say that they can't really bargain with everybody, which is probably true. However, what they said was it's not bargained for and it's unreasonable. And what we're saying here is that if this clause is to be enforced and is to be essentially imposed on consumers... it's not an agreement that you agree to, and I don't think any passenger ticket either on a ship or an airplane is one where you sit down and read it. People don't expect to get in lawsuit when they go on pleasure cruises... at least my client didn't. And... but it must at least be a reasonable clause. William H. Rehnquist: What's your authority for that proposition? Gregory J. Wall: Your Honor, basically the Bremen case. The Bremen case says they are... these clauses are prima facie, reasonable and enforceable unless there is evidence of overwhelming [inaudible]. William H. Rehnquist: Well, now the Bremen didn't put it that way. The Bremen in a footnote said there's no indication here, isn't that right? They didn't say unless. Gregory J. Wall: The Court could be correct on that and I'm not sure. But they... at least the implication of the case is that they did not deal... this clause... the Bremen clause is valid because the parties had approximately equal bargaining power and there was no evidence of overwhelming bargaining power or fraud or-- William H. Rehnquist: So you would draw a negative implication from the language of the Bremen? Gregory J. Wall: --That's correct, Your Honor. And I... excuse me. Antonin Scalia: Well, why do you say there's an overwhelming bargaining... this is a big corporation and just one individual, but you know when I go into a showroom and decide whether or not I'm going to buy a car from General Motors, General Motors and I are even-Steven as far as bargaining power is concerned, it seems to me. You know, unless there's some reason like I need a car or I will lose my inheritance or something like that. I need a car within 10 seconds. You're not talking about food. You're talking about a pleasure cruise. You're client didn't have to go on a... on this boat. She didn't have to go on any boat. She didn't have to go on a vacation. She could have stayed home. What was the disparity in bargaining power? Gregory J. Wall: Disparity in bargaining power... there are different aspects to every transaction, Your Honor, and one of them... the hypothetical you just cited... certainly you have a great deal of bargaining power by not buying the car... in this case my client did want to go on a cruise... or about the price of the car or the terms. However, I suspect that if you tried to bargain about the terms of the warranty, the terms of the contract, you would have a very difficult time. Antonin Scalia: Oh, well, that doesn't go to bargaining power. I mean, it seems to me that goes to whether it is a take-it-or-leave-it type contract, but she's still entirely free to leave it. Gregory J. Wall: She is entitled-- Antonin Scalia: It's a different point from the one that Bremen was making. Gregory J. Wall: --Your Honor, I would disagree with that, because in this case if the plaintiff wants to buy this product, she has to go to a cruise line. And, as you know, there's an amicus brief filed in this case from the International Cruise Line Committee, which is... represents I believe 10 different cruise lines, in which they essentially say we all have these same clauses. So, there's no bargaining power on this at all. If you want to go on a cruise, it's take it or leave it. Now, admittedly, she doesn't have to go on a cruise and it's not a necessity of life, but neither are most things and neither are most contracts we enter into. But they still should be fair. Antonin Scalia: Isn't that what the Bremen meant by disparity of bargaining power? Gregory J. Wall: I think that the Bremen means is that if you have two commercial entities who can bargain over the contract terms and those contract terms are accepted, fair or unfair, you know, advantageous or disadvantageous, you're stuck with it. And in the Bremen case, maybe it's tough on Zapata or Bremen, the owners of the drilling rig to go to Lloyd's and arbitrate it, but they agree to it. In this case, I think what the Ninth Circuit meant when they said it was not bargained for and was unreasonable was that because it's not bargained for, we can look at it and say, is this reasonable? This is imposed on my clients. They didn't get the chance to look at this thing over. You don't get to look at this ticket until it shows up, until you pay your money. And we cited the Carnival Cruise Lines v. Superior Court case, which is the Williams case counsel referred to, in which he says... in which it's made pretty clear. A lot of times you don't get this ticket till you actually get on the ship. So, if you're going to impose this on consumers, it ought to at least be fair. It ought to at least be reasonable. And I think it's a legitimate function of the court to look at these contract revisions in a case like this and for a district court judge to say, I'm not going to enforce this because it's very unreasonable. Now, there's also nothing here to stop the petitioners from bringing a motion to transfer this case to Miami if they think that they can win it. In this case-- Antonin Scalia: Of course the Federal statute doesn't say that. I mean, Congress has addressed what, you know, what's likely to be unreasonable in steamship tickets, and it hasn't said that you can't include this kind of a clause. Gregory J. Wall: --It doesn't specifically mention that. It further doesn't specifically mention any kind of clause at all. It just says you can't use these ticket provisions to lessen, weaken, or avoid the right of a person to get into court. And there are a couple of ways you could read that. We think the intent of Congress is to protect the passenger from unreasonable clauses. And if this case... if we have to go some place where there are no witnesses and which is 3,000 miles away from where my client and the witnesses reside, it very easily does lessen, weaken, or avoid our attempts. William H. Rehnquist: Where are these... the witnesses in your particular case? Gregory J. Wall: Most of the fact witnesses and the... all the medical witnesses with the exception of an unknown Mexican doctor are located in the State of Washington. Well, I should say also the ship's doctor... as a-- William H. Rehnquist: They were fellow cruise passengers? Gregory J. Wall: --That's correct. Some of the cruise passengers that we know of are in California. At the time this lawsuit commenced, the ship was in California. We don't know exactly when, and... or if it's still there or not. I think it may have been moved, but at least when we started this lawsuit, they were in California. The... I would suggest that if the ticket in this case had said, you may sue us in Miami or at the point of embarkation, it would be a reasonable ticket. But it doesn't say that. It says no matter where you're hurt, you have to go to Miami to sue us. In this case, if we were... assume Mrs. Shute was from Los Angeles, had bought her ticket in Los Angeles, had boarded the vessel on Long Beach Harbor, had walked out the gangplank and had slipped in the aisle going to her stateroom, before the vessel ever left the dock, and was injured, she would then... according to the petitioner's position you have to go to Miami to sue her, to bring her action under this. And we think that is fatally unreasonable and although I didn't address the statutes specifically, Justice Scalia brought it up and it's my feeling that the statute is intended to prevent this sort of thing, although the Ninth Circuit never got that far. But I think this Court could very easily rule on that basis. Anthony M. Kennedy: Well, do we look at the forum selection clause from its overall fairness standpoint, just kind of a facial attack or do we look at it with reference to the reasonableness of its application to the plaintiff in this case? Gregory J. Wall: Our position is that it should be applied to this case and to persons in a similar class. Anthony M. Kennedy: Well, then the California example has nothing to do with it. Gregory J. Wall: It does, because if you're in California they get the same clause and they have to go to Miami. Anthony M. Kennedy: Well, but the analysis might be different. Gregory J. Wall: I agree, Your Honor, and I don't mean to restrict it to just this case, but I think... the point I was trying to make is that we don't feel that a forum selection clause was outlawed by Congress per se or that they're invalid per se, because I think they do have a reasonable commercial purpose. I think the example counsel cited is a little weak, because there are multidistrict litigation rules in the Civil Rules for Federal Procedure... or Federal Rules for Civil Procedure which allow the handling of plane crashes and multi-district kind of things. William H. Rehnquist: Well, what if your clients had filed in the Superior Court of King County? Gregory J. Wall: In that case, I think State law because it probably is a procedural matter, would control whether or not this is to be enforced. William H. Rehnquist: No, I mean there certainly couldn't be any transfer to Florida. Gregory J. Wall: Unless it was removed under... because it's an admiralty action and I will confess, Mr. Chief Justice, that not all admiralty actions are removable and I don't know if this one is or not. I know Jones Act actions by crew members are not removable unless there's diversity. But it poses a problem with the forum selection clause and one reason why it's somewhat unworkable and unfair to my clients. This case is one in which the Court has the opportunity to essentially leave the in personam jurisdiction alone and let specific jurisdiction operate according to, I think, it's probably the minimum requirements which is the but for standard adopted by the Ninth Circuit and by the Washington supreme court. Or it can add an additional requirement that the claim itself be identical to the claim... to the contacts with the State. And I think that is an additional requirement, the substantive relevance. And if it is adopted, it will essentially delay these cases one more time and give us much more to litigate about. The Court also in our view should, at least in this case, agree with the Ninth Circuit and refuse to enforce the forum selection clause. The forum selection clause, as the William case illustrates, is an important point across the country, because there are many litigants that want to sue either where they sailed on the ship or in their home States. And many times the only thing preventing them is the forum selection clause. It is unreasonable in this case, and it is depriving consumers of something that they ought to have, a right to sue for injuries when they are injured on board the claimant's... the petitioner's vessels. If that is removed, then they have to go to Miami, the practical effect is that it will lessen, weaken, or avoid their right to recover from-- Antonin Scalia: You're not saying it's something that they ought to have. You would have no objection to this, I gather, if your client had been protected... presented with a ticket that said check here if you're willing to agree that you can sue only in Florida in which case your ticket will be $10 cheaper, because it's going to cost us a lot more to defend suits all around the country. That would have been okay, right? Gregory J. Wall: --In a word, Your Honor, no. Antonin Scalia: That wouldn't have been okay either? Gregory J. Wall: No, because the question here is not whether it has been reasonably communicated to them or whether they knew about it. The question is... because... or if... well, let me rephrase that. Antonin Scalia: xxx. Gregory J. Wall: If my client had bargained for this and said, yes, I agree to that specifically, then I would agree with Justice Scalia. However, if it's going to be imposed upon them and every other cruise line does the same thing, then, no, I think we're back to determining whether it is reasonable because it is imposed upon them. I see my time has expired. William H. Rehnquist: Thank you, Mr. Wall. Mr. Willard, do you have rebuttal? You have 9 minutes remaining. Richard K. Willard: Mr. Chief Justice, and my it please the Court: The one question I wanted to address was the one of the choice of law. The Ninth Circuit did hold, and it's in their opinion in page 21a of the appendix to the petition, that Federal law governs the validity of the forum selection clause, citing Manetti-Farrow and a Ninth Circuit decision. And then the court went on to say, thus, the starting point for analysis is the Supreme Court's decision in the Bremen. Sandra Day O'Connor: And the court... the Ninth Circuit also said alternatively that there was an independent justification for refusal to enforce the clause... I'm looking at page 24a... because of the lack of inconvenience and lack of relationship between the chosen forum and the transaction. Richard K. Willard: That is correct, Justice O'Connor. But it cited the Bremen, so it seemed to indicate that that was... it was deciding that as a matter of Federal admiralty law rather than looking to State law as the source of that doctrine. Similarly, we did cite in our opening brief at page 21 in footnote 18 two decisions of this Court to the effect that the steamship passenger ticket contract would be governed by Federal admiralty law, one actually as recently as 1956. So our position is that this is a question of Federal law. Now the question of whether Federal law would control if this case were in State court or perhaps if it had been brought on the law side of a Federal court is one to which we think this Court's decisions in the past have indicated Federal law would control, and we think that's the better view. But obviously it's not presented in this case. It was brought as an admiralty case in Federal court. I would be happy to respond to any additional question the Court has. William H. Rehnquist: Thank you, Mr. Willard. The case is submitted. Speaker: The honorable court is now adjurned until tomorrow at ten o'clock.

Warren E. Burger: Number 75, the application of Martin Robert Stolar. Mr. Boudin, you may proceed whenever you're ready. Leonard B. Boudin: Mr. Chief Justice and may I please the Court, this is a petition seeking review of an order of the Ohio Supreme Court denying the petitioner the right to take the Bar examination there which is a condition to admission to the Bar. The petitioner was denied that right because of his refusal to answer three questions, a refusal based upon both First Amendment and Fifth Amendment grounds. Those questions appear at the bottom of page five and the top of page six of the petitioner's brief. Question 12 (g), “States whether you have been or presently are a member of any organization which advocates the overthrow of the Government of the United States by force. If your answer to any section of the above question is yes, set forth the facts in detail.” Question 13, these are on two questionnaires says, “List the names and addresses of all club, societies or organizations of which you are have been a member.” And question seven at the top of page six says, “List the names and addresses of all club, societies or organizations of which you are or have been a member since registering as a law student.” I should say that the petitioner had been admitted to the New York Bar were then in Ohio working for a branch of the office in the economic opportunity and had applied for admission to the Ohio Bar. Potter Stewart: Or what he applied for was a permission to take the examination -- Leonard B. Boudin: Precisely, Your Honor. Potter Stewart: Quite right. If he had been a member of the Ohio Bar for a certain number of years he could have been admitted on motion I think, is that still true? Leonard B. Boudin: Now, when he appeared before -- when he got this question he declined to answer those questions on the application form on the ground of what he said was the Fifth Amendment and all of us have assumed that that meant for that stage privilege against self incrimination. Subsequently, in meetings with the character committee members, he indicated that he was also relying upon the First Amendment and that he regarded the questions that were put as not pertinent to it's qualifications as a member of the Bar -- to be a member of the Bar. and when the character committee or the members of the committee eventually wrote their reports, they prayed very strongly the impression that this young man had made on them in their interrogation and one of them said that if the rest if the committee would not the mind the fact he hasn't answered these questions I would have recommend it as admission. But the committee decided not to recommend his admission -- that is his admission to the examination. And at that stage while the matter was appearing, was before the Ohio Supreme Court he retained counsel. And counsel wrote to the Ohio Supreme Court, pointing out that the petitioner had raised First and Fifth Amendment grounds and that a recent decision of Judge Friendly in what we call the LSCRRC case, the Law Students Civil Rights Council case now pending in this Court at 696 and the recent decision by a statutory court headed by Judge Friendly questions of this very type were found by the statutory court to be improper and to impinge upon First Amendment rights and I will develop shortly the respects in which Judge Friendly found questions to this kind to be improper. And the counsel suggested the desirability of appearing before the Ohio Supreme Court arguing the matter instead of the Supreme Court upheld the committee and to then order appearing at page 56A of the appendix denying the application of Mr. Stolar to appear before the Bar -- to take the examinations. Now, we -- as I indicated before I am reasonably satisfied to the extent that the council could ever be could prevail in this Court on the grounds indicated by Judge Friendly and in the LSCRRC case and I will turn to those when I address myself specifically to the questions put by Ohio to Mr. Stolar. We think, however, that there are more important problems, more fundamental problems relating to the entire question of political qualifications if I may use that term for the moment, to admission to the Bar. And it's for that reason our first point, in our submission is that political belief and political association and political advocacy of any kind are not proper conditions or grounds for this qualification to admission to the practice of law. As I say I realize the burden that I'm faced in presenting that proposition in the light of several cases in the Court for the assumptions underlining those cases but I want to address myself to that before I begin my argument on the second and third point which are that the test and the questions and the procedures followed by Ohio in this particular case violates the rule of precision which has been set down by this Court in a large series of cases in the last five or 10 years where the First Amendment rights may be impinged upon. And my third argument is going to be very brief and that will relate to the right to assert the privilege against self-incrimination and answer the questions put by a character committee. All three -- Warren E. Burger: Do you link those two propositions together in any way? Leonard B. Boudin: I think these are completely independent, Your Honor. The last two. Warren E. Burger: The last two. Leonard B. Boudin: The last two are completely independent. Warren E. Burger: They're not suggesting the assertion of the privilege against the questions directed to inquiry about the Communist Party. Leonard B. Boudin: I am suggesting that too and I will come to that at the last page as I am suggesting the right to assert privilege there. I want to suggest very briefly because we have elaborated on our brief and that we'll require a -- we hope a reconsideration by the Court of some of the assumptions in Konigsberg and Anastaplo despite the fact that they effectuate distinguished by the element of the question of Communist Party membership which one reason or another has been regarded as sui generis in this Court. I want to turn to the first proposition which is that it seems to us that those -- that a political test and I may suggest even out conduct which is unlawful, although, obviously we don't have to go that far here, is not related at the proper functions of the Bar. Now, yesterday it as suggested by some members of the Court that the fact that some political activities might be protected against criminal prosecutions. Mr. Justice Stewart, I think made a point deciding when Brandenburg against Ohio was mentioned does not necessarily mean that the persons engaging in those activities protected against criminal prosecutions are proper to admissions to the Bar and I wish to suggest that a reading of Keyishian and of Elfbrandt and Robel and Schneider against Smith which we have cited and quoted from in our brief suggest the contrary that those cases emphasized a point and in dealing with what we think with all due respect at least a sensitive and more sensitive occupations and membership of the Bar, namely work in a defense plant, work as a teacher with the young, work on in a merchant marine and in all of those cases the Court has said that these are constitutionally protected activities and the constitutionally protected activities cannot be a ground for disqualification from employment. Now, our submission here and I don't think it has been fully argued obviously on this argument I can't argue with fully either is that the profession of the law is a profession where these standards are less applicable for the following reasons. First, it is a lawyer is of course not an employee of the State and whatever power the State has over its employees should not be applied to the lawyer and we think to the aspirant lawyer. The second is it is difficult to conceive precisely what function it is as a lawyer that would be adversely affected by a political viewpoint or to go with political activity. It seems to us that there is a difference between the questions of a good private character, to go back to ex parte Garland phrase which we quoted in our brief and the question of a bad public character -- a question of a public character which is involved in the questions of conception of whether or not the State should be overthrown by force and violence to take the extreme situation. In other words, the history of life in this country and in the world generally had shown that the most honorable persons have had conceptions and that sometimes attempted to carry up those conceptions into action. In the political field, without in the slightest way reflecting upon their good character except when they have failed, I suppose, and without if there being any suggestion of the question of moral servitude and I think back specifically to the case of ex parte Garland where is through the Court based its decision on under the rubrics or on the principles of Bill of Attainder and of ex post facto law and yet in that case and in Cummings against Ohio we were dealing with the most serious of political crime. We were dealing with matters described I think by Mr. Justice Miller's dissent as reasonable activities by Mr. Garland who, after engaging in the fight against the union on behalf of them sedulously, was admitted Bar here or retained his membership for the Bar, I should say and eventually became the Attorney General of the United States. Now, In short -- Byron R. White: At all permissible for a committee to ask an applicant to -- if he advocates assassination to right social wrongs? Leonard B. Boudin: Well, I think -- I think, when we get to an extreme question of assassination Your Honor it's always one of those extreme problems that are very hard to answer. Byron R. White: Well then, make it more general, make it more general, do you advocate the general use of violence, violent means to achieve social and economic ends. Leonard B. Boudin: I think the answer is, my answer would be consistent with point of view, I suggest that the committee could not ask that kind of question. Byron R. White: That is a wholly relevant to the -- Leonard B. Boudin: I think it is relevant, irrelevant to the practice of law. Byron R. White: You mean if the advocacy of violence, I suppose, you would say then that it would be wrong to ask the person, “Are you now engage in violent activities to rights or for wrongs?” Leonard B. Boudin: I would consider that too, but of course we're really dealing here at the moment with three kinds of things, belief, association and advocacy -- Byron R. White: How about my last question? Leonard B. Boudin: I would even feel that as far as conduct is concerned that would be an improper question. Byron R. White: And certainly -- and certainly a fortiori just advocacy of violence. Leonard B. Boudin: That is quite right Your Honor. Now I will say that there is a -- in other words, I regard those as matters which may reflect upon the which -- matters which should be handled where we reach the point of danger to the community. Handling the ordinary matters of due process by criminal trial I don't regard those as bearing upon the functioning of the lawyer as a lawyer in the process. I think this is a very different situation for the policeman who was given a gun. This is a question for the yesterday I think also and whom one would expect because he is given a gun to have a responsibility with respect to the use of the gun. But I think that there must be a distinction between the function of a lawyer and his private capacity and the lawyer and his function as a lawyer. Byron R. White: (Inaudible). Leonard B. Boudin: Well, I think -- Byron R. White: (Inaudible) Leonard B. Boudin: Well, the difficulty is that I am going to answer your questions directly, I hope, but the difficulty is Mr. Justice that we really are not dealing in reality in this field if we analyze the last 20 years with the questions of anarchism or the question of actual violence, we are really dealing -- Byron R. White: Well, I am just trying to (Inaudible) Leonard B. Boudin: Well, I would say that even question would respect violence. If one is talking about advocacy of violence, I'm not talking about conduct yet. Conduct I think if it reaches a point where it's punishable, where it's outside the First Amendment protection and most conduct is of course, then it would be punishable. Byron R. White: (Inaudible) Leonard B. Boudin: Well, that would come in to the question of what a lawyer would advice a client. I think we're moving into a different area. I was dealing with a lawyer as a citizen and as I was about to say -- it is very high as I say to hit the extreme situation. I think we have to recognize that what we are dealing with here, we're dealing with this whole question of membership in organizations having political philosophies because that's what these questions are dealing with. We really aren't dealing with the extreme situation of conduct. Byron R. White: (Inaudible) Leonard B. Boudin: Well, I think -- I think it's a closer question when we get to the overlapping and to the conduct but I really think that all of these questions Your Honor, if we're talking within the framework of the reality, are questions that are concerned with membership with organizations which have particular political points of view. We are really never coming down to the question -- nobody ever asked, you are or did you engage in violence, the kind of question put by Your Honor. But we're always dealing with is, “Are you a member of an organization which has for its purpose, which has the literature behind it advocating the overthrow of the Government by force and violence?” Because I think your question is a very difficult one when I get down to the question of the actual conduct. Warren E. Burger: Did I get the impression Mr. Boudin that you thought some of these types of questions might be appropriate to ask a candidate for the police force but not appropriate for the lawyer? Leonard B. Boudin: Yes, I do think so Your Honor because then I thought that he had a particular responsibility and a particular danger and that it was his job to enforce the law. Warren E. Burger: Then you would -- it seems to follow the map that you place the policeman's responsibility on a higher or lower plane. Leonard B. Boudin: No, just different that is that the policeman has to do the law enforcement and I consider the lawyer as a matter of fact very often a boardwalk between his client and the Government in reality. In reality, there's no point am I giving Your Honor the headspring of this thing. I think it's a difference of function, not one that is higher or lower but I would like because I recognize the difficulty of -- part of this argument, we move to the point suggested by Mr. Justice White pertaining to the particular questions here so as the question here I think clearly for under what this Court has called the rule of precision in the First Amendment cases and clearly are in conflict with the decision of the statutory court which while we have felt that it has not gone so far enough as witnessed by jurisdictional statement in the LSCRRC case we agree with the dissenting opinion of Judge Motley the dissenting occurring opinion are nevertheless one that would call the Court's attention to this particular case. The questions that we have in this case questions two and three those dealing with all organizations are questions which the Court has really held improper in Shelton against Tucker. It held that they go so far as to discourage all political associations. Political association that is completely legitimate. And Judge Friendly pointed out Your Honors will see in the appendix in this case Judge Friendly pointed out that the New York Court, I think Mr. Justice Harlan probably was aware of that same questions that was put earlier had withdrawn such question with respect to membership at all organizations and at withdrawing them because of what Judge Friendly said the awareness of the need to bring them in line with developing concepts of First Amendment rights and he referred specifically to Shelton against Tucker and Schneider against Smith. Now, question number one the question relating to membership in an organization advocating the overthrow of the Government has defects that I think were recognized in some of the questions here and that Judge Friendly pointed out, they omit the absence of knowledge concerning the purposes of the organization, they omit the absence of congruence that is membership at the same time that the organization had these purposes. In addition to the two points made by Judge Friendly, which resulted in New York changing its question to import, to include these two elements. We suggest that the elements involved in Brandenburg against Ohio was suggested by that namely a specific intent to advance the purposes of the organization with which one and which one is a member are elements that also should be called for in a question of this kind. And our concern of course is the fact -- Speaker: Am I not right in taking that Judge Friendly upheld the question and so far as the absence of any aspect of knowledge with respect to the Communist Party -- do you upheld that question? Leonard B. Boudin: The question of the Communist Party was not involved in the New York questionnaire specifically. And as I say, this Court had made its decision which we would hope it would reconsider on Communist Party. Speaker: -- sustains that kind of a question. Leonard B. Boudin: It does now -- Speaker: The question there is whether with the passage of time and so forth the element you are arguing before this Court held unnecessarily there is something ought to be (Inaudible). Leonard B. Boudin: Exactly, I am also suggesting one more thing Your Honor with respect to Communist Party questions which of course is not the question put here, it's a communist party question is a much more pointed question I'm suggesting that Your Honors' decision Mr. Justice Harlan in opinion and Barenblatt and the opinion in Gibson and perhaps the sound reasons because we are in the First Amendment area now, would indicate that perhaps even assuming that the Communist Party membership question can ever be put and this in the Court we're willing to reconsider whether it should be put. That kind of a question should not be put in the absence of a foundation, some reason to believe that there's of course can make that particularly inquiry of an individual. Of course, Your Honor stated that view in reference, in dealing with the question of a draft of that inquiry in Barenblatt in a different context. But we're suggesting that the deterrent affect upon association here is one which would require that if even that question could be put it should be put -- Speaker: You're taking out an awful great suite of constitutional baggage here that you don't need to prevail in this case. Leonard B. Boudin: I must admit that I think that my case could won very easily on the basis of -- Speaker: Well, I thought you are arguing your lawsuit. Leonard B. Boudin: Well, because I think that the public problem is quite important and I know that this Court could say not only with the case that I'm bringing here but with the general impact upon membership at the Bar. And my concern is that the large amount of activities which the Court knows young law students are engaging in today activities in the south, activities with the poor, activities with minority groups, a panoply of activities are going to be discouraged and undiscouraged if questions this kind are submitted to be put. Byron R. White: You really think that? Leonard B. Boudin: I really do think so, Your Honor. When I argued this matter before the statutory court these Judge Bonsal raised a question. He sounded skeptical also but I may say that if Your Honor will see the array of the opinion in LSCRRC. The Court eventually recognize that what I have said what the reality thought was we who stand here you who stand there are not as close to these young law students who are engaged in worked in vengeance and even I who have been involved with so many of these cases in the last decade are now regarded as old had as conservatives. Warren E. Burger: Well, what is the work in the prominent program or the office of economic opportunity got to do with organizations advocating the overthrow of the Government by force and violence? Leonard B. Boudin: Well I think one of the -- because Your Honor the distinction is the people who worked among the poor or who works among minority groups are also in fighting against authority I'm using the word fighting at a general sense. They are regarded as dissidents, they regarded as radicals and if I can suggest Your Honor well I have forgotten to mention here, Your Honor will notice in our briefs what happened when Mr. Stolar appeared before the committee and what the committee said to him. They're not after having gone through this and the applicant's waiting to answer these generalized question of the fact of nature, Your Honors will see on page six of my brief that the committee pressed him into specific questions and answers and that eventually he answered that he had -- and these are the words from the committee “that he is not now and has never been a member of the Communist Party or any socialist party or of the students for a democratic society and that he has signed the standards of the United States preinduction army oath with respect to a list of organizations on the Attorney General's list.” In other words, the people who are engaged in work generally and who are members of the student organization after another are met by this kind of specific inquiry under Ohio's program and what reason is there that they should be asked, that a student should be asked whether he is a member of any socialist party. All of these arises as I say in the context of Ohio's program and all of these is bound to discourage young men from joining organizations, from joining student groups and what we are doing ultimately is we are letting the decisions to be made in these things as they must be made I suppose by character committees who makes for into First Amendment protected activities here and who live in a milieu which is so different from the young men who are in the law schools today and I have talked that recently in the law schools I have been amazed in the different quality of the laws students that exist today than those who existed even 10 years ago. And these students should not be discouraged by questions that are of this kind and that are put by Ohio as to whether they are members of The Students for a Democratic Society assuming there is such a single organization today. They should not be discouraged by asking whether they are members of a Socialist Party. All of these arises and arises in the context, Your Honors will know, that nobody has made any determination such as the Court suggested in a different context that I think applicable here in Joint Anti-fascist against McGrath, a determination that an organization is an organization which one should not belong to. It gives a freewheeling suite to the committees to make this inquiry. Now, with respect to the Communist Party although I have suggested that ought to be, should be reconsidered by the Court, the Court has pointed out repeatedly legislative findings, legislative hearings, judicial hearings and so forth. But with respect to matters other than the Communist Party, then it certainly seems to me that somebody must have a hearing to determine whether an organization is on a particular, should be on a list. If list had to be permitted before we are to give committee the right to ask questions concerning that. And of course, when we ask questions concerning any organization you're even going beyond what the Court did at Schneider against Smith when they talked about 250 organizations and are referred to the concurring opinion in that case of Mr. Justice Fortes and Mr. Justice Stewart. Warren E. Burger: Were these, just one question, Mr. Boudin, if I may. Were these questions formulated by the Supreme Court of Ohio or by the Ohio State Bar Association's Committee or by the Columbus Bar Association? Leonard B. Boudin: I do not know, perhaps the Ohio can say. As far as we know that these are the forms used and I suspect -- Warren E. Burger: State wide? Leonard B. Boudin: By the states, I suspect used by the character committees in many states in the last 15 to 20 years not before, this is something new. Warren E. Burger: Mr. Macklin, you may proceed whenever you're ready. Robert D. Macklin: Mr. Chief Justice and may it please the Court at the outset, it should be understood that the rules of the Supreme Court Of Ohio with respect to the Administration of Bar Admissions place no burden upon the applicants approved his good moral character. Procedures actually one of the investigation performed by the admission's committees of some 89 Bar associations throughout the State. There's a sort of a student profession under the Ohio Supreme Court and the procedures of the Bar Association Committees are provided by rule of the Supreme Court of Ohio. Committees are responsible for investigating the character, reputation, and the moral qualifications of the applicants and to report their findings and their recommendations to the Court which in the ultimate result determines whether the candidate shall be in the first instance, registered as a candidate for admission to the practice of the law or in the second instance, whether he should be permitted to take the Bar examination. One process proceeds to the other. Each step of the procedure requires on the part of the applicant the submission of the character questionnaire which is utilized from the Local Bar Committee in performing its investigation. In all the phase of the form the applicant is advised that the information may be used is a guide to further investigation. Potter Stewart: There are two, one beginning on page 5A on the record in the appendix and the second one beginning on page 14A in the appendix. Robert D. Macklin: That's correct Mr. Justice. Potter Stewart: And now who formulated this questionnaire? Robert D. Macklin: It's my understanding that this questionnaire was formulated by the Supreme Court of Ohio. Potter Stewart: By Court, it's the Supreme Court? Robert D. Macklin: Yes, Your Honor. Potter Stewart: And for the use throughout the State and all 88 counties? Robert D. Macklin: Yes Your Honor. The various Bar Associations from time to time make recommendations to the Supreme Court for changes in its rules affecting this, the admission procedure but to my knowledge there has been no change to the format of the questionnaires at least for the past five years. Potter Stewart: So, it's not incumbent upon each one of the 88 or you said 89 committees to formulate its own questionnaire to do its job? Robert D. Macklin: No Your Honor. It is incumbent upon the committees to further the information that they obtain from these questionnaires. As an applicant from other State, the petitioner was -- did not require registration as a law student but the petitioner submitted both forms simultaneously. When he sought permission to take the Bar examination and the reason for this of course is the second questionnaire is primarily designed merely to bring up to the basic information provided for in the first questionnaire. The petitioner refused to answer two questions on the first questionnaire, one dealing generally with membership in organizations and the other is to whether he was a member of an organization which advocates to the overthrow the Government of the United States by force. This refusal was based on this right as guaranteed by the Fifth Amendment of the United States Constitution. On the second questionnaire which-- Potter Stewart: I don't quite understand why you have to fill up the first questionnaire. Because the first questionnaire I think as you have told us was for law students and he and it's dated there December of 1968 and he even graduated from law school on June of 1968. Robert D. Macklin: That's quite correct Mr. Justice Stewart. Potter Stewart: So, why was this applicable to him at all? Robert D. Macklin: This is applicable as a matter of practice on the part of the Ohio Supreme Court itself for obtaining the basic information. If you were to study the questionnaire design for admission at the Bar, you will find that it really merely supplements the basic information obtained in the first instance. And the Ohio Supreme Court treats both questionnaires as a complete application. On the second questionnaire, the petitioner refused for the same reason as on the first questionnaire to answer a question about the membership in club, societies or organizations since the period registered as a law student. After being duly warned, duly warned of the effect upon the investigation of a failure to answer these questions, the petitioner persisted in his refusal to answer and based upon this refusal, the Bar Admission Committee recommended to the Supreme Court of Ohio that the petitioner's application for admission to the Bar examination be denied. The Supreme Court of Ohio approved the recommendation of the Admissions Committee and denied the application of the petitioner to be admitted to the March 1969 Bar examination. Petitioner has not raised an issue any quarrel with the right of the Supreme Court of Ohio to determine the qualifications of those who they would admit to the Bar including the moral fitness of such persons or such person who is to be entrusted with the faith of clients. It follows, therefore, that the Supreme Court of Ohio does have a legitimate interest in investigating the moral character of its applicants. They consider it hand-in-hand a part or in parcel together with the technical qualifications for the admission to the Bar. And pursuant to this purpose, it must be appropriate to allow the Court to inquire into associations to the extent that the information acquired thereby maybe an aid of such legitimate purpose. The function of the higher questionnaire, both questionnaires for that matter, is to provide the basic information as a guide in conducting the investigation of applicants nothing more. There's no political test involved, there's no oath of loyalty involved, and there are no prescriptions in mere membership in any organization. Now, the first of the petitioner's argument in this aggregate effect is really a conjecture as to what the Supreme Court of Ohio might do with the kind of information it seeks on these questionnaires. Not what it has done but what it might do. We submit that it would be unfair to determine this case on the basis of the mere possibilities or potentialities of action by the Supreme Court of Ohio. Surely, one may not presume that the Supreme Court of Ohio is not acutely aware of the decisions of this Court which are so carefully circumscribed areas of improper infringement by the States upon the First and Fourteenth Amendment rights. Speaker: How long do we say to the questions hereon that there are recommendations (Inaudible)? Robert D. Macklin: We don't feel -- Speaker: Specifically, what do you do, what do you say, how does this case incorporate (ph)? Robert D. Macklin: Well, Mr. Justice Harlan we look upon disclosure of these associations as simply an entree into the ability to discuss with all the members of these associations whether or not there are aspects of this person's character, his moral fitness which may or may not have a bearing upon his fitness for the Bar. It's strictly a matter of inquiry or investigation and nothing more. We have no history to my knowledge in the state whereby a mere association or mere membership within an association has resulted in an applicant being denied permission to take the Bar examination. Byron R. White: Can you suggest that this question is primarily directed at enabling an inquiry about the man at the organizations or among the members of the organizations that he was a member? Robert D. Macklin: Members of the organizations and the associates whom he may have worked within the organization. Byron R. White: That maybe a fairly easy question for a man when he is 25 that's a -- when he gets to be 45 that gets to be a more difficult question to answer. Even if his memory hasn't failed by that time perhaps joined some but he can't remember them all. Isn't that pretty difficult burden to put -- Robert D. Macklin: Well, it may be but if there's no dissent intent to deceive upon his part by excluding some organization with purposes to mislead the Bar Associations and their examination, I can't think that an innocent exclusion would militate against his acceptance. I note that most -- I have been a member of this Admissions Committee, as a matter or fact I am a former chairman and I can recall that some applicants even included the Book of the Month Club which I didn't think was necessarily a bad association. Warren E. Burger: But the question because of its breadth has a tendency to elicit that kind of an answer in the exercise of the carrier that would be duly this kind of an application. Robert D. Macklin: It's quite likely. The Ohio we think that the application of the principle of the second Konigsberg case is uniquely appropriate here. The effect of acquisition was pointed out to the petitioner when the investigating committee warned him of the consequence of his refusal to answer. More importantly, the investigating committee has before it a similar questionnaire filled out by the petitioner in applying for admission to the practice of law in the State of New York just a month before he made application to the Ohio Bar. In that application, he answered the following question, “State whether you have been or are a member of any party or organization engaged in propagating or pledge to affect changes in the form of Government supported by the United States Constitution or in advancing the interest of a foreign country. If so, state the facts fully.” Hugo L. Black: Where is that in the appendix? Robert D. Macklin: I beg your pardon. Hugo L. Black: Where is that in the opinion? Robert D. Macklin: That is -- it's contained Your Honor in our brief in opposition to our petition for writ of certiorari that's contained on pages 17A and 18A in the appendix there too. The petitioner responded no to this question. Thurgood Marshall: Are there general requirement that (Inaudible) the organizations that he ever belonged to? Robert D. Macklin: I don't know that it does sir, but it touches on a great many others. I don't believe that New York has a type of question exactly like the one on Ohio with regard to the associations. We really felt in Ohio, that where the applicant or the petitioner had answered this similar question at least it has similar elements and to those which refused to answer in Ohio on the basis of his rights as guaranteed by the Fifth Amendment but he thereby created an area of at least let's say perplexity on the part of those who were charged with the investigation of this moral character. The question of course would be, “Had something occurred in the intervening (Inaudible) that would cause his answers to the Ohio questionnaire to be possibly incriminating?” It may well be reasonable to logical explanations but the refusal of the petitioner to answer left a complete void in this particular area of the investigation being performed by the Admissions Committee. The members of the Admissions Committee were literally unable to complete the full investigation and they could not logically make any recommendation to the Supreme Court of Ohio as to the moral qualifications of the applicant. We contend that there was no reasonable alternative to the action of the Supreme Court of Ohio in denying the petitioner's application. We submit that the circumstances of this case which offered inconsistent statements bring the fundamental issue squarely within the principles of the second Konigsberg case. Hugo L. Black: Does the applicant have to swear to this taken oath? Robert D. Macklin: Yes, Your Honor, he does. Hugo L. Black: For which he could be punished for perjury? Robert D. Macklin: Yes, Your Honor. Hugo L. Black: It might be a little difficult, wouldn't it? To be able to swear where there's some organization believe in overthrowing the Government by force, I don't think there have been many of them. Would that be an issue to be tried in the perjury case under your questions? Robert D. Macklin: I suppose -- Hugo L. Black: If he swears it means he does not belong to any organization that believe an overthrowing the Government or have that advocacy by force and violence and that would be an issue in a perjury case, wouldn't it? Robert D. Macklin: Mr. Justice Black, I think it possibly would be but I conceive of it, it could possibly be. Hugo L. Black: Well, it would be, wouldn't it? That's what he's swearing. Robert D. Macklin: Yes, but I think in addition of this you would have to show that he had an intent to deceive or to answer incorrectly. Hugo L. Black: But I'm not talking about the intention to deceive. I'm talking about whether he belonged to any organization that believes on the overthrowing the Government by force and violence. And he swears to that, one of the incidents would be, whether he belonged to an organization which did that and wouldn't that make that issue open when the case of trial by perjury. Robert D. Macklin: Yes, I would agree with you sir. Well, the fact -- we felt in this particular case is even more appropriate to the principles of the Konigsberg and Anastaplo cases, we would urge that this be the controlling point from the standpoint of our State and we respectfully urged this Court to affirm the decision of the Supreme Court of Ohio. Warren E. Burger: Thank you Mr. Macklin. I think you have about -- I think your time has expired, yes. Thank you, Mr. Boudin for your submission. Leonard B. Boudin: Thank you. Warren E. Burger: Thank you, Mr. Macklin, the case is submitted.

John G. Roberts, Jr.: We'll hear argument next in Norfolk Southern Railway versus Sorrell. Mr. Phillips. Carter G. Phillips: Thank you, Mr. Chief Justice, and may it please the Court: The fundamental question in this case is whether the common law doctrine of equivalence between defendant negligence and plaintiff negligence applies under the FELA. The doctrine of equivalence is, I think, most clearly stated in the Restatement (Second) of Torts, which is reproduced on page 19 of our blue brief in the middle paragraph. And I think it is worth taking a second to read it. The rules which determine the causal relation between a plaintiff's negligent conduct and the harm resulting to him are the same as those determining the causal relation between the defendant's negligent conduct and resulting harm to others. That is a principle of law that has been in effect long before the Federal Employers Liability Act was enacted. It is obviously a restatement of the law in 1965, and it is an absolutely clear statement of the law as it applies today. There is nothing in the Federal Employers Liability Act that remotely modifies the doctrine of equivalence. The two provisions, section 51 talks about negligence resulting from... or negligence in whole or in part. And section 53, which describes the contributory negligence portion or comparative negligence talks about negligence attributable to. None of that deviates at all from any kind of common law doctrines. Negligence inherently calls for an analysis of proximate causation. Antonin Scalia: Except that the... what was it, the Rogers case, which said that the... well, you debate whether it said that, but let's assume that it said that the rule of proximate causality doesn't apply to the negligence of the defendant. The basis for that holding was that in whole or in part language which is used for the negligence of the defendant, but not used for the contributory negligence. So if you believe that that case was at least decided for the right reason, it seems to me there's a good argument that it changed it for the one, but not for the other. Carter G. Phillips: Well, even if that were true, we would still, of course, be entitled to... I mean, it doesn't change the doctrine of equivalence. It doesn't say that we're not entitled to the same rule with respect to the... our clients-- Antonin Scalia: But nobody does-- Carter G. Phillips: --The plaintiff would be. That doctrine is unaffected by that holding. Now, I'd like to take issue with the interpretation of Rogers, if you want, at this point. But it seems to me the doctrine of equivalence is fundamentally different from the doctrine of proximate causation. And therefore, you can change one without affecting the other one whatsoever. Ruth Bader Ginsburg: Mr. Phillips, the fundamental problem, at least for me, in this case is that there was no objection at all at trial to the instruction that the judge gave on negligence. There was an instruction requested by the defendant on contributory negligence, which read, "such negligence of plaintiff contributed in whole or in part to cause his injury. " That was the only instruction objected to, because the refusal to give that instruction. But you seem to be using that as a lever to attack the instruction on negligence to which no objection was made. Carter G. Phillips: That's not our attack, Justice Ginsburg. Our objection, which is reproduced in 28A of the cert... of the petition's appendix, that says... and I think the current MAI instruction has a different causation standard for comparative fault, meaning that under Missouri's rules, we must prove that such negligence of plaintiff directly contributed to the cause... to cause the injury. And that misstates the law, because of the doctrine of equivalence. That's our initial argument, is that no matter how you analyze this, whether you do it from a proximate cause or a slightest cause standard as the appropriate way to evaluate our negligence, that same standard has to be applied in evaluating the plaintiff's negligence. That's the core doctrine. That's what we sought certiorari on. The argument with respect to Rogers was not an argument we put into this case, Justice Ginsburg. It's an argument that the Respondent put into this case. David H. Souter: I take it you would be satisfied... not wholly satisfied, but substantially satisfied if we said, yeah, we accept the doctrine of equivalence, and we think the instruction on contributory negligence was correct. Because that would mean in the next case, you would get a proximate cause instruction on defendant's negligence. Carter G. Phillips: We would regard that as certainly at least half a loaf, maybe more than half a loaf. But at the end of the day, I think the right answer in this case is that the Court ought to go ahead and decide whether or not Rogers really did work a sea change in the law. David H. Souter: If we came out the way I just described-- Carter G. Phillips: You wouldn't have to address that issue. David H. Souter: --We wouldn't have to. Carter G. Phillips: Absolutely don't have to address that issue. On the other hand, the question is squarely presented. And-- Anthony M. Kennedy: But I thought you argued the Rogers standard was a correct standard in the Missouri court? Carter G. Phillips: --We clearly did that, Justice Kennedy. And we didn't raise... we are not here complaining about Rogers as an argument for why we shouldn't be liable. That's not our... we're not criticizing that. What we're saying is, in response to the Respondent's argument which seeks to undermine the doctrine of equivalence based on an overreading, I would argue, of Rogers, that that interpretation is incorrect. And if we're right that that interpretation is incorrect, we would win on the doctrine of equivalence for two different reasons. The first one that Justice Souter described. And the second one would be that to the extent that there's any equivalence, there's no problem here because proximate cause is required in every case. And we think that that's an issue that the Court doesn't have to decide, but certainly could. I'm sorry, Your Honor. Ruth Bader Ginsburg: Mr. Phillips, the defendant requested a charge on contributory negligence that read, "such negligence of plaintiff contributed in whole or in part to cause his injuries. " You didn't want the direct relationship, you didn't ask for that. You asked for one that said, "such negligence of plaintiff contributed in whole or in part to his injury. " Now you are saying that that was... what you asked for was an incorrect charge. Carter G. Phillips: No, what we're saying, Justice Ginsburg, is that we were entitled to the same... if they were going to use slight negligence with respect to our negligence, then with respect to the plaintiff's negligence, we were entitled to slight negligence as well. That's our fundamental argument. That's the issue we have put on the table. And candidly, I don't think there's an answer to that that's been offered in this case, other than a harmless error argument, which I think is candidly without substance. The issue, then, is whether in evaluating the doctrine of equivalence, do you want to then entertain the plaintiff's or the Respondent's counter argument, which is that somehow Rogers requires this fundamental change, and indeed overrules the doctrine of equivalence as it applies to FELA. And I would say, one, Rogers doesn't speak to the doctrine of equivalence at all. And, two, to the extent it does speak to it, it was never meant to change the fundamental rule with respect to proximate causation. Antonin Scalia: --Except we've rejected petitions for certiorari on that issue at least a couple of times. Eleven circuits are in agreement as to what Rogers required. You-- Carter G. Phillips: Well, at least one circuit clearly. Antonin Scalia: --Do you really expect to get five votes for the railroad on this, what would be a massive change of what is assumed to be the law for, what, 50 years? Carter G. Phillips: Well, I think the... well, the answer is yes, of course, I expect to get five votes for that. Antonin Scalia: But you were wise enough not to ask for that. [Laughter] Carter G. Phillips: But you know, the basic... the point here is that if you look at the decisions that have analyzed this Court's opinion in Rogers, I don't think any of them has analyzed it with much care. And the reality is the Third Circuit has analyzed this case with care, and reached the opposite conclusion. We think there is a split in the circuits. And at some point, if not through this vehicle to address that issue, then through another vehicle to address that issue. But, yes, it seems reasonably clear that, first of all, there were at least 20 decisions of this Court dealing not only with the sufficiency evidence, but also with the adequacy of the jury instructions prior to Rogers that refer specifically to proximate causation. There is nothing in the statute that remotely meant to change that. There is nothing that's been identified in that context. It is at least clear to me, and I hope clear to five of you-- Antonin Scalia: Rogers said, in whole or in part. Now, I agree with you, that I don't see how that does it. But Rogers said that it did it. Carter G. Phillips: --But what Rogers saying in whole or in part eliminated was the specific proximate causation standard existing in Missouri. And Missouri's proximate cause standard talked about sole causation. And this Court said, no, in whole or in part means sole causation can not be the right standard for proximate cause. The Court was not asked to decide, and I don't think it did decide, that proximate causation, as it is traditionally understood, was also thrown out the door, or more fundamentally, that you can never ask for a jury instruction that calls for proximate causation to be given to both parties... I'm sorry. John G. Roberts, Jr.: Mr. Phillips, I may be lost a bit here. But I mean, which... I'm looking at the instructions that were given. And it seems to me it is hard to take issue with the instruction on the railroad's part because it tracks the statutory language. The statute says in whole or in part, and the instruction says in whole or in part. So if you're pushing the doctrine of equivalence, your objection seems to be to the directly contributed language with respect to the employee, the plaintiff. Now, but doesn't directly contributed, isn't that a typical proximate cause instruction? Carter G. Phillips: Yes, that is a typical proximate cause instruction, and that meant that our burden was heavier than the plaintiff's burden, which is why we're saying that under the doctrine of equivalence, we're entitled to the equivalent instructions. Whatever they are. If it is slight cause or proximate cause. John G. Roberts, Jr.: Right. But on the other hand, you're also arguing in favor of proximate cause. You are saying Rogers didn't change proximate cause. Carter G. Phillips: Right. But we are only doing that in response to the Respondent's argument. I'm not... we didn't bring to this Court an affirmative argument that said we are entitled to no liability because of proximate cause. That's not the argument we made. The argument-- Anthony M. Kennedy: How is the blue brief in response to Respondent's argument? Carter G. Phillips: --Because if you look at the opposition to the cert petition, which took us to task for not discussing Rogers in our petition, it says on page 6, "inexplicably, petitioner does not cite, let alone discuss Rogers, an omission that enfeebles its entire discussion of FELA's causation standards. " Against that kind of an attack, we felt it incumbent on us to deal with Rogers. Stephen G. Breyer: As we're supposed to decide the case, in your view, there was instruction 13. Instruction 13 used the word direct. Carter G. Phillips: Yes. Stephen G. Breyer: You object to 13. You said it should use the word in whole or in part. Carter G. Phillips: Yes. Stephen G. Breyer: You then argued to the lower courts, 13 should use the word in whole or in part. And then you say you've argued that here. So what you're saying is now we're supposed to decide, should instruction 13 use the word in whole or in part. That's what it is. I have to admit, I didn't quite get that out of the blue brief. I thought you were arguing something else about railroad negligence. But you're not now, you say, arguing about railroad negligence. You're arguing about plaintiff negligence. Carter G. Phillips: Right, we're arguing both. Stephen G. Breyer: All right. So if I reread the blue brief, what I'll discover on closer examination, that your real objection, not responding to the other side, has simply been about the standard to use in respect to plaintiff's contributory negligence. And what you want this Court to say is, you're right about that, we want the more relaxed standard used for contributory negligence. End of case. Carter G. Phillips: Right. Stephen G. Breyer: Yes? Carter G. Phillips: Yes. Stephen G. Breyer: It says that in the blue brief? Carter G. Phillips: Yes, it does say that in the blue brief. Because what we say is that the doctrine of equivalence is the principle that should apply. And you know, it is not specifically before the Court whether that means slight cause or proximate cause. Stephen G. Breyer: I would say it sure is before the Court, because what we are considering before the Court is your objection to instruction 13. And you said it should use the words in whole or in part. And I have to admit, I don't know why it shouldn't. But I'll have to ask them that. Carter G. Phillips: That's fair. Stephen G. Breyer: You're going to say yes. So all this other stuff is quite extraneous about whether... the railroad standard of negligence, the railroad should be in a relaxed standard of negligence, in whole or in part. Carter G. Phillips: Well, I don't know that it's-- Stephen G. Breyer: Causation. Carter G. Phillips: --I don't know that it's extraneous. It clearly is not something that the Court needs to decide. On the other hand, it is something that the Respondents, to my mind at least, put into the case. And then we responded, to be sure, somewhat aggressively in urging the Court to rethink whether Rogers was right... whether Rogers really decided this issue as some courts of appeals have. Ruth Bader Ginsburg: Perhaps my memory is faulty, but as I recall your opening brief, many pages were devoted to what instruction should have been given on railroad negligence. You were dealing not simply with what seems to be the question presented, that is, was the instruction on contributory negligence wrong, because it said... it didn't use the in whole or in part language. Instead it said directly caused. So that's the limit of what we can deal with, whether the in whole or in part should have been in the contributory negligence. But it was your brief that spent a lot of time talking about the proper standard for the railroad's negligence. Carter G. Phillips: There is no question about that, Justice Ginsburg. But the point is that we made both arguments. And they are in some ways intertwined, in part because so much of the doctrine of equivalence itself is based on proximate cause as the standard. And so if you go back and look at all of the common law analyses here, which are the predicate-- Ruth Bader Ginsburg: But you didn't object to the charge that was given on negligence. You didn't object to the in whole or in part. So that should be out of the case. Carter G. Phillips: --Except to the extent that the Respondents are asking you to interpret Rogers as a mechanism for getting at the doctrine of equivalence. Now, it seems to me you can answer that in one of two ways. You can say simply, as I said to Justice Scalia, Rogers doesn't speak to the doctrine of equivalence, and therefore, you don't have to entertain that, you should just reaffirm a doctrine that every court except the courts in Missouri have recognized for a very long time. Or alternatively, you can say, well, look, they say that in order to properly analyze the doctrine of equivalence, you should examine whether or not Rogers worked a sea change in the law. And we took them up on that argument, and said, we don't think it did. And that if it didn't work a sea change in the law, then there is no basis at all for doubting that you would grant equivalent instructions in these two cases. And that's the guidance you would give to the lower courts on remand. Because this case would have to go back for a new trial. Ruth Bader Ginsburg: You're not taking them up on any argument when you spent half your brief arguing about what the proper standard was for the railroad's negligence. Anthony M. Kennedy: And I would add to that that we don't usually look at a BIO to see the issues that the Petitioner is presenting. Carter G. Phillips: And you know, Justice Kennedy, I understand that. But the reality is we raised the doctrine of equivalence as our question presented. The other side raises and uses a substantial amount of its pages for the issue of the meaning of Rogers. We answer that in the reply brief. The Court grants certiorari. We decided under those circumstances that the sensible way to proceed was to address the Rogers issue. Now, to be sure, I suppose we could have said, here's... section one is the doctrine of equivalence. That's a 10 page brief. Maybe the better way to do it is just write a 15 page brief, wait for their 47 page brief on Rogers, and then 20 pages on Rogers. But we anticipated that they were going to do precisely what they did, which is-- John G. Roberts, Jr.: So you would have us announce a decision on the doctrine of equivalence without saying which way it should be made equivalent? Raising the railroad's standard or lowering the employee's? Carter G. Phillips: --Well, because... courts of appeals have been doing that for years. There have been a lot... you know, a lot of them assume that there's a lower standard, and they say that the doctrine of equivalence requires that if the plaintiff gets to go with slight cause, then the defendant gets slight cause. So that's a ruling that's been rendered for years and years. Is that the most sensible way? I don't know. I think it would make sense for this Court to address the more fundamental issue of Rogers. Because I think it is an important issue that needs to be decided. I don't think the Court needs to decide it. I do think it has been thoroughly vetted for the Court on both sides, and it would certainly provide significant guidance to the lower courts. John Paul Stevens: Mr. Phillips, may I ask you this question. Assuming you're right on the doctrine of equivalence and you're wrong on proximate cause, for the moment. Now, you said earlier in your argument, it is perfectly clear there was no harmless error here. Carter G. Phillips: Yes. John Paul Stevens: It seemed to me that a possible interpretation of the record... and I'd like you to comment of the record... is that the jury either believed the one... one truck driver or the other. And that the direct causation thing really didn't have an impact on the calculation of damages. And I was going to ask you to comment on that and to tell me whether during the argument of the case before the jury, did the plaintiff's lawyer argue, in effect, that he had... the railroad has a much heavier burden of proving a causation than we do? Carter G. Phillips: Let me take the first question first, and then I'll address the second one. There were three theories that the plaintiff put forward of the negligence of the railroad. Not just that the one driver drove the other driver off the side of the road. There was also a claim that the road wasn't constructed properly, and there was a claim that he wasn't given adequate safety instructions. And there's no way, given that this was a general verdict, to remotely figure out which of those theories was the one the jury thought was correct, and how that theory might line up with a causation theory, based on the plaintiff's own particular view and the defendant's arguments in this particular case. So it is not as cut and dried as he said, he said, and that's it. They were more theories in it. And you know, if you accept the idea that jury instructions count, and there's clearly a very different burden that's imposed on one as opposed to the other, then it seems to me the answer is there's no way for the Court to make a harmless error determination. It is also a question of State law. It ought to be decided by the Missouri courts in the first instance in any event, I would think, rather than this Court trying to sort through the record. With respect to the argument at the close of the case, I don't remember any specific arguments that either side made with respect to the burdens, because the jury instructions were what they were. And I think each side was saying, you know, we really didn't do anything wrong. And so that's basically the way that it was presented. But I think given the way the jury instructions played out, that there's no way at this time to unscramble that. Stephen G. Breyer: I think I'm seeing now, I think the structure of your brief is... perhaps a gloss put on it, but saying this: Look, we objected to the contributory negligence instruction on the ground that it couldn't be different from the direct instruction... from the railroad instruction. And we said they should be the same and they should both be in whole or in part. Carter G. Phillips: Correct. Stephen G. Breyer: And we now want you to say that the refusal of the court to do that was wrong, because it violated the equivalence. But as soon as you do that, you're going to have to think about what the right standard should be for a new trial. Carter G. Phillips: Right. Stephen G. Breyer: And if you stop there, probably, they will put the in whole or in part, but that's not the right standard. Carter G. Phillips: Correct. Stephen G. Breyer: And if you really think about it, you will see that the one we didn't ask for, but the one that the court gave, is the right standard and should have been given in the other case, too. Now, we wouldn't have to say that. Carter G. Phillips: Right. Stephen G. Breyer: But you're saying unless you say that, you're not going to give proper instruction to what happens in the future. Now-- Carter G. Phillips: You know, that's-- Stephen G. Breyer: --Now let's think back for a minute on the merits. Carter G. Phillips: --I'm sorry? Stephen G. Breyer: How could it be wrong? How could it be wrong to have instructed the jury with the in whole or in part language for the railroad, since that's the language of the statute itself? Carter G. Phillips: Well, I think if we were entitled to go back to the trial court, and if the issue was what's the proper instruction, we would have asked for and we should have properly received a proximate cause instruction. And that's what... that's the question that will be at issue on the remand. Stephen G. Breyer: What possible... you have two sides. One, you write a proximate cause instruction in whatever language you like. Carter G. Phillips: Right. Stephen G. Breyer: The other side submits a proposed instruction with in whole or in part. I'm a trial judge. I've never heard of this case, kind of case before. I just was appointed. I read the statute. And I say, well, here, theirs says what the statute says, and yours doesn't. I'll play it safe. I'll go with the statute. All right? Now, how could that be an error? Carter G. Phillips: Well, it is not a correct statement of the law. Stephen G. Breyer: All right. Carter G. Phillips: Is the answer. Stephen G. Breyer: In other words, what the statute said it is not a correct statement of the law? Carter G. Phillips: Well, because it doesn't adequately explain to the jury what decisionmaking it has to go through in order to evaluate this case. I mean, it is true, it is not an incorrect statement in the sense that there's nothing wrong with it. But it is not an adequate statement because it doesn't deal, it is not sufficient, it doesn't deal with the proximate cause issue. I mean, it seems to me-- David H. Souter: Mr. Phillips, may I interrupt on exactly the point that I think you're addressing with Justice Breyer? As I understand your argument, you're saying one view of Rogers is that the in whole or in part language eliminates the proximate cause instruction. We all agree that that is one view of Rogers. Carter G. Phillips: --Right. David H. Souter: But it also does something else. And I don't think we disagree about that either. It specifically instructs the jury that multiple causation may be present. And if it is, if the defendant is at least one, the source of one of those causes under Rogers even slightly-- Carter G. Phillips: Right. David H. Souter: --that that will suffice. The problem I have with... in a way with your response to Justice Breyer, and the problem that I have with the instruction that your side requested on contributory negligence is this: It seems to me that the in whole or in part language would be wrong on contributory negligence, or at least it would be very misleading, for the simple reason that you never get to contributory negligence unless you found the defendant was negligent in the first place. Carter G. Phillips: Right. David H. Souter: And therefore, if the plaintiff is also negligent, it will necessarily be in part. It couldn't be wholly or in part. If it were wholly negligent, you would never have found the defendant was negligent in the first place. Carter G. Phillips: I-- David H. Souter: So that to the extent the instruction addresses multiple causation, it would be misleading to the jury, and it would assume a possibility that couldn't happen. Therefore, if you are not going to mislead the jury on multiple causation when you instruct on contributory negligence, you've got to have some other way of addressing the proximate cause language. Is that analysis right or wrong? Carter G. Phillips: --Well, I think it is wrong on two levels. One is, I don't know why you would need to have proximate cause as your fallback, the last comment you just made, because it seems to me if you're saying slight cause, which is what Missouri thinks the in whole or in part means, then you can just say slight cause when you're describing the contributory negligence. David H. Souter: Okay. But the instruction that your side asked for, as I understand it, was not a slight cause instruction, it was an in whole or in part instruction. Carter G. Phillips: What we asked for was an equivalence. David H. Souter: Okay, and that... all right. But if you're asking for the in whole or in part instruction on contributory negligence, it seems to me the judge has got to have been correct in saying no to that, because to the extent that it addresses multiple causation, it would be addressing a problem that couldn't even occur in contributory negligence which will always be in part. Carter G. Phillips: That was not the basis on which the judge rejected it. He didn't reject it on the basis-- David H. Souter: Well, maybe that was not the basis on which he rejected it, but if... we've got to consider it in deciding whether to reverse it. Carter G. Phillips: --Well, the point here that remains is we said we are entitled to an equivalent instruction. Now, if there's some variant of that, we could certainly argue about that. David H. Souter: But that's not what he said. He said equivalence instruction was not on multiple causation. It was the equivalence instruction on either proximate cause or not proximate cause. It was the causation issue, it was the proximate causation issue, not the multiple causation issue that concerned you, right? Carter G. Phillips: Well, that is the specific issue in this case. David H. Souter: They don't have to have proximate, we don't have to have proximate. Carter G. Phillips: Right. That's our argument. David H. Souter: Okay. But because the instruction addresses both, in one view, proximate cause and multiple cause, it would have been misleading so far as the multiple cause issue was concerned, and a request for an instruction in whole or in part on contributory negligence really should have been denied. Is that correct? Carter G. Phillips: Well... I think... I think the argument would be that that cuts it too fine, candidly. I think you can make an argument that what, you know, what we were entitled to was some variant. And that... our objection here is not-- David H. Souter: You were entitled... your argument is you were entitled to an equivalent-- instruction on the issue of the need to prove-- Carter G. Phillips: --The slightest cause. David H. Souter: --proximate cause or no need to prove proximate cause. Carter G. Phillips: Right. David H. Souter: That's your basic argument. Carter G. Phillips: That's our basic argument. David H. Souter: Okay. Carter G. Phillips: And we didn't get that. David H. Souter: And I don't think you could have gotten where you want to go with the instruction that your side requested, which was an in whole or in part instruction. That's my only point. Carter G. Phillips: Well, it may be that the in whole part of this may have been slightly misleading, although I think you can make an argument that you can end up with in whole on both sides as a conceptual matter. But that's not the... that wasn't the complaint at trial. It wasn't the basis for the trial judge's decision, wasn't the basis for the court of appeals decision. If the Court wants to send it back and say, is there another objection to this instruction, that's fine. But it seems to me, this Court ought to address this issue in the way it has been presented. Ruth Bader Ginsburg: What was wrong with the instruction, in your view of the case, that was given, instruction number 13, negligence of plaintiff directly contributed to cause his injuries? Carter G. Phillips: Because that's proximate causation. And that's higher than we were required to prove under a doctrine of equivalence, Your Honor. David H. Souter: That's the direct language? Carter G. Phillips: Yes. David H. Souter: Yeah. Carter G. Phillips: I would like to reserve the balance of my time. John G. Roberts, Jr.: Thank you, Mr. Phillips. Ms. Perry? Mary L. Perry: Mr. Chief Justice, and may it please the Court: The controlling question raised here is whether instruction 13 accurately states Federal law. That's exactly what petitioner said in their reply brief to the Missouri Court of Appeals. They could not have been any clearer that their challenge was to instruction 13. In John versus Poulin, this Court said that State courts have the authority to prescribe the rules of procedure in their courts even when Federal issues are at stake. The requirements in the Missouri courts were not complied with here. No abstract question was presented. The sole question presented and preserved was with respect to instruction 13. And that can again be seen in their opening brief in the Missouri Court of Appeals, which specifically says the trial court erred in giving instruction 13 based on MAI 32.07(b). Samuel A. Alito, Jr.: Is the question whether instruction 13 is flawed viewed in isolation, or whether it is flawed when it's viewed together with the instruction on employer negligence? Mary L. Perry: It is viewed in conjunction with the instruction on employer negligence, but a fixed concept of what it was, they did not challenge the language of instruction 12. They accepted that. Holding that language constant, what should we do to instruction 13? They could have objected to instruction 12 and 13, and they could have said, here are a pair of instructions both in proximate cause, and here are a pair of instructions both in... resulting in whole or in part, and then they could have preserved this issue. But they did not do that. They accepted instruction 12 as a correct statement of the law, and said, now let's look at instruction 13. Samuel A. Alito, Jr.: But do you agree that they set out different causation standards, 12 and 13? Mary L. Perry: Yes, they do. Rogers concluded that 50 years ago and the courts in the Federal and State system have nearly uniformly interpreted Rogers as reaching that decision. Samuel A. Alito, Jr.: So if the causation standards are in fact the same, then instruction 13 is defective; isn't that right? Mary L. Perry: Yes, if you can reach that decision without interpreting instruction 12, or the propriety of instruction 12, particularly since instruction 12 contained the exact language of the statute. Whatever judicial gloss has been put on that language was not told to the jury. Justice Stevens, the question you asked, whether there was any argument about the different standards, the answer is no. There was no argument. The only way in which the jury learned of this difference was in the language of the instruction. And instruction 12-- John Paul Stevens: Let me ask you this question, if I may. Perhaps I should have asked Mr. Phillips. Is there such an animal as the doctrine of equivalence? I understand the restatement describes what the plaintiff's burden is on proving causation, and then it says the same rules apply to defendant's contributory negligence. But that doesn't sound to me like any overriding doctrine of equivalence. It just says when they wrote the restatement, the rules were the same. Is there such a thing as the doctrine of equivalence? Mary L. Perry: --There wasn't in the early 1900s for certain, Your Honor, because at that time, even petitioners recognized the doctrine was emerging. And if we look at the language of 53, it talks about the type of contributory negligence that used to be a bar. And that certainly was a type of contributory negligence that only arose with the traditional proximate cause. It certainly wasn't on the slightest cause standard. John G. Roberts, Jr.: Well, doesn't there have to be a doctrine of equivalence when you're running a comparative negligence regime? Because, you know, you talk about the plaintiff's negligence causing the harm to a certain degree and the defendant's negligence causing it to a certain degree. And if you're not dealing with apples and apples, it seems to me you can't conduct the comparison. Mary L. Perry: No, Your Honor. You can conduct the comparison, and it happens all the time in cases where one party has committed intentional misconduct and another party has had negligent misconduct. The causation standards are different in that instance. There's a-- John G. Roberts, Jr.: Right. But we're talking about comparative negligence here, where there's negligence on both sides. And I just don't know how you say one party's 20 percent... contributed 20 percent to the harm and the other 80 percent, if you're using different causation standards. Mary L. Perry: --Well, the causation standard is used to decide what negligence you use in the balance and in the comparison. For example, if a party is negligent, but the negligence had no causative effect, that negligence falls out of the analysis. Antonin Scalia: Yeah, but your example of other instances including having to compare a defendant who did the tort intentionally with negligent... contributory negligence, that's not what we have here. We have here a difference in the causation. Intentional or non-intentional has nothing to do with causation. But once you say that there's a difference in the causation, it seems to me you cannot compare the two. You cannot compare the two sensibly, unless you are using the same kind of a standard. I mean, let's assume that you find that the railroad did not directly, but nonetheless caused the injury to some extent, but the defendant was directly contributory to it. What do I do? Do I add another 40 percent to his culpability because it was... his causation was more direct than the plaintiff's causation? Mary L. Perry: No. Antonin Scalia: Why not? Mary L. Perry: It just affects which negligence was in the balance. And-- Antonin Scalia: No, it doesn't. It certainly bears considerably upon the culpability of the two, it seems to me. Mary L. Perry: --Well, in responding... going back to your question about intentional conduct, the petitioner's reply brief, in fact, states that a broader range of harms are considered proximately caused by intentional torts. So there is a different conception of proximate cause in that context. But in any event, their merits brief consistently argues for a proximate cause standard. In fact, it closes with that. And its criticism of instruction 13 in this case was precisely that it was a proximate cause standard. So if they are now before this Court asking for a proximate cause standard, they conceded that instruction 13 was a proximate cause standard, they in fact complained about it precisely because it was a proximate cause standard, that issue really isn't before this Court anymore. John G. Roberts, Jr.: You don't have any conceptual difficulty with adding in whole or in part to instruction 13, which is the employee's instruction, because it's comparative negligence. It seems to me that necessarily implies in whole or in part. If you can reduce his recovery because he's in part negligent, what would be wrong with saying in whole or in part in instruction 13? Mary L. Perry: Well, I think Justice Souter hit the nail on the head on that one, in that it does create confusion and it can mislead the jury that the railroad worker is responsible for other parties' culpability as well. Moreover-- John G. Roberts, Jr.: No, no. I thought Justice Souter's point was that taking it out of the railroad's instruction might cause confusion because of it. But I don't see how adding it to both of them when you're dealing with comparative negligence, and it's necessarily the case that partial negligence on either of their parts can enter into the verdict, I don't see how that can be confusing. Mary L. Perry: --Well, in-- John G. Roberts, Jr.: You can answer it. Mary L. Perry: --I don't want to interrupt anybody. Antonin Scalia: Answer the question, Justice Souter. Yes or no. David H. Souter: The point that I was trying to make about it being misleading is that if you use the in whole or in part language for a contributory negligence instruction, you are misleading the jury into thinking that at least there might be whole contributory negligence. There never will be. You don't get the contributory negligence unless you've already found the defendant was negligent, at least to some degree. Therefore, if the plaintiff is negligent, it can only be in part. That's all I was trying to say. John G. Roberts, Jr.: Under that scenario, then, what objection could there be to a recognition that the negligence of the plaintiff can contribute in part to the accident? Mary L. Perry: If petitioner had asked for an instruction that said directly contributed in part, the inclusion of the phrase in part there might not have any impact. It could still potentially mislead the jury, but they were seeking not just to add the words "resulting in whole or in part. " but remove the word "directly" because it connoted proximate cause, and that they felt proximate cause was not the appropriate standard for contributory negligence, even though now that is the standard that they solely are seeking. Anthony M. Kennedy: Well, two things you might comment on. First, the in whole or in part, you might take account of the fact that there are other negligent actors, third parties, who have contributed to the injury to the employee. Secondly, Section 53 does not contain the language in whole or in part. Mary L. Perry: Absolutely, Your Honor. It does not. In section-- John G. Roberts, Jr.: But that's what Justice Souter has identified, right? That's not because they're adopting different standards. Mary L. Perry: --I disagree, Your Honor. I think it is because they are adopting different standards. The contributory negligence-- John G. Roberts, Jr.: Well, you just told me, a good reason for not putting in whole or in part in instruction 13 is because it doesn't make sense, the whole part doesn't make sense with contributory negligence. That's a good reason not to put it in Section 53 either. Mary L. Perry: --That's one reason. But another reason is that it's a different standard. In Section 53, they're talking about contributory negligence that was a bar to liability. That type of contributory negligence was the kind that was more than... it wasn't caused by slight causation. It required proximate cause. That was a pretty harsh result. And it certainly didn't arise in instances where the plaintiff had just had the slightest causal connection. And that certainly was the conclusion in Rogers. David H. Souter: Well, no, no. May I pick you up on that? Because there's a point at which you and I are disagreeing about Rogers. And in all candor, I think it's because you are ignoring one part of Rogers, and if I'm wrong, I want you to tell me. You quote the slightest bit language from Rogers on both page 26 and 33 of your brief. And you take that as being language that eliminates the proximate cause requirement. What you don't include in your quotation is the footnote in Justice Brennan's opinion following that slightest cause language. And the footnote was to a citation, the citation was to the Coray case. The opinion in Coray was written by Justice Douglas and... I'm sorry, Justice Black. And in the very language that Justice Black used, he said expressly that if proximate cause is shown, there can be recovery. Now, given the fact that in Rogers, the very citation to the language which you say eliminated the proximate cause requirement cited a case in which proximate cause was part of the very sentence relied on, I don't see how you can read Rogers... maybe later cases, but I don't see how you can read Rogers as eliminating the proximate cause requirement. And therefore, I think you have to read Rogers as addressing the issue of multiple causation, not proximate causation. Now, am I going wrong there somewhere? Mary L. Perry: I have two responses, Your Honor. First, Justice Brennan wrote Crane twelve years later. David H. Souter: Absolutely right. Mary L. Perry: And he, you know, definitely clearly said that a railroad worker does not have to prove common law proximate causation relying on Rogers. David H. Souter: He did, but he was also pointing out, just to make it simpler, he was pointing out in Crane that the liability arose in Crane out of... I forget the full name of it... the Appliance Act. And the Appliance Act had its own set of standards. And therefore, you cannot, from an Appliance Act case, you cannot infer anything one way or the other about the general standard in FELA. And to make it even more complicated, as I recall, Rogers was an Appliance case, too, but he didn't get into that there. But my only point is, you are right about the two Brennan opinions, Rogers and the... Crane. But given the fact that it was an Appliance case, I don't think you can infer one thing or another about an ultimate FELA standard in the absence of an Appliance action. What remains is that the citation in Rogers was to Coray, and Coray spoke about there still being proximate cause. Mary L. Perry: Yes. But if we look at those earlier cases, particularly Coray, we can see that Rogers articulated what was meant by that proximate cause language. Proximate cause is, in a sense, a label for scope of liability or legal cause, as the restatement says. It doesn't have any singular conception. And in Coray, the Court found-- David H. Souter: Well, it is understood by everybody, isn't it, that at least it has the conception which is captured by using the word 13, and at least it has that core of meaning whenever it is used, doesn't it? In other words, it may not have a lot of bells and whistles associated with it in the prior law, but at least it requires some direct causation as opposed to indirect, right? Mary L. Perry: --Yes, Your Honor. David H. Souter: Okay. And that's... I don't know that Justice Brennan's citation to Coray, or Coray's use of the language carries you any further than that. But that's as far as Mr. Phillips wants to go. Mary L. Perry: We don't accept that, but even if that's the case, the Rogers... the parties to Rogers immediately interpreted that decision as affecting proximate cause. Twelve years later, this Court did say that in Crane. The lower courts have uniformly, nearly uniformly interpreted Rogers in a certain way. And at this point, stare decisis suggests that this Court should not overrule. David H. Souter: That may be. But it seems to me that that's a different argument from saying Rogers requires it, because I don't think you can get that out of Rogers. Mary L. Perry: Well, and I also think, though, that by lightening... by saying the slightest cause possible or, you know, a slight cause would create liability, that does affect proximate cause. John G. Roberts, Jr.: You don't have to say that. I mean, you know, when in doubt, we ought to follow the words of the statute. And so whole or in part makes sense with the railroad, but directly doesn't appear in Section 53. Why don't we just... why shouldn't the instruction just say, "such negligence of the plaintiff contributed to cause his injury. " It's not going to be a complete bar because we know the immediate... the next instruction talks about reducing the award by the amount of the negligence. Why wouldn't that be preferable to introducing extraneous terms? Mary L. Perry: Because Section 53 refers to contributory negligence that created a bar. And that was the type of negligence that required proximate cause. Moreover, the type of instruction you are positing is not at all what petitioner requested in this case. John G. Roberts, Jr.: Well, no, but he requested that the instructions be the same, and the directly is what causes the problem, and directly doesn't appear in the statute. Mary L. Perry: But under Missouri procedures, you have to be clear in the nature of your objection, and the objection was that we want the same language, we want the language resulting in whole or in part. And out of respect for the State courts and their right to create the rules that govern in those courts, that was not satisfactory under Missouri rules. Missouri rules also have specific requirements for what you have to do in the court of appeals. There's a 84.04. And it sets forth a very specific format, and it's supposed to start with "The trial court erred in", and then you give your reasons. And it says that negligence... it erred in instructing the jury to find plaintiff negligent only if it concluded that his negligence directly contributed to cause his injury, rather than cause his injury in whole or in part. You know, there is no issue that was preserved in the Missouri courts other than that challenge. Cook versus Caldwell which we cite in our brief, in Missouri, not only do you have to object, but you have to keep consistent with the basis of the objection. You can't just object to instruction 13 on one ground, go up to the court of appeals, and raise a completely different challenge to instruction 13. You have to stay consistent. And out of respect-- John G. Roberts, Jr.: Do you think they raised an objection based on the doctrine of equivalence? Mary L. Perry: --That was a justification for rewriting instruction 13 to include the words "resulting in whole or in part. " I do not think they raised an abstract argument about equivalency; that in order to do that, they would have had to object to instruction 12 and instruction 13, because equivalency in the abstract would require modification of both instructions, and they clearly chose to accept the language of instruction 12 and only object to instruction 13. So no, not in the abstract, it hasn't been raised. It was a justification for one particular result, and that was a result that would have modified instruction-- 13. And in a particular way, too, modified it in a way of including the words Stephen G. Breyer: I guess they want to make the argument now, whether they did or not, that if we look at Section 53, which I think is the part dealing with contributory negligence. I don't see anything else. It doesn't speak of causation at all. Mary L. Perry: Exactly, Your Honor. Stephen G. Breyer: It just says if there's some contributory negligence, the damages will be diminished according to the negligence attributable to the employee. So I take it their argument was, maybe with hindsight, Judge, don't give this direct language, because nothing requires it. And since, other things being equal, nothing requires it, you ought to give the same language you gave for the other side. And they said the judge rejected that argument, so now they tell us, well, that was wrong, he should have accepted it. And all the rest of what he's saying is just in case the Court wants to reach it, or something like that. But what about that one? Mary L. Perry: I'm sorry, Your Honor. Could you-- Stephen G. Breyer: Well, I mean, should we answer the question he now... perhaps in his minimalist position... might want to raise, or maybe did, that Section 53 doesn't speak of causation, the judge gave a causation instruction. The judge's causation instruction in their view was wrong, and the law requires the judge's causation instruction on contributory negligence, if there is one, to be the same as it was on direct, the defendant's negligence. And he says that isn't what happened, we objected to it, we produced arguments, one of them was this equivalence thing. So he's saying to us: Decide it, say that they were wrong. What's your view of that? Mary L. Perry: --We disagree with petitioner. Stephen G. Breyer: I'm not surprised. [Laughter] Mary L. Perry: The abstract question of equivalency-- Stephen G. Breyer: No, no. That's just an argument. Mary L. Perry: --Right. Stephen G. Breyer: It was not, but they say, nonetheless, we did object that this instruction was wrong. One reason it was wrong is because it speaks of causation differently than when they spoke of causation in respect to the railroad. We thought that was a reason why it was wrong then. We think that's a reason why it is wrong now, and we would like the Missouri court, but they wouldn't do it, so we want you to say it was wrong for that reason. Mary L. Perry: Well, I think we're in a difficult position right now, because they're asking for proximate cause in their blue brief-- Stephen G. Breyer: Oh, we say, well, we'll abandon all that, that's just a series of different arguments that we'd like the Court to say. Mary L. Perry: --Okay. If we're putting aside the blue brief then-- Stephen G. Breyer: If you read it carefully, you'll see it, basically. [Laughter] Mary L. Perry: --But if the question goes to the fact that Section 53 doesn't have an express causation standard in it, what you fall back on is traditional proximate cause, that Congress departed from the traditional proximate cause standard by using the words "resulting in whole or in part. " in Section 51. It didn't create the same departure in Section 53. In fact, by referring to the kind of contributory negligence that creates a bar, it was pretty much pointing right back to proximate cause. Antonin Scalia: Can you have more than one proximate cause? Mary L. Perry: I believe the treatises that say yes. Antonin Scalia: Of course. So then how can "in whole or in part" possibly eliminate the proximate cause requirement, because it could be in part and still be a proximate cause. How can that language possibly be interpreted to eliminate the proximate cause requirement? Mary L. Perry: Because when a cause that... when a slightest cause can give rise to liability, that has effectively reduced or relaxed that causation standard. There is still a legal cause requirement, yes. David H. Souter: But it could be the slightest direct cause, which is Justice Scalia's point. Mary L. Perry: Well, but if we look at like the first-- David H. Souter: Now, it may mislead the jury if that's all you say. But as a matter of analyzing the statute or even of analyzing what the Court meant in Rogers, you can have a slight but direct cause, and that would be proximate cause in the traditional analysis; isn't that so? Mary L. Perry: --Well, no. The Restatement, for example, at the time of Rogers talked about substantial factors, and talked, in other words-- Antonin Scalia: How can you say no when you acknowledge that the prior law when there was contributory negligence used to require proximate cause for both the negligence of the defendant and for the contributory negligence of the defendant? Such a situation could not exist unless proximate cause doesn't have to be the sole cause. It can be just the cause in part, right? Mary L. Perry: --Right. Antonin Scalia: So the mere fact that we had contributory negligence statutes that were applying proximate cause requirements demonstrates that a proximate cause can be a cause in part. Mary L. Perry: Yes, Your Honor, but what Rogers and the statute recognizes that it can be a very, very slight cause. And what it was understood, for example, in the-- John G. Roberts, Jr.: That's what Rogers might have said, but the statute doesn't say anything about slight cause. It only says in whole or in part. Mary L. Perry: --And neither did the instruction. It just used the words "resulting in whole or in part. " also. But Rogers did interpret the language as meaning playing any part, even the slightest. And that has been the law for 50 years. And it would be a massive change in the law, as Justice Scalia said earlier, for this Court to depart from that at this point in time. Antonin Scalia: It doesn't seem to me that slight is the opposite of proximate. It could be a slight proximate cause. Mary L. Perry: The Restatement at the time of Rogers talked about substantial factors, and in the comment to that, it explains that sometimes the other causes can be so predominant that one causation is just not sufficiently significant or of sufficient quantum to constitute a legal cause. So there is a component of quantity within the concepts of proximate cause. I believe their reply brief talks about substantial factor, and to talk about something as being a substantial factor does have a quantum component to it, just as slight has a quantum component to it. A slight cause could not be a substantial factor, or oftentimes would not be a substantial factor. So the two really do go hand in glove. David H. Souter: But under the old rule that plaintiff's negligence in whatever degree was an absolute bar to recovery, wasn't the rule customarily stated that plaintiff's negligence, however slight, was a total bar to recovery? Mary L. Perry: I'm not aware of that, Your Honor. It may be. David H. Souter: I thought it was. I may be wrong about that. Mary L. Perry: I am not aware of that. So that would be a pretty harsh remedy if that were the case. David H. Souter: That's what I thought. Yes, I thought it was a pretty harsh rule. Mary L. Perry: And clearly, Congress in this statute was trying to move away from the common law in many respects to protect the railroad worker. And the interpretation of Section 51 as lightening the causation standard for the defendant's negligence, but leaving intact the traditional proximate cause standard for plaintiff's contributory negligence completely comports with the purpose of Congress in enacting the statute. John G. Roberts, Jr.: Why isn't "in whole or in part" simply the logical corollary of introducing comparative negligence? Why do you have to read that as departing from proximate cause, instead of simply recognizing that under 53, negligence on the part of the employee can reduce recovery which... without barring it? Mary L. Perry: I reach that conclusion on the basis of Rogers. And in the petitioner's brief-- John Paul Stevens: Beyond that, if the plaintiff's negligence was in whole the cause of the action, then the... there was no reason to get to comparative negligence or contributory negligence, because by hypothesis, there would have been no negligence by the defendant. Mary L. Perry: --Yes, Your Honor. John G. Roberts, Jr.: That's why you don't have 53, not because they wanted to depart from proximate cause there, but because, as Justice Stevens pointed out, you wouldn't have it in whole or in part. Mary L. Perry: Even the petitioner's brief describes the language "resulting in whole or in part. " as an elaboration of proximate cause. They recognize that it has bearing on proximate cause. And so if it has bearing on proximate cause in Section 51, it certainly would have bearing on proximate cause if it was incorporated into the language of the instruction on contributory negligence. So that may be one reason for not including the language, but another reason is that it does affect the causation standard and Congress did not incorporate it in Section 53, whereas it did have it in Section 51. And when it modified the statute in 1939 for assumption of the risk, to abolish assumption of the risk, it did not equate proximate cause and necessarily as the same thing because one version had proximate cause and it was not adopted. The phrase was used in its place. So suggesting that Congress may, in fact, have seen a difference, just as Rogers concluded, and I think rightly so. Moreover, as I said, that has been the law for 50 years, and it's pretty settled in this country and it would create a massive change if this Court were to depart from that. Moreover, this is not the right case to decide that because the language in instruction 12 said, And petitioner has never-- Antonin Scalia: It is not the kind of change anybody would have relied on, is it? I mean, I find it hard to see reliance interest on this interpretation. Mary L. Perry: --Excuse me, Your Honor? Antonin Scalia: I find it hard to see any reliance interest on this 50 year old interpretation. Is there anybody doing something differently because they believe that the railroad does not have to be accused of proximate causality? Does anybody act differently because of that rule? I don't think so. Mary L. Perry: Well, for Mr. Sorrell in particular, I mean, he acted, that he allowed that instruction to be used, and now they're attempting to disrupt this judgment. John Paul Stevens: I suppose employees have been under the rule for a long time. Mary L. Perry: Yes. Anthony M. Kennedy: I suppose employee associations, workman compensation schemes and Congress have all relied on it. Mary L. Perry: Yes, you're absolutely right, Your Honor. And there is employees' compensation for railroad workers, and that may be very well be because of this interpretation of Rogers that was adopted 50 years ago. John G. Roberts, Jr.: Thank you, Ms. Perry. Mary L. Perry: Thank you. John G. Roberts, Jr.: Mr. Phillips, you have two minutes remaining. Carter G. Phillips: Thank you, Mr. Chief Justice. I'd like to address just sort of two issues. One is the minimalist issue that Justice Breyer asked about. It seems to me that the minimalist way to look at this case is we raised the question of whether or not the Missouri standard which says that you cannot deviate from our designated instructions creates a disparity in the way you approach negligence and contributory negligence, that disparity is inconsistent with the common law doctrines, and nothing in FELA modifies it, and it's wrong. And that by itself warrants the case being set aside and a new jury being... and a new trial. That's the simplest way to resolve the issue. If the Court wishes to go forward and deal with the issue that Justice Souter addressed, then the question is, what does Rogers mean and what do you do with this "in whole or in part" language. And if you go back... you asked the question, Justice Souter, you know, what does the common law say. We cite this on page 38. If its negligence contributes proximately to the injury, no matter how slightly... there must be a dozen cases that we cite in those briefs that talk about no matter how slightly. And they refer to "in whole or in part" as language that still recognizes that you still require proximate causation. The reality is nothing in Rogers remotely casts doubt on cases like Brady that say but-for causation is not enough, you have to have proximate causation, or Earnest, where this Court said that proximate causation is the correct jury instruction that has to be given. This Court said nothing about that in Rogers. Ruth Bader Ginsburg: Would you have in your ideal instruction the words proximate cause given to the jury, that defendant's negligence must be the proximate cause of plaintiff's injury? Carter G. Phillips: No, Justice Ginsburg. We didn't ask for that. All I'm saying to you-- Ruth Bader Ginsburg: Would you? Carter G. Phillips: --is that the guidance of the Court on remand, you could, and we would ask you to address that issue and to resolve it. It is fairly in front of you. Ruth Bader Ginsburg: But in your model instruction, in your correct instruction, would the jury be told, in order to hold the defendant liable, you must find the defendant's negligence is the proximate cause of plaintiff's injury? Carter G. Phillips: Yes. That would be my preferred instruction on remand, yes. Ruth Bader Ginsburg: Even though almost universally, the term proximate cause has been criticized as totally incomprehensible to juries? John Paul Stevens: Let me ask this one very brief question, Mr. Chief Justice. In your view, would the doctrine of equivalence be satisfied if we simply directed that the word directly be omitted from the instruction 13? Carter G. Phillips: I think that would certainly go a long way. I don't know exactly how strictly you want to do it, but sure. I mean, that's the pivotal problem with the way that instruction reads today, Justice Stevens. John G. Roberts, Jr.: Thank you, Mr. Phillips. The case is submitted.

Earl Warren: Number 131, Margaret L. Holt, et al., Petitioners, versus Alleghany Corporation, et al. Yes, and Number 132, Margaret L. Holt, et al., Petitioners, versus Allen P. Kirby, et al. Mr. Updike. Stuart N. Updike: Mr. Chief Justice, may it please the Court. Since I have two petitions to argue here, I would like subject to the approval of the Court to argue the basic case first, and the intervention problem second, because I think it will economize on my time and the Court's time. Earl Warren: You may proceed in your own manner, Mr. Updike. Stuart N. Updike: Thank you sir. This action was begun to set aside for fraud the settlement of prior derivative actions. The same relief here is sought that was demanded in those actions, that is the return to Alleghany Corporation of stock, as we say, illegally taken from its portfolio or damages measured by the value of that stock. The prior actions were pending in the District Court for the Southern District of New York and the New York County Supreme Court. They claimed among other things that the principal defendant here, Allen Kirby and three other officer, directors of Alleghany Corporation, acquired 48,000 shares of a Class A stock of investors diversified services from Alleghany's portfolio. The stock was alleged in both the state court and the federal court to have been acquired by means of false and misleading proxy material in violation of Section 14 (a) of the Securities Exchange Act of 1934. It was successful in gaining shareholder approval. The prior actions also alleged that the same facts gave rise to a common law liability. All of these actions were settled with judicial approval of the state court in December 1959. Speaker: The basic action for both -- there was an action of the stockholders suit in the federal court and the stockholders suit in the state court? Stuart N. Updike: Yes, Your Honor. Speaker: And the ultimate settlement was made in the state court, (Voice Overlap)? Stuart N. Updike: In the state court only, yes sir. For convenience and speed in getting through fairly lengthy facts, I would like to divide my fact presentation into three-time groups. One, the period of 1949-1950, when the self-dealing transaction took place; two, the period from 1954 through 1957 when these litigations were proceeding and discovery and in the direction of settlement; and finally, 1959 when the case was settled with New York State Court approval following which this action was brought. And while this action was pending, it was brought on behalf of Alleghany by Murchison Brothers of Dallas, Texas and a man named Fossland (ph) in Chicago seeking to set aside these settlements on the grounds that I have stated but while this action was pending and in the course of a proxy contest, a -- the slate of Murchison Brothers succeeded in ousting Mr. Kirby's management and as a consequence of that, certain of what we call, the concealed material which we think was crucial to the determination of the liability involved that is when it was found. Now, the self-dealing transaction came about like this. In 1949, Alleghany Corporation after a good deal of careful study and on the recommendation of Mr. Kirby, and Mr. Robert O. Young, who was the Chairman of the Board of Alleghany Corporation, they acquired 85% of the voting stock of IDS. IDS is the investment advisor of the largest mutual fund complex in the United States. And in 1949-1950 it was also a highly leveraged investment company on its own. IDS had in addition to its voting stock, Class A stock, the only difference being that the Class A stock had no vote. And while control of the voting stock was being acquired, authorization was given by the Board to acquire some Class A stock as a long term investment for Alleghany. In that manner, 48,000 shares were acquired at an average cost to Alleghany of $8.15 per share. Upon acquiring control in April of 1949, Alleghany sent a man named Robert Purcell who was Vice-Chairman of its board and a Securities Analyst named Shipman to IDS and those men found at IDS that there was a regular year in, year out, month in, month out program of forecasting the income, forecasting the expense and finally forecasting the net earnings of the corporation. As a result of those trips to Minneapolis where IDS had its base, one of the forecast that was found was a five-year forecast dealing with the years 1949 through 1953 and whereas the stock had earned a $1.25 in 1948, that was the year before it, Alleghany bought in the prognosis by ideas for its earnings was $4.59 for 1949, $5.67 for 1950, almost $8 a share in 1951 and over $10 a share in 1952. With this information at hand, and on the 6th of December, 1949, a board of seven directors met, there were 10 directors of Alleghany but only seven were present. And of that seven, four, well, Mr. Young, the Chairman of the Board; Mr. Kirby, the president; Mr. Purcell, the Vice-Chairman; and Mr. Anzalone, the Secretary. All four of them of course were directors and they were needed for a forum and they formed a majority of the board at the meeting. At the suggestion of Mr. Young, it was resolved that Alleghany offer to the officer, directors, the opportunity to acquire 48,000 shares of this stock at the average price to Alleghany in exchange for turning in Alleghany preferred stock at market value. After that meeting -- oh, this was made subject to stockholder approval at the stockholders annual meeting on May 3rd, 1950. But between the date when this stock opportunity was voted and the date of the shareholders meeting, additional projections were prepared, additional projections came to the attention of Mr. Purcell, Mr. Shipman and as we contend to Mr. Young. In some respects, we know from the court below that some of them came to Mr. Kirby. Those projections indicated that for 1950 itself, these shares being offered to these directors for $8.15 as a whole purchase price, these shares were expected to earn over $20 per share and that in the five-year period of which 1950 was the first year, in no year would be the earnings be less than $13 per share and the average earnings were almost $18 per share. Now that, if the Court please, is the posture with respect to the so-called inside information as we charge, and of course, none of these information was ever disclosed in the proxy material. That is the transaction that all of the judges of the Court of Appeals held was illegal because it violated fundamental principles against self-dealing. They all concluded that the proxy material was false and it was misleading especially in its omissions. In 1954, more than 20 derivative actions were brought against the insiders on Alleghany's behalf. Some eight different cause of action were alleged in the New York cases, one of which was one based on this transaction, and that's the only transaction that we bring before this Court. It was the insider's fraud as we claim in achieving a settlement of those actions that this case derives. Ten of those actions were instituted in New York State and they were consolidated under the caption Zenn against Anzalone. Ten parallel actions in the Southern District of New York likewise were consolidated under the same caption and Abraham Pomerantz who perhaps is the best-known man in the field of derivative stockholder litigation was named as general counsel for all of the plaintiffs in both the state court and the federal court in the consolidated action. Mr. Kirby was a citizen of New Jersey and he was named as a defendant but he was not served in the state court action. The plaintiffs here holds however, were able to bring him into the federal court action, as we call it, Zenn federal by saving him extra territorially under the Federal Securities Acts, he appeared in the federal case, was represented there by counsel and that case is still pending in the Southern District Court, not dismissed. Both the complaints in the state court and the federal courts specifically referred to Section 14 (a) of the Securities Exchange Act in alleging that they had -- that the shareholder vote had been achieved by the use of force and misleading proxy statements. The Pomerantz led group commenced discovery in Zenn federal and as part of that discovery, Pomerantz demanded any and all forecasts and projections of IDS earnings prepared by or for the use of Alleghany or IDS and although those -- such projections did exist, and at least three out of the four insider defendants knew it, none were produced among the thousands of papers. Thousands of papers were produced for Mr. Pomerantz's firm and for the other plaintiffs' lawyers in these cases, but none of these were produced, and Mr. Pomerantz so testified in the court below. His proceeding -- discovery proceedings were interrupted by an offer of settlement from the defendants. And unaware of the existence of these projections, Pomerantz reached a settlement of this and of other causes of action for an aggregate sum of $700,000. I will deal more fully with this in a few moments but at page 1359 of the record is a replica of a longhand letter. Byron R. White: What volume is that? Stuart N. Updike: This is in Volume 4 sir, page 1359. It's a replica of the letter and I draw attention to its date, July 27, 1954, this is some months after the commencement of the derivative litigation that I've just referred to. It's a letter from Mr. Purcell to Mr. Robert Young. And he transmits with this letter in completion of Mr. Young's talking with Mr. Pomerantz, the counsel for the plaintiffs in these shareholder cases, he transmits to Mr. Young one of the projections which had it been shown would have demonstrated that the stock would -- was believed in 1950, in January or February of 1950, was believed to be about to earn $20 a share and that is the subject -- thank you -- that is the subject of this letter and I shall deal with it more fully in a few moments. Although the discovery had been conducted in Zenn federal, the settlement was taken to the New York State Court for submission and for approval. Now, about this time, a competing group of Alleghany shareholders led by a man named Randolph Phillips and a lawyer named Graubard instituted an overlapping derivative action in the Southern District which was captioned Breswick against Briggs. They obtained an order in the Breswick case which stayed the use of the Pomerantz settlement by the defendants in these Pomerantz -- in the Zenn cases. They stayed the use of any settlement negotiated with Pomerantz with which excluded negotiations with the Breswick plaintiffs and their counsel. And Judge Dimock later was to refer to that order, that state order, as creating a veto in the Breswick plaintiffs over the Zenn settlements. Now, this Graubard-Phillips group appeared in the state court to oppose the settlement negotiated by Pomerantz and the state court referred the matter to a Referee to hear and report on its fairness. In this posture, the state court Referee hearings began after the fairness of the settlement. The Pomerantz of course, claiming that it was fair; Graubard claiming that it was unfair. But both of them were proceeding in ignorance of what we now know to have been extensive forecast and projections of income that were available to the insiders. The issue before the Referee was stated by him, thus, was there substance to the shareholder claim that the upward surge of IDS earnings was foreseen to or foreseeable by the insiders. Was there substance to the claim that the proxy material was false and was misleading? Now, Mr. Graubard pursued these issues relentlessly and unsuccessfully over 35 hearing days extending over some three months, he repeatedly reiterated Mr. Pomerantz's demand for forecasts, for projections, for earnings, for financial records in either of those categories but he never got to see the projections that are before this Court and in this record. Thank you. In Volume 3, at page 1104 appears the five-year forecast beginning in 1949 and running through 1953. I referred to earlier, this was sitting in the files over time and it shows in 1953, I've given the Court the other figures that by 1953 these shares were expected to earn over $12 a share. That by turning in the same volume to page 1121 -- we have, I'm sorry to say the reproduction is not very clear. But it still can be figured out. We have the five-year period beginning 1950 and running through 1954, and there as the Court will see for the year 1950 the projected income is $7,100,000 which is over $20 a share and almost $300,000 shares outstanding. And for the next year, it's $18 then $13 and then $15 and then $18 again. In addition to these projections, the records showed that actuarial studies had been made with a view to determining whether IDS was going to be able to meet its obligations on time, studies of cash flow and again, each one of those actuarial studies was related to the forecast to which I've just drawn the Court's attention. In addition to these great -- Speaker: Excuse me, may I? May I? Stuart N. Updike: In addition to these five-year projections, I'd like to draw the Court's attention to page 1136 which is a one-year projection and it's done my months. It's for the year 1950 and in the lower right hand corner appears the date, April 14, 1950, that's three weeks before the shareholders' meeting was due to take place and two weeks before the supplementary proxy material required by the Securities and Exchange Commission was sent out. Byron R. White: Was this (Inaudible) this was never disclosed? Stuart N. Updike: Never disclosed sir. Byron R. White: And there was no mention (Inaudible)? Stuart N. Updike: No sir. I know my adversaries will contend, not these were present for that one -- an ingenious lawyer might have been able to put together some of these conclusions but I will deal with that too sir, if I may, in a few moments. Mr. Graubard testified below that he had (Inaudible) -- he had seen all of the Alleghany files. Well quite obviously, what he necessarily meant was that he believed he'd been given the opportunity to see all of the Alleghany files because he couldn't know what's fact, that he'd seen them all. So when I showed him these five-year projections, and he saw that stock being bought at $8.15 was due to earn $20, $18, $15 over the next ensuing years, he said, “Had I seen anything like those earnings so high, I would have introduced it had I known.” Now, it is our claim that one cannot believe on this record that these documents were ever made available to men of the ability and background of Mr. Pomerantz and his partners, Mr. Graubard and his partners, there were 20 sets of lawyers who went over these papers to whom they were made available. Byron R. White: (Inaudible) Stuart N. Updike: I beg your pardon, sir? Byron R. White: And not made available to the judge. Stuart N. Updike: And not made available to the judge or the Referee. And one of the best proofs of this in my judgment is that Mr. Graubard kept asking for these forecasts and not once over a period of several months, not once did any lawyer representing the defendant say, “Why Mr. Graubard, we gave you those. Mr. Graubard, don't you remember that you had those?” They never were given. Now, if the Court please, in addition to this and I will only touch it very lightly. Byron R. White: Well what did the -- Stuart N. Updike: Mr. -- Byron R. White: What did the District Court or the Court of Appeals (Inaudible)? Stuart N. Updike: They -- the District Court took the view that many, many papers had been given as to whether these particular ones had been put before them. He made no specific finding. Now the Court of Appeals took the view that not reaching that question that these documents were not material in the sense that they would not -- applying the rule of ordering a new trial on the basis of newly discovered evidence. They would not probably have changed the result in the mind of the Referees. Now, in our view, a -- an examination of them clearly indicates that had these been before the Referee, he would have. He couldn't possibly have found the way he did which was to approve the fairness of the settlement at $700,000 but even if I'm wrong about that, we argue to this Court that the proper test is not the test for ordering a new trial on the basis of newly discovered evidence where probably would change the result as to usual tests. We urge here the test that was suggested by Judge Friendly in his dissent, is there any fair basis for believing that these might have changed the result and by that test of course we fairly think that they would have changed that result. William J. Brennan, Jr.: Well, Mr. Updike. Stuart N. Updike: Yes sir. William J. Brennan, Jr.: If the test were -- would follow this change in the result, what scope of their review that that judgment in the Court of Appeals assuming the test they applied was (Inaudible)? Stuart N. Updike: Well, if the Court please, I think it's a question of law for this Court to decide whether the proper test was applied because -- William J. Brennan, Jr.: I'm assuming if I may for a moment -- Stuart N. Updike: Yes sir. William J. Brennan, Jr.: -- without intimating at all -- I mean, disagreeing with you about it. They did apply the test, would probably change the result. Stuart N. Updike: Yes sir. William J. Brennan, Jr.: And my question is, when they apply the judgment in this record that it would not probably change the result. Now, my question is, if that were the correct tests, what scope of our review was that judgment? Stuart N. Updike: I think the scope of your review on the judgment is as to whether their being a federal cause of action, being subject to the settlement that this Court has the power to determine the criteria by which that settlement shall be either set aside for fraud or not set aside for fraud and that -- William J. Brennan, Jr.: Or that -- was that -- are we then to do -- hold again the job that the Court of Appeals did? Stuart N. Updike: Well, I think that this Court can review again the criteria that were applied by the majority in that case. Byron R. White: Yes, but what is -- what if the criteria were correct? And what if the rules they applied were really correct? And Mr. Justice Brennan asked, why should we second guess the Court of Appeals in reviewing this essentially questions of -- out of the evidence? Stuart N. Updike: Well, they -- it -- if I get the Court's question, and perhaps I don't get it clearly, but this Court is sitting in review of a determination by the Court of Appeals where the Court of Appeals did not seek to apply what I called federal criteria -- Byron R. White: Well, I didn't -- Stuart N. Updike: -- to this issue. And -- William J. Brennan, Jr.: Oh, the question Mr. Updike, is suppose we disagreed with you on that point -- Stuart N. Updike: Yes. William J. Brennan, Jr.: -- and suppose we conclude that the Court of Appeals did indeed apply the correct criteria, and my question is, how far do we review their application of those correct criteria? Stuart N. Updike: Well, I -- it seems to me that if this Court can conclude that this was fairly erroneous that it should so rule. Byron R. White: Well, now, where -- did the Court of Appeals say what the origin was of the rule that was applied? Did it say it was federal law or state law or was it wholly silent? Stuart N. Updike: It was wholly silent. It did not -- Byron R. White: And the -- what do you -- do you suggest that the Court of Appeals was applying state law rather than federal law? Stuart N. Updike: No. I suggest that the Court of Appeals, the majority of the Court of Appeals was applying what might be called federal common law according to which views but not the lower -- the policy of which has been determined by this Court with reference to the federal securities statutes. Byron R. White: Let -- aside from the federal securities law, would you say this would be a federal question or a matter of state law? Stuart N. Updike: I think that this would be a matter of state law aside from the federal question, unless one can agree that there is -- Byron R. White: (Voice Overlap) Stuart N. Updike: -- such a thing as a federal common law then it would be a matter of state law. Byron R. White: But aside -- you say that this is the federal statute, the federal securities laws -- Stuart N. Updike: Yes sir. Byron R. White: -- which make this a federal question rather than a state law question. Stuart N. Updike: Because a federal cause of action was the subject of the settlement and this Court has repeatedly held that where a cause of action federal in nature is being settled, the criteria for the settlement are to be derived from federal considerations and not based on state considerations. Byron R. White: And so the federal standard of disclosure should apply. Stuart N. Updike: Yes sir. In other words what we say -- Byron R. White: And is it the same standard for disclosure in the settled -- in the process of settlement as it is in the process of buying the stock? Stuart N. Updike: That's precisely our argument. That is the disclosure which should have been made to the shareholders in the first instance. It's precisely the disclosure that should have been made to the Referee and indeed to the federal court in New York when the federal court was asked to lift its injunction and I would ask if I may to get the Court to turn to that -- Byron R. White: Yes, but, well on the sense, may I get it? You're saying the Court of Appeals has simply applied a wrong standard to (Voice Overlap) -- Stuart N. Updike: Yes sir. Byron R. White: -- to this question, namely that the -- that (Inaudible) -- the question of actuality rather than probability. Stuart N. Updike: The state court deferred -- I mean the District Court deferred to the state rules. The Court of Appeals did not do that. Byron R. White: Did the District Court did? Stuart N. Updike: The District Court turned to the state for its guidance. It went to this -- New York state cases with respect to the so-called in -- extrinsic-intrinsic fact rule in determining whether or not one could set aside the judgment for fraud. But on appeal, the Court of Appeals -- Byron R. White: Didn't say which -- Stuart N. Updike: -- did not do that. Byron R. White: It didn't say which it was applying, did it? Stuart N. Updike: No. It did state -- Judge Kaufman stated that principles of comity and institutional maintenance I think is what he called it, the idea of being but one shouldn't idly and easily disturb a New York State Court judicial determination. So he -- in that sense, he vowed as a matter of comity to the state court but he did not go out and apply New York state law to the issues. Byron R. White: What makes you -- what makes you think the federal rule is the rule you -- the federal rule is as you announced it? Stuart N. Updike: Well, the federal rule as I announced it, I derived from the cases that this Court has decided in construing Section 14 (a) and in construing other aspects of the Federal Securities Act. Byron R. White: So you say essentially the stockholders action, the original stockholders action is a suit under 14 (a)? Stuart N. Updike: Yes sir. It's right in the complaint and both in the state court and in the federal court. Now, in the state court, when the matter came up for settlement, and Mr. Graubard and Mr. Phillips opposed confirmation in part on the ground that the federal court had exclusive jurisdiction of the cause of action under Section 14 (a) but at that point, the New York State Court was asked to and it did construe the allegations identifying 14 (a) in a state case as being a mere X questions and could be disregarded in connection with the approval of the settlement. But the 14 (a) identification is clear in the Zenn federal case and that case of course is still pending -- Byron R. White: What's the -- what (Voice Overlap) -- Stuart N. Updike: -- in the District Court. Byron R. White: What case gives the stockholders the right to private actions under 14 (a)? Stuart N. Updike: Case against Borak, isn't it? Byron R. White: Is that a 14 (a) case? Stuart N. Updike: Yes sir. It held squarely that it gave rise to a derivative right and a private right and the shareholder. Now, returning briefly to the picture before the Referee, the -- Young and Purcell testified, Mr. Kirby did not. When Mr. Young and Mr. Purcell testified, they testified in terms of what oblique future ideas had in the spring of 1950. They testified that it was underwater, that it was a dog, they used all of the deprecating words that man skilled in finance can used with respect to a corporation. And all of the time, as we contend, they had in their back pockets the information that we say should have been before the Referee and I now return if I may to that letter. Speaker: The 1359? Stuart N. Updike: Yes sir, 1359. Letter from Mr. Purcell to Mr. Young, “The enclosed, dear (Inaudible) -- the enclosed letter from Mr. Waag. Now, Mr. Waag is the Vice President and Comptroller of IDS, the man in charge of its fiscal records. “The enclosed letter to Mr. Waag with accompanying material is information relating to 1949 versus 1950 income. That is folded in line with our talk following your meeting with Pomerantz. I suggest that you note among other things on page 2 of the income account attached to the comments on operations for December 1950. That income from operations, i.e., before taxes or capital transactions had been projected at $5,992,000. That figure had been projected at. That figure is over $20 a share. But it turned out to be $8,600,000 which is over $25 a share. I draw the Court's attention to the following observation by Mr. Purcell. This may not be too helpful. Now, this is in contemplation of a talk between Young and the plaintiff's counsel. This may not be too helpful especially since the income for the proceeding here was a $1.5 million which is a little bit over $4 a share. Now, if the Court please, Mr. Waag had sent three enclosures in his letter to Mr. Purcell. Mr. Purcell sends Waag's letter and those three enclosures with this longhand letter that I just read to the Court. Two of the three enclosures that came from Mr. Waag to Mr. Purcell were innocuous. They contained information that was generally available and those two enclosures were produced. They were given to the plaintiff's counsel. They were introduced in evidence before the Referee. But the piece of paper that contained the projection of $5,900,000 never found its way in that case at all. The state court proceeded to confirm the Referee's report subject to the state that the Breswick plaintiffs had. In September 22, 1959, Judge Dimock handed down a decision in which he declined to vacate the stay. He had been asked to do so in order to pave the way for the approval of the state court settlement. He declined to do so in stating that the adequacy of the settlement in his view had not been completely probed. Following that, the defendant Ireland who had been working for the New York Central informed Mr. Kirby that he was going to be called as the first witness on the new hearings that had been ordered by Judge Dimock. He also told Mr. Kirby that Mr. Young had figured himself in the state court proceedings, the settlement hearings and that this would undoubtedly be brought out on the new hearings. Mr. Kirby immediately turned to his lawyers. They also represented Alleghany incidentally. He turned to his lawyers and asked them for their opinion as to his maximum outside liability if everything went wrong. And they advised him that his potential personal liability arising out of this transaction totaled $62 million. Now, spurred by that advice, Mr. Kirby authorized the commencement of new settlement negotiations which he carried on through Mr. Ireland who by this time had become an officer of Alleghany Corporation and Mr. Ireland negotiated with Mr. Phillips who was a representative of the plaintiff's counsel. And as a consequence of their negotiations before the end of 1959, a separate settlement from Mr. Kirby had been worked out by his paying an additional $1,100,000 beyond the $125,000 which was his share of the prior $700,000 figure. Now, in connection with the presentation of this, Mr. Kirby retained new counsel. His former counsel were representing the Estate of Robert R. Young and the Robert R. Young Estate was not settling so Mr. Kirby retained new counsel. And at the same time, it developed -- there was a need to have counsel for Alleghany and at that point, Mr. Ireland, a lawyer, became Alleghany's counsel in presenting this settlement to the United States District Court for the Southern District. Now, he is the man who negotiated the settlement on behalf of Mr. Kirby and in that connection, the testimony below was -- there was testimony below that Mr. Ireland with the approval of Mr. Kirby offered $45,000 a year for 10 years and a position to Mr. Phillips to induce him to take the settlement offer. The District Judge however found that Mr. Phillips rejected the bribe offer. Mr. Ireland representing Alleghany, the Graubard plaintiffs having now become satisfied with the new offer, they will join hands as Judge Friendly said at his dissent below and went before the Court and Judge Dimock left it to stay. They went to the state court and the state court made its settlement -- its order approving the settlement final. Nothing was done then and nothing has been done since to remove Zenn federal from the row in the United States District Court for the Southern District and in that connection, there may be a technical problem. First, if the Court please, we think that Mr. Kirby would like to have the benefits of this settlement without accepting the responsibilities for the concealments that made it possible. Now, I have been charged as having abandoned any claim against these defendants in the -- or at least against Mr. Kirby and against Young and Purcell in connection with the trial of this case in the District Court, because I did say I didn't know who did it. I didn't know who was responsible for these concealments but I didn't abandon the fact that they were the concealments or that Mr. Purcell and Mr. Young testified with respect to areas where they obviously had to have knowledge such as indicated by this letter and where they -- never made the disclosures. So this was argued to the District Court, it was argued in the post trial brief to the District Court and of course it was argued in the court below. Byron R. White: Did Pomerantz testify? Stuart N. Updike: Yes he had testified in this case and he said he had never laid eyes on these documents that I've -- I have identified to this Court as being what we call the crucial documents. Byron R. White: (Inaudible) Stuart N. Updike: The question was not asked. Speaker: (Inaudible) Stuart N. Updike: Beg pardon? Speaker: (Inaudible) Stuart N. Updike: No, it was received in evidence at least -- the testimony was received by the Court but as to whether he was asked whether it would make any difference, we have the best testimony of all, it was Mr. Graubard who said, “Had I seen these, had I known these ratios, I would have put it in, had I known.” Byron R. White: (Inaudible) Stuart N. Updike: That question was not asked. Byron R. White: (Inaudible) Stuart N. Updike: Or Mr. Pomerantz either. In our view, these documents are so shocking that we have to ask ourselves whether the shocking character of it -- of them does not in itself persuade that the same result could not have been achieved. As a matter of fact, if the Court please, bringing your attention back to the -- just the one year projection. Yes, I have it right here. It's at page 1137 of the record. I asked this Court if you had been Judge Dimock and you were being asked to lift a stay and that after you had made a decision requiring them to go back and have more hearings, and you come in with a new settlement -- they come in with a new settlement proposal and you are sitting there being asked to lift to stay and somebody quietly gave you this exhibit which showed that in 1950, it was projected that this company would earn $20 a share. I'm sure that no judge on this bench and no lawyer in this courtroom would have allowed this case to go through on the basis that it did. The earnings alone are three times the purchase price of the stock. Byron R. White: The Court of Appeals did, (Inaudible)? Stuart N. Updike: I beg your pardon. Byron R. White: (Inaudible) Stuart N. Updike: No, the Court of Appeals in my view having found that it was illegal and having found that it was false and misleading as far as the information was concerned the Court of Appeals then went on to say, “Well, we don't think that all of these documents would really have probably changed the result.” And in so doing, the Court of Appeals felt in my judgment into the error of looking for example at the exhibit that when it was concealed when the material from Young's letter was supposed to be put into the case, the two innocuous exhibits are put in. The one important one contained actual figures for 1950. They also contained the projection for 1950. And because actual figures for 1950 were in the document, Judge Moore says, “Well, this was obviously prepared after 1950.” And in consequence, he bypassed the significance of the projection for 1950. Now, I have urged the Court that this is a case requiring disclosure and that the same standards for disclosure should follow through litigation and follow through settlement because -- it's time for recess. Earl Warren: (Inaudible) your sentence. Stuart N. Updike: Thanks. Earl Warren: Just finish your sentence. Stuart N. Updike: It should follow through settlement because if, as the District Court held, a director who was engaged in self-dealing suddenly loses his obligation to make disclosure because a litigation has been commenced against him, that we think is an invitation to reward oneself by nondisclosure. We think it's a very serious loophole in the law if that continues to be the rule. Thank you. Earl Warren: We'll recess now. Mr. Updike, you may continue your argument. Stuart N. Updike: Thank you Mr. Chief Justice. At the opening -- in the beginning of the recess, I was dealing with the duty of disclosure as we conceived it to be and indeed we think that that is where the Court of Appeals did go wrong in holding as it did that a -- as soon as a self-dealing director is sued by a shareholder, his duty of disclosure ceases. He becomes an ordinary adversary in litigation. This is true even where the subject of the cause of action is a charge of a violation of Section 14 (a) of the 1934 Act. William J. Brennan, Jr.: Mr. Updike, -- Stuart N. Updike: Yes sir. William J. Brennan, Jr.: -- frankly what is the definition of the federal being (Inaudible). Stuart N. Updike: Well, I would define it with reference to a self-dealing transaction. Now, I realize we're in a broad area here where directors perhaps could be sending out proxy material with respect to a subject matter where later on the charge instead of being self-dealing might be ways of mismanagement or some just charges that. But where self-dealing is involved, in my judgment the disclosure that must be made to the Referee and the courts is measured by the amount of the disclosure that was necessarily to be made under the statute to -- in the first instance, when seeking the shareholder approval and that means in this instance that all of the inside knowledge that these directors had with respect to future earnings should have been disclosed or they shan't be able to keep the stock that they took. Byron R. White: Well not all of the courts said -- all the courts apparently agree with you that there was not adequate disclosure. Stuart N. Updike: Yes sir. Byron R. White: In the original proxy material. Stuart N. Updike: That is correct. Byron R. White: And if you were -- and if they had it -- had agreed with you that the same standard applied before the Referee and in the settlement, do you claim that there must be a reversal here? Stuart N. Updike: Yes sir. And I claim that it was clearly erroneous on the part of the Court of Appeals to have found the way they did with respect -- Byron R. White: But they didn't even -- but you must -- you claim that they didn't even apply the right standards? Stuart N. Updike: I think that also was true -- Byron R. White: They didn't apply it -- Stuart N. Updike: -- with respect to disclosure. As Judge Friendly said that when Mr. Kirby is dealing with his own corporation in settlement in 1959, he's just as much on the opposite ends of a self-dealing transaction as he was in 1949 when he helped to vote himself to stock. And indeed, it is interesting to note that Judge Kaufman agreed with Judge Friendly in the court below with respect to whether Mr. Kirby can escape liability for the return of these shares by reason of his not having directly imputed to him the knowledge of the specific contents of all of these documents because Judge Kaufman said in terms of its reliability as a fair and genuine adjudication of the adequacy of the settlement. The Referee's approval would seem to stand on no firmer grounds merely because the fraud which kept material documents from the attention of the Zenn plaintiffs may not be directly imputed to Kirby. Judge Friendly in handling this question of disclosure said, “When a self-dealing director seeks to extinguish the corporation's claim against him, he is dealing with the entity who's interest had been entrusted to him just as much as in the earlier transaction that I see no reason why their obligation of fair dealing and full disclosure to a court passing on the settlement should be one with less than their previous duty to disinterested co-directors and to the stockholders. Earl Warren: Mr. Updike, may I ask what your answer is to the footnote of Judge Kaufman to the fact that if the applicants are aggrieved by any possible wrongdoing of the Board of Directors in deciding to terminate the litigation, the District Court's denial of intervention does not preclude a derivative suit based on such crimes. Stuart N. Updike: That is in the intervention side of my argument. And I haven't quite gotten there sir. Earl Warren: Well, you're almost finished (Voice Overlap) -- Stuart N. Updike: I (Voice Overlap) -- Earl Warren: -- that's the reason I asked you. Stuart N. Updike: Well, the clerk had told me that I had 16 minutes -- Earl Warren: Well, I think that's right. That's right. Stuart N. Updike: And I'm -- I will pass if I may. Earl Warren: Well, I don't -- do it your own way Mr. Updike. Stuart N. Updike: I will answer it sir. Earl Warren: Okay. Stuart N. Updike: One argument that has been made at great length here and which impressed the court below, is that no director should be under a duty to ferret out information against him and that phrase ferret out is used over and over again in the District Court's discussion as well as in the majority of the Court of Appeals but we're not confronted with that here because Mr. Kirby was not served as I pointed out in the state court action although he was a proponent of the settlement, he wants to get the benefit of that settlement. He wasn't served. But he was served in the federal action. And in the federal action was where the demand was made on his attorney that called for the production of these documents. So the issue as to Mr. Kirby is a not a realistic one. He was required by legal process to come up with such documents as he could control. Now, if I may, I will turn to the intervention point. And this as I point out, the suit began in September of 1960. There came a time, a year and a half later when Alleghany itself took over the litigation. That state of affairs continued through the trial and a decision after the dismissal in the District Court was taken to appeal to the Court of Appeals from so much of the decision as was predicated on a dismissal of the complaint based on this concealment charge. When we came to argue that in the Court of Appeals, Mr. Kirby's counsel applied for a day certain for argument, early in December of 1963 for the reason that he had acquired by purchase control of Alleghany Corporation but that control had not been formalized at any shareholders meeting and in order to have the posture as he thought it correct, he said to the Court, we'd like to have a day certain for argument because on 4th of December, at a special meeting of shareholders at Alleghany, control of Alleghany will pass directly into the hands of the plaintiff-appellee, Kirby. Now, the case was argued. It was decided about five months later, 2 to 1 with Judge Friendly dissenting. At the conclusion of Judge Friendly's dissent -- at the conclusion of Judge Friendly's dissent, the last sentence reads, “Since Kirby has regained control of Alleghany Corporation, I would instruct the judge to make provision for the continued prosecution of the action free from any control by the present directors. In that posture of the case, with Mr. Kirby at -- by this time, in fact in control, I apply to the Court of Appeals for instructions to me and to my framers, officers of the Court in the circumstances they are presented.” While that application for guidance was being considered, Alleghany itself asked our views, we gave them, they authorized us to make an application for rehearing en banc. That rehearing en banc was granted 4 to 3 and we were authorized to proceed to rebrief the case. That was 4 to 3 because as this Court will recall, it's a nine-judge court but Judge Lombard disqualified himself and Judge Clark had died earlier that year. While the case was being briefed, the person appointed Judge Anderson to fill the vacancy period by the Deputy Judge Clark. The case -- the briefs were submitted. The Court took it under advisement on the 12th of January of last year. The Court came down with a 4 to 4 split. At that time, again, we were asked for our views this time to write a letter to Alleghany. We gave our views urging that an application be made to this Court for certiorari. The Alleghany in addition to asking our views took the views of Mr. Hughes' firm will be far as to independent guidance and that firm did not take any position with respect to the merits but advised the directors that whether they voted for or against the authority to my firm, they would not be personally liable. Accordingly, the directors voted with Mr. Kirby and his sons I believe absenting themselves and one director abstaining and they declined to authorize us to proceed. That was not a publicized decision of the Board of Directors. Some two months later, just shortly before our time to do anything about it would have run out, the interveners here, Mrs. Holt and Ms. McMahon learned of the development of the refusal of the Alleghany Board to go forward with an application for certiorari and they authorized us three or four days later to bring this application. The record shows that they own an aggregate of about $60,000 market value of Alleghany stock. The District Court declined the application under the rule and the rule itself just set forth at page 3 of my brief says, “Intervention as a right upon timely application anyone shall be permitted to intervene in an action when the representation of the applicant's interest by existing parties is or maybe inadequate and the applicant is or maybe bound by a judgment in the action. Now, I don't think there's any dispute here that had -- that had the -- excuse me -- yes, okay. I don't think there's any dispute here that had the application of this Court not been made, these intervener's rights would have been bound by the result of the case. That is the resulting action from the Board of Directors not authorizing the application. Next, intervention of right upon timely application, we think that the application clearly was timely because they took their action within three or four days following their learning of the non-action, if you will, by the Board of Directors. We don't think that timeliness is due to start at the point where Mr. Kirby came back into literal stockholder control or as long as this litigation was being pressed forward, the -- these intervener's rights were being represented in the litigation. And when the election was made not to go forward, their representation ceased so far as the litigation is concerned and if representation here means representation by the Board of Directors, then we submit that every member of this Board of Directors owed his presence on that board to the suffrage of the majority stockholder of Alleghany Corporation and the principal defendant responsible if we're right with respect to this action. Hugo L. Black: May I ask, if your argument is based on the theory that there is fraud here and that you do not have to begin a suit for fraud, if you've been -- if it's been concealed from you until a reasonable time after the fact is discovered. Stuart N. Updike: That would -- that's the normal rule with respect to fraud but in this instance, we don't have any statute of limitations problem here. I don't believe because these -- Hugo L. Black: You were just saying though that it was timely in giving the reasons. Stuart N. Updike: Yes sir. Hugo L. Black: I thought that was the reason you were giving. Stuart N. Updike: No. Hugo L. Black: Maybe I misunderstood you. Stuart N. Updike: In -- with respect to the intervention sir? Hugo L. Black: Yes, timeliness. Stuart N. Updike: Was far as timeliness is concerned, in our view, it is timely where no intervening rights have been prejudiced by the passage of time and whether we take the time when Mr. Kirby came back into control of Alleghany or the time when the ladies first learned about it or at the time when the board declined to take action and none of those intervals was there any prejudice to any rights of Alleghany or to the rights of any litigant in that case, and in that sense, the application clearly was timely. Hugo L. Black: Suppose there had been prejudice and you -- yet you charged that the -- you kept from doing it earlier because of fraud and you didn't discover it until then, what would say then? Stuart N. Updike: Well, I think that the usual rule with respect to fraud is that the time starts to run when the fraud is discovered.That would certainly be the normal rule. Now -- Earl Warren: Is there any question of fraud in the case? Stuart N. Updike: In what sense? We claim that the failure -- Earl Warren: Did you -- did you -- Stuart N. Updike: I beg your pardon, sir. Earl Warren: Did you allege fraud? Stuart N. Updike: Yes sir. It is our claim that the failure to produce documentation when under a duty to do so is a nondisclosure and nondisclosure where there is a duty to disclose is one well-known form of fraud. Potter Stewart: But on the -- on this branch of the case, Mr. Updike, on this decision not to petition for certiorari, you don't claim any fraud (Voice Overlap) -- Stuart N. Updike: No we do not, no sir. Potter Stewart: -- in that decision, do you? Stuart N. Updike: We do not claim any fraud on the part of the Board of Directors in acting as it did -- Hugo L. Black: I understood you were reading letters however with the purpose of claiming if they had told you that they concealed from you the facts which you had known you would apply due action, or you would have proceeded quicker, was that right -- Stuart N. Updike: (Voice Overlap) Hugo L. Black: -- or wrong? Stuart N. Updike: No, those letters had they been known would have resulted in a different result in the case back in my judgment -- Hugo L. Black: (Voice Overlap) Stuart N. Updike: -- the 1954 and 1955. The intervention aspect of this only arises because Alleghany took over the litigation itself. Having been started derivatively Alleghany took over the litigation then there came a time when Mr. Kirby resumed literal actual control and at that point, we say, when it's controlled by a Board of Directors selected by, nominated by and voted in by him, that is a sufficient showing of lack of representation where he is the principal defendant in the action. That is a sufficient showing of inadequacy of representation to bring us within the rule. Earl Warren: Well, at any place, did you allege fraud as such? Stuart N. Updike: We alleged fraud? Not in relation to the intervention, no sir. We alleged fraud in the main case, the one that I argued this morning, yes sir, it's a charge of fraud on the part of the defendants as to how they got this stock. Byron R. White: Well, isn't the -- why shouldn't your obligation to intervene or why shouldn't the notice to you that representation might be inadequate? Why shouldn't that notice date from the time Kirby took over Alleghany again? Stuart N. Updike: Well -- Byron R. White: Instead of -- because you waited 16 months after that, didn't you or some period of time? Stuart N. Updike: Well -- Byron R. White: How long was it between the time that Kirby took over the company again and that there was a decision not to apply for certiorari? Stuart N. Updike: About a year, I would say, a little more than a year. He took over control on the 4th of December of 1963. The case was under consideration by the Court of Appeals until about May of 1964. Byron R. White: (Inaudible) Stuart N. Updike: He authorized the continuation of the suit. He and the rest of his directors authorized the continuation of the suit as far as the application for rehearing en banc was concerned. Byron R. White: Oh, I see. Stuart N. Updike: But when that was granted, 4 to 3 in our favor is when there was a change of heart and the -- a new judge having then appointed that the actual final vote was 4 to 4 and that's where the split took place. Byron R. White: So Alleghany -- and Alleghany Control Board took it to the Court of Appeals, did it? Stuart N. Updike: Yes sir -- no. Byron R. White: No? Stuart N. Updike: It -- Byron R. White: But it could apply (Voice Overlap) -- Stuart N. Updike: It -- and Alleghany Control Board came in two days, I mean a Kirby Control Board, came in two days after the oral argument in the Court of Appeals (Voice Overlap) our argument. Byron R. White: And that Kirby Control Board applied for rehearing. Stuart N. Updike: They authorized us to apply for rehearing after the board -- the Court of Appeals since split 2 to 1. Byron R. White: After -- and after a decision in favor of the settlement. Stuart N. Updike: Yes. Well, Judge Kaufman's footnote that Your Honor asked about, conceivably that procedure would be available but we have here the principal defendant, we have here the charges. We were only allowed by the District Court to explore whether Alleghany had the right to go back and try the original cause of action on its merits. All of the proceedings in the District Court in this case were designed to search out whether the defense of res judicata or the defense of using the settlement as a bar could be set aside so that on a rediscovering, there could be a reevaluation of the liability of these defendants. Potter Stewart: You said that Judge Kaufman to the suggestion in the footnote by Judge Kaufman's opinion would be available. How could you prove damages if any in that kind of a primitive action? How could you -- Stuart N. Updike: It would be most difficult to do so -- Potter Stewart: It would (Voice Overlap) -- Stuart N. Updike: -- I agree. Potter Stewart: -- highly speculating. Stuart N. Updike: Most difficult to do so. The true measure of the damages here and the true issue before this Court here we think is whether Mr. Kirby and these others on this showing can keep that which they took in the circumstances that the record in this case shows. I thank the Court for its attention. Earl Warren: Mr. Hughes. Mark F. Hughes: May it please Your Honors. By arrangement between Mr. Mansfield and me, I shall take 10 minutes. I will confine myself exclusively to the intervention appeal and Mr. Mansfield will deal with the underlying appeal. I'd like first quickly to answer some questions that were propounded by certain of Your Honors during the argument. Mr. Justice White, it was 16 months after Mr. Kirby acquired voting control which is a totally different thing from domination of a board when he acquired voting control, it was 16 months thereafter when this application to intervene was applied for. And Mr. Chief Justice, there would be a remedy against these present directors who took the action which was to not proceed with this litigation any further. There's been no question that there would be a right of action against them if they were actuated either by fraud or banally or subserviently or in any way except according to the dictates of their consciences. Potter Stewart: What would the remedy be? Mark F. Hughes: The remedy would be to -- it would be an action against them for fraudulently if it was fraud or banally or subserviently permitting the expiration of the right to apply to this Court for a writ of certiorari to expire. Potter Stewart: How could anybody measure the amount of damages? Mark F. Hughes: Well, I -- one of the things I would like to know is how the -- the measure of damages is going to be measured in the underlying case because if you can measure it in the underlying case, you can measure in the action against these directors. It would be the same measure of damages. Potter Stewart: Well, no. Because no, the damages here would depend upon what this Court did, first with respect to the petition for certiorari and then one can go on and hypothesize that that would've been granted them then with respect to the -- Mark F. Hughes: Well, what I -- Potter Stewart: -- merit of the case. Mark F. Hughes: What I mean to say is that if as a result of the -- their action, a right was lost and it was transparently clear that this Court would reverse and it was equally transparently clear thereafter that they were liable in damages. It would be the same measure of damages as existed in the underlying litigation. Now, my time is short and I want to move along. There is this threshold question and if we are right on the threshold question, that's the end of this litigation and Your Honors are spared the necessity of deciding this deep clash that you must be aware of just by reading these briefs as to what the facts are and what the areas of dispute are. Now, I say that the record in this case and what we must go upon is a very, very clear record is that after the 4 to 4 affirmance here and undominated honest Board of Directors met, took the benefit of legal advice, not only from Mr. Updike's firm but from ours and came to the conclusion that they would not apply for a writ of certiorari. And that I say that that action was taken by a group of men, nine of them who represented $2 million shares of stock of this corporation which is approximately 20% of the entire outstanding voting shares and a group who with these fantastic figures of $60 million have any virtue in them at all would have stood to increase their equity by approximately $10 million. Now, it's that group of men who met and decided that they would not proceed with this litigation and what the petitioners are now attempting to do is to set their will against that deliberate action of this Board of Directors and that we say is something which they may not do as long as it is clear that this Board acted independently and did this according to their honest judgment and conscious consciences, that is the end of it and the stockholder may not intervene for the purpose of setting his or her will against the wishes of the directors. Byron R. White: Mr. Hughes. Mark F. Hughes: Of course the -- Byron R. White: Did the Board of Directors act on the petition for rehearing in the Court of Appeals? Mark F. Hughes: Yes, they did. Byron R. White: They authorized that. Mark F. Hughes: They did. Byron R. White: The same people? Mark F. Hughes: The same people. In addition to which Mr. Kirby himself at that time voted for the rehearing. Byron R. White: What if the -- did the board articulate any change of conditions which prompted the -- not seeking cert or --? Mark F. Hughes: Well, yes, I will come to that -- Byron R. White: Well, (Voice Overlap) -- Mark F. Hughes: I'll come to it now -- if you'd like me to. Byron R. White: Well, go ahead. Go ahead. Mark F. Hughes: The -- I do want to stress that this -- that the Board was an independent board and it's conceded that it was an independent board. And then I will come to the question but I'd like to develop this in order. Now, the law is very clear that management of a corporation is in the Board of Directors. That's been decided time and again not only by this Court but by every court that's ever had occasion to consider the matter and it's also clear that that control of the affairs of the corporation also goes to the control of litigation involving the corporation and we say the leading case on that is Swanson against Traer which is cited in our brief which discusses all the cases including the cases in this Court and also was the rule in New York with the cases on pages 8 and 9 of our brief discuss it. Now, I want to stress independence here and to stress the fact that on this record, the petitioners concede the integrity of these directors. At page 79, they say that as far as adequacy of the board's decision is concerned, we don't question the integrity of the men involved. Well now, if you don't question the integrity of the men involved, you mean, you're certainly saying that they're honest, that they're not banal, that they're not pliant, that they're not subservient and that they're acting according to their own honest consciences. Hugo L. Black: Page 79 of what? Mark F. Hughes: Page 79 of Volume 1 of the record before you, Mr. Justice Black. Tom C. Clark: How many shares, what percentage of shares does Mr. Kirby had? Mark F. Hughes: Mr. Kirby had approximately 40%.I think subject to correction but it was not an absolute control. It was less than absolute control.0 Now, there was more to this question of whether these people were independent in the Court of Appeals and that's highlighted by the footnote that appears in Judge Kaufman's opinion at page 2385 where he says that the applicant's counsel expressly refused to characterize the board as dominated by the Kirby group. Now, that came about in this way, that as Mr. Updike was making his argument before the Court of Appeals, he started to talk about the bruiting presence of Mr. Kirby whereupon Judge Kaufman said, “Well, Mr. Updike, are you charging that Mr. Kirby dominates this Board of Directors?” He was invited, he was invited to say that and he expressly refused to say -- to characterize them as being dominated. So you have a record in the District Court before Judge Ryan, supplemented by this concession that these were independent directors. Byron R. White: Well, they could be independent and all the words you applied to them still be quite wrong, couldn't they? Mark F. Hughes: Of cou -- oh, of course. If -- of course, just as the court could be wrong but it's a question of business judgment at that point, Your Honor. It's a question as to whether having brought to bear -- Byron R. White: You mean that's suppose -- that's going to measure a question of inter -- of the right to intervene? Mark F. Hughes: No. It's going to measure whether their decision to drop this litigation -- Byron R. White: That's on the merits. Mark F. Hughes: No. No, it's going to measure whether their decision to drop this litigation was taken in good faith because if it was taken in good faith, then their representation of all of the stockholders was adequate. And that is -- we submit, is the proper rule of law because once you have adequate representation, you can't have minority stockholders sounding off and doing whatever they choose contrary to the wishes of those who are entrusted with the management with the affairs of the corporation. Now beyond all that, and I want to come to this because Your Honor raised the question, what actuated the -- this Board? Well, it's very simple what actuated them. They were confronted with the fact that this corporation had been in litigation between the Kirby group and this Murchison group for over ten years, that there had been no success from any of that litigation except that they had that settlement of three-and-a-half -- $3,300,000 in cash and they had also acquired from the Murchisons the voting control of IDS which Mr. Updike did not referred to and which has been variously estimated as having a value of $5 million to $15 million. Now, that they knew they had. I see my time is up but -- Earl Warren: Well, you can share your time. Mark F. Hughes: Well, I just -- just let me finish my thought. Earl Warren: You can share your time any way -- Mark F. Hughes: Now -- Earl Warren: -- you want with your co-counsel. It -- this will take two minutes. They were aware of that. They were aware of the fact that if this Court took this case on certiorari and reversed that that wouldn't be the end of this litigation. It would be just another merry-go-round for probably ten more years because this would have to go back to the District Court for a retrial. Eventually, there would have to be some proceedings in the state court. You can be sure that Mr. Kirby would fight this every inch of the way. You can be sure that he tried to bring the Murchisons back into this litigation. There's a real chance that the Murchisons would take the position that if this litigation, this settlement was fraud and should be set aside, that they would want to get back a voting control that they gave up in connection with the settlement. So there was a -- there's a grave risk that if this ever goes back and is ultimately tried on the merits, we'll wind up with nothing and these directors Your Honors are simply fed up with this litigation. They want this corporation to get out of the courts and those reasons singly and collectively prompted them to drop the litigation. I see my time is up. Earl Warren: Mr. Mansfield. Walter R. Mansfield: Mr. Chief Justice, may it please the Court. The case presented here by the petitioners is in our opinion only a superficial resemblance to the case that was tried below. The reason is that they disregard facts and findings which in our opinion call for dismissal of this appeal before getting to the questions that they presented for review. I'd like first to -- just to state some of these main facts and findings. First, there's the fact that the courts below unanimously found that the proof did not show that Allan P. Kirby was guilty of any fraud or failure to volunteer evidence in the Zenn proceedings. No question has been presented here challenging that this finding is erroneous under Rule 52. Yet the petitioner's main brief just like the pleadings and like this Rule 16 statement of issue -- issues before the District Court repeatedly states that Kirby was guilty of deceit and that he knowingly joined in a fraud on the part of others on the Referee. The unchallenged findings in the record are to the contrary. There was a complete failure of proof on this basic issue in this case. Secondly, there are the findings of the courts below that the documents allegedly concealed were cumulative or irrelevant. These findings took into consideration not only the IDS projections that was received in evidence in this case, but also those that were excluded. No question has been presented to this Court here challenging these findings. Yet petitioners repeatedly say that this evidence was in their words crucial and would have destroyed the Zenn defense. Now, we have analyzed each one of these 12 documents that were allegedly concealed and compared them with those that were before the Referee in point -- we've done that in points one and four of our brief, main brief. And we submit that that shows that they add nothing to what was already before the Zenn Referee. And at pages 34 and 35 of our brief, we list the projections and other documents forecasting income that were before the Zenn Referee. Byron R. White: Well, Mr. Mansfield, I take it then on this point, it wouldn't make any difference what standard the court -- either the District Court or the Court of Appeals was applying. The documents really wouldn't make any difference say, in any event no matter what standards you apply, that's -- Walter R. Mansfield: Mr. Justice White, that is our view that even if you apply, the might have or the would have standards, the documents when you set them down opposite what was before the Zenn Referee showed that they add nothing of any significance -- Byron R. White: Well, what if the court -- Walter R. Mansfield: -- to the facts before him. Byron R. White: What if the court disagreed with you on that? And then -- and the question really was whether they made enough difference or not. What's your view of the applicable rule to be applied in a situation like this? Is it the state law? Did you look at the state law or the federal law? Walter R. Mansfield: Our view Mr. Justice White is that it's the state law that should be applied since we are dealing here with what amounts to a standard of proof in a state court proceeding, that is the Zenn proceeding and therefore one should abide by the state law because of course, it could have a very substantial effect on the outcome of the litigation. Byron R. White: You don't think this was a 14 (a) suit originally at all? Walter R. Mansfield: I submit Justice White that that was not a 14 (a) proceeding for the reason that it was adjudicated by the state court itself not once but repeatedly to be a cause of action rooted in common law in which the allegations with respect to Section 14 (a) were incidental or as I think was set by the Referee and then affirmed by the New York Supreme Court and expresses. Byron R. White: Have you -- you're answering here on the basis that is res judicata in that respect (Voice Overlap). Walter R. Mansfield: That's right Your Honor. Byron R. White: Now what -- what if the Court -- what if -- as an original matter, was that a 14 (a) suit or not? Walter R. Mansfield: As an original matter, it was in our opinion a common law cause of action in the state court. The mention of Section 14 (a) was merely incidental. I think that the pleader, the complainant had a choice. He could have pleaded it as common law cause of action or as a violation of Section 14 (a).He chose to plead it as a common law cause of action. He pursued it all through the courts twice having it adjudicated on appeal within the state courts and he never sought review here of the question of whether it was a 14 (a) cause of action. Our position is therefore that he is bound under the doctrine of this Court's recent decision in Durfee against Goo -- Duke by the adjudication of the state court. Byron R. White: Well, of course if by some standard or rather there was fraud and then the case ought to be set aside, it would be set aside on that point too, I suppose. Walter R. Mansfield: Your Honor, Mr. Justice White, I believe that there are other bases besides the -- that or other hurdles which must be jumped before one would set aside this appeal and I was coming to them if I may. Byron R. White: You go right ahead. Walter R. Mansfield: I'm afraid I didn't hear you sir. Byron R. White: I -- you go right ahead. Walter R. Mansfield: Well, the third fact of significance to us and I think perhaps follows just what Justice White was pursuing is that except for the so-called corrupt bargain claim below in this action, dismissal of which after trial was never appealed, the sole issue alleged presented under Rule 16 and tried before the District Court was whether or not Kirby had defrauded the Zenn Referee, not Young, not Purcell but solely Kirby. There was no claim below of fraud in the part of Young and Purcell and no claim against Kirby based on any fraud by them. No such issue was tried. Petitioner's counsel expressly disclaimed any such charge. The complaint was limited to Kirby's conduct and after 20,000 pages of depositions, and a series of Rule 16 pretrial conferences, the statement of issues was limited to Kirby's conduct it read, did Kirby procured by fraud certain judgment. Young and Purcell were never involved either in the corrupt bargain claim which was dismissed in every appeal. Yet the petitioners for the first time on appeal inject the charge that Young and Purcell committed a fraud upon the Zenn Referee. Judge Friendly accepted that charge as the cornerstone of his dissent and the only basis found in the record was a statement of petitioner's counsel made as he was examining Purcell which Judge Friendly quoted as follows, Mr. Updike, “Well, it seems to me sir that Mr. Kirby entrust the responsibility to some extent of his being a director of Alleghany that he entrust some of that responsibility to Mr. Young that Mr. Kirby cannot avoid accepting the consequences of whatever Mr. Young may have done.” Judge Friendly stopped there but what Judge Friendly did not quote was the balance of the same sentence in which Mr. Updike continued right on to say, “And I do not say that it was Mr. Young and I do not say for a moment that it was Mr. Purcell and I do not know who is responsible.” The completed statement without truncation which the only reference Judge Friendly could find is a disclaimer, and Kirby's counsel, we submit, was entitled to rely upon it and on the pretrial statement of issues and the pleadings in conducting his defense and in cross-examining the very witness on the stand, Mr. Purcell. And we submit that a theory based on Young and Purcell's conduct is not now open to the petitioners, that they're barred by their pleadings, their statement of issues, their statements at trial. Now, although petitioners' brief, reply brief points to counsel statements in the District Court made after trial on the issue presented to the effect that Kirby could not escape responsibility by delegating to others the duty to search out and volunteer records. Not one of these statements ever claims fraud on the part of Young and Purcell. The first time that was claimed was on appeal. The next fact that I think is very significant is that the attack here is not upon some joint settlement made in Zenn by Young, Kirby and Purcell. It is on Kirby's separate settlement approving what the complaint specifies in this action, 22 times as Kirby's “separate settlement”. There was never any issue, proof or finding of any joint action between Young, Kirby and Purcell in the conduct of the Zenn settlement hearings. Kirby was neither subpoenaed nor served in the Zenn action. The record shows that he negotiated a separate settlement, separately approved by a separate judgment over the strenuous objections of the Murchisons and the disapproval of the Young Estate. He was not called, although he was served in Zenn federal, that case was never pursued. It has been dormant since the action was begun and he was not called to testify there nor was he called, subpoenaed to produce any records there. Yet petitioners in the dissent predicate their position here entirely on the existence of some kind of a conspiracy or joint action between Kirby, Young and Purcell. Next, there is the fact that the legality of the underlying 1949-1950 exchange, stock exchange transaction and of the proxy material used to obtain its approval was not an issue below. It was expressly excluded as an issue. It has never been tried except to the extent, the Zenn Referee and the Zenn court considered it when they were passing on the fairness of the Zenn settlement and they concluded that the transaction on the proxy material would be upheld after a trial. The record shows in this case that the District Court in one of a series Rule 16 pretrial conferences said, and I quote, “What we are not going to try are the merits of the 1950 transaction itself. The trial will not go into the issue as to whether the 1950 transaction was a bad transaction or not. It will not go into the quest. It will go into the question of whether certain facts were concealed from the court. Is that understood by everybody?” To which Mr. Updike replied, “Yes.” And at a later point, Judge Dawson said, “I am not going into the question of whether the Zenn-Anzelone case was a good case or not, yet the petitioners here assume the illegality of the basic 1949-1950 exchange as the whole predicate of this appeal and they do so on the strength of an assumption made by the Court of Appeals in this case without benefit of any issue, any trial or any findings. And the fact that the Court of Appeals was making an assumption is evidenced by the statement of the majority opinion at page 2344 of the record in which it was said after the assumption and I quote, “But the bona fides of the 1950 stock exchange were not the issue for determination by the District Court here. The issue was whether there was a sufficient basis for a federal court to nullify a settlement in a case involving fraud which had been judicially approved in the state court. Next, there is the fact that the said action was adjudicated by the New York Supreme Court and the appellate division as I pointed out earlier as one for common law fraud in which Section 14 (a) allegations were incidental. No attempt has been made by the petitioner's representatives there to seek review, we submit that under Durfee v. Duke, they're bound and yet the appeal here, and the questions presented here are based entirely on the assumption that Zenn was to quote their brief, “A Section 14 (a) action.” Lastly, I'd like to point out that the legality of the 1949-1950 exchange transaction was neither alleged nor involved in the Breswick suit in the dis -- Federal District Court below. The one in which the injunction was issued by Judge Dimock. Breswick and Zenn had other claims in common which involved American citizens but not the claim based on the 1949-1950 transaction. The Breswick court, Judge Dimock, never approved the Zenn settlement. The -- its injunction arose out of other claims before it not the legality of the said 1949-1950 exchange. Yet the petitioners erroneously in our opinion asserted here that the alleged fraud related to a claim before the Federal District Court in Breswick. Now, petitioner's counsel here has (Inaudible) referred it to the claim that Ireland offered a bribe to Phillips and said that the District Court dismissed it finding that Phillips had rejected it. I would like to point out in view of that statement that the District Court had that claim before it analyzed it thoroughly and concluded on the District Court's own words that the evidence was all to the contrary. It found not just any rejection but it found that the so-called bribe was to be part of a settlement that would be presented to the Court whereby Mr. Phillips' services might be retained for the -- as a representative of the opposition in the corporation if the settlement went through now and that did not go through. And the Court -- no appeal was taken from that so I think it's improper at this point to refer to any bribe which has been thoroughly passed over and found unsupported. Reference has also been made to some statement made to Mr. Kirby about Mr. Young having committed perjury. I -- we have treated that in our brief. I shall not go into detail. I would like to point out just this. The statement was a hear -- triple hearsay statement made on the basis of an opinion of a non-lawyer with respect to another case, Young against Ebbett involving a matter that was not an issue here, a transaction between the Murchisons and Alleghany for the part of certain stock. It had nothing to do with this underlying transaction, the stock exchange in this case. Now, one or two other background facts I think are important. The present case relates to only one out of eight claims in the Zenn suit. It started 1954 and that charge that in 1950, Alleghany's directors had obtained stockholder approval of the so-called 1949-1950 exchange by concealing favorable current earnings, current earnings, and by concealing earning prospects and the claim was that the defendants could foresee that from this evidence that the market price of IDS stock would enjoy the spectacular increase that began some years later. At the protracted negotiations and pretrial depositions, a settlement was proposed in 1955 in the New York State Court, not the federal court. That case lay dormant and has ever since and it was referred to a Referee. The hearings before that Referee developed into a hotly contested proceeding in which 22 law firms appeared, some for, some opposed the settlement. 4600 of pages of testimony were taken from 18 witnesses, and 480 exhibits were introduced. The objections by their own later testimony examined voluminous documentary material including 28 Alleghany file drawers containing documents relating to IDS and the personal files of Young relating to IDS. IDS had its main offices and its principal office in Minneapolis and it was then under the control of the Murchisons, not Young, Kirby or Alleghany and the mass of proof before that Referee included both optimistic and pessimistic forecasts. There was evidence that the transaction when viewed as of the time it was made and without the benefit of the hindsight was not unfair to the stockholders and that the proxy material did not rep -- misrepresent the facts. Now time does not permit analyzing all that evidence now. We have reviewed it in pages 10 to 22 of our brief. Just one or two facts I think are significant. After the transaction was consummated back in 1950, IDS' earnings did rise sharply but after these, these earnings became public, the market price of IDS stock remained close to the same level it had -- exist -- it had enjoyed prior to that for quite a long time. And in July 1950 for instance, IDS rose to $15 a share and IDS' president who had all of the allegedly concealed forecasts and projections required Alleghany to fulfill an earlier contract to buy 3034 shares at $20 a share, the market then being $15. He certainly was not impressed by the forecasts. By August of 1951, one year after the sharp earning's increase became public, IDS stock had risen to only $32 a share. And then but only then it began its meteoric ascent to $200 a share in 1954 and that was what led to a flood of stockholders' actions. Now, the Referee submitted a 125-page report and in viewing this transaction, weighed both the optimistic and the pessimistic factors and he noted that the directors had it by the stockholders to quote the phrase from the statement or proxy statement that “The outlook for future earnings was unusually promising”. That they were dealing with hopes said the Referee as against reality and that if more specific rosy predictions were made but did not materialize, they would expose themselves to huge claims by disappointed stockholders. Now, why is the proof claimed to have been concealed by Kirby? On the eve of trial, the petitioner listed 86 documents, and at trial -- as trial revealed that most of them were already in the Zenn record, before the Referee, there were whittled down to 12 and the record shows that the plaintiffs below, in answer to interrogatories stated that they could not say whether any of these documents were seen or made available to the Zenn Referee, the Zenn parties and the Zenn court. We think that's a striking admission in view of the claim that they were deliberately concealed by Mr. Kirby. Petitioners divided them into four categories. The first they called the Waag correspondents and that I think has been dwelled upon at length by Mr. Updike here. That is dated more than four years after the transaction under attack in Zenn. A proof of the record shows that Kirby was not a party to that correspondence. He never knew about it. He never had it. Some of it was before the Referee but not the copies that were part of what was later turned -- produced in evidence in this proceeding but duplicates. In other words, there were several copies of this around and two copies are part of it. Not the same strikes as the one they introduced here were put in the evidence. There's no basis for any charge that Kirby concealed it. As for the second category, the so-called IDS projections, those documents came from the Minneapolis files of IDS. Kirby could not have furnished them to the Zenn Referee because he didn't have them and he was neither an officer nor a director of IDS and at the time of the Zenn hearings, it was under the control of the Murchisons. For two weeks, in 1949, six years before the Zenn hearings, Kirby's office had possession of one of those documents which was returned. Kirby did not recall it. But it was not a forecast of IDS earnings. It was an evaluation of IDS certificates and income available for improvement of reserves. Also, this document, this allegedly concealed document, was identified by author, by date and quoted from in another report before the Zenn Referee, the shipment report, exhibit 295 and referred to in annual IDS, annual reports that was before the referee. Certainly, that doesn't show any concealment by Kirby. Then the third category they've listed are the Stybel reports. The claim there is that Kirby concealed one report, the second Stybel report dated March 15, 1949, over a year before the stock exchange that is the subject of attack on Zenn. Stybel was a Cleveland investment firm. That document was in the public files of the SEC which were examined by Mr. Pomerantz and his group in the Zenn stockholders action. Kirby testified, “I don't remember ever seeing it before.” He had no reason to conceal it because it updated -- it was updated and repeatedly referred to by title and date and incorporated by reference in another report by ref -- before the Referee, the shipment report of April 7, 1949 which took at least as favorable view of Alleghany's prospects as to that report. Lastly, petitioners' category is the monthly reports. Petitioner's statement that Kirby received these reports every month which they make in their petitioners' brief is incorrect. The record shows Kirby had only one such report in his possession and that was not relied upon by the petitioners here because it postdated the transaction under attack. That is the record as to Kirby, if Your Honors please, and we submit that it shows a complete failure of proof and the courts below recognized that. The proof is equally clear that even if the petitioners' proposed special disclosure rule were adopted, Kirby did not conceal or withhold any evidence. Now, turning to the new claim made for the first time on appeal that Young and Kirby concealed evidence, if the rule against raising new issues on appeal is to have any meaning, it certainly applies here. Petitioners raised not just a new legal theory but a new issue of fact. If their new claim had been asserted on the District Court, there would have been different interrogatories, different depositions, different pretrial statement, and different proof. We would have certainly gone after Young and Purcell staff to just -- see just what they did have. We would have gone after Pomerantz and Graubard staff to find out -- get all their notes as to just what they did see from these voluminous files. Kirby would have joined Young and Purcell as third party defendants in the action if they committed fraud without his knowing it. We would have offered additional evidence to confirm that the IDS records were passed over in Zenn because counsel there felt that they already have sufficient proof and didn't want to invite defense proof that those forecasts without benefit of hindsight amount to nothing more than economic astrology. If Kirby who had not committed any fraud were told six years ago when this actions were commenced that Zenn was going to be resurrected because of alleged fraud by Young and Purcell, he would have marshaled all the evidence to show that the original exchange and proxy statement complied with the law. Instead, he relied on his Zenn judgment approving his separate settlement as he had a right to do. Six years later, much of that proof has undoubtedly evaporated. It would be manifest -- be unfair, we submit, to ask him now to try to resurrect it. Therefore, even if we were to assume arguendo and we say it's not the fact that Young and Purcell defrauded the Referee, it would be unjust now to set aside the Zenn settlement as to Kirby who was admittedly innocent. Now, if there were proof of conspiracy, agency or some joint action in the conduct of those Zenn hearings, our basis might exist for holding Kirby responsible for the conduct of Young and Purcell but there is no such proof. The claim below and the undisputed proof was that Kirby made a separate settlement opposed by Young's Estate and the others. Now, since Young's conduct was not an issue in this case, it should be unnecessary to review such literal record evidence as there is on the subject but when we do review it, we find that Judge Friendly was in error when he inferred from the 1954 Waag correspondents that Young probably concealed 1950 IDS forecast from the Zenn Referee and let me explain if I may why. There was other evidence in the Zenn record not known to the Zenn -- to Judge Friendly but known to the Zenn Referee which shows that Judge Friendly was wrong and that Young and Purcell both made a whole disclosure. Judge Friendly inferred that Young probably withheld one 12-page enclosure in that Waag correspondence because two back pages showed that back four years earlier, in 1950, IDS had prepared a forecast of its 1950 earnings and that this clue would have acquainted the Zenn Referee with the existence of the forecast and led people to go trotting on out at Minneapolis to get them. And Judge Friendly's inference is destroyed by the record of Young's deposition before the -- in the Zenn proceedings which was Zenn Exhibit 4, which Judge Friendly didn't see. And it shows, we have attached it as appendix, Appendix C to our brief. It shows that in the same March 29, 1955 deposition where the petitioners claimed that Young “sat mute”. He testified in detail to the fact that IDS in Minneapolis routinely prepared earnings, forecasts and projections including a five-year projection prepared annually some of which he received and I quote his words, “from time to time”. William J. Brennan, Jr.: Excuse me, Mr. Mansfield. Walter R. Mansfield: Yes, Justice Brennan. William J. Brennan, Jr.: It seems to me that you're arguing this, as if you are arguing before the Court of Appeals, the merits (Inaudible), is that your idea of what -- the way we have to look at this case on the merits? Walter R. Mansfield: Mr. Justice Brennan, I submit that it is for the reason that one never gets to the questions that are presented here on this record because they are presented on the theory that Young -- that the evidence showed fraud on the part of Young and Purcell and that Young -- and that Kirby could be held responsible for that. What I am trying to show here is that that record fails to show that. William J. Brennan, Jr.: But you won in the Court of Appeals, didn't you? Walter R. Mansfield: Yes, we did, Your Honor. William J. Brennan, Jr.: Well that's what I was wondering. Walter R. Mansfield: But what we are saying is -- William J. Brennan, Jr.: What are we supposed to do with that finding? Walter R. Mansfield: I didn't hear -- William J. Brennan, Jr.: What's the limit of our review of what -- determination of the Court of Appeals Walter R. Mansfield: Our view if Your Honor pleases is that the writ here was improvidently granted because the sole question that could've been presented on the record that was before the Court was the question of whether the evidence was -- or the findings were clearly erroneous and what I am trying to -- William J. Brennan, Jr.: What's the consequence of the 4 to 4 division on -- Walter R. Mansfield: I think Mr. Justice Brennan that the three judges who joined Judge Friendly were likewise unaware of record proof before the Zenn Referee showing that their inferences were unjustified. William J. Brennan, Jr.: Well, of course what I'm getting at -- of course, I'm not anxious to do it, do I have to go all through this thing in order to (Voice Overlap) -- Walter R. Mansfield: Oh, we submit Your Honor that one does not have to go very far through it because on the first point raised that the issues, pleadings and everything else would direct it solely to fraud on the part of the -- the claim of fraud on the part of Kirby, that that ends the case. There was a complete failure of proof there. What I'm now saying is that even if you go further, Judge Friendly's inferences were incorrect because he didn't have all the record performed for the simple reason that that was not an issue before the District Court. William J. Brennan, Jr.: Have you had any idea, what's the status of the panel decision in light of 4-4 division en banc? Walter R. Mansfield: What is the status -- William J. Brennan, Jr.: What is the status of the panel decision in light of the 4-4 division en banc? Walter R. Mansfield: Well, of course, we cannot -- it's difficult to speculate Mr. Justice Brennan as to just what the intracourt views of all eight members were. One may infer that the four who were for reversal joined Judge Friendly but one may have had other reasons. Byron R. White: Well the -- it would be very easy here to say that, “Oh well, the Court of Appeals reviewed this record and decided that these documents wouldn't have made any difference anyway. That's the factual finding. We're not going to go behind.” The trouble is that the people who said that are now submerged in a 4 to 4 split. I mean the panel decision is no longer a -- the controlling decision of the Court of Appeals. The Court of Appeals controlling the decision is in 4 to 4 split, an automatic affirmance. And we have to sit like in a -- as a result of that, we have to sit as a Court of Appeals here? I mean if we does -- if we do, why (Inaudible) -- Walter R. Mansfield: Mr. Justice -- Byron R. White: -- we do have a lot of reading -- Walter R. Mansfield: Well, Justice White, I think that -- I think if I may be so full that the writ was granted (Inaudible) improvidently for the reason that the questions here which are -- whether there should be a duty of disclosure in a Section 14 (a) action comparable of what would've been required in disclosure to stockholders in a proxy statement are not presented by this record. And that's what I am arguing, Your Honor. The action was adjudicated between these parties not to be a Section 14 (a) action. The proof shows that even if you were to adopt the proposed disclosure standard urged by the other side, Kirby was not guilty of violating it because the evidence was all of the contrary. So I fail to see how taking up of the questions presented by our review here would make any difference in the result. Hugo L. Black: What about Judge Friendly's statement, the evidence was improperly excluded and that therefore he wants -- what he wants to do is to send it back and let them consider the case, the issue you talked about on the basis of the evidence that was improperly excluded? Walter R. Mansfield: Well, I -- but the majority opinion did consider it Justice Black and concluded that it was cumulative. The District Judge in excluding the evidence rule that it was not tied in any way to Kirby on this charge of fraud against Kirby alone and that it was cumulative in that -- already the Referee had before him evidence of the favorable prospects for IDS. So that I do not feel that sending it back to the District Court would make any difference at all. Hugo L. Black: But they seem to have disagreed 4 to 4 on the facts. Walter R. Mansfield: That they did and I think they disagreed on the facts because Justice Black, they were unaware of certain things in the Zenn record. And the reason they are unaware of those things in the Zenn record was that the issue as to the conduct of Young and Purcell had never been presented as an issue in the case. Hugo L. Black: If it's all that's the case, why isn't it reasonable? But I'm not saying it is that it has to be done. Why is it reasonable? Except the fact that they disagreed 4 and 4, they don't know what the facts are and the -- that is unless we accept one side or the other and let them come back and try it out that issue which you say Judge Friendly was wrong on. Walter R. Mansfield: Judge Black -- Justice Black, this case begun in 1960. If we had known -- Hugo L. Black: I understand the delay, it's a good argument, but is that the only argument? Walter R. Mansfield: Well, the other argument it seems to me is that if we were to allege -- if you were to allege wrongdoing on the part of Young and Purcell, we of course would have possibly considered pleading over against them in the action. What it amounts to is that on the basis of bits and pieces and the evidence with respect to a matter not an issue, it's being suggested that we go back, have a new complaint based on a new theory, new pretrial issues and a new trial. And I submit that at this late day that would be very unfair to Mr. Kirby. Hugo L. Black: Well, if you consider the delay, wouldn't it be far more delaying to dismiss this on the theory that they can file a new suit and start over from the very beginning and offer a great deal of this evidence that's here and other evidence that you could offer more. Wouldn't that be the way to delay it intermittently? Walter R. Mansfield: Well, we -- Hugo L. Black: And I also having doubts (Voice Overlap) -- Walter R. Mansfield: (Inaudible) Hugo L. Black: -- also wondering about how they could ever prove damages because you couldn't predict what the Courts would do on the new hearing. Walter R. Mansfield: Well, our position on that Justice Black would be that this is the kind of a case that should not in any event be brought in the federal court because what it seeks to do is to set aside a fraud, a state court settlement which the state court referee and that court reviewed the evidence at great length and the availability of a clear and open remedy in the state court in which all the parties would be before the state court as valid basis for dismissing this appeal. Under the New York law where there is no statute of limitations, a litigant, any party may move to reopen and set aside a judgment for fraud, for newly discovered evidence or for misconduct short of fraud. In that proceeding, the Court would have all the parties before it, including Young's Estate and Purcell. It could -- Hugo L. Black: Could they not have them here? Walter R. Mansfield: No, Your Honor. This is the most startling part about this case. Hugo L. Black: Who do they not have? Walter R. Mansfield: They seek -- they do not have Young, they do not have Purcell. They zeroed in solely on Kirby because at the time when the action was commenced, it was simultaneously with the commencement of Murchison proxy by -- for control of Alleghany. They seek only to set aside the Zenn judgment as to Kirby only and not -- Hugo L. Black: But they could -- other parties could be added if the issue had been denied then they could file a new suit because (Voice Overlap) -- Walter R. Mansfield: I don't know whether they could've explained -- Hugo L. Black: Following the pages of evidence again. Walter R. Mansfield: But Your Honor, at that instant, the state court has is this, it had all the evidence before it. It is in a far better position having lived with the case to decide whether it was defrauded than the federal court. The state -- Hugo L. Black: Well, are you -- are you saying (Voice Overlap) -- Walter R. Mansfield: -- the rule in New York -- Hugo L. Black: -- the federal court doesn't have jurisdiction? Walter R. Mansfield: What I am saying Your Honor is that a collateral attack of this sort should be dismissed on the ground that the best remedy and the utmost -- most equitable and adequate remedy is on the state court and that this is the kind of a case which should be pursued as it would under state law before the very judge, the state court rules provided that it's reassigned to the very judge who had before him and that he's in a much better position to decide whether he was defrauded after having lived with the evidence in the case, then a new judge to whom it's exposed for the first time and I might also -- Hugo L. Black: You mean, apart of these thousands and thousands of pages of evidence have to be reintroduced in a state court suit? Walter R. Mansfield: I don't think they would because, if Your Honor pleases, the state court, the Zenn Referee had before him 480 exhibits and that's already in the state court filed before the judge who is still serving and the Referee, they're both in service. They would simply pick up where they left off and see whether or not the evidence would have made any difference to them. But now, we would be asked to go back and I might add parenthetically that the District Judge before whom this was tried, Judge Dawson since deceased would have to go back and start a trial all over again before a judge who never lived with it, and would have to second guess whether he thinks this evidence would have made any difference to it. Hugo L. Black: In your judgment does this -- would the federal court have jurisdiction of this suit?Does it have it? Walter R. Mansfield: In my judgment Your Honor on the proof that is now -- Hugo L. Black: I'm not talking about where -- what -- I'm not talking about whether it should be exercised. Does it have jurisdiction? Walter R. Mansfield: I think that the federal court has jurisdiction to collateral -- to entertain a collateral attack upon a state court judgment for -- in New York for what is called extrinsic fraud and that the proof in this record shows that the fraud was not of the type which under New York state law would permit collateral attack and therefore it would be dismissed on the record for lack of jurisdiction. Hugo L. Black: Well, then you think it could not -- the suits should not be filed? Walter R. Mansfield: On the proof? That's now on the record, I would say that is correct, Justice Black. I would like to point out one very important piece of evidence which I think has been wholly left untouched by petitioners and that is the fact that on February 11, 1950, the objectant's counsel had before him and introduced into evidence in the Zenn proceedings a report by Mr. Purcell, one of the defendants to Young and Kirby, the other two defendants, Zenn, forecasting $19.61 of income per IDS share, from IDS' mortgage department alone for 1950 plus increased revenue from all other departments. Now, we submit that that forecast which is at 1186 of the record. Certainly, a plaintiff, the Zenn Referee with the essential facts as to what was being forecast at that time, the value of forecast is a different matter. It's also been -- that the witnesses testified that such forecasts of course have very limited value in view of the many other pessimistic factors that were in existence in 1949 and 1950 but were taken into consideration. Now, it's also been suggested that there was a concealment of IDS forecasts. I pointed out that Young testified that he had the -- he from time to time received IDS forecasts. He testified again in December 1955 before the Zenn Referee and by that time, it was clear to everybody that Purcell had taken back with him from Alleghany to IDS in Minneapolis these forecasts that Alleghany had received when Purcell went there to become president in 1953 and that he would bring them back with him when he came to testify. And in January of 1956, he did come to testify.He testified for a full day and he brought with him as he testified and I quote, “An enormous briefcase in one hand, an enormous manila folder into my other arm containing IDS financial projections and records and IDS projections. Now, Young had no motive therefore to conceal. He knew that Purcell was coming along with the IDS projections and the record shows, this is the Zenn record, that Purcell appeared with the ID -- that when he appeared with these records, they were examined for only a few minutes, that's what the record shows by the Zenn objectant's. And that at end of a full days testimony of a 130 transcript pages, Purcell announced to the 15 lawyers present and this is Purcell's testimony, “This company, referring to IDS, produces a large number of reports, many of which I brought here today that nobody has asked me about.” Now, he was inviting everybody to interrogate him about the IDS records but the objectant's counsel Graubard shows not to because he had the Purcell report between the very principles involved that was far more valuable to him than anything else he could possibly had. So he decided to let -- well enough alone and we submit the proof of -- there's no proof in this record of fraud on the part of Young and Purcell. Now, there's some testimony that -- or statement here that Graubard said later that he would have by (Inaudible) offered a certain exhibit in the evidence or a certain forecast. If that record is read, it shows that he could not recall whether he had seen this exhibit and he could not recall when other IDS forecast was shown to him, whether he had seen them because he said he had a team of people going through thousands of records and many of which were examined by others and not by him. Pomerantz testified to the same effect. He had a team and he test -- he examined part of the records, Mr. Clinger, an accountant examined part of them and Mr. Haudek examined the -- another. Now, we had analyzed these documents in detailed in our brief and we submit that they add nothing. Hugo L. Black: May I ask you just one question? Walter R. Mansfield: Yes Justice Black. Hugo L. Black: You said there's no proof of fraud on the part of Purcell and Young. Suppose there had been, suppose all eight had determined there was fraud, what would be the situation then? Walter R. Mansfield: In -- on the basis of this record, Your Honor, first of all, the issue was never raised below and we say that it would be unfair now to charge us on the basis of evidence that did not relate to an issue to set aside the judgment below. But even if there had been an issue, as the District Court noted, the failure to adduce evidence in a proceeding before the state court under state law is not ground for collateral attack. It is ground for going back to the judge and trying to find out whether that judge considered that the evidence would have changed his mind and that's what we say should have been done here. Hugo L. Black: It didn't amount as to practically to say there's no jurisdiction, doesn't it, in the federal courts? Walter R. Mansfield: There is no jurisdiction for collateral attack on the basis of the kind of evidence that has since been brought out in this case, Justice Black. Now, what we also point out -- want to point out is that the whole -- the questions presented here are based entirely on one fundamental concept that this is a Section 14 (a) action and we submit that it is not a Section 14 (a) action, that Section 14 (a), the legislative history language shows, there was never any intent to relate to production of proof by a director in litigation. Thank you. Earl Warren: Thank you.

William H. Rehnquist: Mr. Jibson, you may proceed whenever-- J. Robert Jibson: Mr. Chief Justice, and may it please the Court: The issue before the Court in this case is whether an Asylum State Court may block extradition on the ground that the person is not charged with a crime because that court concludes, based on extrinsic evidence, that the person is innocent. On March 9th, 1984, real parties in interest, Gerard and Richard Smolin took Richard Smolin's two minor children from his school bus stop in Slidell, Louisiana, St. Tammany Parish, and removed them to the State of California. Speaker: Mr. Jibson are you reciting facts? Now, from where are you getting those facts? J. Robert Jibson: These facts are from the record of the record of the habeas corpus hearing, Your Honor. Speaker: The record of the habeas corpus xxx. J. Robert Jibson: That's correct. At the time of the abduction, the children had been living with their mother, in her custody for three years in the State of Louisiana. Three days after the abduction, the St. Tammany Parish prosecutor filed simple kidnapping charges against Gerard and Richard Smolin. And their extradition from the state of California was sought. Two months later, in June of 1984, the Louisiana Governor sent a requisition to the Governor of California, requesting the extradition of the Smolin's. After two more months, in August of 1984, the California Governor granted the extradition request and issued his warrant for the rendition of the Smolin's. However, the courts of California have now blocked the extradition on the basis that the Smolin's are not actually charged with a crime. They reached this conclusion only after the habeas corpus courts in California took judicial notice of some other California court records containing a decree which gave Richard Smolin custody of the children. Essentially, the habeas corpus court found that since, in light of that decree giving Mr. Smolin custody, he could not be found guilty in the state of Louisiana; therefore, he and his father Gerard were not actually charged with a crime in Louisiana. Speaker: xxx does the state argue at all that the habeas proceeding should not have gone forward at all? J. Robert Jibson: No, the state is not taking that position, Your Honor. Speaker: So that there maybe some inquiry made by the habeas court into what? J. Robert Jibson: the habeas corpus court may inquire into four very narrow areas, Your Honor. Two of those are factual, and two of those are legal. Speaker: Where do these limitations come from. J. Robert Jibson: They come from this Court's case in Michigan v. Doran in 1978, Your Honor. The factual questions that may be inquired into in habeas corpus are Number 1: Whether the person before the court is, in fact, the person wanted by the demanding state. Question of identity as the person charged. Secondly, whether in fact he is a fugitive and by that I mean a legal term of art whether he was in the state at the time the alleged offense took place. And thereafter, is found in another state. Fugitivity if you will. Those two factual questions. Then the legal questions are whether the extradition papers on their face are in order according to the-- Speaker: Well now, in order in what sense? Whether-- J. Robert Jibson: --Whether they meet-- Speaker: --Whether they're properly charged? J. Robert Jibson: --That is actually the fourth inquiry, Your Honor. The facial validity of the papers-- Speaker: But the habeas Judge could look at the habeas papers, all of the papers-- J. Robert Jibson: --The extradition-- Speaker: --I mean, the extradition papers rather. J. Robert Jibson: --That's correct. Speaker: And determine whether or not the, what's his name, was properly charged, may it not? J. Robert Jibson: It may look at the extradition papers, yes. Speaker: And determine whether properly charged? J. Robert Jibson: That's correct. Speaker: And how far does that inquiry go? J. Robert Jibson: That inquiry, it is our contention, is limited to what is included in the extradition papers. Whether they, on their face, state the charge of an offense in the demanding state. Speaker: Uh-huh. xxx also have to show that it is a crime in that state too? J. Robert Jibson: The papers must allege that it is a crime in that state. That's true. Speaker: In both states. J. Robert Jibson: No, that is not true, Your Honor. As a matter of fact, it only need be shown that the crime for which extradition was sought is a crime in the demanding state. It doesn't even matter if it is a crime in the asylum state as a matter of fact. The criteria is whether the person is charged under the law of the demanding state. Speaker: I'm curious to know where that requirement comes from, because one would think that the Louisiana authorities would be the best judge of whether the person is charged with a crime under Louisiana law. Why should a California Superior Court look into the law of Louisiana? J. Robert Jibson: Well actually, Your Honor, that language "under the law of the demanding state. " is contained in the Uniform Criminal Extradition Act, which has been adopted by both the states involved here as well as all other states with the exception of two. Speaker: And the Uniform Extradition Act says that the court of the asylum state may examine into that question. J. Robert Jibson: No, it doesn't say that explicitly, Your Honor. The courts-- Speaker: Then why should the court in California go that far? Why should it examine it where the state's a claimant of Louisiana law? I thought your position was that you just looked at the face of the papers and if those papers purported to state a charge under Louisiana Law that was the end of it. You're not supposed to go to the statute books and look about anything. J. Robert Jibson: --Well,-- Speaker: California courts don't know Louisiana law. J. Robert Jibson: --That's true. That's true. And-- Speaker: Isn't that your position? J. Robert Jibson: --It is our position that you look at the face of the documents to determine whether there is a charge there. Speaker: Well, Mr. Jibson, suppose xxx. I take it that means also looking at the face of the affidavit's, does it not? The affidavits that accompany the-- J. Robert Jibson: The face of the affidavit's. That's right. Speaker: --And on the face, they do state a charge. J. Robert Jibson: That's correct. Speaker: Let's assume. But, let's suppose the judge knows, personally knows from previous experience with the case, as I gather was the case here, that those affidavits do not state the facts as he recalls them personally. J. Robert Jibson: It is our contention that he is not permitted to bring to bring extraneous-- Speaker: He can't do that? J. Robert Jibson: --That's correct. In the context of the extradition hearing he is not to bring in extraneous facts, other than what is contained in the four corners of the extradition papers. That's true. And that is our contention. Speaker: Including notice, judicial notice of lawful judgments and decrees of the asylum state, is that right? J. Robert Jibson: That's correct insofar as it bears upon these questions of law which are-- Speaker: Well, do you concede that the California custody decree granted lawful custody of the children to Mr. Smolin. J. Robert Jibson: It appeared to. It purported to, yes. And the problem that, maybe I can give a little-- Speaker: --Well, if so, could the Smolin's be guilty of a crime in Louisiana? Of this crime, if Mr. Smolin had lawful custody? J. Robert Jibson: --If he had lawful custody, it would appear that he has got a defense to the crime. But the problem with going beyond the face of the documents when you're inquiring into this question of whether the person is substantially charged is because you just don't know what else is out there. We do have these decrees that were found in the California court file, but as I've indicated in the brief, there are grounds upon which those can be disputed. And, in fact, the Louisiana authorities do dispute the validity of those. They're aware of those orders. They dispute their validity. And it's my position that the extradition-- Speaker: xxx federal law though, it seems crystal clear that only California had jurisdiction. J. Robert Jibson: --What was crystal clear under federal law and I don't want to transform this into a custody case, but what's clear under federal law is that California retained modification jurisdiction over the original order which gave Mrs. Pope custody of the children. That is not the same, I submit, as to whether that is the only court that can deal with the custody issue regarding these children. As I said at the outset, these children had been living with their mother for three years in the state of Louisiana. They had established home state jurisdiction in the state of Louisiana. And, as a matter of fact, custody proceedings were pending in Louisiana at the time of this abduction. Now, as I said, there are areas for dispute as to whether or not ultimately, Mr. Smolin had custody of the children. Speaker: Well, the Federal Parental Kidnapping Act would not appear to give any state other than California, jurisdiction to modify the decree-- J. Robert Jibson: If I-- Speaker: --As long as one of the parents remained in California, as Mr. Smolin did. J. Robert Jibson: --to modify the decree, that's correct. If I might I could quote just a brief section of that Federal Act, Your Honor, and hopefully this will help to answer that particular question. This is subdivision G of 1738(a). A court of a state shall not exercise jurisdiction in any proceeding for a custody determination commenced during the pendency of a proceeding in a court of another state. Or such court of that other state is exercising jurisdiction consistent with the provisions of this section to make custody determinations. Just one ground as a possible means of attacking this particular decree that Mr. Smolin is relying upon would be that there were pending Texas proceedings regarding the custody of these children at the time he went in to the California court to get the custody decree modified in his favor. He was aware of those Texas proceedings. Those Texas proceedings were being held in order to receive a full faith and credit recognition of the original California order. There was no notice to the California court when Mr. Simolin went in to get his modified decree. The Texas proceedings were already pending; therefore, there would be a violation of this section of the Federal act. The point is, in these custody disputes and I'd rather get back to the extradition issue, but in these custody disputes the key under both the Federal act and the Uniform Child Custody Jurisdiction Act is communication where there might be problems with concurrent jurisdiction, where more than one court might have jurisdiction over the custody matters involving these particular children. Communication did not occur in this case; therefore, we have a result of conflicting custody orders. So, the point of all this is that it was not that cut and dried that he could not be charged. This actually goes to the merits of the case in Louisiana. And, of course, this is my base line position that those have to be delved into only where the charges are pending out in the asylum state. That is not part of the summary executive proceeding that we call extradition. This Court has on numerous occasions recognized that extradition is intended to be a summary executive proceeding in which the courts of the asylum state play an extremely limited role. In Michigan v. Doran, this Court clearly stated that a court of an asylum state can do no more than decide those four issues that I enumerated a little bit earlier. Can do no more than. It's a matter of power of the courts. This Court indicated that asylum state courts are without power to go further than that. And I submit that what occurred in this case is that the California Supreme Court. Speaker: Let me just, maybe you've already answered this, but xxx, the Chief Justice's question, and what is the source of the law that says they have no power to go beyond this? What do you rely on? Do you rely on the Uniform Extradition Act, the Federal Statute or the Federal Constitution xxx? J. Robert Jibson: When I say, no power to go beyond those four inquiries,-- Speaker: Yes. J. Robert Jibson: --I'm relying on Michigan v. Doran. This Court's decision xxx. Speaker: You mean you're just relying on an opinion of this Court? J. Robert Jibson: That's correct. Speaker: Which was based on what? J. Robert Jibson: Which was based on the extradition clause in the Constitution and the Federal Extradition Act. Speaker: And the Federal Statute. J. Robert Jibson: That's correct. Speaker: So, you don't rely on the Uniform Act for this purpose? J. Robert Jibson: Well, the Uniform Act was promulgated and enacted by the various states under the auspices of the extradition clause and it supplements it. But I'm not just relying on the UCEA. No, Your Honor. As this Court made clear in Michigan v. Doran, these are requirements that are dictated under the Constitution provisions as well as the Federal Act. Speaker: And it's your position, I want to be, maybe this is repetitive and I don't mean to do that but, can the court in the habeas corpus proceeding at least inquire as to whether there is a statute in Louisiana as alleged in the charging papers? Can it look at the statute books? In your view? J. Robert Jibson: Yes, they can take judicial notice of the statute in the demanding state. Speaker: What if there is a court decision in the demanding state construing the statute, can they look at that? Say there's a court decision that says the prosecutor in a case like this has the burden of proving that the alleged kidnapper, when he's a parent, did not have custody? J. Robert Jibson: Well, they can look at court decisions that amount to the general law of the state, of the demanding state. That's true. Speaker: For what purpose? I don't understand that. J. Robert Jibson: Well, that would again go to-- Speaker: It seems to me you're slipping into a trial of the merits once you start looking at court decisions. J. Robert Jibson: Well, the extent to which they can look at those is very limited and it has to appear on the face of the documents that the charges as set forth in the charging documents clearly do not fit within the law if, for example, if another state-- Speaker: --So the asylum state conducts sort of a judgment on the pleadings kind of a call, is that xxx. J. Robert Jibson: --Well, I wouldn't go to that extent. It has to be so clear that there is no interpretation of the demanding state's law by the asylum state. They can't go that far. xxx. Speaker: So long as the requesting state's law is clear, the asylum state can use it, is that it? J. Robert Jibson: That's right. If it reasonably fits within the law of the demanding state. If it's clear on its face that it does. Speaker: All you need is a clear defense to the charge and you can't be extradited? J. Robert Jibson: No, no. Speaker: I thought that's what you just said. J. Robert Jibson: No. Because that would-- Speaker: Well, I don't understand what you're saying then. J. Robert Jibson: --That goes, no, that goes to the question of an affirmative defense to the charge that can be raised only in the demanding state. Speaker: Affirmative defenses are not allowed, even if they're clear? J. Robert Jibson: That's correct. Speaker: Even if they're in the statute? Supposing the statute contains a proviso, provided that it shall not constitute the crime of kidnapping if the alleged kidnapper happens to be the father who has a decree awarding him custody of the child? And it's all spelled out in the statute? We still couldn't look at that? Is that your view, because it's an affirmative defense? J. Robert Jibson: No, you cannot look at that xxx. Speaker: Even though it's perfectly clear on the face of the statute that the man can not be convicted of a crime? J. Robert Jibson: Well, then you're presupposing the other fact and that is the fact that somehow the papers show that it-- Speaker: I say we're relying on Louisiana Code Provision XYZ. You read it and it says in there if he's the custodial parent he cannot be charged with this crime. That it's an affirmative defense in the statutes and the proviso. You say you can't rely on that as I understand your view. J. Robert Jibson: --No, what you cannot rely upon is an asylum state court interpretation of the demanding state's law. Speaker: No matter how clear? J. Robert Jibson: No. Speaker: Even if there's a cow case right on all fours, you can't rely on it? Well, then you're saying in effect-- J. Robert Jibson: Not if it's the demanding state. Speaker: --you're saying in effect that the Louisiana authorities are the judge of whether he's charged under Louisiana law. J. Robert Jibson: Exactly. That's what I'm trying to say. Speaker: Well, but you're not really saying that. You're saying, unless it's clear. I mean that's what I'm trying, I can understand that. That a sensible position, leave-- --It's clear. Why not just stick with the proposition that the Louisiana authorities are the judge of what Louisiana law says. J. Robert Jibson: Well, that's my premise that they are the judge of what the law says. Speaker: But-- J. Robert Jibson: If their statute is included in the papers let's say, which often is the case and clearly the allegation simply does not state a crime under the law of that demanding state then there might be an argument to be made that he's not substantively charged. Speaker: --So the asylum state courts can second guess the prosecutor who wrote out the charge. He made a charge under a certain statute. J. Robert Jibson: Well, what actually-- Speaker: And the, so you can review his, you can in effect grant a motion to dismiss for failure to charge a crime. J. Robert Jibson: --No, what actually happens-- Speaker: Is that your position? J. Robert Jibson: --No. No it isn't, Your Honor. Speaker: Well, it sounds like it. J. Robert Jibson: What actually happens in those situations and believe me they do not come up in the extradition context because of the communication that goes on between the asylum state authorities and the demanding state authorities. And, if there would appear to be a question in the mind of the executive people who are reviewing the documents, then the matter is cleared up as a matter of demanding state law. The demanding state authorities are the ones who are to determine-- Speaker: But that's the governor's inquiry. We're talking about a habeas corpus. J. Robert Jibson: --That's right. Speaker: A court inquiry after the kind of second guessing the governor. J. Robert Jibson: That's right, they are second guessing the governor. Speaker: Well, supposing that there's an, I don't know if Louisiana has information or indictments, but supposing the charge simply is that the county attorney of St. Tammany County charges that this defendant violated Section 11256 of Louisiana Code. Now what sort of an inquiry can be made by the asylum state? J. Robert Jibson: Well, there wouldn't be any inquiry in that particular situation because it is lawful to charge simply in the language of the statute, or even charges-- Speaker: Well, how do you know what's lawful in Louisiana? You're a California lawyer. If that comes from Louisiana, don't you simply presume it's lawful to charge that way in Louisiana. J. Robert Jibson: --Yes, you do and that's why I say there wouldn't be an inquiry xxx. Speaker: Well then you don't look at anything but the paper? Right. J. Robert Jibson: That's correct. Speaker: I wouldn't be too sure. Louisiana's civil law and the other states are common law. So how do you know what happens in a civil law state? J. Robert Jibson: Well, again I think goes to the point that you don't presume to know. That's what Louisiana authorities-- Speaker: You wouldn't even look. J. Robert Jibson: --to decide. Speaker: You wouldn't look. You wouldn't even if there, even if you went to the Louisiana statute books and you find that there is no Section 11256. It does not exist, or it's been repealed. Right? You would not look at that? That's none of your business. That's for the executive. Right. J. Robert Jibson: I'd have to agree with that. Yes, Your Honor, because you don't know how far to go in the extradition context. It's supposed to be a summary proceeding. Speaker: Well, despite Michigan v. Doran, counsel, there are a few statements in earlier opinions of this Court that indicate that if it's clear there is no reasonable possibility that the fugitive is guilty that the asylum state court can refuse extradition. What do you do about that language in the Strauss case and the Drew case? J. Robert Jibson: No reasonable possibility-- Speaker: xxx valid. J. Robert Jibson: --I'm not familiar-- Speaker: That language? J. Robert Jibson: --with that particular language in the Drew case. In fact, I believe in the Drew case it held just the opposite. There appeared to be a very-- Speaker: Well, Drew said that extradition is proper, given the reasonable possibility that the fugitive may have committed a crime under the other state. J. Robert Jibson: --Well, that's true. If the reasonable possibility standard would simply mean that on the face of the documents it appears that it's possible that he is charged with a crime. If you can determine on the face of those documents that there is no such possibility then that particular factor of those four in Michigan v. Doran is missing. And therefore, he might be entitled to habeas corpus relief in that particular situation. Speaker: As I understand your position now, really the only inquiry that can be made in the asylum state in this proceeding, is whether the extradition papers are facially valid. Is that right? J. Robert Jibson: Whether the extradition papers are facially valid? Speaker: Facially valid, and you can't make any inquiry beyond that? Now suppose this judge as I understand it had had considerable experience, at least some, with this very case, had he not, previously? J. Robert Jibson: Yes. Speaker: The habeas judge had? And suppose he looks at these papers and on their face they all look very proper, but he knows because he was there that the affidavit is misleading. Doesn't really tell what actually occurred, as he remembers how it occurred. Would that be sufficient basis for him to say that to that extent the papers are facially invalid? J. Robert Jibson: No, because then the invalidity does not appear on its face to anyone reading the document. This particular judge happened to have outside knowledge which was irrelevant to that particular inquiry at the habeas corpus hearing in the asylum state. And,-- Speaker: And I suppose it appeared that indeed the extradition request itself had been obtained by fraudulent means? The asylum state still was helpless to refuse to send-- J. Robert Jibson: --The asylum state would not be helpless, Your Honor, but the court in habeas corpus hearing would not have the authority to go into that particular question. Again, that's where you get into the executive branch. This is an executive proceeding. I want to emphasize that, that there in these cases there commonly is communication between two states. If something looks amiss upon the executive branch examination of these papers, whether it be fraud, a false affidavit, any of those areas that you had been discussing, the communication takes place. The governor, in fact, the governor in this case took two months to issue his Governor's Warrant of Rendition. And there was an inquiry made into some of these factors and communication was made with the state of Louisiana. And that is the source, the check where these types of frauds and inconsistencies ought to be brought up-- Speaker: --Well, I suppose it's possible though that the governor has no discretion either-- J. Robert Jibson: --Well-- Speaker: --to refuse extradition. J. Robert Jibson: --I'm aware-- Speaker: I think you're making an assumption that may not be valid. J. Robert Jibson: --I'm aware of the case of Branstead which is before this Court. Up till now it has at least been presumed that what has grown to be, or become known to be discretion does lie with the governor. But even if the governor doesn't have discretion to deny the extradition, this communication still takes place and on many occasions the governor can communicate to the demanding state's governor and ask that he withdraw his request after giving him all these facts. And that's happened. Speaker: Mr. Jibson, your new position, or your position, if it isn't a new one, that you just look within the four corners of the instrument, how do you square that with the language, "substantially charged"? J. Robert Jibson: "Substantially charged" I see-- Speaker: Where is that language by the way? That's in the Uniform Act, right? J. Robert Jibson: --That's in the Uniform Act. Speaker: It's not in the federal statute. J. Robert Jibson: No, but it's been used-- Speaker: And in it's not in the Constitution? J. Robert Jibson: --No. Speaker: So, who made it up? J. Robert Jibson: It's been used by this Court in several cases and I-- Speaker: Before the Uniform Act was adopted? J. Robert Jibson: --I believe so. I believe so, Your Honor. The Uniform Act does use it. But it doesn't change the constitutional requirement in this way. Speaker: I understand. Well, just tell me what it means then if it doesn't mean that you-- J. Robert Jibson: It simply means that the substance of a charge must appear on the papers and I think what that means is, we don't go into possible pleading defects, whether it's charged every element of the offense or any of those things. If the substance of an offense appears on the papers then that satisfies the requirement. That's all substantially xxx. Speaker: --Or, what you really mean is the substance of an alleged offense? J. Robert Jibson: That's correct. That's right. Just the substance. Speaker: The governor sometimes by telegram, sometimes by telephone, but many times completely informally changed all of that? J. Robert Jibson: Well, they don't change it, they communicate. They communicate-- Speaker: They communicate-- J. Robert Jibson: --to make sure that-- Speaker: --and said this point here doesn't appear to be correct because the facts are thus and so. And the governor changes it. That happens every day. J. Robert Jibson: --It does happen, yes. Free communication between the two executives. I would like to reserve whatever time left I have, Your Honor, for rebuttal. Speaker: Thank you, Mr. Jibson. We'll hear now from you, Mr. Riordan. Dennis P. Riordan: Mr. Chief Justice and may it please the Court: I'd like to begin by trying to clarify what's been at issue in this case. I think it's gotten a little muddled because Mr. Jibson came here today looking to hit a single and he's been invited to hit a home run. And I think his position in response to that has changed. Before we got here the following things were clear. One the California decree giving Richard Smolin sole custody of his child in 1981 was valid in '81, it's valid in '84. The issue has been completely litigated by both parties in California, that's a matter of state law. He was the legal custodian of his children in 1984. What was clear before we came here today was that under federal law, that decree has to be respected in Louisiana. It was clear, one, because that federal law holding by the California Supreme Court was never challenged by California before this Court, which it could have been. It's also clear because the plain language of 28 U.S.C. 1738(a) makes it absolutely apparent that Louisiana will and must respect the 1981 California decree. Furthermore, if you look at the case law in Louisiana interpreting 1738(a), and I can cite the Court to two cases, it's absolutely plain that they will hold that California was the only state that could modify the decree, that the '81 decree was valid. Speaker: This is Section 1738 of what, the Kidnapping Act? Dennis P. Riordan: No, it's the Federal Parental Kidnapping Prevention Act of 1980 xx. It's a Full Faith and Credit Act which is found in 28 U.S.C., which was passed by Congress to make sure that there could only be one valid custody decree at any time. And under the terms of that act, the only valid custody decree in 1984, when Richard Smolin picked up his children, was the California decree. Speaker: I don't know, I mean, maybe that's right, but really what we're talking about here is whether that issue going to be fought about in California or in Louisiana. Dennis P. Riordan: Precisely. Speaker: Now why should it be fought about in California? Dennis P. Riordan: Well, the reason is we go to the last issue, which is, if he was the sole legal custodian can he have committed kidnapping in Louisiana? And here's what-- Speaker: But, if you put it the other way, you say you don't get to that until you decide what issues you can raise in California. Dennis P. Riordan: --Right. And here's where we get to the single rather than the home run. The single is relying on a hundred years of precedent. Mr. Jibson says, it is true that for a hundred years you've gotten a common law demur in the asylum state. That's what it comes down to. As Justice Scalia said, you get a motion for judgment on the pleadings. That's existed since this Court's decision in Roberts v. Reilly in 1885. It's existed because of the use of the word, "substantially" in Roberts and in the Act. Substantially has never been viewed as surplusage if the act said you determined whether there is a charge in Louisiana and there always is in an extradition case. There's always a charge that's been lodged. You determine if there's a charge and that's the end of it. "Substantially" has always been interpreted to mean it's got to be a substantial charge. Speaker: That language isn't in the Act. It isn't in the Federal Act and it isn't in the Constitution. Dennis P. Riordan: Right. But it is in 100 years of precedent. It is in this Court's decision in Roberts v. Reilly. It is in the Uniform Extradition Act. Speaker: What the justification for it? Dennis P. Riordan: Hum? Speaker: What's the justification for the Court having read-- Dennis P. Riordan: Well, the-- Speaker: --Wait till I finish my question. Dennis P. Riordan: --I apologize. Speaker: What's the justification for the Court having read the extradition clause that way in the first place? Dennis P. Riordan: I think the justification is that recognized by the concurrence in Michigan v. Doran. Extradition is worse than an ordinary criminal charge because you have to be processed in one state. You have to be forcibly transported to another. The justification is, it's not unfair to a demanding state to file an indictment that passes muster under their own law as a question of law. And for a hundred years it's worked well to say, you get a demur. That's all you get. Speaker: But how does the Superior Court of California, I mean it seems that's a very wasteful proceeding to have them trying to find about Louisiana law. Dennis P. Riordan: Well, I think if you look at Varona, if you look at Lewis, which is cited in our brief in New York case, they say, hey, we are not going to descend into the intricacies of Louisiana law or Alabama law in Lewis. Speaker: Is Lewis a case from this Court? Dennis P. Riordan: No, Lewis is, almost all of these cases with the exception of Roberts and Michigan v. Doran are, these come up in state courts in extradition proceedings and they are legion. You make this demur and the courts have said, wait. If it depends on an interpretation of Louisiana law, go to Louisiana. We're not the experts in Louisiana law. If it's a facial, if the judicial gloss on the statute is clear, or the statute is clear by its terms then you do have a right to a demur here. And no one can suggest under the Louisiana Statute, the sole legal custodian of his children can be guilty of kidnapping. Louisiana-- Speaker: How do you know who the sole legal custodian is the defendant just on the face of the papers? Dennis P. Riordan: --You know that-- Speaker: You have to bring in this decree. Dennis P. Riordan: --Hum? Yes. Speaker: You have to bring, and that would ordinarily not be a demur. You would demur to the pleading or the charge-- Dennis P. Riordan: Right. Speaker: --you don't bring in evidence aliunde. Dennis P. Riordan: Well, that brings us, let's look at that, as an example let's look at Louisiana. Let's pose the question this way. If you were to demur to this charge in Louisiana could you judicially notice the California decree on a demur? The answer is, yes. Speaker: So then the Superior Court in San Bernardino County has to not only know the Louisiana Statute Law, but it has to know what grounds could be raised in a demur in Louisiana. That's how you go about making this decision? Dennis P. Riordan: No, no. I use that merely as analogy. What I'm saying is that you've traditionally gotten a common law demur in the asylum state. Now the-- Speaker: The common law of what state? Dennis P. Riordan: --Hum? Speaker: The common law of what state? Dennis P. Riordan: I use that as a term of art. What, for 100 years, what you have gotten in every state of the union, if someone seeks extradition, you've been allowed to say, that doesn't make it on the pleadings. Speaker: And then you can bring in evidence outside the pleadings is your theory, I guess. Dennis P. Riordan: No. Speaker: How do you get this California decree in there? Dennis P. Riordan: Well, what I am suggesting is the, I should qualify that. It depends what you're talking about. Speaker: Then you can bring in some evidence outside the pleadings? Dennis P. Riordan: Of questions of law. Matters of law. In Louisiana as an example, and I use this as an example. If Richard Smolin went into Louisiana under Section 532 of Louisiana Code of Criminal Procedure, he gets a demur. A modern equivalent of it. A motion to dismiss for failure to state a charge. Louisiana would say and does, don't bring in any evidence here. Don't bring in evidence of justification or so forth and so on. But if you want to use judicial notice to bring before us a matter of law, i.e. a California decree, you're free to do that. Speaker: What if Louisiana law provided otherwise? That not only can you not bring in any evidence, but you can't bring any judicial decrees in. It's just a traditional, very narrow demur. Dennis P. Riordan: Right. I use-- Speaker: Would that bind the California Court under your view? Dennis P. Riordan: --No, I use Louisiana as an example, because it isn't a question of Louisiana criminal procedure, it's a question of what you've been allowed under federal law in the asylum state. Speaker: Well, what's the source of federal law? Dennis P. Riordan: This Court's decision in Roberts v. Reilly. Speaker: So, you think this Courts decision, Roberts, laid down a whole guideline to pleading, you know, what you could raise in this thing and that sort of thing? Dennis P. Riordan: We cite probably a dozen cases in our brief. We could cite 100 that say for the last 100 years the fourth exception in Michigan v. Doran, was listed second. That is you check to see whether there is the existence of a charge, has been interpreted to mean you check to see whether there's a substantial charge? That is, a charge that would withstand a demur? Now, this Court could choose, of course, to reverse 100 years of precedent. Speaker: Well, yeah, the only case we would be narrowing would be Roberts, wouldn't it? Dennis P. Riordan: Well, no. You'd be over-ruling the decisions of the supreme courts of probably-- Speaker: But, we don't overrule state supreme court decision. We may disapprove. Dennis P. Riordan: --I stand clarified, corrected. Yes, what you would be doing is saying that the word "substantial" in Roberts and the word "substantial" in the Uniform Extradition Act has always been interpreted to mean that you get a demur. But we're now holding that all it means is that you get to check and see whether there's been an indictment filed. Speaker: Well, in Michigan the claim was the Michigan Court said, "substantially charged" means that we look at the facts to see it there was probable cause. And we said, no that isn't what "substantially" means at all. Dennis P. Riordan: Right. But this Court never dealt with-- Speaker: xxx. Dennis P. Riordan: --This Court in Michigan never dealt with the exception that we're talking about here. Michigan didn't involve fugitivity and it didn't involve the right to a demur. This Court referred to the fact that, the interesting thing about Michigan v. Doran is it didn't use the word "substantial". And since then there are been, an argument has been made that by pulling out the word "substantial", this Court overruled the right to the equivalent of a common law demur in asylum state. If it did that would be a very strange case to do it in because it didn't involve the scope of this. And I use demur again as a term of art, this judgment on the pleading. But if you look at Roberts, if you look at all of the state cases since then you get a challenge to the legal sufficiency of the charge even though it's in the asylum state. And the reasoning has been-- Speaker: Mr. Riordan, are you sure that the existence of a custody decree is a matter of law? Let's say parentage, is parentage a matter of law, whether I am the father or not? Dennis P. Riordan: --Well, it is if two parties have come together, litigated an issue to the highest court in the state and settled it in an opinion of which a court can take judicial notice. There's no more argument. Speaker: But let's assume a particular indictment would be absolutely invalid if I was the father, and valid if I wasn't. Would my parentage, my natural parentage would obviously be a question of fact not of law, right? But, what if I had adopted the child and there's an adoption decree. Is that converted from a question of fact in to a question of law? It would take notice of an adoption decree? Dennis P. Riordan: If, as in this case, it's res judicata, it's been fully litigated and the only court that can litigate the issue-- Speaker: Oh, I see. Dennis P. Riordan: --and is no longer subject to challenge. No one can challenge the validity of Richard's '81 decree. It's happened. It's a matter of California law-- Speaker: I see why you're going-- Dennis P. Riordan: --initially and it's been fully litigated. And all California did in doing that was look at law. It didn't look at fact. Now, I will be the first to concede that if this Court decides to overrule 100 years of tradition and say you don't get a common law demur, you don't get the equivalent of a motion on the pleadings, we lose. Let me make that concession. If we are not allowed to challenge in the way you have been for 100 years, the Louisiana charge in the sense of getting a demur or judgment on the pleadings, we lose. Because there is a charge in Louisiana. Speaker: --Would you lose if there was any other judge but this judge? Dennis P. Riordan: But the-- Speaker: The judge that had personal knowledge. If you had a judge that didn't have personal knowledge would you lose? Dennis P. Riordan: --No, we would win. If we get a judgment on the pleadings conversely, we win. And we win before any judge-- Speaker: Would you get the judgment on the pleadings before a judge that didn't know the facts? Dennis P. Riordan: --Yes. Yes, because-- Speaker: Well, how would he find the facts? Dennis P. Riordan: --He did know the facts, but he didn't say I know the facts. Speaker: The facts. Dennis P. Riordan: Right. We would still win because the judge who didn't know the facts could take judicial notice of the California decrees which were final and binding. So the happenstance existed that this judge knew the facts of the case. But,-- Speaker: I have trouble with happenstance, frankly. Dennis P. Riordan: --That this particular judge-- Speaker: Yes. Dennis P. Riordan: --Let me make one thing clear, Your Honor. This was not the judge who issued the child custody decree. This was not the judge who originally gave custody to Richard. There is no question that there was an collusion here between a judge originally giving custody and then dealing with a habeas corpus matter. He was familiar with the family law matter because he was the judge that later heard the challenge to the '81 decree. Speaker: Mr. Riordan, can you give us any guidance on how clear the law has to be? I mean, we went around and around on that with Mr. Jibson. Dennis P. Riordan: Right. Speaker: And I guess we eventually ended up, it doesn't matter how clear it is. Now you say that we do take law into account. Dennis P. Riordan: Well, the-- Speaker: You know, you can have some very refined questions of law that go to whether a motion for judgment on the pleading should be granted or not. Dennis P. Riordan: --I agree, and I think if you look at a decision like Lewis, where it was a New York Court act and they said, caution is called for in this situation. We are not he authorities on Louisiana, in that case, Alabama law. You've got to make out a very clear case. Speaker: So, the test is not simply whether it's an issue of law? The test is what? Dennis P. Riordan: No. The courts have demanded that the resolution of the issue of foreign law be crystal clear. In this case, there might have been quibbling about the validity of the '81 California decree. That's been settled in a California court. We could have an interesting discussion. Perhaps someone once has a complex question about PKPA, but that's a federal law question on which this court, and Louisiana can give this Court no guidance at all. This is the Court that eventually decides exactly what PKPA means. But in terms of the Louisiana law question here, if anyone, I will also concede we should lose the case if anyone can come up with an interpretation of the Louisiana statute under which the sole legal custodian of his children could commit kidnapping. It would be like saying that Charles Lindburgh had he gotten the kid back from Bruno Hauptman could have been prosecuted under this statute. It's just not possible. Speaker: Mr. Riordan, xxx his father. Dennis P. Riordan: Hum? Speaker: That assumes that the sole legal custodian is his father. Dennis P. Riordan: No, I don't want to assume that. I'm willing to demonstrate it as a proposition xxx the law. Speaker: Well, I know, but who decides that? Dennis P. Riordan: Hum? Speaker: Who is entitled to decide that? Dennis P. Riordan: Well, we can't make an argument that Louisiana is better able to decide, in fact, California-- Speaker: I didn't say it that it would be better, I wondered who was entitled to decide it under the extradition clause? Dennis P. Riordan: --Our interpretation of the extradition clause is that if it's simply a matter of applying federal law then California as the asylum state is entitled to apply it. And I would suggest, let me point out one thing. Once this case gets to Louisiana, federal law-- Speaker: May I interrupt you just one minute? I tried to interrupt you before. I'd like to get back to a fairly simple-minded question. Is it your position that if one in California is found to be the custodian of a particular child, that he then may by self-help, wherever he may find the child, whatever the child's condition, he may kidnap the child? Dennis P. Riordan: --If-- Speaker: Is that your position? Dennis P. Riordan: --No. Speaker: Well, what is it then? Dennis P. Riordan: A state could pass a statute that says it you are the sole legal custodian and your child has been taken by an interloper or by a parent who has no legal right, they could say we'll pass a statute that requires you, that makes it a civil violation or criminal violation to get the children yourself. Speaker: Well, let's focus on this case. Dennis P. Riordan: Right. Louisiana-- Speaker: Yes, here you have a California decree that we assume is valid and instead of having it enforced by the customary means of enforcing judicial decrees the father who won in California decides he's going to enforce it himself. So, he goes to Louisiana and he picks the child up at a bus stop. Dennis P. Riordan: --Uh-huh. Speaker: Suppose the child had been home in bed, or in the back yard? So you don't get into a Fourth Amendment situation-- Dennis P. Riordan: Uh-huh. Speaker: --perhaps. Or suppose a child had been in a hospital? Suppose the child had been in New York? Dennis P. Riordan: Uh-huh. Speaker: He could go anywhere he wants and enforce the California judgment himself. Dennis P. Riordan: No. He might commit burglary if he did that. He might-- Speaker: He committed a law into Louisiana. Dennis P. Riordan: --No, he didn't, whatever-- Speaker: He committed a violation under Louisiana law. Dennis P. Riordan: --No, no. My position is just this. That can be very unwise to do that. It could even be illegal to do it. Speaker: He may lawfully do it. Dennis P. Riordan: He can lawfully do it without violating Louisiana kidnapping statute. Because the Louisiana kidnapping statute says that a legal custodian can't commit kidnapping. They could say he committed trespass. Let's say he took a buzz saw and sawed his ex-wife's car in half. He might have committed four felonies by doing that, but he won't have committed kidnapping which is the only charge-- Speaker: Well, the lawyer for California here today conceded when I asked him that question, that it does not violate Louisiana law if Mr. Smolin had lawful custody for him to take him. That was the first concession he made. Isn't that right? Dennis P. Riordan: --There simply-- Speaker: Today. Dennis P. Riordan: --I don't think there's any question about that and I would just refer you to one thing as well which is a case called Snyder v. Snyder, 474 South 2nd, 1374, it's a Court of Appeals decision of Louisiana in 1985. It involved a situation where a father in Utah got a valid modification decree, came in and took the children forcibly from the mother. The Louisiana court in a civil action said, one, the Utah decree was valid under PKPA and we have to follow PKPA. Two, there's not a hint in that opinion that there was anything therefore illegal under Louisiana law by him taking the children once he had the valid decree. I will be the first to say that if Louisiana wanted to make sure that you go into court to execute on these, it could pass a statute. Perhaps it would make it a misdemeanor to take children even if you are the legal custodian, but it's clear that under it's kidnapping statute you can't violate the kidnapping statute if you're the sole legal custodian, which Mr. Smolin is. And that is a question of federal law that is better resolved in California and the reason for that is, once this case goes to Louisiana, Louisiana is barred from PKPA by 1738(a), from questioning the California decree at all. If there had been any defect in the California decree, and there wasn't, the only place that it could have been raised collaterally was in California. Speaker: Mr. Riordan, let me ask, if you are a law enforcement official who gets somebody from another state, you initiate the process of extradition, on an indictment that is so patently invalid that it would be subject to a demur as you put it, would you be liable for any civil damages for false arrest or imprisonment, or something don't you think? Don't you think it's pretty risky business? Dennis P. Riordan: I've got enough trouble with the questions that you've thrown at me about that. [Laughter] Speaker: No, I understand. Well, I'm trying to think-- Dennis P. Riordan: I think it's clear that any such officer under the decisions of this Court would have a good faith defense that would render him immune from any liability. Speaker: --A good faith defense. Dennis P. Riordan: I don't know the answer to that. It's in part, a question of federal law. Certainly under federal law I think there would be immunity from any claim of violation of a person's right if he acted on a decree in that context. Speaker: Is the fact that this particular judge was personally familiar with this case, is that fact at all relevant to our decision of the case. Dennis P. Riordan: No. Speaker: Why not? Dennis P. Riordan: Because he did not say, I'm familiar with the facts and I'm going to rely on my personal knowledge. He said I'm going to rely on the device of judicial notice, which is the device that would have been available to any judge. And he did not do other than take judicial notice-- Speaker: Judicial notice of what? Dennis P. Riordan: --Of the decrees in the civil case which established that Richard Smolin was the sole legal-- Speaker: And these were files, were they, of the Superior Court? Dennis P. Riordan: --They were files of the San Bernardino Superior Court. Might I point out this? What is now before you is the judgment of the California Supreme Court. Prior to that decision, the entire matter had been fully litigated up to a published, an unpublished, but a written opinion of the Court of Appeal which had become final which before you in the Joint Appendix. Speaker: Well, hadn't the custody decree been appealed? And hadn't the former spouse of Mr. Smolin appeared and litigated it in California? Dennis P. Riordan: She had, I mean, one of the things that really put a judge on a tough spot if we were to adopt the rule that there couldn't be judicial notice. She had appeared before him and said, I want to contest his '81 decree. Let's have a hearing on it. She had a hearing. She got a ruling. She appealed that ruling and eventually got partial relief on appeal. The court said the '81 decree was valid, but you're now free to obtain joint custody today. Yet then, that same judge looks at an affidavit that's sworn out after all of that occurs that says he had no decree. He had no, I should correct that. He had no legal authority at the time he took the children. That's pretty tough stuff for a judge to say, I've litigated this matter-- Speaker: But, Mr. Riordan, why if it's so clear is Louisiana insisting on this? It's just a little hard to understand, isn't it? Dennis P. Riordan: --Well, Your Honor, I was here on Monday and I saw in attorney get in trouble by making assertions outside the record. I think I can answer that question, but I can't do it by staying within the four corners of this particular-- Speaker: All right then don't. [Laughter] Is it your position that we are bound to take the Louisiana judgment and give it full faith and credit and everything. I mean the California one. Dennis P. Riordan: --Right. Speaker: But ignore the Louisiana one. Both from state courts. Dennis P. Riordan: No, there is no Louisiana judgment. The two judgments were-- Speaker: What's this man-- Dennis P. Riordan: --Texas. Let me clarify this. Speaker: --xxx Excuse me, was it Texas? Well, why is Texas? What's wrong with Texas? Dennis P. Riordan: There's nothing wrong with it at all. You could get a complicated conflicting decree case but this isn't it. What happened is that the original decree went to the wife. She got sole custody. Speaker: Right. Dennis P. Riordan: Fine. It was valid when it was issued. She went to get Texas and got that recognized, full faith and credit. The Texas judgment merely recognized the rights in Texas that she had in California. There is no conflict. It was consonant with the California decree and recognized only such rights as existed in California. And under PKPA that's all it could do. So, therefore, when the California decree comes down and give him sole custody, modifying the original decree, it modified the rights that he had, she had in California and the rights that she had in Texas, cause it simply modified xxx. Speaker: The district attorney who acted in this case in Louisiana thought that the California decree had been obtained by misrepresentation and fraud. Dennis P. Riordan: Well-- Speaker: That's what the record shows, isn't it? Dennis P. Riordan: --I think its-- Speaker: That's what he thought, that maybe totally false but-- Dennis P. Riordan: --There's a statement somewhere to that effect, but I think it's not fair of us to demand of our district attorney's that they understand anything about child custody law. And frequently, they don't. I mean, the fact of the matter is that the California decree, it's been litigated fully on, if there were any fraud, any misrepresentation, any unconstitutionality in it, it could have been taken to this Court itself. It's full and final. It's over. That's settled. Speaker: --Mr. Riordan, did your client take the, did he make an appearance in the Texas court? Dennis P. Riordan: No. Speaker: He didn't object to it in any way? He couldn't have objected officially if he didn't make an appearance, could he? Dennis P. Riordan: Right. Speaker: Well, why didn't the Texas court find him? Dennis P. Riordan: Well, the Texas judgment is a full, we don't, the Texas judgment is fine. It gives full faith and credit-- Speaker: What has happened so far as custody was concerned following the Texas judgment? Dennis P. Riordan: --The Texas judgment gave full faith and credit to the original judgment. And all we are saying about that is, you can accept it as valid at the time it's issued. It can, it did purport to give no rights other than those in California. And therefore, when the rights in California were modified, that's the whole point of PKPA. Another state can recognize your rights anywhere else. But, it can't give you new rights. It can't give you independent rights. The only state that can modify the original rights is the state of the original decree. So, when California modified to give him custody, it modified the original California decree and the original Texas decree. The Texas decree has no independent existence. And this, it may take a little, have taken me a somewhat secuitcus route to explain it, but it's not a complicated question and it's a federal law question that is better litigated in California than it is in Louisiana. I would suggest this to you, that the whole point of PKPA was to make sure that adjudication stay in the original state. Here we have a situation where extradition is really being used to shift the focus away from a state that under federal law should be the locus of this litigation, and that is California. Let me, perhaps there by-- Speaker: Extradition didn't shift it, the kidnapping did. Dennis P. Riordan: --No, no. The kidnapping in-- Speaker: You wouldn't of had the extradition. Dennis P. Riordan: --The kidnapping-- Speaker: Right? Dennis P. Riordan: --The kidnapping though, Your Honor, Justice Marshall, brought this case back to the locus where it always supposed to be. The original decree state. Let me just add this. And these are sort of mundane considerations for this elevated atmosphere. One thing we know is that this is not a kidnapping case. Richard Smolin in can never be committed of kidnapping. That may be resolved in Louisiana rather than California, depending on this Court's judgment. But it's just the case. I mean, it's not a criminal case. It never should have been a criminal case. Speaker: Mr. Riordan, you say that. Does your opponent agree to that? Dennis P. Riordan: My opponent is not going to dispute it. He's not going to dispute that this is a valid California decree and he's not going to dispute, in their brief they say, and they have to, that the California decree here is not one they want to take issue with. But it's going to be a civil case. It's going to be a civil case. It should be a civil case. And these two individuals for whom a lot of blame can be attributed to both of them, this mother and father, are going to have to work out an arrangement so they both can have their children again. They're going to have to finally act sensibly and settle this. And it will be settled, and it can be settled as a civil case. And the sooner that it stops being a criminal case, an auspicious criminal case, the sooner I think these children are going to for the first time in ten years, enjoy the love that they should have from both of their parents. And I'd ask this Court to put an end to it. To declare that the case, the extradition is improper because the charge is-- Speaker: Well, if the children, if the case had gone back to Louisiana right away, it probably would have been dismissed long ago, as you say. Dennis P. Riordan: --I would like to believe that. I would like to believe that. Speaker: Well, you say it's so clear that nobody could possibly dispute it. Dennis P. Riordan: Right. But the human cost for Richard Smolin of going to Louisiana in 1984, after he had his children for the first time in six years, would have been very substantial. And I submit he did nothing wrong by challenging the action in the Courts of Louisiana. Speaker: Thank you, Mr. Riordan. Dennis P. Riordan: Thank you. Speaker: Mr. Jibson, you have three minutes remaining. J. Robert Jibson: I'd just like to make a couple of points. First of all, we do deem this a criminal case. It is a criminal case. The charges are still pending in the state of Louisiana. What brought this into the criminal justice system was Mr. Smolin's exercise of self-help, which is in itself, one of the things that the Parental Kidnapping Prevention Act, by its very title is designed to prevent. And, I don't want to get into the, to make this a custody case but this Court does not have to decide the question of who's entitled to custody here. Suffice it to say as it was stated earlier, the Louisiana prosecutor does dispute this. And, I've got some knowledge about him, but I'm not going to go outside the record either to tell you his reasons for that. But the point is, what's being attempted here is simply to come in through the back door with what you cannot come in through the front door with and that is a defense to this charge in Louisiana. This analogy to a judgment on the pleadings, I think, is inappropriate because that by definition is restricted to the pleadings and here they had to go outside the pleadings which in this case, are the extradition documents to bring in some extraneous evidence to show a defense. And, we're not to inquire into the prosecutor's motives in the state of Louisiana. Communication has been had with authorities in both states. They are anxious to go forward with this case and if, in fact, there is an air tight defense for Mr. Smolin, then he is to bring that in the state of Louisiana where these charges are pending. Thank you very much. William H. Rehnquist: Thank you, Mr. Jibson. The case is submitted.

Earl Warren: James P. Wesberry, Jr., et al. versus Carl E. Sanders, et al. Paul Rodgers: Mr. Chief Justice and may it please the Court. Earl Warren: Mr. Rodgers. Paul Rodgers: I believe yesterday, to summarized briefly yesterday the position that we could've sometime state to the Court was that we believe that the decision of the District Court should be affirmed on the ground of -- on the grounds of equitable abstention and that the decisions, the legal issues in this area should be reserved for future consideration to be decided after state legislatures, had a full opportunity to redistrict congressional districts along population lines and it only until such time should this Court at that time of endeavor to determine the legal issues within that area. In other words, whether or not this Court is going to continue to abstain from requiring congressional redistricting or at such time require the congressional redistricting to be performed. Now -- Earl Warren: Mr. Rodgers, one thing about me is your -- you don't help us very much in indicating how long that abstention should be, whether it should be for one session of the legislature after they've already had one session in which they could do it or whether we ought to go farther or whether we ought to leave those loose ends. Can you help us on that? Paul Rodgers: Well, it's rather difficult to tell this time for this reason, that you take a three-judge District Court in Georgia in Toombs versus Fortson has applied the federal analogy to our state legislature that said that if you reconstitute one House of the state legislature according to population, that would satisfy constitutional criteria. Now, Georgia had done that. We still have one House, the House of Representatives, largely apportioned according to geography. Now, if this Court should decide in the decisions in the cases that's recently heard in both Houses to some extent should reflect population then of course that would mean that Georgia would again have to reconstitute the House of its legislature. We feel that -- that we've -- that there cannot be a full opportunity for the state legislature to reapportion until after we are certain that the Georgia General Assembly had been reconstituted along constitutional lines, we cannot be certain of that until after this Court renders decisions in the cases it's just heard. So we'll say -- of course we feel that the General Assembly is going to redistrict in its January session but we'll say, we'll assume for the purposes of further consideration that the General Assembly redistricted but that the appellants were not still satisfied but that soon after, we'll say that the session closed, this Court should then require that both Houses of a legislature be reconstituted along population lines or more closely to population lines. And Georgia would like -- and have to reconstitute the House of Representatives. That might take another year or several more months so it's difficult to tell, we ask is -- is that a -- a -- that the state legislature, when it -- when we're certain that it has been constitutionally constituted and had a full opportunity to act and solve this problem in the traditional American fashion, then after that time had expired and if the appellants are still not satisfied with how the congressional districts have been reconstituted, then they can come back to Court. It's difficult to pinpoint any particular amount of time Your Honor, at this stage of -- at -- at this stage of proceeding. This morning I would first like to address myself to what we consider to be the undesirability of elections at large. Now, the requirement of elections at large is the course of mechanical device is very easy to apply but we feel that the inequity resulting from elections at large are probably worse than the present circumstances. I think one of the best descriptions as to the disadvantages of elections at large was stated by Judge Knowles who was the dissenting judge in the case of Bush versus Martin which was a Texas case where two of the judges in the three-judge court found against Texas' program for redistricting. Of course, the Court -- Justice Black have to confirm with the other member -- other members of the Court that stayed the application of their judgment but Judge Knowles stating, “We think its particularly appropriate to the Georgia case as well, although we don't have as many cards but we think the same principle would apply.” Judge Knowles stated, “All districts are presently served by a Congressman even if at large elections were held, there's reason to assume many people in those districts that want at least the opportunity to re-elect there in the Government, Congressman in the at large elections. But it is highly unlikely that Congressman from the thinly populated region far removed from the metropolitan area and known only in that district to get re-nominated or re-elected in at large elections. If this experienced Congressman should be swept out of office in an avalanche of statewide vote, it would probably be done none to their lack of statewide, it's more to their lack of statewide reputation than to their qualifications or lack of them. The consequences, the inherent unfairness to the people living in the present districts from not having a reason or opportunity to have their own Congressman reelected is disturbing. And the consequences to the entire State of Texas when the removal of these Congressmen is threatened not by the expressed will of the people of Texas through normal political action but by the politic but -- but by the practical operation of an unfortunate intervention and untimely order of a federal court is likewise disturbing. The election of Congressman at large would call a far more serious discrimination and consequences for people living outside the great metropolitan areas and is even alleged to exist presently, or today every region has substantial representation by districts, hence, only claimed present serious under representation in a few areas. At large elections would leave many of the regions of the State of Texas and the people practically speaking without representation at all. And we fear Your Honor that that would apply not only in Georgia but in every other state that would have to suffer elections at large with congressional representation. And of course the ratio in your congressional districting case is a no or nowhere near to the series ratio presented by state legislature. In other words, I understand that the worst -- alleges that the worst ratio in your state legislatures as I believe in New Hampshire was -- in New Hampshire was approximately 750-to-1. I think the worst ratio in your congressional district throughout the nation is 4-to-1 but nevertheless if you require a strict population standard in the apportionment of these congressional districts, then you can -- the Court can quickly tell from the record that the vast majority of the states of this nation allow this if -- if you use the population standard, these standards. We move on to equitable abstention doctrines to the origin with -- in a more fuller sense. I think the first thing we must take into consideration is -- is the significant political changes coming to Georgia. Now, the call for Georgia's political structure in the past, its historic structure in the past, Georgia was subject to the grasp of the rural areas, probably more so in any other state and union for this reason. We have the county unit system that this Court is well aware of and the county unit system applies of course in the democratic primary, if we call the strength and power of Democratic Party of Georgia as the cliché go, the -- the democratic primary of successful nominees there are tantamount to election. Well consequently, the Governor and the Chief Officers of the State, the Chief Executive Office of the State when nominated by the rural areas of the State of Georgia and consequently they were elected. So of course in Georgia, we have the Governor and the Chief Official of the state government under the control and nomination of rural areas. Now, after this -- and now whenever the Court in Sanders versus Gray overturned that in this decision in large one was affirmed. Of course that's true that many county unit systems in the primary, the last primary in Georgia, the last democratic primary, when the government -- when the nominees ran statewide, every person's vote counted equally and of course that gave full weight to the metropolitan areas. So we say in the courts, by virtue of that, we've had a modern elected as Governor of Georgia, this Court knows Governor Carl Sanders which of course is the significant and substantial political difference between Governor Carl Sanders and one of our past Governors Marvin Griffin. They present two different approaches in polity and I think the Court can really recognize the contrast. But the overwhelming defeat of Governor Marvin Griffin by Governor Carl Sanders indicates, we think dramatically, the change has come to Georgia politics just by the elimination of the county unit system. It's also quite clear in Georgia that the Governor as it is in many states has a tremendous amount of influence and power over the workings of the state legislature. He exert substantial power there and we have that now, a Governor who is of course it has to be amenable and of course is susceptible to where -- to the popular feelings of the metropolitan areas of the state. And of course we also have the case of Toombs versus Fortson which required the reapportionment of our State's Senate. That case is still pending. I do not know why the plaintiff in that case did not appeal to this Court but they asked in their -- in their complaint that both Houses with state legislature be reapportioned according to population. The Court only granted their complaint halfway. That case is still pending and of course if this Court requires to both Houses' legislature be reconstituted at large along population lines, then of course the District Court can move very quickly on that. So we may yet have to -- we don't know what the courts want to determine but it's quite possible, the majority voice in Georgia which we think is already strong is even going to get stronger in the near future. Now, we believe that these considerations are important and if they call for the application of the equitable abstention doctrine called just before a year -- a year and a half ago, Georgia had the -- the majority control in Georgia had no practical opportunities for exerting their will, as far as state government is concerned. Now, in this apparent session of the legislature and of course the appellants made quite some reference to this in their brief. The appellant Wesberry, who is a State Senator, introduced Senate Bill No. 101 for the redistricting of Georgia's congressional districts. But either the gravity of the major coupled with insufficient time of appropriate study, the bill did not pass that session but was referred to the rule Committee of the Senate where it's still pending for further action. The bill is not dead, it did not die in the last session, it's still pending. Now, I doubt here that the bill is going to pass and I will -- will come to that in the next few minutes. Next, Senator Julian Webb introduced Senate Resolution No. 56 for the creation of a Joint Center House Committee to study congressional redistricting which was passed by the Senate but was reported -- unfavored by the House, that bill was not passed. However, this should not end all attempts that reapportioned that session of the General Assembly, stated by the appellants in their brief because Senator Webb then introduced Senate Resolution No. 129 for the authorization of Interim Senate Committee to study congressional redistricting and reported recommendation and study the 1964 regular session of the General Assembly. This resolution was adopted March 15th, 1963. Arthur J. Goldberg: (Inaudible) Paul Rodgers: Not yet. Now, in July 1963, the Joint Congressional Redistricting Study Committee was created by the President, and was then appointing -- appointing ten Senators, one from each congressional district and a Speaker of the House appointed ten Representatives, one from each congressional district. Now of course, that was done sooner after this Court noted probable jurisdiction which I believe was in June of 1963. Senator Julian Webb was made Chairman of this Committee. Now we think that's significant because Senator Webb who was working to get reapportioned congressional districts before this Court noted probable jurisdiction, he -- he at that time was working for as the chairman of that Committee so I think that right there is an element which demonstrates the good faith that the General Assembly of Georgia is putting into this effort. Now, it's a matter of common knowledge that the Committee is working in good faith and the Governor of the State is going to support any fair and equitable redistricting plan that's presented. Now, it's interesting to note that appellant Wesberry, now of course he introduced Senate Bill 101. However, he admitted in his statement of September 17, 1963, following the Joint Congressional Redistricting Study Committee. And this is what he had to say about his own bill. He says, “I made it clear and I do not think that Senate Bill 101 should be passed as introduced but that it should undoubtedly drastically changed to meet with the approval of all citizens of Georgia.” And he goes on to say, “I believe it includes some good suggestions and I know it includes some bad ones, so even if the author of the bill admits that the bill was not good, that he'd be drastically and meant it weren't to be passed.” The point is, we do not believe that Georgia -- the General Assembly in Georgia yet have an adequate bill to set or a fair opportunity to redistrict its congressional districts. Now -- Arthur J. Goldberg: Doesn't the grip of this argument leads to the conclusion that (Inaudible) Paul Rodgers: The only difference we had have with Judge Tuttle's decision on the claim was, first, we believe that just out of considerations of comity, the complaint should be dismissed. Also Judge Tuttle would probably felt like they should go ahead and resolve the ultimate considerations as errors, legal considerations. We feel the consideration of legal issues should be deferred until Georgia has failed to redistrict. In other words, we feel that nothing more should be done at this time than to apply the doctrine of equitable abstention, that the decision of the District Court be affirmed and after a reasonable time, if they're not satisfied they can re-file their case which we feel is required out of considerations of the comity for the workings of our federalism. Now, of course, we won't go into these cases extensively. They are cited in the brief. Of course, this Court long held in its -- and it's frequently applied the doctrine of stating Great Lakes Dredge & Dock Company versus Hoffman which construed and considered the Federal Declaratory Judgments Act which held that the same considerations of equitable abstention applied and appropriate cases applied elsewhere in the area of federal adjudication. And of course we feel the same thing applies here. Now, in one of the previous cases, the -- the Solicitor General as he pointed, “There's no room for the doctrine of equitable abstention in the -- in enforcing rights under the Civil Rights Act.” We feel that that position is fatally fallacious because we feel I would think that any member of this Court can conjure up circumstances where equitable abstention should be applied in the -- in the construction of constitutional rights or in the construction of any federal statute. Also, the Court has recently applied in 1959 in -- in the case of Martin versus Creasy and Harrison versus NAACP, all of which is cited in the brief. It's given other examples there over the application of doctrine of equitable abstention. Now, a valid conception of Baker versus Carr, that Baker versus Carr was an emergency measure that it was -- that Baker versus Carr was an effort to -- to restore the democratic workings of the state legislature that would take and after a great deal of consideration, I believe the case pending here for two years. It was taken after it seemed to me obvious reluctant but as the Court felt that it was faced with no other alternative but intervene this area in order to rescue the workings of democracy in the state legislature. And we think that Justice Clark in his concurring opinion in Baker versus Carr put his finger upon the fundamental point of Baker versus Carr when he stated, “Although I find the Tennessee of apportionment statute offend the Equal Protection Clause, I would not consider intervention by this Court in a so delicate appeal, if there were any other relief available to the people of Tennessee.” But the majority of the people of Tennessee have no practical opportunity for exerting their political way of the problems to correct the existing invidious discrimination. Tennessee has no initiative in referendum. I have searched diligently for other practical opinions present under law, I find none other than through the federal courts. And we think that this case here which involves the second stage area of congression. This should be involved second stage is the far cry from that presented by the first state which is the state legislature. We call to think it's quite clear that the state legislature when they are -- are -- are -- are switched to the control of majority are going to provide the relief that many seek in the area of congressional districting. But we think the restoration of the democratic process has placed Georgia's political destiny in the hands of the majority. Now, the appellants made one allegation there, complained with paragraph 14. We think it was a necessary allegation to their complaint but it's -- it's in fact a -- a very important one to their complaint but which is by virtue of the restructuring of Georgia's political system, has lost all vitality. This is what paragraph 14 of the appellant's complaint state. It's -- and these -- these words right here were written prior to the political restructuring of Georgia, I think in April of 1962. Today, all attempts by the informed civically and militant electorate and arouse public to have the General Assembly to reapportion the congressional election districts so as to move -- so as to more nearly equalize the population has been without itself a contributing, if not be called of this situation is the fact that state legislature has chosen on the basis of state election subdivision inequitably apportioned in a way similar to those with congressional districts. That the issues stating congressional apportionment, thus, so interdependent and interrelated that it is to -- that it is to the interest of the state legislature to perpetuate in equitable apportionment of both state and congressional election districts. Consequently, there are no practical opportunities that the plaintiff and the people of Georgia for exerting their political way proposed. Georgia has no initiative and referendum, so therefore, we say another, a -- a recognition of the point made by Justice Clark and the Court there showed right in the complaint that the solution to this problem is related to the -- to the structure of the state legislature. Now, one other point that we think is particularly good and -- Arthur J. Goldberg: The strength of your argument therefore (Inaudible) Paul Rodgers: No sir, not at all. Arthur J. Goldberg: How can you get (Inaudible) Paul Rodgers: Well, that gets back to the statement we read yesterday from the Senator Wesberry, the papers he filed when the election law -- I mean with the Joint Congressional Study Committee. Senator Wesberry's decision, I think it's a practical one of is, is that the way to solve this redistricting problem as far as he's concerned is to redraw the districting lines around Metropolitan Atlanta, the fifth district. And that if you do that, that would solve the situation. Now, but you see, in -- in redrawing the district lines in that way, that would leave many of your rural districts, either not changed or only slightly altered. And of course with such a system as that, you could I think depend not only upon your -- your metropolitan support in the House of Representatives which is not controlling but it's abstention because of 321 tier and also I think they could stand upon the support of many rural representatives who would I think would have a built-in in Senate to support the plan because they feel like that they could preserve their districting unimpaired or salvages substantial part of -- so I think it's worth serving to your trial on the Court. On top of that, as an overlay on top of that, you have got the prestige and influence of the Governor operating on the House of Representatives. So we feel like that there's a very good chance that the General Assembly is presently constituted going to redistrict. Certainly, it should be tried and of course this Court should certainly assume that a state legislature is in good faith going to perform its duty. And of course, if -- if we should have to reconstitute the House according to our contention is that the General Assembly of Georgia, I believe would constitute now, but if we should have to reconstitute it would make it that much easier. Now, in the -- in the first brief, in the first amicus curiae brief found in Baker versus Carr, the Solicitor General we thought made some very fine comments. This is from the Solicitor General's amicus brief of May 14, 1961, found in Baker versus Carr. And we think the Solicitor General then gave a much better perspective to this situation than he -- than he gave in his present brief. On page 15 of his brief, he state, “Congressional malapportionment is clearly related to reappointment of state legislatures or legislature with full urban representation is unlikely to challenge malapportionment of congressional districts, discriminating against urban vote.” Now, he wanted to emphasize that statement so much, he put it again on page 58 of his brief. On page 51 of his brief, the Solicitor General stated, “In addition, malapportionment state legislatures to the basic calls of congressional malapportionment. Since urban voters are unrepresented in the state legislature, there is little likelihood the legislature will reapportion congressional districts to give urban voters their fair represent -- their fair proportion of representation to Congress. As a result, urban voters are discriminated against both from the Federal House of Representatives and in their own state legislature not have -- and have no remedy in either body.” Now, on page 68, the Solicitor General made a particularly good statement, which I think juxtaposed to this case. It -- the -- there, Solicitor General addressed to himself to the question of whether the state or for the people and other reasonable remedy here would effect that would have upon the action of this Court say in Baker versus Carr, and I assume to any reapportionment case. The Solicitor General answered that question this way, “Even if the malapportionment is gross, it may well not violate the Fourteenth Amendment if the state unlike Tennessee afford its people an alternative remedy. For example, the majority cannot complain too seriously about the underrepresentation of the state legislature in a state which provides for referenda initiated by a reasonable number of voters. Under such a system, the majority can reapportion the legislature itself.” And he goes on to state, “But if the state provides a feasible political remedy, it might be concluded the state has not been so arbitrary as to violate the Fourteenth Amendment.” And I think that brings us to basic philosophic consideration to this Court, although it's unnecessary for this Court to reach that day on these cases but that courts will have to reach eventually, and that is what this Court is going to do in the case that whether majority has control of the state legislature to state political process but through less -- but through lethargy is not exercised in their control. If the Court then you won't go a step further and carry the majority towards its goal or that this Court won't require the majority in the traditional American fashion to carry itself, fall on its own momentum and not stand up on a federal court. That's another consideration which I believe this Court should keep in mind, although it doesn't have to be decided this time. Now, we say we believe it has been restored of the power of political persuasion had been restored to minor -- to the majority in Georgia. And also, we -- we think the record demonstrates very clear that the whole nation is now districted.And this Court would render decision like the appellant Wan. It would come down at early part of next year. You can depend upon the District Courts to quickly apply that decisions in Baker versus Carr and you're going to have redistricting suits across the nation, at large election. It's going to create a traumatic shock on Congress unparalleled in history, whereas to this Court it will abstain to this time the leave their work to reapportioned state legislatures, the correction of congressional districting will come from the position it sought. And of course, this -- it -- it will -- will not be -- it will be a little more gradual, we don't think unduly so than it would be to bring it about by federal or judicial decree. Now, we think that -- that as we -- as we pointed that the remedy is political, we think that the words of Justice Douglas. And (Inaudible) -- the judges on particularly I propose. On page 56, Justice Douglas stated, “Political actions and other method of deciding certain controversies, not all the victories for Human Rights have been won in the courts. In the Western World, more such victories have probably been won in Constitutional Conventions, on legislative halls than in courts of law. The remedy for unwise improvident legislation is I suppose political action is indeed a birth to a remedy for the correction of injustices.” And then Justice Douglas goes on to state on page 56, “Litigation is not the cure or the solution for every conflict. If all our disputes and differences had to go to the courts, we would indeed be bulked down in time-consuming wasteful procedures. The importance of the courts are necessarily low as litigation serves only a limited function. Rule must be left for the workings of other conciliatory, mediating and directive influences.” And then of course that was reechoed, those sentiments were reechoed to a largely inspiring in principle by Justice Douglas in his -- when he wrote to majority's any of the opinion of the court in Williamson versus Lee Optical of Oklahoma. And we feel that in Minersville School District versus Gobitis that Justice Frankfurter also states the principle very well when he said, “Judicial review itself, a limitation on popular government is a fundamental part of our constitutional scheme. But to the legislature, no less than to the court is committed to guardianship of deeply cherished American liberty. Where all of the effective means of inducing political changes left free from interference, education and the abandonment of foolish legislation is itself a training in liberty to fight out the wide use of legislative authority in the form of public opinion and before legislative assembly rather than to transfer of such a contest to the -- to the judicial arena, serve to vindicate the self-confidence of a free people.” So Your Honors, in conclusion, we say that we believe that the appellant misconceived Baker versus Carr. We believe that Baker versus Carr was right in a time of great internal crisis to American Democracy. It was rendered in time where there was no other remedy in Tennessee and the Tennessee Court. Of course the -- in Georgia, the Court -- the state court have not, yet can try. We feel that the legislative remedy is more likely. However, the state courts could afford the remedy because they have Baker versus Carr to guide them. But it was right in the time where in Tennessee, there was no other remedy as it was in the vast majority of the state to this nation. It was an emergency measure, and we feel it meant to be used sparingly. I think that the Court's intention in Baker versus Carr was not try to takeover basically, a classic political or legislative decisions, it was the -- the intention of this court in Baker versus Carr, to try and to get the democratic process restored so that at least that the legislatures themselves could make these decisions. And I don't think the court has any desire to make these decisions. It was designed, we believe, Baker versus Carr was to strengthen the state legislatures and not to weaken it, but it was designed to restore the democratic process, not to impair it. And it was designed to repair the main spring of representative government not to operate it, designed to make the state legislatures and the citizenry of this nation more responsible, not less responsible by casting their obligations on the federal court. I think the appellants -- the appellants, we get as the Declaration of Independence, the Constitution and the Bill of Rights were brought forth by the liberty of bodies and not by a court. They were brought forward by liberty of bodies by militants and arouse citizenry, and that is of course is what kept this country going thus far in its history. And if we're going to preserve this country, we've got to depend to that kind of citizenry and not an advocation to the federal court. We believe that when the government has accepted the majority rules, it is in Georgia and it's clearly as it will be, and if it's not already that -- it's -- that the situation or the solution must be brought about by the citizenry, by letter writing campaigns, by demonstrations, by delegations, by petitions and by other forms of public protests. Otherwise, if you do not leave and otherwise it is implied to clear implication that -- it is that the citizenry is definite on appeal. And we believe that under such circumstances, citizens and particularly State Senators are under a plain obligation to work toward solving their problem to the state legislative process rather than attempt to advocate their responsibility to the federal courts. In Baker versus Carr, this Court slashed the Gordian knot of American politics. This Court guaranteed the majority's rightful place in the state legislatures. In Georgia, the power of political persuasion has been restored to the hands of the majority and we say it's not up to the majority in Georgia to accomplish its goals through conventional political means. In conclusion, Your Honor, we believe that the judgment of the District Court should be affirmed on the grounds of equitable abstention. Thank you for your attention. Earl Warren: Mr. Cash. Frank T. Cash: Mr. Chief Justice, Mr. Associate Justices, may I please the Court. Even though we alleged in -- in our notice for appeal, we set forth in our briefs jurisdictional statement and we've argued before this Court that the appellants have been denied their constitutional rights, the state is yet to offer any argument to support the finding of the District Court that the appellants have not been denied their constitutional rights. We would like to assume that we have set forth our case that the appellants have been denied the constitutional rights and will proceed to counter some of the defenses raised by the state in this matter. In the area of the abstention doctrine, certainly it has never been held by this Court that the powers of this Court will be restrained or abstained until such time a law has been enacted. If a person's constitutional rights have been denied, they're entitled to relief here and now. In the case that was before this Court and decision was passed down from this Court in the case of McNeese where Justice Douglas says that the application of the abstention to this suit under the Civil Rights Act would deplete the purpose of Congress to make the federal courts that primary tribunal to grant the relief set forth under that particular case. And we contend that our case is also brought to this Court under the Civil Rights Act, we have been denied Civil Rights as set forth under that Act. I believe counsel for the state was being less than frank to this Court in making statements that the appellants of our suits are the -- the residents of the Fifth Congressional District of Georgia have a powerful voice in their General Assembly. The facts dispute their statement. The people of the Fifth District have 3.4% influence or the vote in the State House, and have approximately 14% in the State Senate. Gentlemen of the Court, this question differs from the cases you've been hearing for the past week. In most of those cases, the question was, “Could a minority control a majority by failing to apportion on an equal population basis?” This case presents somewhat different facts. Here is the case where a -- there's a presumption of course that the minority controls this General Assembly of Georgia. But even if majority controlled it, the people of the Fifth District are a disadvantaged minority. The appellants want relief so that the majority may be represented in the House of Representatives of Congress, but the majority of the State Houses could, in fact the -- but I think the facts show -- present themselves in our brief that the only district in Georgia that is grossly disproportioned to the other districts is the Fifth District. The other nine districts, the other representatives in the State Houses of the other districts have no reason to change this present system. Only the Fifth District has a crying need for relief. So we would suggest that the relief is not available to us in the General Assembly. Certainly, and I -- disadvantaged minority and the voting case has no difference than a disadvantaged minority in a racial or segregation case. And the question of whether they have adequate opportunity to act, in our record, we have shown that the -- a bill was presented in the state legislature in 1952. It was introduced by Representative Albertson from the Fulton County, delegation in that bill of course was defeated without any committee being appointed to study the matter of congressional districting. The Baker versus Carr was decided in May -- excuse me -- in March of 1962. The suit was filed and this case in April 1962. There was no effort by the state legislative body to take any action in the matter at that time, nor did take any action when the decision was handed down. There was a special session of the state legislature to consider the question of state reapportionment. And gentlemen of Court, again, let me emphasize to you that the question of state reapportionment is a much more difficult problem, yet the state body reapportioned the State Senate. 54 senatorial districts, much more difficult problem than the question here of having 10 congressional districts and yet they did it in -- within a -- a month's time. They met -- enacted the law within -- actually within a week, and they had election other that law within a month. There was a, I quote, Reapportioned General Assembly in January of this year. It was a 40-day session, split by 15 days interim between the two sessions, given sufficient opportunity again for the General Assembly to act in this matter. Potter Stewart: Mr. Cash, under that reapportioned Senate that was done in January this year, was it? Frank T. Cash: Yes, Your Honor. Potter Stewart: The State Senate. Does -- does the county in which Atlanta is located, that's Fulton County have representation in the State Senate proportionate to the population of the county? Frank T. Cash: Yes Your Honor, it does. Potter Stewart: I wonder -- Frank T. Cash: It has seven Senators based on population in the Senate. Potter Stewart: And to that extent, paragraph 14 of your complaint in this case is that it should -- should be -- should be modified -- should and I don't mean that there wasn't? Frank T. Cash: Was that the paragraph -- Potter Stewart: That's the one that -- Frank T. Cash: -- of our brief body. Potter Stewart: -- was quoted by Mr. Rodgers. Frank T. Cash: If that -- you recall in that we said that a controlling reason, if not, we did not allege -- absolutely, that was the only reason. Potter Stewart: You say contributing if not just the cause of this issue. Frank T. Cash: So it's certainly a contributing cause but it's not the only cause. Potter Stewart: And then as -- as of the existing reapportioned state legislature that's been attacked in the lawsuit or the -- or the old one -- or the old one before the action of -- of this January that's been attacked in the other lawsuit? Frank T. Cash: Mr. Justice Stewart, we did not attack the legislature. We attacked a law that's still in effect. We're asking that it would be declared unconstitutional and asking for equitable relief to retrain the enforcement of that law. We're not attacking a -- a -- either the old legislature or the reapportioned, which is alleged and it's in our petition to indicate that as I have said today that the reasons why we couldn't expect relief from “political remedy” that's been suggested. Potter Stewart: I'm talking now about the other lawsuit in Georgia. Frank T. Cash: Oh, the Toombs case? Potter Stewart: That's right. Frank T. Cash: Yes, that's the same case and in fact, it was filed prior to the reapportion just the judges in the three-judge court in the Toombs cases have been holding pending and I think the final decision of this Court, whether the two Houses have to be reapportioned on the basis of population. But they did require one House under the counsel for the state has stated that the fact that they applied the federal analogy. Potter Stewart: And then that was done by the Georgia General Assembly. Frank T. Cash: That was done by the -- Potter Stewart: But it was (Voice Overlap) Frank T. Cash: Let me emphasize the state assembly has never took the initiative. They did not act at all in the Sanders versus Gray case on the county used them until the decision of this -- not this Court but the lower court. They did not act in the Toombs case until the decision of the Toombs case. They will not act in this case until the decision of this Court. Arthur J. Goldberg: That though (Inaudible) is that correct? Frank T. Cash: I think it is. Arthur J. Goldberg: (Inaudible) Frank T. Cash: I'm not aware of any -- I think I believe the -- it's closed to maybe the -- the segregation cases of this Court, I think the apportionment cases are met with very favorable response upon the people because after all, we're trying to sustain the rights of the majority. Arthur J. Goldberg: (Inaudible) within the district or between -- to consider the apportionment of the upper house. Frank T. Cash: Yes. Arthur J. Goldberg: You think there are any exceptions to the decision? Frank T. Cash: In my opinion and I think that's based -- I think the counsel for state would -- would see that, and I think it actually did. I'd like to direct myself to the question of whether this Court ought to go ahead and act in the premises now and not wait until a fuller time has been given to the state to act. It seems that the best reason that the appellants can set forth, why they're entitle to a decision now, has been set forth by Judge Bell in both the Sanders versus Gray case and also in -- in the lower court of this -- in this -- in the court's opinion below in this matter. First is that in the Sanders versus Gray case, he said, “Due consideration has been given to delaying the entry of an injunction until the next regular session of the General Assembly in January. But having recognized that the constitutional right of plaintiff, we cannot fail to protect it, nor do we believe the state would want to deny it. And any -- in the lower court of in this matter he said, “The defendants are entitled to their due, a final decision.” We submit that we too are entitled to a final decision. The question presents itself if the present apportionment statute is declared unconstitutional, what is the remedy?Your Honors, the remedy as suggested by this Court in earlier cases, one that would be suggested by the Article I, Section 2 itself would be the at large election. The -- in fact, the judicial remedy of congressional district cases is of course very clear, simple and moderately, namely, that of course the election at large and that the reason for this could be certainly justified and that the ordering of an election at large of defendant state's congressional delegation, can be resolved, it can be at any time that the defendant state chooses to apportion, the state on constitutional -- on a constitutional basis then there would no longer be any reason for an at large election. The Congress -- that would be based upon if -- if every state was required to have an election at large, Congress would still be Congress formed according to Constitution. It would be able to function normally no matter how many Congressmen at large. And the most important, the people of all the states and all of the people of each state would be fully represented. The bylaws, that is the interstate local representation, of course, we don't feel it is the first order importance, certainly not when it's in direct conflict with constitutional rights. And of course, as I said before, it can be regained by -- at the bargain price of redistrict -- redistricting. The most convincing and persuasive argument for this remedy of course is that it is an opportunity to afford everyone equality of representation. The state has raised the question and I think it's a very good question that is, if the relief that we ask for this Court -- of this Court, what would be the result with the make up of Congress? Of course the figure cited by the state demonstrate that the problem of grossly unrepresentative congressional district is national in scope and threatens to undermine the basic principle of equal popular representation which the House of Representation was originally founded. It emphasizes the need for immediate, uniform and a final solution, which only this Court is capable of granting. Your Honors, we respectfully submit that we have set forth a cause of action, we have set forth the facts at the trial, we have had our day in court, we now would like an adjudication of our rights.

William H. Rehnquist: We'll hear argument now in Number 88-334, John S. Lytle v. Household Manufacturing, Inc.-- Ms. Reed. Judith Reed: Mr. Chief Justice, and may it please the Court: Petitioner John Lytle filed a complaint in Federal district court alleging that he had been fired for racially discriminatory reasons and that the Respondent employer had subsequently retaliated against him for racially discriminatory reasons. Petitioner sued under both 1981 and Title VII. His complaint therefore alleged both legal and equitable claims. He made a timely demand for a jury trial. Notwithstanding the presence of those legal claims, the district court dismissed the Section 1981 claims on reasons that everyone concedes were erroneous and proceeded to trial on the equitable claims, ruling against Petitioner and in favor of Respondent. Respond... Petitioner subsequently attempted to correct that error in the court of appeals. While the court of appeals held that it was error to dismiss the 1981 claims, it found that it was powerless to reverse and remand, for it held that the judge's findings, if not clearly erroneous, could collaterally estop Petitioner from litigating his claims before a jury. Thus, the import of the holding of the court of appeals is that because the district court proceeded to make findings, his original error in denying a jury trial was unreviewable, meaning therefore that orders denying the jury trial are not reviewable after trial. William H. Rehnquist: Ms. Reed, these were findings in connection, of the sort that are ordinarily made in connection with a bench trial, findings of fact? Judith Reed: The findings on Title VII. There were findings of fact on whether Title VII had been violated. The issue in this case, then, is at what point a party is entitled to appeal an improper denial of a jury trial. Under the view of the respondent, and apparently in the view of the Fourth Circuit, Petitioner lost his right to appeal that order denying a jury trial on the first day of trial when that demand was extinguished and the bench trial begun. Such a holding has serious consequences for both litigants and the Federal courts, for if a party is in danger of losing his right to a jury trial, he must proceed by mandamus or take an interlocutory appeal. Such an order would now fall within the confines of the Cohen doctrine, addressed by this Court in Lauro Lines v. Chasser and Midland Asphalt. The practice of this Court for well over 100 years, as we discuss in our brief, and that of all other circuits, has been to reverse and remand upon a finding that the denial of the jury trial right was erroneous. What the Fourth Circuit has done, in effect, is to create a new category of interlocutory appeals. Until now, one would have thought, one had a right to appeal that denial at the conclusion of the proceeding. Indeed, if Petitioner had taken an interlocutory appeal, under its prevailing view, it is likely that such an appeal would have been dismissed. Certainly Petitioner could have proceeded by mandamus, but-- William H. Rehnquist: Interlocutory appeal under 1292(b) by certification? Judith Reed: --Well, either that or because it now fell within the Cohen doctrine, because it would be effectively unreviewable after trial, which is what we say the import of the Fourth Circuit's holding is. Anthony M. Kennedy: I just want to make sure I under... you said it is likely that it would not have been dismissed? Judith Reed: I... we believe that under the prevailing view of the law, had he attempted to take an interlocutory appeal, that appeal would probably have been dismissed because it was thought the jury trial orders were not appealable until the conclusion of the trial. Anthony M. Kennedy: I see. Judith Reed: Now, Petitioner certainly could have proceeded by mandamus, but he was not required to do so at peril of forfeiting his right to ever appeal the denial of the jury trial. That has simply never been the law. Now, the court of appeals did this under an erroneous view of collateral estoppel. Now, collateral estoppel is not like law of the case, which is used to maintain consistency during the proceedings of a single case. Collateral estoppel is not applicable in the course of a single proceeding. It is certainly not applicable on direct appeal. The Fourth Circuit's use of collateral estoppel on direct appeal to preclude review of an obviously erroneous order is simply unprecedented. Now, collateral, by its terms, would appear to mean a separate proceeding. What the court of appeals seems to have done is some sort of new kind of estoppel that one might appropriately term bootstrap estoppel. Petitioners cannot correct the denial of the jury trial, according to Respondent, because the district court made not one error but two errors. It is a somewhat circular argument. It ends up meaning that two wrongs may make a right, that because the district court proceeded to make findings after his error, Petitioner cannot get review of that. Now the consequence of this ruling is that a party must seek and be granted interlocutory review of all rulings that might possibly infringe on a right to the jury trial. Now that is contrary to the Federal system as we know it, and it would be highly disruptive. It raises the specter of trials being ended before they start, of counsel being required to simply walk out of the court room. And indeed such a rule would not foster the values of repose that collateral estoppel is designed to foster. It would, to the contrary, generate additional litigation, generate additional appeals, because it would force counsel to take protective appeals. Now, Respondents secondly argue that because the court would have directed a verdict for Respondent, a remand in this case is not required. Now, our first response to that is that is not what the court of appeals held in this case. The court of appeals did not hold that no reasonable jury would ever hold for Petitioner, or could ever hold for Petitioner. The court of appeals simply viewed the findings under a sufficiency of the evidence standard. Second, the record shows that there was considerable evidence on the... on both the issues that Petitioner raised to submit this case to a jury. And if the district court could have found for either party there can't be a directed verdict. Now, in our briefs we cite several examples from the record showing why in this record there was sufficient evidence to submit the case to a jury. The court could grant a directed verdict only when no reasonable fact finder could have decided for Petitioner. In the instant case the court decided the issues under Rule 41(b). And under that rule the judge could indeed do what he did. The judge could make rulings on disputed testimony. The judge was free to make inference. The judge was free to decide whom he believed. But not so under Rule 50. In accordance with this Court's decision in Anderson v. Liberty Lobby, the judge was required to allow the jury in this case, had one been empaneled, to weigh the evidence, make inferences and come to a conclusion as to whether or not Petitioner had been discriminated against. And we think that the trial judge indicated that by his own words in the trial transcript, as we point out in our briefs. When Petitioner's counsel recited a view of the evidence that could support Mr. Lytle's claim, the district court responded that that was indeed a reasonable view of the evidence. That single statement, especially coupled with the earlier denial of a summary judgment motion, puts to rest any claim that a directed verdict could have been granted in this case. What was okay under Rule 41(b) for the judge to do, we contend, was... the judge was precluded from doing under Rule 50(a). Accordingly, this Court should reverse the decision of the court of appeals and remand for a jury trial. You... in... indeed, the practical case, the practical issue in this case is when a party is supposed to appeal the wrongful denial of a jury. Now, our position-- Anthony M. Kennedy: Well, in this... in this case the judge didn't rule on the... on the question of the right to jury trial. His ruling, that you claim was error, was that there was no cause of action at all. He didn't rule that there was not a jury trial if there had been a cause of action presented. So this is not really a case in which we must be concerned that the jury trial right will be stifled because judges will erroneously rule that a jury is not required. This is just... there is, the fortuity here is an erroneous ruling of law by assumption. And I don't see how that is much different than having a previous hearing by the SEC. Judith Reed: --Well, if you are referring to Parklane, it is a very different case, Justice Kennedy. The reason... the sole reason that Petitioner was entitled to a jury trial was because his claim... his complaint raised legal claims, and the 1981 being that claim. The respondents don't pretend to-- Anthony M. Kennedy: But you see my point. The judge didn't err in ruling that the seventh... in ruling on the scope of the Seventh Amendment. Judith Reed: --The judge... we contend the judge erred, and indeed all parties agree that the district judge erred in dismissing the 1981 claims. The 1981 claims were what brought into play the right to a jury trial. By dismissing that claim and the judge then saying we will not have a jury; we will now proceed to trial in front of the bench, that is... is the denial of the jury trial. It seems to me that it begs the question to decide that there wasn't explicitly an order striking a demand, as opposed to dismissing a claim, because it... you still are left with a category of cases barring direct review of an erroneous decision of the district court. Now, we contend that in this case there is one single, very important practical issue, and that is when is a party supposed to appeal the wrongful denial of a jury. Now, our position is clear. Plaintiff or defendant, if aggrieved by the grant or denial of a jury trial, can appeal that order at the end of trial, no matter what the reason for the order. Now we don't understand what Respondent's position is-- William H. Rehnquist: You mean you can appeal, you can appeal from the judgment entered against you and assign that as a ground of error. Judith Reed: --Absolutely. William H. Rehnquist: Yes. Judith Reed: That would be our position, that after the conclusion, after final judgment was entered on direct appeal, you could appeal any of the errors that you contend were made, including the error denying the jury trial. Now, we have raised that issue in our briefs, and Respondent has not answered that question. And we don't understand exactly what Respondent's position is. I would like to reserve the remainder of my time for rebuttal. William H. Rehnquist: Thank you, Ms. Reed. Mr. Dennard. H. Lane Dennard, Jr.: Mr. Chief Justice, and may it please the Court: We may disagree with some of what the petitioner said about the background facts in the case, but we don't believe there is any disagreement about what Mr. Lytle's claims are, and we feel that the claims themselves are important for the Court's initial consideration. Mr. Lytle claims that he was discriminated against because of his race when he was terminated for violating the company's rule on unexcused absences. He next... in other words, he claims the discriminatory application of a company rule or policy. Next, Mr. Lytle claims that he was retaliated against or discriminated against because he filed an EEOC charge when the company gave out references to perspective employers that included only the job title and length of employment. Again, we are talking about the discriminatory application of a company policy, and in this instance the alleged basis of discrimination is the fact that Mr. Lytle filed an EEOC charge. From the very start of this case Schwitzer has taken the position that both claims, retaliation claim and the discharge claim under Section 1981, should be dismissed because Title VII covers this conduct. This is an... important for the Court to consider initially because the Court can avoid the constitutional issue that is urged by the Petitioner by considering the application of this Court's decision last term in Patterson to this case. Byron R. White: This is a ground that you think you are entitled to press as a respondent? H. Lane Dennard, Jr.: We do, Your Honor, because we feel like we have raised the issue below, and that's what we intend to argue, and that-- Byron R. White: But you, did you-- H. Lane Dennard, Jr.: --certainly records adequately developed-- Byron R. White: --Have you cross-petitioned? H. Lane Dennard, Jr.: --No, Your Honor. Byron R. White: Well, isn't this different relief than you... than you got below? H. Lane Dennard, Jr.: Well, this is... of course Patterson was decided after that, but it is our position that we adequately... raised these issues, as far as the coverage of Section 1981, so that we can make this argument at this stage. William H. Rehnquist: You argued it before the Fourth Circuit? H. Lane Dennard, Jr.: We argued before the Fourth Circuit and in the district court that... that the retaliation claim... it's a little bit different argument with both claims. But with the retaliation argument, we specifically argued that Section 1981 does not cover retaliation. Byron R. White: Well, had Patterson been decided then? H. Lane Dennard, Jr.: Patterson hadn't been decided then. Byron R. White: But you nevertheless were arguing that point? H. Lane Dennard, Jr.: We were arguing the point, and what our position here today is is that we have developed the record on that and that we have adequately raised Pat... the issues that are covered by Patterson-- Byron R. White: And the court of appeals rejected that. H. Lane Dennard, Jr.: --Well, the court of appeals did not rule on that. They ruled on another grounds, but they did not specifically reject that, Your Honor. They... I think they mention in the decision that they will not rule on the other grounds that were presented by both sides. Antonin Scalia: Would the relief you get under... under your Patterson theory be precisely the same as the relief that you are seeking to defend? H. Lane Dennard, Jr.: That's... well, the relief from the standpoint of Section 1981 not covering discharge and retaliation would be the same. Byron R. White: Well, what was... the court of appeals ruled on collateral estoppel, didn't it? H. Lane Dennard, Jr.: That is correct. Byron R. White: Well, that certainly is different than saying 1981 doesn't cover this. H. Lane Dennard, Jr.: Well, we would contend, Your Honor, that as-- Byron R. White: It may be in result... it may be in result that you, that there just isn't any 1981 claim for one reason or another. But it isn't the same reason. H. Lane Dennard, Jr.: --Well, we would contend, Your Honor, that as an appellee we would have the right to defend on any matter that was raised in the record. Byron R. White: As long as it doesn't give you more relief than you would have had. H. Lane Dennard, Jr.: Well, I think the relief would be the same. I mean, we are talking about-- Byron R. White: All right. So, yeah. H. Lane Dennard, Jr.: --The additional... the additional point is that... this consideration of an appellee relying on matters that are developed in the record, or raised in the record, is even stronger when there is an intervening decision like the Patterson case. Thurgood Marshall: Wouldn't you have to amend to get under Patterson? H. Lane Dennard, Jr.: Amend? I don't understand. Thurgood Marshall: Your pleadings, your original pleadings. Realize that the case was before Patterson. H. Lane Dennard, Jr.: Well, we feel that we would have a right to present the issue at this point in time to the Supreme Court because we've raised the issue below and because the record is adequately developed to consider it, without any amendment. Thurgood Marshall: But you didn't raise the Patterson issue. H. Lane Dennard, Jr.: Well, we didn't raise the Patterson issue-- Thurgood Marshall: xxx. H. Lane Dennard, Jr.: --per se. Thurgood Marshall: I see. But just the same. H. Lane Dennard, Jr.: But we took the position that Section 1981 could not be added to Title VII claims in this case for both discharge and retaliation, and the Section 1981 claims were dismissed based on that argument. William H. Rehnquist: The certiorari papers in this case were filed before we heard and decided Patterson on rehearing, weren't they? H. Lane Dennard, Jr.: That is correct. Given the status that we're... of the record that we have, we feel that we stand in a better situation than someone simply arguing the retroactive application of Patterson, although I think it's clear that Patterson should apply retroactively, because... and that has been the majority... that has been the result in the big majority of cases that have considered it in the lower courts. The Sixth, the Seventh, the Ninth and the Eleventh Circuits have all applied Patterson retroactively to pending claims at this point in time. We cite the Ninth Circuit or the Seventh Circuit and the Ninth Circuit opinion in our brief, and the Eleventh Circuit decision in McGinnis v. Ingrahm Equipment Company is at 888 F. 2d at 111, considered the application of Patterson to a pending case and considered the plaintiff's argument in that case that Patterson couldn't be raised because it hadn't been perfected on appeal. And the Eleventh Circuit concluded that Patterson would have to be considered because it actually restricted the subject matter of the court to consider claims under Section 1981. William H. Rehnquist: We granted certiorari on the question of whether the violation of the Seventh Amendment was... at what time it should be reviewed on the question presented by the petitioner's question. And if you are asking us to decide the case on a ground... kind of an alternative basis to what the court of appeals decided it on, you really have to show us some reason why we ought not to reach that question, don't you? H. Lane Dennard, Jr.: Well, the point... the reason not to reach that question is because it, you have to consider a constitutional question there. William H. Rehnquist: What is the constitutional question? H. Lane Dennard, Jr.: The constitutional question is the Seventh Amendment right to a jury trial. That's... the question that was presented in the petition for certiorari, it was... that's the way it was grounded. William H. Rehnquist: But I... the Seventh Amendment, obviously, is a provision of the Constitution, and it guarantees the right to jury trial in a civil case. But what we are talking about here is how a decision claimed to have wrongfully denied that right should be reviewed, and collateral estoppel, and that's... now, those aren't necessarily constitutional questions. H. Lane Dennard, Jr.: Well, that is the view that we've taken, and that's the grounds for the Court considering. And of course the other basis is because we feel like we have raised the issue and the record is adequately developed so that we can have the issue considered under... under those principles. Byron R. White: Well, was there ever a denial of the motion for new trial, in so many words? I mean, for a jury trial, in so many words? H. Lane Dennard, Jr.: There was... what there was-- Byron R. White: All there was was a dismissal. H. Lane Dennard, Jr.: --a dismissal of the Section 1981 claim, which carried with it the right to a jury trial. William H. Rehnquist: Even if you are right about the, this being a constitutional claim that the petitioner has raised, I don't think that the avoidance of constitutional claims is something that we pay much attention to and a question where we have granted certiorari on the question. We could grant certiorari on a very important constitutional question that we think there is a conflict in the circuits on that needs decided. The respondent could come in and say well, look, you could decide this on a statutory ground. Our answer in the past has been we don't want to. We choose to decide the case, if we can, on the basis that the petitioner has presented. H. Lane Dennard, Jr.: Well, we have the additional course, Your Honor, we feel like we have developed the issue and that the... the record is adequately developed. And as an appellee we have a right to present those grounds. William H. Rehnquist: You certainly have a right to present them. But you do have some burden, I think, to persuade us that we ought to go that way and more or less abandon the question which we granted certiorari. H. Lane Dennard, Jr.: Well, the additional basis would be the argument that we have with the avoidance of deciding the... a question with constitutional dimensions to it. Sandra Day O'Connor: Mr. Dennard, the petitioner argues in a brief that he was wrongfully denied a promotion, discriminatorily denied. Now, would that survive Patterson as a Section 1981 claim? H. Lane Dennard, Jr.: Under... of course, under the reasoning in Patterson, some promotion decisions would be subject to coverage. But I don't think the promotion issue has really been preserved up the line. In Patterson the Court really considered the question of the overlap coverage between Section 1981 and Title VII and concluded that there could be a rational, common sense interpretation of the language of Section 1981 to make and enforce contracts that would yield an interpretation that wouldn't frustrate the congressional objective to the preference of conciliation over litigation in Title VII cases. And with the... they looked at the... the court looked at the terminology to make and enforce contracts, and to make a contract extends only to the formation of a contract, and not to subsequent conduct, like the... even if it amounts to the breach of a contract or the imposition of discriminatory working conditions. The right to enforce contracts, on the other hand, would extend to the legal process and protection of the legal process. So our position on the Patterson case would be that we would urge the Court to apply Patterson in this case to uphold the dismissal of both the retaliation and the discharge claims, because this is post-formation conduct. The discharge is obviously post-formation conduct. It actually involves the discriminatory application of rules. It's very analogous to the situation in Patterson where we were talking about alleged discriminatory working conditions, harassment, sweeping the floor and this type thing. Sandra Day O'Connor: I wonder if it wouldn't be advisable to let that question, the extent to which Patterson governs these particular claims, go back to the lower courts in the first instance and just deal with the question we thought we were going to deal with on certiorari. H. Lane Dennard, Jr.: Well, that... Your Honor, we would say that we feel that we have adequately developed these issues along, that would give us a right to have that considered at this point in time. Antonin Scalia: I guess your point is that we have no power to reverse the lower court and to remand it, if... if in fact the Patterson issue should be resolved your way. H. Lane Dennard, Jr.: Well, the... the question of collateral estoppel doesn't even come into play unless you assume that, the error in the case. Antonin Scalia: We certainly don't have to reach Patterson, you would acknowledge this, if we... if we... we don't have to reach Patterson if we find for you on the other point, on the jury trial point. If we affirm the court of appeals, you would never get to Patterson. H. Lane Dennard, Jr.: Well, in that situation you would have to consider the constitutional question and consider the-- Byron R. White: Well, but aren't you defending the court of appeals' judgment or not? H. Lane Dennard, Jr.: --We are. We are. Antonin Scalia: It seems to me you have two points, and you are not... you are not separating them. Your one point is that we ought to take the Patterson issue first. And that seems to have met some... some resistance. Your... you have a second point, though, don't you, and that is if we don't take the Patterson issue first, and find against you, then we must take the Patterson issue, because we have no basis for reversing the court of appeals. H. Lane Dennard, Jr.: I believe that's correct, Your Honor. John Paul Stevens: Let me just test that out. You mean we don't have the power to reverse and send it back and say take a look at this issue? Is that what you're saying? That if we reverse them on the only thing we granted cert. to decide, and we decide you are wrong there, we could not send the court case back to the court of appeals and say take a good hard look at the Patterson issue? You don't think we have power to do that? H. Lane Dennard, Jr.: I believe you have power to do that. If the Court does consider the... if the Court does consider the collateral estoppel issue, or if it is addressed, we urge the Court to uphold the Fourth Circuit's decision that Mr. Lytle was collaterally estopped from relitigating issues under his Section 1981 claim. And reaching the result that the Fourth Circuit reached, they relied on an earlier decision, in that case in Ritter v. Saint Mary's College. And in that case there had been dismissal of age discrimination act and equal pay claims that were combined with Title VII claims, and this is the decision. The Ritter decision really contains the rationale that the Fourth Circuit has for applying collateral estoppel. The Fourth Circuit looked at the conflict that was involved, on the one hand the denial of the plaintiff's right to have his issues relitigated before the jury, and on the other hand the policy as to underlying collateral estoppel, the economic... economical resolution of cases, and concluded that Park... this Court's decision in Parklane Hosiery had already tipped the scales in favor of applying collateral estoppel-- John Paul Stevens: xxx this 1981 suit and the court, for some reason or another, denied a jury trial and then tried the 1981 suit itself. H. Lane Dennard, Jr.: --That would... we would submit that would be a different situation, Your Honor. Byron R. White: Well, but then on appeal the-- H. Lane Dennard, Jr.: On appeal then that could be reversed, but that is not our situation. Byron R. White: --Why isn't it? H. Lane Dennard, Jr.: Because our situation is the situation where you have Section 1981 claims combined with Title VII claims. The Section 1981 claims were dismissed. There is a good-faith dismissal of those claims. And the courts, faced with Title VII-- Byron R. White: Well, you don't claim that the... you don't claim that the correctness of the dismissal of the 1981 suit wasn't appealable? H. Lane Dennard, Jr.: --We don't claim; we realize that-- Byron R. White: That is reviewable in that case... in this case. It was reviewable in the court of appeals. H. Lane Dennard, Jr.: --That is correct. Byron R. White: And it was all part of one suit. H. Lane Dennard, Jr.: But it's still a different situation-- Byron R. White: It isn't... wasn't two different suits, though, was it? H. Lane Dennard, Jr.: --No, not two different suits, but it is-- William H. Rehnquist: And Parklane was two different suits, wasn't it? H. Lane Dennard, Jr.: --Parklane was two different suits. And the Fourth Circuit looked at that, and that was of course the argument that the plaintiff made in the Ritter case, that this was different because there is a separate suit involved. And the Fourth Circuit reasoned that the separate suit really didn't make a difference because that was just because collateral estoppel [inaudible]-- Byron R. White: But you say because there were two... because there were two counts in the... two counts in this complaint, collateral estoppel applies, whereas if it had just been a 1981 suit which was lost, then-- H. Lane Dennard, Jr.: --If it was just a 1981 suit and the court proceeded to just try that case before the court, without a jury trial, then that would be a direct violation of the right to a jury trial, and it would be subject to-- Byron R. White: --Well, I know, but in the court of appeals the court says well, we agree, the trial judge arrived at exactly the right conclusions on the facts of the case, but we have to reverse. There is no collateral, no estoppel, because it should have been tried by a jury. H. Lane Dennard, Jr.: --Well, that's the only... the distinction we have is that we have two different claims involved. And in our case it is not a situation where there is a direct denial or trying of an issue before the court that should be considered by the jury. It was a situation where the legal claims were dismissed and they were... there were pending equitable claims remaining that, under Title VII, that required the court to proceed with a bench trial. In the separate suit type argument, too, another point to make would be that Parklane specifically recognized that the major premise with Beacon Theatres is that... is a rule that unless legal claims are tried first, prior to equitable claims, then the judge's factual findings on the equitable claims would collaterally estop the jury's redetermination of these issues. And the two quotes that we would like to point out, or two portions of the opinion in Parklane that establish that... this premise is established by the following language that is in Parklane at page 334. Recognition that an equitable determination could have collateral estoppel effect in a subsequent legal action was the major premise of this Court's decision in Beacon Theatres. And then quoting the Court's earlier decision in Katchen v. Landy, both Beacon Theatres and Dairy Queen recognize that there may be situations in which the court could proceed to resolve the equitable claims first, even though... even though the results may be dispositive of the issues involved in the legal claims. So certainly Parklane and Katchen establish that Beacon Theatres rule that normally equitable or legal claims should be tried first as a general prudential rule, and that an equitable determination can have collateral estoppel effect in subsequent legal proceeding-- Byron R. White: Do you think that would be the routine result if... suppose the trial judge here said... said well, I think you state a good cause of action in both 1981 and 19... and Title VII. I am going to try the Title VII claims first. H. Lane Dennard, Jr.: --Well, that wouldn't be our case. Byron R. White: Well, I know, but what if, what if he had said that? It violates Beacon, doesn't it? H. Lane Dennard, Jr.: I believe it would. Byron R. White: Then it would not be collateral estoppel. H. Lane Dennard, Jr.: Because it violated the Beacon principle. But that's not our situation, the distinction that we have. We are not a situation in which there is a direct violation of the right to jury trial, that... we have a situation where the district court judge made a good-faith dismissal of legal claims and was faced with a statute that required the court's determination before the bench. William H. Rehnquist: Well, what do you mean by a good-faith dismissal? I would assume that most... in fact I can... it is hard to conceive of a district court dismissing an action. Even though it's erroneous, it was not done in good faith. H. Lane Dennard, Jr.: Well, the Petitioner claims, I think, that the judges, district court judges, would be inclined to dismiss legal claims based on administrative and personal convenience, which we're distinguishing it certainly from that situation. Antonin Scalia: You're really arguing for something of an extension of that language in Parklane. That language just says that there are some situations where you can try the equitable claim first. You are not arguing that this is such a situation. But you are saying where it has been mistakenly tried first, the same philosophy that says there are some practicalities that sometimes make it triable first also dictate that that's water over the dam, that it was mistakenly tried first and we will give it collateral estoppel effects. H. Lane Dennard, Jr.: That is correct. Antonin Scalia: But that is an extension of Parklane, of even the dictum in Parklane. H. Lane Dennard, Jr.: Well, we agree that it is not, you know, directly within Parklane, that it's... but within the rationale of Parklane. From the standpoint of the harm involved, though, I mean, the defendants in Parklane were denied the right to a jury trial, the same as we have in our situation. To summarize the argument or conclude-- Antonin Scalia: The only thing that makes that... that argument difficult is... and the Court keeps pressing you on this... I don't see why it wouldn't be just as true if the lower court erroneously denied a jury trial. You... surely you would be able to say the same thing. You know, well, yeah, they should have done it first, but, as Parklane shows, we do take practical considerations into account-- H. Lane Dennard, Jr.: --Well, that would fly right in the face of several decisions that... that [inaudible]. Antonin Scalia: --Well, so did this dismissal, which is why it was reversed. H. Lane Dennard, Jr.: To conclude on Parklane, our position would be that in Parklane the court found that the defendants had a full and fair opportunity to litigate their claims in the prior lawsuit, and that they were therefore collaterally estopped from relitigating factual issues in a second lawsuit. The court found that this application of collateral estoppel did not violate the Seventh Amendment. Likewise, Mr. Lytle had a full and fair opportunity to litigate his claims in the Title VII proceedings. From the standpoint of looking at the principles of judicial economy, the same principles that applied in Parklane apply here, the dual purpose of protecting litigants from relitigating an identical issue and of promoting judicial economy by preventing needless litigation. To summarize our final argument, it's clear that the Court need not address the collateral estoppel issue if a directed verdict would have been proper, since the dismissal of the 1981 claim in that situation would have constituted harmless error. We realize that the standards are different for a Rule 41(b) motion and that there is some weighing of the evidence that is allowed there, but the standard for directed verdict would include a situation where there is an absence of proof on an issue material to the cause of action. With both the discharge claim and the retaliation claim, the district court judge ruled that the defendant, or the plaintiff did not establish a prima facie case. William H. Rehnquist: But, under Rule 41, the trier of fact is entitled to weigh the credibility of the witnesses and make those sort of determinations that the trier isn't entitled to make under Rule 50, isn't it? H. Lane Dennard, Jr.: We recognize that there is a difference in those standards, and... but our position would be that... that we met the directed verdict standard in... by what the judge really did. He ruled that as a matter of law the plaintiff did not establish a prima facie case in either situation. William H. Rehnquist: Well, this was after a bench trial on the Title VII action? H. Lane Dennard, Jr.: That's correct. William H. Rehnquist: Well, why, why would a district court be saying that as a matter of law? H. Lane Dennard, Jr.: Well, he didn't... the district court didn't say that, Your Honor, we say-- William H. Rehnquist: That's the kind of-- H. Lane Dennard, Jr.: --that the evidence that was presented would meet that standard. William H. Rehnquist: --Well, but you... the district court wasn't engaged in that sort of an inquiry, was it? H. Lane Dennard, Jr.: That is correct. William H. Rehnquist: So you are asking us now to reweigh the evidence and to... or to weigh the evidence, decide that you should have gotten a motion for a... for dismissal or summary judgment? H. Lane Dennard, Jr.: Well that, you know, even the circuits courts, like Hussein, that apply the opposite rule in this situation, would look at the evidence to determine if it would have in fact gone to the jury. And that is what we are asking-- William H. Rehnquist: But we don't ordinarily make that sort of determination here. Did the court of appeals make that determination? H. Lane Dennard, Jr.: --No. No, sir. Unless there are further questions, that concludes my argument. William H. Rehnquist: Thank you, Mr. Dennard. Ms. Reed, you have 18 minutes remaining. Judith Reed: Respondent urges that this Court avoid a constitutional issue by deciding on the Patterson grounds. Now, on that matter we agree with the Chief Justice on this question. Whether an ordinary collateral estoppel rule will prevail and a determination as to when a petitioner may appeal the denial... the wrongful denial of a jury trial, does not depend on the... the fact that the jury trial right stems from the Constitution. The issue would be the same whether it was a statutory right to a jury trial or that it came from the Seventh Amendment. We think this Court... this question is important, and the Court ought to decide the issue upon which it granted cert.-- There is the conflict, as the Court recognized, between the Fourth Circuit and the Seventh Circuit on this issue. Antonin Scalia: Excuse me, you wouldn't feel free to argue if we came out the wrong way on the jury trial thing, that by denying you either interlocutory appeal or vindication here we have denied you your constitutional right to a jury trial? You don't think that that constitutional right is involved? Judith Reed: Well, oh... the constitutional right to a jury trial is implicated here. My point is that the... the decision that this Court must make as to the collateral estoppel issue doesn't turn on that. We believe that-- Antonin Scalia: Well, no... I mean, suppose we said collateral estoppel is perfectly fine. Wouldn't we... as a matter of statutory law and common law, wouldn't we then have to say but, in this area of the Sixth Amendment, isn't there some special restriction upon it? I mean, I am just not sure I agree with you that you can possibly avoid saying that we have to ultimately say would it violate the Sixth Amendment for us to apply collateral estoppel here. Judith Reed: --Well, I think what the court did constitutes a violation of the Seventh Amendment, don't get me wrong. However, the issue of when a party gets to appeal a wrongful denial does not turn on whether the, the jury trial right stems from the Constitution. So the... I don't think you... the necessity for avoidance of a constitutional... deciding on a constitutional issue is really implicated here. Now, there are... Respondents state that they argued below the same thing that they raise here, that is that retaliation is not covered under 1981, for the grounds that are set forth in Patterson perhaps. The argument they made below was a very different one. Now, we don't deny that they can get to raise the Patterson questions on remand. We think that would be entirely appropriate and that that is what should occur. This record is not in the condition for this Court to resolve the Patterson question. What Patterson means is that there are fact-specific issues that would be appropriately redressed, addressed on remand, including retroactivity and including whether discharge and retaliation are within the scope. As Justice White pointed out, if we had by-passed Title VII and sued only under Section 1981, Respondent would concede that the denial of a jury trial would have been reversible error. We don't think the Court should adopt a collateral estoppel rule that encourages or perhaps even requires a by-passing of Title VII remedies. Finally, Respondents urge that no remand is necessary because of the directed verdict possibility. Now, certainly on remand, whether a directed verdict is appropriate can also be considered. In closing, I would like to state that indeed the Patterson issues are relevant now and they may be raised by both parties on remand, and we would urge that this Court reverse the Fourth Circuit's ruling and remand this case. William H. Rehnquist: Thank you, Ms. Reed. Judith Reed: Thank you. William H. Rehnquist: The case is submitted.

Earl Warren: Number 104, Alexander Tcherepnin et al., Petitioners, versus Joseph E. Knight et al. Mr. Shure. Arnold I. Shure: Mr. Chief Justice, Justices may it please the Court. This case is here in certiorari to the Court of Appeals for the Seventh Circuit. It involves an interpretation of the definition of security in the Securities Exchange Act of 1934. In connection with this argument that as I state the facts of the case that the Court bare in mind the decisions, many of which are of recent years of this Court dealing on what are securities and what the purpose of the 1933 Securities Act and the Securities Exchange Act of 1934 is although the direct decision of this Court on the 1934 Act was on the recent case of Surowitz versus Hilton Hotels Corporation and this Court set out a strong statement of the fact that the primary aim and purpose of the 1934 Act as well as the 1933 Act is the protection of the general public and investors including the uninformed, the gullible, the ignorant and the little investors. Judge Cummings dissented on the opinion -- majority opinion of the Court in our matter and his opinion sets forth the aims and purposes of the 1934 Act and that they are served by the application of that Act to the typical savings and loan accounts holder who was a small investor who was just as unwary and in need of protection of the typical and sophisticated holder of corporate stock. Now the other cases pertaining to the 1933 Act that I think are particularly important here are the Securities and Exchange Commission versus W.J. Howey, 1946. C.M. Joiner, S.E.C. versus Joiner 1943, the variable annuities case which involved the main opinion or the concurring opinion and dissenting opinion, 1959, the United Benefit Insurance Company, lawyers term of court -- and the Capital Gains Research case which involves another section of the Act but still dealt with the overall purpose. This action was brought pursuant to Section 10(b) of the 1934 Act and Rule 10(b)(5) promulgated there under. The respondents here and the defendants below are the City Savings Association which is an insolvent Savings to Loan Association which has closed its doors and is now in the process of liquidations. Its officers and directors, the liquidators or purported liquidators and certain officials of the State of Illinois who had seized custody of the association at the time the complaint herein was filed. The petitioners are about 150 investors in the capital shares of City Savings Association pursuing on their own behalf and as a class action on behalf of over 5,000 investors who purchased their shares after July 24, 1959 and prior to the closing on June 26, 1964 just short of five years. Potter Stewart: What is the relevance of that date? Arnold I. Shure: The only relevance of the date is that all of the investors who were there prior to July 24, 1959 were investors prior to 1957 because in 1957, the association had been closed by the State of Illinois and then reopened. The accounts were frozen and the people couldn’t withdraw. So these people were in the plate that they’re still in except for the fact that they’ve been able to realize some recovery of their interest out of the new moneys which we claim were received from our clients in the class we represent, through misrepresentation and fraud. Now the relevance becomes very important because the defense is based on the theory that this creates a hardship on these earlier investors and I can only suggest this as the natural consequences of that defense. Here are people who were there prior to 1957 that were frozen and it’s still there in 1959 when the management of the association started in on a program of defrauding new people by selling new securities to outsiders without telling them of the material facts which should have been disclosed to them under the terms of the 1934 Act. Now what material terms were not disclosed? For one thing, this association which was soliciting investors through the United States mail sent throughout the country failed to disclose to these new people that in representing how safe this association was as they did that they failed to disclose that the association had applied for federal insurance from the homeowners -- from the Federal Home Loan Bank which is in charge of the FSLIC, the Federal Savings and Loan Insurance Corporation. And after examination, they rejected the association and the reasons stated for the rejection were the unsafe management and unsafe financial policies of the association. Well to us, it is quite material that when people are informed that this is a safe association, we believe that at the same time whether they wanted to tell these new investors or not that in representing that it was safe, they have to tell them that that was -- had been held we believe it’s safe but the government thinks it’s not and they won’t give us any insurance. And particularly when they were soliciting people had their money and insured associations to withdraw and come to this association that was very material to tell them that they have been rejected. We do not charge that there was a fraud by -- that they told anybody they were insured nor do we charge that the mere non-statement of the fact that they were uninsured would in itself possibly have created a fraud or possibly it might have under the circumstances but when they say how safe they are then I think that they became incumbent upon them to tell the whole story. This is -- Abe Fortas: Do you have a remedy under the state law? Arnold I. Shure: Pardon me? Abe Fortas: Do you have a remedy under the state law? Arnold I. Shure: Not at least. Abe Fortas: Why not? Arnold I. Shure: The withdrawal remedy that they talk about the fact they say that we have the right to withdraw, number one, that the practical remedy was nonexistence because since 1959 -- Abe Fortas: But they have a right to sue for Fraud? Arnold I. Shure: I believe that under the state act, we would not be able to do. Potter Stewart: Why not? Arnold I. Shure: Because the -- Abe Fortas: That’s unusual isn’t it? Arnold I. Shure: The -- your rights are limited for a period of one year first of all. Secondly, we would have to go with the association with a liquidation and we would not be able to proceed in the state without proceeding through the liquidation proceeding. As far as any remedy, there is no policy restricting the federal law against the application. The Section 78 CC I believe, it says that this is not to interfere with regulation by any state -- by the securities department of any state but except to the extent that the state acts are inconsistent with the federal act so if the state act -- there is a definite policy shown for a dual control. The state security laws were well known just the same as they were in connection with the 1933 Act. This is mentioned in the Variable Annuities case that there are state acts. The Variable Annuities case involved a specific situation where they’re running up against the McCarran-Ferguson situation. The McCarran-Ferguson Act which was enacted in 1944 made it quite patent that this -- the recent cases handed down here by this Court and was not to be interpreted to knock out the Paul case which have stood for 90 years as pointed out in the decision of this Court. So that there is a dual system of regulation and there is no policy as there is in the insurance companies for the federal government not to go into areas that the state also covers. There’s one other aspect here and that is throughout the briefs this matter of regulation -- Abe Fortas: That wasn’t quite my question. Arnold I. Shure: I’m sorry. Abe Fortas: My question regarded simply the state law provides a remedy here against the person who had committed this and named as a fraud. Arnold I. Shure: There is a State Securities Act and the Securities Act does provide remedies. There is a recession remedy that was exercised within six months after knowledge. The difficulty here is what constitutes knowledge. Everything under the way of Savings and Loan Association is run under state law. No access maybe hacked to a shareholder, to the books and records of the company. The only way -- Abe Fortas: I don’t want to take a lot of your time. I think I’ve got you’re your answer is. Arnold I. Shure: All right, the City Savings Association is an Illinois chartered association. It is a corporation under Illinois law. It has -- as a corporation the investors are shareholders which means stockholders. In our brief, we cited the Bowman case of the Supreme Court of Illinois, the Gidwitz case also in the Supreme Court of Illinois defining what the attributes of stocker and what are the rights of stockholders. Our opponents say these cases are irrelevant because they do not involve Savings and Loan Association. It is our opinion that these cases are relevant because the first thing we have to do in defining a term is to find out what the term means and we have to find out what stock is and stock is the investor’s interest of the -- the investor who takes the risk of the success of the enterprise as in this savings of loan association and that’s why they are called shareholders. The definition in the Act provides that the term security means any stock among other things. Certificate of interest or participation in any profit sharing agreement, transferable share, investment contract or in general any instrument commonly known as the security. Now this definition of security is about as carefully drafted definition as the mind conceive see because the terms overlap each other and then you have a secondary defense theory against fraud. You have encompassed within this definition of security and other phrase which is a catchall which is called or in general any instrument commonly known as a security so that if anything can possibly slip through stock which overlaps with share, certainly a share is stock and if the share is transferable as every share is and every stock share is the two terms are certainly to some extent considerably overlapping. Now you can have shares and something which is not stock in the corporation. You can have shares in the partnership enterprise. You can have shares on the trust. There are many situations so therefore you have not only stock which overlaps here that you have transferable share which overlaps investment contract because every share of stock is a contract. It involves the state statute which enables the corporation to exist. It involves the certificate, what is in the certificate, the bylaws of the company and all of these things go together to setup the contract. Earl Warren: Are these products traded on exchange. Arnold I. Shure: They are not traded in on exchange. They’re traded on in the over-the-counter market. Section 10(b) of the 1934 Act indicates what the over-the-counter market is although the preamble to the Act says that this Act is for the protection of investors and for other purposes and relates to exchanges and over-the-counter markets. When you get down to Section 10(b) which was the operator provision that we’re suing under here, they don’t use the term over-the-counter market or exchange. Section 10(b) relates to any transaction in any security by any person on any exchange or not on any exchange. Now Professor Loss in his text has pointed out and the case has have indicated that this is a pretty broad statement of what the over-the-counter market is. It means that it pertains to anything -- the over-the-counter market pertains to anything that is not on in exchange. This coverage under 10(b) is as broad as can possibly be conceived. It covers all transactions and security over the door step. There are many transactions where there had been securities not on a market and not through a dealer -- that have actually been between one person and another where the remedy has been supported because that’s what over-the-counter market means. That means not on an exchange. Have I answered your question fully? Earl Warren: To what extent has it been trading over the market in this type of security? Arnold I. Shure: Well in 1934, immediately after passage of the Act, the Securities and Exchange Commission was asked to and did grant an exemption to trading in this type of security from the operation of the 1934 Act. It was a limited exemption running for 90 days and they were being traded I believe on the equivalence stock exchange so that they -- the particular exemption that they wanted there was from registration because of the fact that these were clearly securities. So as far as trading during the depression days and during the days whenever -- Earl Warren: We don’t need to go way back there -- Arnold I. Shure: Right now -- Earl Warren: -- to what extent is the trading over-the-counter now? Arnold I. Shure: Well for seven years, City Savings Association was on a restricted payout phase because ever since they got into trouble back in 1957 up to the date they closed. If someone who was an investor in there couldn’t get his money from the association that he had a dying relative or he needed surgery, they had somebody over their old country that they want to bring over, after all the investors in these savings and loan association involved a lot of little people who put $0.25 together and as the plan shows, they save up a $100.00 and these people have to unload their -- Earl Warren: You got to go very fast and you don’t need to take that much time -- Arnold I. Shure: I’m sorry. Earl Warren: --you only got to tell me to what extent, to what extent there is trading all over the market and I won’t -- Arnold I. Shure: To the extent is that anybody who has a share who dispose -- who wants to dispose of it and is unable to get his money from the Savings and Loan Association, there’s no alternative but to sell it over-the-counter. Earl Warren: To what extent has that been done? Arnold I. Shure: There are no figures on that but it is done necessarily widely in City Savings Association. Earl Warren: Is it done widely or not, that’s what I want to know. Arnold I. Shure: It occurs wherever an association does not pay out. The textbooks -- this gets to the situation of the Savings and Loan Association which I was going to go into anyway. A Savings and Loan Association has the right whenever it wants to. Under the Illinois law, there is no mandatory withdrawal probation. The associate -- the individual may demand withdrawal of their shares and the association may pay him. There is no requirement that the association has to pay. After the -- if the association decides not to pay for the reason that it doesn’t have the cash, it may go on a rotation basis. That means that anybody that -- if anybody does want money, they have to get in line and everybody gets a certain amount before they get around with the head with the line again. Now, this is what happened in City Savings Association and the textbooks on Savings and Loan Associations say that this is why Savings and Loan Associations are better than banks to put your money in because there weren’t so many failures of Savings and Loan Associations. There are $38 billion -- 38 million accounts involving $120 billion I believe in the United States and many times in any of these associations goes on withdrawal basis. The insurance on them even in uninsured association does not become effective until there is a default and there is no default until the assets of the association are less than the total of creditors claims plus the claims of all investors so that at any time that investors that an association finds that its investments have become frozen. If you get into an adverse position as occurs from time to time where they’ve used up their money and you get a tight money market and there isn’t much money coming in and the money is out. They find -- they may find themselves in a position and there have been many, many instances where associations have had to go on withdrawal basis to the point where the industry uses this to advertise its claims. Byron R. White: In a normal liquidation do the holders of this kind of a certificate take after creditors? Arnold I. Shure: Yes they do. Byron R. White: In an ordinary liquidation. Arnold I. Shure: They are -- because they are the shareholders. The risk of the investment is on these investors. Other creditors come ahead of them. They -- and when I say other creditors, I mean the general creditors because these people are not. If we succeed in this case, our people would be declared to be creditors because they would rescind. Now, I had mentioned one of the elements of fraud, one of the other elements of fraud is that this association had at present the man who had become terribly involved in many situations. One of them was the United States government was claiming money from him because they charged him with taking taxes because they said he was taking kickbacks in connection with the associations operations. Pardon me, this goes to the question whether or not there was a fraud involved. Byron R. White: Alright. Arnold I. Shure: Well, we’ll assume that there was a material fraud shown in the complaint. Byron R. White: What was the cause of that? Arnold I. Shure: Since the court held, there was no cause of action stated and the -- one of the respondents has raised the question as to whether or not we state the cause of action here that’s in night brief. I was addressing myself to that but if the Board wishes, I’ll pass this over. As far as -- we then are getting to the definition of security as set forth here. We have asserted that we do hold stock in a corporation which is clearly within the Act. We claim that we have certificate of interest or participation in a profit sharing agreement, investment contract and a transferable share which brings us down to the question of whether or not this is commonly known as a security which I called the secondary of this case. They -- in examining the authorities and the arguments cited by the respondents, we find that time after time in attempting to prove that this is not stock or this is not a transferable share whatever it may -- one is attempting to prove in particular cases, we find a situation developing where we come head on into a matter of commonly known us, for instance Professor Kerry who was then chairman of the Securities and Exchange Commission testified in 1963 with respect to the 1964 amendments. He was asked why savings and loan shares were exempted from the additional registration probations which were being imposed by the 19 -- by the proposed amendments. His answer was because these are commonly known as shares and it was therefore necessary to provide an exemption for them. The testimony and the report in 1932 which was two years before passage of this Act in connection with amendments to the Bankruptcy Act, the house judiciary committee made a statement that they were not taking on the liquidation of savings and loan association through bankruptcy and this would be left to state regulation which could better liquidate them. In the house report statement, these interests are referred to as securities. They are referred to as securities over and over again in federal sources, in state sources, there are at least five Acts in Illinois that referred to in these securities and the respondents assert that since the Illinois legislature went to pass those acts was not referring for this particular federal legislation. Therefore, those citations to the Illinois acts and to their reference to these as securities were an opposite. However, if we are looking to see what is commonly known as the security, we look into the Illinois legislature, we look into the legislative action of the states throughout the country and we find wherever we go and in the testimony of the representatives of the savings and loan industry in 1933. It connects with the passage of the 1933 Act which contains the statute of the same definition that they said they welcome these antifraud provisions. They did not want to be registered but they welcome the antifraud provisions application for this type of interest. The respondents have raised the point that in connection with the 1933 Act, there was a considerable testimony in opposition to the registration of these securities. They also state that there was opposition to their inclusion generally. They say that nothing appears in the legislative history of the 1934 Act to indicate whether anything in connection with these savings and loan shares. The fact remains that the 1933 hearings did encompass all of the objections that anybody wanted to make and there were hearings and representations by those who favored registration and those who oppose registration. What was the net result? In 1933, they exempted from the registration provision and specifically not -- did not exempt them from the antifraud provisions in ‘33 Act only those savings and loan associations which made loans to their members and which did not charge more than 3% for the privilege of withdrawal so that the net result of all the controversy about what happened in the congressional hearings on the 1933 Act adds up to nothing because they didn’t get the exemptions yet respondents would argue that because these things were discussed, therefore congress must have had in mind in 1934 they want to exclude them. But if we look at the 1934 Act, we find that there are some very significant references when they wanted to exclude any reference or any supervision over insurance company securities, the congress put it in very plainly but when they wanted to -- but when it got down to its savings and loan associations, the only reference to exclusion of any savings and loan associations as the exemption paragraph that I've just mentioned which does not exclude savings and loan associations generally. If we look at the cases cited against the background of that definition and we look at all of the pertinent laws which have been passed not only in Illinois but are represented by the United States Savings and Loan League and its literature which we have cited as covering states throughout the country where they have referred to these securities -- where they advocate these as investments. We come to the inescapable conclusion that this is the type of investment that the Congress was talking about and it doesn’t make any difference whether it was -- it comes from little people who put in very small sums of money and accumulate them over lifetime or when it comes -- where the money is invested by people who have a lot of money and invested in the shares of large companies. The concept of regulation that is objected to by the respondents here is a different kind of regulation and if this -- if the Court holds here as has generally been understood to be the law throughout the years that these are securities and are protected by the antifraud provisions, this does not mean that any Savings and Loan Association has to do one thing as far as registering that you don’t have to register, they need to do nothing. All they need to do is not make misrepresentations to the people. They cannot sell these securities and hold back vital information such as the fact that they are in serious financial trouble with their other investors and that there is a no money that is being taken in, through one door is going out the other door or through another window to make partial payments under your payout plans of the old investors. Byron R. White: Well, broker, dealers will be regulated by --? Arnold I. Shure: The broker in these securities? They always have been regulated since the inception of this Act. Byron R. White: With respect to these securities? Arnold I. Shure: Those who specialize -- there are specialists who specialize in this type of security and contrary to the statements made by respondent that this just started after this case was filed. The fact remains that the Chicago office of the Securities and Exchange Commission has supervised the brokers who specialize in these securities all the way back. The case of Archer -- Byron R. White: Of course that doesn’t make it -- Arnold I. Shure: It’s an interpretation. Byron R. White: Well, I know what it is. It may not be right but all I'm saying is that a decision that it is a security will ensure the fact that broker dealers will be covered by the ‘34 Act. Arnold I. Shure: In the case of S.E.C. versus Archer which went up to the Court of Appeals in the Eight Circuit in the name of Archer -- this Archer’s appeal. We mentioned that in our briefs and I believe the S.E.C. does also. In that case, Mr. Archer had committed various manipulative practices with regard to a number of different securities. Some were common stocks, some were certificates of Pacific Savings and Loan Associations. We made specific inquiry as we stated in our reply to the briefs and opposition, the petition for certiorari and we learned that these were withdrawable certificates. The court -- the Eighth Circuit Court of Appeals specifically found that the manipulative practices in connection with these particular certificates were a violation of the 1934 Act which they couldn’t be unless they were considered to be securities within the 1934 Act definition. They -- as far as -- at the distinctive characteristics, the argument has been made "Oh, well, these are just shares in name alone. They are not really shares if you get down the substance, they’re nothing at all. The Court of Appeals found to support that kind of an idea. Hence, there are either 67 different errors in the Court of Appeals decision where you have upon to graciously find that these are creditor-debtor relationships. The Supreme Court of Illinois, the Supreme Court of the United States, the Court of Appeals in the District of Columbia, the statute all say these are not debtor-creditor relationships. They say that even when you demand the withdrawal of your money, you do not become a creditor of the association but the Court of Appeals found that they are creditors. In one place they find that they are depositors. Under Gordon versus Hodgins in the Supreme Court of Illinois held that you cannot have deposits in an Illinois Bank because that connotes a debtor-creditor relationship which is prohibited on constitutional grounds in Illinois. In the Wisconsin Bankers case was a great dispute between the Wisconsin Bankers Association and the Federal Home Loan Bank in connection with the adoption of some new regulations. That went to the Court of Appeals in the District of Columbia and the Court of Appeals found and there’s a very strong concurring opinion by Judge Burger in which he said, what difference it make what you call them or you call them depositor or anything else, they are still shareholders, not creditors, and that’s exactly what they are here. So the Court of Appeals -- Abe Fortas: The savings account and the savings bank have security? Arnold I. Shure: Pardon me? Abe Fortas: Does the savings account and the savings bank has security by your reasoning? Arnold I. Shure: I would think not for the simple reason that the shareholder here bares the investment risk. He is at the bottom of the pile. He is a shareholder. These Savings and Loan Association advertised you own this association. You own the assets. You have our wonderful management which will pick wonderful investments and do your business for you and so on. In a bank, you have stockholders beneath the depositors and therefore you have a debtor-creditor relationship there, while here you have the shareholder. Byron R. White: You have a fix interest don’t you? Arnold I. Shure: In a bank savings account. Byron R. White: You have dividends? Arnold I. Shure: Here, we only get dividends if they’re earned. My time is up for this part of the argument. Earl Warren: Okay, Mr. Loomis. Philip A. Loomis, Jr.: Mr. Chief Justice may it please the Court. In these associations as Mr. Shure has said, the holders of shares have the equity position. They are corporations consequently the nearest analogy to the position of these people is that of shareholders. As Judge Cummings pointed out in the Illinois statutes expressly provide that they are not creditors. They have a certain unusual characteristics. They are so long as the association is operating normally and profitably redeemable and therefore they are not traded in the markets because the investor who wants to sell instead just redeems and the amounts of which he redeems is fixed so there would really be no point in trading them in the market so long as the association was operating profitably. When the association gets in trouble, trading may develop. They are nonnegotiable for the same reason that they don’t trade because the redeemability features no need to have them traded. Now Mr. Shure referred to four cases in this Court which considered the definition of security under the Securities Act. I think that those cases taking in conjunction not only show that this is a security but refute each of the contentions that the respondents make that they shouldn’t be deemed to be shares because they’re redeemable for example. Well, the variable annuity and flexible fund were both redeemable at the option of the holder during the pay in period that they are not traded in the markets. Well, the orange groves interests and oil leases involved in Howey and Joiner were not traded on any exchange or in any organized market. Further, the cannons of construction used by this Court in those opinions and in other cases such as the Capital Gains case, the effect that these statutes are to be broadly construed that the fact that an instrument falls that this broader features of this definition are not to be used to cut down the specific features and conversely the specific features do not limit the broader features. All of these, I think demonstrate that this is a security at least for purposes of the Securities Act of 1933 with sufficient clarity that I don’t think that is really contested anymore. The Legislative History of the ‘33 Act shows that Congress expressly considered the status of savings and loan shares and determined that they would be exempted from registration but included under the fraud provisions and the savings and loan industry acquiesced. In fact they seemed to think this was a good idea. They didn’t want to be registered because of the expense but they did want federal protections against fraud. Potter Stewart: Mr. Loomis, can you enlighten me a little bit. You’re speaking as though all savings and loan are organized the same way, is that in fact true? Philip A. Loomis, Jr.: I don’t believe it is. We are talking about withdrawable shares of a savings and loan which has only one class. Potter Stewart: Savings and loans, are they sometimes called Building and loan society, that I suppose they are the same or they’re different or were an import from Germany largely or central New York in the 19th century into this country? They originally began if I’m not mistaken. They’ve been quite mistaken as membership organizations in which only the members could borrow and in which the members also share the profits of redounding to the institution because of the mortgage loans given to the members. That was the old fashion conventional building and loan or savings and loan, Bausparvertrag, it’s called in German I think. And this obviously is not that kind of an animal. Philip A. Loomis, Jr.: That’s right. You’re right. There are quite a number of different types of organizations that are sometimes called savings and loans and they have rather different stocks. Byron R. White: Speaking as though they’re generically all of them are treated alike -- Philip A. Loomis, Jr.: I’m thinking about this particular type of association, this characteristic is that as far as I know, it didn’t issue any kind of shares except one class of withdrawable shares and maybe certain loans that it made. It didn’t limit itself to making loans to those who had accounts with it but solicited accounts widely all over the country and could invest not only in mortgages but in other things. Abe Fortas: Mr. Loomis, the various federal insurance available to this type of savings and loan association. Philip A. Loomis, Jr.: Provided it qualifies where -- Abe Fortas: I understand that and what does that cover in terms of the shareholder? Suppose a shareholder -- suppose somebody advised a $1,000.00 share in this particular savings and loan association and supposed it had qualified and had obtained federal insurance. What would that federal insurance cover? Philip A. Loomis, Jr.: Well, as I understand it and I’m not an expert in savings and loan insurance and I may be wrong. If the association gets into trouble, the Savings and Loan Insurance Corporation will arranged to work things out for the investor either by giving him shares in another association or giving him some other kind of interest or ultimately, it would have necessary pay him in cash but he doesn’t get his cash right away as I understand it. Abe Fortas: Pay him what, how much? Philip A. Loomis, Jr.: The base amount? Abe Fortas: That’s the interest? Philip A. Loomis, Jr.: I’m not sure how they handle interest. I think they get something on that too. Abe Fortas: Well perhaps the Savings and Loan council will tell us. Philip A. Loomis, Jr.: As I was trying to say, these interests with this particular -- involved in this particular case seemed to me to be so clearly securities for purposes of the securities act that it seems to be almost conceded. Now as to the Securities Exchange Act, respondents attempted -- Potter Stewart: It’s also conceded that if indeed they are securities for purposes of the 1933 Act, they are explicitly exempted from the registration requirements for that statute. Philip A. Loomis, Jr.: That’s right. Potter Stewart: Is that true? Philip A. Loomis, Jr.: That is true and the same is true incidentally as to the registration requirements in the Securities Exchange Act. Potter Stewart: Of the ‘34? Philip A. Loomis, Jr.: The ‘34 Act. They are excluded form that also. There seems to be a suggestion, the Securities Exchange Act is somehow different and narrower than the Securities Act and the same broad construction should not be applied to that Act. That seems to be suggested also in the majority opinion below. It seems to me that this suggestion has no basis. These two acts were passed by the same Congress on the same term -- no. Same Congress and basically the basis of the same investigation and in response to the same events, the stock market depression and the words of the definition were impertinent part I think substantially identical. The only difference of which anything has been made is the concept of evidence of indebtedness used in the ‘33 Act and not the Exchange Act to which I ought to return. It seems to me inconceivable under these circumstances that Congress -- if the congress had intended the same words, stock transferable share, investment contract, certificate of interest or participation in a profit sharing agreement and so forth were to mean something different in the Exchange Act that they meant in the Securities Act that there would have been some hint of this somewhere in the statue or on the legislative history. There is none. There is no suggestion that these words somehow mean something different in the act that followed a year later. Incidentally, the Ninth Circuit in the Los Angeles trustee case apparently felt that once it had shown that the real estate interests they are involved which where participations and mortgages were securities, investment contracts for purposes of the Securities Act, it necessarily followed that they were securities for purposes of the Securities Exchange Act and granted the decree accordingly. The structure of the two acts is based -- as here pertinent is basically the same. You will have a broad definition of security including practically all media of investment evidenced by an intangible except the direct ownership of property and even that sometimes is in Howey followed by appropriate exemptions from the right registration or regulatory provisions. The savings and loan shares vary of a certain type were exempted from the registration but not the fraud provisions in the Securities Act and again in the Exchange Act when the coverage of the Exchange Act was broaden to include securities not traded on exchanges. The failure to include evidence of indebtedness in the definition in the Exchange Act is I think irrelevant for two reasons. First because as Judge Cummings had shown, this is not an evidence of indebtedness. There is no debtor-creditor relationship and in any event, it falls within the other terms. I think probably, the significance although the Congress didn’t say of taking out and not putting evidence of indebtedness in is probable that -- it is probable that that term was so broad as to include things that are not investment media at all lik doctor Bill which says you are owed money or an I owe you or a cashier’s check or something like that. In the -- none of the cases which I have referred to, the four cases referred and under the Securities Act which we think govern here involved the term investment contract and none of them -- I mean evidence of indebtedness and non-relied on it. Finally, there is no policy reason to exclude this type of share from the protection of the fraud provisions of the Exchange Act that is not equally applicable to the fraud provisions of the Securities Act which as we have seen the congress expressly did not do. To read these interest out of the fraud provisions of the Exchange Act would have certain anomalous consequences. It would mean that fraud in the sale of such interest would be prohibited by federal law but not fraud in the purchase because the ‘33 Act only reaches fraud in the sale of a security. The Congress brought in the ‘34 Act to include fraud in the sale or in any transaction in connection with the purchase or sale of a security. The commission’s authority to register and regulate broker dealers who deal in these issues would be eliminated and there seems -- it has existed from the beginning for it has been the commission’s consistent administrative construction ever since 1934 that these interests are securities for purposes of Securities Exchange Act as well as for purposes of a Securities Act, Very few courts have had to consider this question. No one has ever seemed to think it required extensive litigation before this case and those instances which are cited in our brief where the Court did have occasion to consider this question. They have all proceeded upon the assumption at least that these are securities for purposes of the Securities Exchange Act. Here, we are dealing both for purposes of the Securities Act and for purposes of the Securities Exchange Act with the fraud provisions and nothing more. No greater federal regulation. Congress has never thought that the existence of state regulation justifies exemption from the fraud provisions. Indeed the fraud provisions of the Securities Act applied by necessary implication to state securities themselves, state bonds. The Congress insofar as fraud is concerned, intended to broaden and improve and provide greater protections in this Exchange Act and to determine that it would have provided in the Securities Act and the contention that somehow the Exchange Act is to be interpreted more narrowly insofar -- Byron R. White: If the state provides (Inaudible) Philip A. Loomis, Jr.: No. The way both these statutes provide that they don’t eliminate any state remedy conversely. Their remedy is an addition to any state remedy on State remedy doesn’t preempt them either. The two -- Byron R. White: (Inaudible) Philip A. Loomis, Jr.: It depends on what the state law is. Byron R. White: (Inaudible) Philip A. Loomis, Jr.: Well, I haven’t made any great study of the state law. I don’t -- I’m not sure what remedy these people would have had under Illinois State Law. Byron R. White: But we’re talking about prior to that -- Philip A. Loomis, Jr.: That is right but I don’t think you have to reach all of that question yet because you’re really asked whether this is a security. Earl Warren: Mr. O'Laughlin. Charles J. O'Laughlin: Mr. Chief Justice may it please the Court. It is my position that from an inspection of the Act itself, from a consideration of policy and as a matter of history that the particular item we are confronted with is not a security within the meaning of the Securities and Exchange Act of 1934. Potter Stewart: I’ve had a little trouble gathering just what is this particular animal that we’re dealing with and then how -- and how rare it is or how common it is. Charles J. O'Laughlin: It’s indeed Your Honor a rare beast. I would say that to characterize it as one, A, B, C or D is something that perhaps is not possible. It’s defined under the Illinois statute as a withdrawable capital account. The statute uses that term throughout and I might say in the consideration of this case, it may be important to note that in savings and loan has chartered under the Illinois law, there is also permanent reserve capital. This association did not have a permanent reserve capital. It had only withdrawable capital account. Potter Stewart: (Inaudible) Charles J. O'Laughlin: Certainly would not be binding upon this Court under any consideration. This case as I construed it is a matter of interpretation of the intent of Congress, only this and nothing more. Potter Stewart: What is the usual savings and loan underlined basic documents. Charles J. O'Laughlin: The philosophy -- Your Honor, I think this. Potter Stewart: A very rare bird -- is there any kind of a common bird in the savings and loan business? Charles J. O'Laughlin: May I address that in a big picture. I would say this. I walk into a savings and loan. I put down my $5.00. The statute says to me that the association must give me either a certificate or a passbook. Potter Stewart: Passport? Charles J. O'Laughlin: Passbook. As a practical matter -- Potter Stewart: Which statute? Charles J. O'Laughlin: The Illinois Savings and Loan Act. As a practical matter, I get only the passbook. I defy anybody in this courtroom to tell me the difference so far as the average investor is concerned between this and the typical savings account passbook issued by -- Potter Stewart: It has no capitol at all (Inaudible) Charles J. O'Laughlin: That is very correct Your Honor. Potter Stewart: That is the difference. Did they say that that’s not the difference between savings and loan as to -- Charles J. O'Laughlin: It may have peripheral effects. I might say this. The organizational provisions of the Illinois Savings and Loan Act provide that a certain amount of minimal capital be on hand that I would say that so far as the organizers or developers of a new association is concerned, they may look at it a little but differently. But to answer your question, I question very much ,very, very much indeed that the average investor is aware of 1% difference except the -- what he is talking about is a rate of interest that pays maybe a quarter or a half percent interest more than the bank which is across the street from him. I think since we’ve developed the argument this way, it might be well to point out a few salient characteristics which I think are of vital consideration in the determination to this question and that is savings admittedly bare a vote. The typical association provides one vote for every $100.00 or fraction thereof. But notice this very unique provision in my judgment. There is no limit, no limit whatever to the amount of accounts that can be taken in and therefore no limit to the amount of votes that maybe cast in any given election. What I’m saying is this. You compare this within a corporation in which there is a preemptive right, there is an authorized capital and what have you which is designed to preserve for the individual owner his aliquot portion of the management of that concern. There is nothing like this in the Savings and Loan Association and after this one further provision, on motion of the Board of Directors, any depositor, any withdrawable capital account maybe redeemed. An investor has no right to preserve his management, his equity position or what have you in the Savings and Loan Association. Potter Stewart: It’s like a callable stock isn’t it? Charles J. O'Laughlin: Well, callable stock -- Potter Stewart: I mean it is callable, it’s still a stock. Charles J. O'Laughlin: It’s still a stock but it’s generally a unique type of stock. The equity owner generally, a stock is not provisioned or subject to such call. That is nor it’s a preferred stock or special type of stock, something unique and extraordinary in and of itself. What I’m saying is this Your Honor. I’m really following on Mr. Justice Harlan’s line of thought as to these are the owners. What I’m saying is that they are very unique owners, very selected and very different. Abe Fortas: Where in this record is there a statement of what the rights and privileges are of a person who buys one of these things whatever they are? Charles J. O'Laughlin: Your Honor, it’s a matter of the Illinois Savings and Loan Act. Abe Fortas: Is that set out in any of your briefs or does it appear anywhere in all of these documents we have before us? Charles J. O'Laughlin: What -- the specific character? Abe Fortas: Yeah. Charles J. O'Laughlin: I think Your Honor in the brief we submitted that is on behalf of the City Savings Association and the liquidators we have set out in quite a great detail what the unique provisions of -- Abe Fortas: Well, I could guess -- need very much if you would tell us just exactly what this is. You said this is not like if I correctly understood you. This is not like the usual savings and loan transaction or instrument or whatever. Charles J. O'Laughlin: I must have missed all. What I meant to say is that it’s not the usual device whereby a person having money imparts to the care of another. Abe Fortas: Oh, but this is a typical savings and loan transaction. Charles J. O'Laughlin: I would think it was very typical. Abe Fortas: Now, what rights does a man – when a man goes out on a -- let’s say pays a $100.00 then he gets a passbook is that right? Charles J. O'Laughlin: Right. Abe Fortas: -- which shows that he has paid them a $100.00. Now what are his rights? Charles J. O'Laughlin: Well -- Abe Fortas: What are his rights with respect to capital or his rights with respect to dividend or participation, what are his voting rights and what are his rights on liquidation? Charles J. O'Laughlin: Normally speaking he signs a proxy at that moment, the moment he opens his account. And this proxy generally states that it’s good until revoked and then only for the particular meaning it’s revoked. As a practical matter, he never -- Abe Fortas: In a sort of round about way that he has got to vote. That’s what I want to know, it says those ultimate simplicities that unlikely the states calls about his vote, what right he has to -- money and what right he has on liquidation etcetera. Charles J. O'Laughlin: He has a vote which I’m confessing that he has but I say it’s very limited because it’s normally not exercised because of the nature of the proxy. He has a right to receive what are called on the statute dividends. These are traditionally declared by the Board of Directors out of earnings after the provision is made for reserves and things of that nature. These amounts of dividends are declared routinely. They are usually advertised current rate 4.75 %, 4.5%, I would say determined not so much by the earnings themselves but what in the law of supply and demand is necessary for this Savings and Loan Association to compete with its competitors, the banks. He is entitled -- Potter Stewart: Unlike a bank which pays savings account interest with a guaranteed rate, we people get so called earning at a non-guaranteed rate although there’s an advertisement of the current -- Charles J. O'Laughlin: Right and I would say Your Honor that it need not be earnings for the specific period it’s covered. Not all the earnings need to be paid out. More maybe paid out in earnings -- Abe Fortas: But what are his rights of principle. Charles J. O'Laughlin: Principle? He is entitled to apply the statute says for immediate withdrawal and that the Savings Association has the cash, he is entitled to have it back immediately even though he deposited only five minutes ago. The statute provides a scheme since these are association -- Abe Fortas: If there are any unpaid dividends when he applies for withdrawal, does he have a right to get that with bonus? Charles J. O'Laughlin: Yes Your Honor, he does. Abe Fortas: All right, now upon liquidation what happens? Charles J. O'Laughlin: Your Honor, the Illinois statute provides for two types of liquidation and I might point out that the Federal Bankruptcy Act specifically provides that the Federal Bankruptcy Act is not applicable. It’s a matter of state liquidation. It may be voluntary or involuntary. This if voluntary it’s by -- under the Director of Financial Institution, the Commissioner of Savings and Loan appointing a receiver. Under the voluntary liquidation which we provided here, it is under liquidators of whom I speak in this Court. It provides for a realization of the assets filing claims, I would say that there are many questions that under state law which re-- Abe Fortas: I understand that but let me try to get at the ultimate simplicity again. A person who has paid a hundred dollars into the Savings and Loan Association, in the event of liquidation would file for a $100.00 plus accumulated an unpaid dividend. Charles J. O'Laughlin: Yes Your Honor. Abe Fortas: Is that right? Charles J. O'Laughlin: Yes Your Honor. Abe Fortas: And then he’d get -- Charles J. O'Laughlin: I might say he need not apply. The Act provides that he need make no application. Abe Fortas: All right. Then he gets his aliquot share of the assets after but differed to other creditors for rent, light, heat and whatever else it may have. Charles J. O'Laughlin: That question Your Honor I think is a matter of state law and I might say has given us pause as to the relationship between the withdrawable share accounts and the creditors. Abe Fortas: Whether he is on the parity or the insurance -- Charles J. O'Laughlin: Yes Your Honor. Abe Fortas: -- to coordinate. Charles J. O'Laughlin: Yes. Abe Fortas: Alright. Potter Stewart: Can these shares ever be sold on the market or that’s their value above their base amount? Charles J. O'Laughlin: My answer to that is unequivocally no Your Honor and may I explain. The Act specifically provides that the withdrawable share account is not negotiable. Potter Stewart: It is assignable. Charles J. O'Laughlin: It is assignable which of course means the assignee stands in the shoe and stands the defenses if any which may be urged against the assignor. As a practical matter, I’m aware of not a single assignment. Potter Stewart: Is that material? Charles J. O'Laughlin: Yes Your Honor, I think it is particularly when you read the preamble to the 1934 Act, it specifically states that the Act was designed to be passed to meet fluctuations on market – over-the-counter market. Potter Stewart: On what appropriate deal would that (Inaudible) Charles J. O'Laughlin: I share that question with Your Honor. Potter Stewart: But that must be because of someone -- Charles J. O'Laughlin: Your Honor, I might say this that this is one of the SEC in all due difference dips into its file and comes out with -- I believe in the opening brief is said to be 13 or 14 registration statements. I do not know what these registration -- Potter Stewart: No broker would come and register (Inaudible) possibility of trading -- Charles J. O'Laughlin: Your Honor, I -- Potter Stewart: Nobody? Would you as a -- Charles J. O'Laughlin: I’m speculating Your Honor but I would say this, if he were doing other activity subject to the ‘34 Act, he might say also soliciting savings on loan accounts. I would say this that it would be the solicitation not the broker dealing part of that that would be applicable. I know of no dealers as such. There may -- there are persons I’m given to understand although I have never met them never seen their activity who solicit funds for Savings and Loan Association but I might say this that this case comes on an interlocutory appeal from a motion to dismiss and the record is indeed bearing. When you face the individual categories found in the statute, that is note, stock, treasury stock, bond, the venture, certificate of interest or participation in any profit sharing agreement or any instrument commonly known as a security but again excluding note, draft, bill of exchange or banker’s acceptance which has a maturity at the time of issuance of not exceeding nine months. I think proper analysis indicates that the withdrawable capital account of the Savings and Loan Association does not comply. I particularly would like to emphasize and particularly in the line of the Howey case, the United Benefit case, the Variable Annuity case, this consideration in a typical situation where a person having funds gives them to another on an equity basis he stands the risk of capital appreciation a return of some consequence in the Savings and Loan Association, not so. If you could conceive of the unusual situation or a bonanza was had where the fruit, the orange groves return large sums of money, the oil lease is profited. There would be a chance that that investor would receive money. In the savings and loan, he will receive “the current rate of interest or current rate of dividend” as the case maybe as it is described. My point is simply this. There is not that likelihood of incremented value which this Court spoke up in the United Benefit case and the Variable Annuity cases which led this Court to characterize those instruments as securities. Because this interest is subject to redemption, because it’s subject to dilution, because the passbook and everything indicates that this man is entitled to a return of its capital, all indicate that there isn’t that chance of capital appreciation which lures an investor. Earl Warren: You made (Inaudible) -- Charles J. O'Laughlin: Yes Your Honor. Earl Warren: -- do you think that that more, on this act (Inaudible)? Charles J. O'Laughlin: Your Honor, the questions which you address to Mr. Loomis and I share some of the same lack of information as to the practice of the industry as a whole. I have a feeling that this case addresses itself the whole savings and loan association industry as such. When I make a statement in open court, the man receives a passbook. This Court must take it as more or less general information because there is nothing in the record which indicates that that specifically is the case. I think that I have done -- the counsel has done -- we have all done a scribe general practice in the industry and things of that nature. I can state unequivocally that so far as this record is concerned, there isn’t a single assignment. There isn’t a single trading that we are aware of in the administration of the essence as the Savings Association. Byron R. White: Mr. O'Laughlin, what about the jurisdiction of the Federal Home Loan Bank Board, it seems to me they had a rather broad dispensation to -- perhaps to issue rules with respect to the issuance of the shares just like we’re talking about. Charles J. O'Laughlin: Yes Your Honor. Byron R. White: Or prescribing reports that a bank may have to make to its non-security holding. Charles J. O'Laughlin: I wholly agree and not only do they have that right but they have to exercise that right. Potter Stewart: Did anybody asked them of their view of this case? Charles J. O'Laughlin: We have talked to them informally. They covered 96%. Potter Stewart: But they haven’t been represented in any of these proceedings? Charles J. O'Laughlin: They represent 96% of all the deposits and Your Honor, I know that the -- as a matter of fact do provide for registration of those soliciting accounts. They do provide particular -- Potter Stewart: What about reports to security owners or the interest owners, isn’t that -- that’s covered by the ‘34 Act too isn’t it? Charles J. O'Laughlin: I can’t answer that question Your Honor. Potter Stewart: I gather you suggest that there could be dual or conflicting -- Charles J. O'Laughlin: Overlapping, overlapping. Unnecessary to put -- Potter Stewart: Well, I suppose the bank board could prescribe by regulation what it is these that each association must tell its perspective investors. Charles J. O'Laughlin: Yes under the registers -- Potter Stewart: And then for violation of that, this might still be a 10(b) violation I might admit. Charles J. O'Laughlin: It could be. Potter Stewart: Maybe that’s the answer here then that’s why the board isn’t here. No matter what the board may do or has done or hasn’t done, this after all as investors or claimed investors if he has the security. Charles J. O'Laughlin: Your Honor -- Potter Stewart: Is this a cause of action for fraud? Charles J. O'Laughlin: I think so far as federal -- so far as regulation is concerned in general, there is a detailed state proceeding of liquidation and I might say this in the trial court, there was a motion made to appoint a federal district court receiver for this association. When that motion was being considered, the SEC petitioned that such a receiver not be appointed. I would take it that this after investigation by the SEC is a vote in favor of the state court liquidation. I would say to answer Your Honor’s question specifically, state administration is adequate -- it is adequate and if there is any area not filled by state administration, it is more than adequately filled by the Federal Home Loan Board. Potter Stewart: Well, has the Home Loan Board in any way ousted state court -- Charles J. O'Laughlin: You see this was not a state or this was not a federally insured association. Potter Stewart: Well even so, doesn’t the Federal Home Loan Board have some -- Charles J. O'Laughlin: Only if it were insured Your Honor is my understanding. Potter Stewart: Well then what’s it got to do with this case? Charles J. O'Laughlin: What I’m saying is this, 96% viewing the overall position and whether there is need from a policy basis to have the SEC participate in this sort of thing, it would be applicable at most only 3% of the deposits in the Federal Savings and Loan Associations that the field is already preempted substantially by -- Potter Stewart: But your Federal Home Loan Board bank argument I gather is its no good as to your association -- Charles J. O'Laughlin: That’s right. Potter Stewart: But if it’s a security -- but if this is ought to be a security for purposes of ‘34 Act, it will be a security for those purposes with all the other association. Charles J. O'Laughlin: Right. It would have assumed that like all the way around. To answer Mr. Justice Fortas’ question as whether there is a state remedy here. Not only is there a state remedy but a state remedy has been invoked. We have filed a chancery litigation in the Circuit Court of Cook County which has been pending almost as long as this case has been seeking to surcharge the persons who administer this administration for their elections. Hugo L. Black: Do you think that the state remedy takes it out from the jurisdiction of the SEC? Charles J. O'Laughlin: I think it takes it out from the need. Hugo L. Black: From the need. Do you think it takes it out from the jurisdiction? Charles J. O'Laughlin: Well, I think whether this SEC has jurisdiction Your Honor is a matter of Congressional intent and whether or not there is state court jurisdiction as such, I think that in gauging what the intent of Congress is, the availability of state remedy, state procedure, state administration is a factor which this Court might well take into consideration. Hugo L. Black: Did it not provide something about being maybe in addition to that that the state remedy should not be considered exclusive and it’s something that I get in here. Charles J. O'Laughlin: I’m not prepared to answer that question -- Hugo L. Black: Well that -- what is the answer Mr. -- Charles J. O'Laughlin: I’m not prepared to answer that question. Potter Stewart: Well, there is no problem in the VALIC case that there was state administration of the insured -- Charles J. O'Laughlin: That was the question of insurance. There was a state -- Potter Stewart: I know but what’s the difference here? The mere fact that the state regulation doesn’t mean that if appropriate -- Charles J. O'Laughlin: No. I understand Mr. Justice Black’s question right now. In the state insurance provision, there is a specific provision allowing for the presence of state administration and I would take that there would be no provision, there were no conflict so far as the savings and loan association administration by this commissioner savings and loan. I would take that a duplicate administration would be feasible where they’re desirable along with the third agency, the federal home loan bank is my point that the -- we don’t need three, two is enough. Byron R. White: You don’t concede I take it that this interest as a security even for the fraud provisions of the ‘33 Act? Charles J. O'Laughlin: No Your Honor, I do not and I join with the court below that the evidence of indebtement omission is significant. Byron R. White: Well that’s Act ’34. Charles J. O'Laughlin: Well, the ‘34 or the ‘33 Act has but the ‘34 Act does not. Byron R. White: That’s right but for the ‘33 Act, do you agree that it’s the security that there’s interest in the security? Charles J. O'Laughlin: No, I do not. In conclusion, I would like to point out to this Court if I may the paradox which this case, which so far as I can see as unique under the ‘34 Act. If counsel were to prevail here to the extent which he asks to prevail, this would mean roughly that 15 million of depositors took priority over the other 20 million. A result I think under some -- in my judgment highly artificial differentiation. I believe it was Mr. Justice Stewart who asked the question what was the significance of the date and I must confess every time we ask that question, we get a different answer. At one time, the answer was that the date meant something to do with the statute of limitations and other times it meant to put a difference with some changes in the Illinois Act if the Court please, I think that the date is of no significance that these people are depositors. I find no -- if there were a fraud here which led to the additional depositors by the same token -- the same fraud would mean that the depositors are already there maintain their deposits. So to answer your question specifically, I challenge any date and I also challenge that a finding under the -- that this was a security would mean that there was a priority. Potter Stewart: In other words, that is -- it would mean there was a priority only if these petitioners should succeed in their action for recession, then they would get a hundred cents on every dollar. Charles J. O'Laughlin: That’s what they contend -- Potter Stewart: If it were available and presumably this would leave less or maybe nothing for the pre-July 1959 depositors. Charles J. O'Laughlin: Yes Your Honor. Potter Stewart: And there are 15 million post July 1959 depositors and 20 million pre of that date deposit, is that right? Charles J. O'Laughlin: Roughly speaking. Potter Stewart: And how about in terms of amount of deposits, about the same ratio? Charles J. O'Laughlin: Well, I’m -- when I’m answering that question it is as to amounts. Potter Stewart: That is to amounts. Charles J. O'Laughlin: That is to amount. Number I’m not -- Potter Stewart: Right. Abe Fortas: Do you ever think there hasn’t been (Inaudible) Charles J. O'Laughlin: When you tie it up Your Honor with the Bankruptcy Act which provides it that the administration should be only under state law. What I'm saying is that provision can only be true when the association is insolvent and I would say that the Court please that tying those two acts you find an act of Congress that if there is a question of priorities that that is committed to state law to be answered under the acquiescence of the Federal Bankruptcy Act. Thank you. Earl Warren: Mr. Perlman. Stuart D. Perlman: Mr. Chief Justice may it please the Court. I’m here on behalf of the State Regulatory Agency who regulates the Savings and Loan Associations in the State of Illinois. We are here on behalf of the Commissioner of Savings and Loan to secure an equal treatment and fair treatment of all the depositors in this association and not to have one group prevails over another group. Savings and loan transactions are as common as every debt in our everyday life. They are well known. They weren’t in existence long before the 1933 Act. They existed as Mr. Justice Stewart pointed out in these mutual savings and loan associations or if you wish building and loan association. William O. Douglas: Mr. Perlman, isn’t it normal to have the defrauded stuff over to occupy different positions from none defrauded stuff over. Let’s assume the same stockholder that had pursued under state law judgments. Would they add the priority? Stuart D. Perlman: They would sue as the way I see it. William O. Douglas: Let’s assume they got judgment. Stuart D. Perlman: If they got judgments they would get it against the ones who defrauded them. This would be the management as they alleged. It wouldn’t be from their fellow depositors who have this identical interest. Byron R. White: It would be against the association wasn’t it? Stuart D. Perlman: For the association? Yes, that’s correct. But -- Byron R. White: And then it would be a charge against the assets of the association. Stuart D. Perlman: They get charge against the assets as well as the directors as you wouldn’t have and other derivative actions where you would have the directors who afre really the primary liable for the acts -- for their acts. The savings and loan account as I said was an existence long before 1933. This distinguishes from the variable schemes that were devised after the 1933 and 1934 acts. It distinguishes it from the Alice and Wonderland variety of situations. These instruments were discussed, debated and thoroughly analyzed in the -- before the Securities Act was enacted into law. As Mr. Loomis pointed out, representatives of the industry of the building and loan industry did come to Congress to ask for an exemption because of the fear that they thought they would be covered under the registration provisions and that there maybe a possibility that these accounts would be covered under that act they ask for their exemption but still maintain that they would desire the antifraud divisions to prevail against it. The Securities Act did provide for an exemption in the final act reported out. And the hearing that Mr. Loomis is talking about is about a bill that was really poorly drafted according to a statement by Dean Landis who was the principal drafter of the Act. He said that Bill was -- have very few exemptions and later many new exemptions were enacted in the final legislation. In 1934, the Congress then enacted a totally new Bill. It did amend the 1933 Act but did provide for a new statutory regulatory scheme for transactions that would not previously regulate it. The Bill was very carefully drawn and the Congressional records state in the debate that there were more than five revisions of this particular Act. It is said in the Congressional record that every word, every line, every sentence in the Bill was thoroughly considered. In 1934, and it is virtually conceded by the silence of the S.E.C and council for the petitioners, there is not any mention of this particular interest. The only thing that you see constantly throughout this -- the debates, the hearings preliminary to the passing of the 1934 Act is that there is a desire to protect the institutions descending alone institution, the bank savings -- the mutual bank savings, the banks, insurance companies, because this institutions invested in securities and bonds that were fluctuating in value due to the problems that were raised at that time. There was a desire to make sure and protect the integrity of the investments of these institutions, not the interest that are involved. In fact, you see and most of the discussions in the Congress at that time where you see that they say people took their money out of the savings and put them into work with securities. They want -- there was no desire to protect the particular savings interest because there is no trading in this and we could see this in the Section 2 of the Act. Section 2 specifically sets forth the purpose and the intention of Congress and we see in that Act that the purpose was to regulate trading and the traders of investments. When there is trading then the regulatory scheme is necessary out of the Securities Exchange Act. When there is no trading as in this case then the regulatory scheme is not proper. In this particular association, it was asked whether there was any trading of this -- in this particular accounts of this association as far as the association which must get knowledge of all assignments, there has been no record of any assignments whatsoever. With regard to savings accounts, there was much discussion in Congress not only of savings and loan accounts, banks, insurance companies were all considered together. This is the way the Congress talked of these institutions not distinguishing between a bank or savings alone association or insurance company. They lumped the consideration of these institutions because by the very nature of them, they were the type of institutions that would come under a similar -- were similar in nature. Byron R. White: Do you know why there are brokers who trade in this? Stuart D. Perlman: Your Honor, I’m on the impression that there are solicitors not brokers and by that I mean the solicitor is really a person who writes to an individual and they say that he would like to get you to deposit your money and association where you could get perhaps 5% like in California. Byron R. White: Well, why does he register with the S.E.C. if -- Stuart D. Perlman: This is beyond me and I believe that the S.E.C. -- there has been no virtually no regulation by the S.E.C. of this broker but there has been excessive regulation by the Federal Home Loan Bank Board of these brokers or whatever you want to call it. In any event, the S.E.C. can’t control these individuals under the Securities Act of 1933. A specific remedy is provided that when a broken or when any -- when there is a violation of Section 17(a) of the Securities Act of 1933, this S.E.C. has power under the 1934 Act to go against that individual and that appears in our brief on page 24 where we state that Section 15 specifically provides for this sort of situation. Byron R. White: Am I correct -- your argument on behalf of the state that one reason these are not securities as if they’re not tradable. Stuart D. Perlman: That’s exactly right Your Honor. Byron R. White: But in fact we know there are brokers who do register as trading. Stuart D. Perlman: They don’t trade in it. There is no trading. What they do Your Honor is they -- at the issuance which is specifically a ‘33 situation. They only seek to have you put money in a bank or saving’s association at the inception. They never take that particular account and transfer to another individual. There is no such thing as a trading. It’s an absurdity in this particular situation because anybody could go into an association and open an account anywhere. He could close out his account and go next door and open up his account in some other association. There is no need to trade these accounts. Potter Stewart: Well, one of these brokers are dealers -- what do they get out of it even at the issuance, do they get an underwriter’s fee of some kind or underwriter’s commission? Stuart D. Perlman: They do Your Honor and the Federal Home Loan Bank Board as I cited in my brief has a very restrictive regulation on this particular solicitors and I -- again, this is out of the record but I have been told that there are very little activity after this regulation because it was the Federal Home Loan Bank Board who restricts these people. They say how much money you could put into one institution. They say how much commission you could get. So this is where your true regulation comes as in the Federal Home Loan Bank Board, not the S.E.C. and by the way, the (Inaudible) three form is a mere informational board. This is as the S.E.C. points out, it doesn’t really regulate them, it just tells them that we solicit the particular provision as the solicitor said, it’s loan accounts. Solicitor, that’s all they do. Nothing more, no trading at all Your Honor and I don’t believe that the S.E.C. can point to any specific provision where they do trade them. In fact, they have stated in their brief, they’d only seek to have funds placed in an institution. Potter Stewart: Well, that’s an original issuance I should -- Stuart D. Perlman: Exactly Your Honor which is under -- Potter Stewart: Under ‘33 Act. Stuart D. Perlman: Exactly Your Honor. That’s precisely our point. So there’s no real trade in any event if there is a violation under Section 17(a) of the 1933 Act, the Securities Act, they have their remedies under the specific provision on the Exchange Act where they can regulate this type of activity. Abe Fortas: Well, if there is -- if this is a security and if Mr. A is soliciting persons to purchase this security and it’s not astounding to me that Mr. A is regarded as a broker. Is it to you? Stuart D. Perlman: He maybe regarded as a broker but not under the terms of this Act because this is not the type of interest that is traded. A broker as I understand -- Abe Fortas: It is traded if bought and sold. He solicits somebody to buy a security, assuming this is a security. So nothing astounding about calling him a broker because there is a trade, the trade being from a -- Stuart D. Perlman: It’s an issuance Your Honor, it’s not a trade. Abe Fortas: But it’s a trade. It’s a trade on the initial issuance of the -- in order to confine the definition of trade to secondary distribution or to trading on the over-the-counter market what I hear as I gather that these securities if they are not traded in that sense that there is a purchase and a sale, there is if it is an intermediary on some occasions namely this Mr. A who solicits somebody to buy than if that would comes down there. Stuart D. Perlman: Your Honor, it’s correct and in the sense of the solicitors who seek to have you -- they issue these accounts and this is specifically regulated under the ‘33 Act and as I say, these individuals are really regulated very much so by the Federal Home Loan Bank Board because they’re the ones who really -- Abe Fortas: But do you agree that ‘33 Act -- the fraud provisions in ‘33 Act applies to this kind of instrument, security or whatever you may call it. Stuart D. Perlman: From the reading of the legislative history, I am inclined to think that it does apply because the legislative history specifically says that these people did come to seek this exemption for these type of transaction. Abe Fortas: What difference would it make in terms of state interest whether that person had thought he was defrauded, brought action under the ‘33 Act or under the ‘34 Act? Stuart D. Perlman: We firstly say that the -- we must look to Congressional intent. What the Congress intended. Abe Fortas: That’s not -- that is not -- Stuart D. Perlman: And then we say that the two -- Abe Fortas: (Voice Overlap) this event so far as the state is concerned. Will the action be brought on the ‘33 Act or ‘34 Act? Stuart D. Perlman: In this particular case, the fraud provisions of the 1933 Act would come under Section 12(2) and possibly Section 17(a), and in those particular provisions, the Congress has specifically provided certain provisions of that Act relating thereto. In other words, there is a statute limitation. The limit there is when you are from the discovery of the Act or no later than three years from the time of the particular act of defraud is committed. In other words you cut down allegedly on this class. There were fewer people who could come within that particular provision. Secondly, the Act also provides that this concurrent jurisdiction of the federal and state court, and in that case a very possible in the sate insolvency proceeding, we have -- say liquidation proceeding where the court has already taken jurisdiction of the state court in a Savings and Loan Association. The Federal Court may remove it to the state court and join and consolidate the two actions and could hear the claims in one entirety and save on expense and costs in that particular litigation. And thirdly, the accounts in this particular case there would also be -- there’s also provision in the Securities Exchange -- Securities Act of 1933 for security of costs. Abe Fortas: I could assume that your agency would be happy if there has been fraud here to have people who were the victims of fraud to have a remedy. Stuart D. Perlman: That’s correct Your Honor, we do. Abe Fortas: What is the remedy? Do they have a remedy here under the ‘34 Act? Stuart D. Perlman: Well, as Mr. -- Abe Fortas: Mister -- your preceding counsel said that a suit has been brought in chancery against the person who is responsible for the fraud if that’s not the same thing, that is say these particular individuals claim that they individually were victimized, is that right? Stuart D. Perlman: Correct Your Honor. Abe Fortas: And is there something -- is there some other -- some alternative remedy that they have. If I understand you, you’re telling me that you don’t think they got a problem down the ‘33 Act because of statute limitation there in -- Stuart D. Perlman: No, I say they do have it done under the ‘33 Act. They would have possibly an Act. I mean assuming they could prove their case. The allegations that they make insofar as if there is such a cause as it would be under the 10(b)(5) situation, 17(a) and 12(2) of the Securities Act, essentially the cause of action. The elements are essentially the same except for the statute limitations, concurrent jurisdiction and security for cost situation. Now, as far as the state remedy, there is -- as Mr. O'Laughlin says, it would be against the ones who defraud. They are the ones who really have caused the injury to these people and it would be improper the way I see it to seek recovery against a group who were in the same with similar situation because the type of interest that they may have. Potter Stewart: That state action in chancery as I have understood was on behalf of all the depositors for mismanagement of the institution, am I wrong about that? Stuart D. Perlman: Excuse me. Potter Stewart: I thought this action in the state chancery court to which reference has been made and I thought so because I guess so. It was never explained. It was an action on behalf of all the depositors -- Stuart D. Perlman: That’s correct. Potter Stewart: Alleging mismanagement of this institution -- Stuart D. Perlman: That’s correct Your Honor. Potter Stewart: -- which is my Brother Fortas points out as quite a different cause of action from one by a purchaser against the seller of a security for fraud and the sale of that security. Stuart D. Perlman: That’s correct Your Honor. I would say that it would be somewhat distinctive. But as I said that there is a possibility and we have said that in our brief that there maybe a claim under the ‘33 Act if assuming there is the elements of their cause of action provided for. We just like to state that the industry did not come to Congress in 1934 to seek any exemption. Because there was no intent, no consideration to really protect -- really cover this type of transaction. The only indication that you have from any sort of association such as a mutual savings bank or savings and loan association or an insurance company seeking any sort of relief if there were any coverage was by the mutual savings banks and they only ask not for exemption of their interest but for an exemption of municipal bonds because they invested it in municipal bonds which were traded and they felt that they needed to have some exemption because this is one of the investments they make but not for the interest that they were involved. Therefore, there is entirely no intent to include these type of insurance in the ‘34 Act. This is born out by the testimony, by the hearings, by the reports, by the debates that a petition as an S.E.C. has demonstrated nothing to the contrary. In fact, the S.E.C brief in reply to our brief is conspicuous by its remedy and that they virtually concede the Congressional history, the legislative history in this particular act. They do not say anything to the contrary and it is their burden to show that there was an intent to include as particular transaction. And then -- and we have in 1963 the situation where the -- the hearings had conducted and Chairman Cary of the S.E.C. testified and Mr. Milton Cone who was part of a special study testified in regard to savings and loan associations and savings and loan accounts and they said that these account should be exempted. They also said that the savings and loan account should be on parity with bank accounts because this was the same type of transactions that they were -- same type of transactions. They also said that there’s normally no trading in these type of interest, nothing at all and it’s very unlikely that they thought that this type of interest was within the purview of the 1934 Act. Then we have an understanding that these type of associations, building and loan associations as Mr. Justice Stewart pointed out are mutual. They are mutual associations and this is born out by the theory and principle behind it that was necessary for such associations to prevail during the 30’s, this mutuality where you don’t have one group of depositors on the neck of another group of depositors. They all work together and shared together. This was the concept that Mr. Prather in his article that we cite in 15 business law points out that it may cause the building and loan associations to have a very good record during the 30s because of mutuality. Potter Stewart: Are those early associations unless I’m mistaken also the lenders -- the only people who borrowed from the association were members. Stuart D. Perlman: Same thing here Your Honor. We have only lenders and borrower -- Potter Stewart: I mean borrowers. Stuart D. Perlman: Borrowers are members under our statute. Illinois Statute provides that they are members as well as a depositor. Potter Stewart: Do you have to be a prior member? Do you have to be an investor in it in order to borrow from it? Stuart D. Perlman: No, no. Potter Stewart: But that was true about the earlier associations if I’m not mistaken. Stuart D. Perlman: I believe that -- essentially, not really that much difference, it maybe so that there was this concept that only members who were investors in the association could borrow but under our law, a borrower who may take out a mortgage on this house does not necessarily have to be a depositor. Potter Stewart: Was this -- are these institutions under Illinois Law and was this institution limited and how it could lend money with limited to mortgage loans on residential real estate? Stuart D. Perlman: Well, yes Your Honor. There are certain regulations provided within the statute of what type of mortgages they are permitted to make and how much -- what percentage was they are allowed to. This is regulated by the statute Your Honor. Potter Stewart: Well, now how are they limited? Stuart D. Perlman: Well, usually, the concept -- Potter Stewart: Mortgage loans on real property? Stuart D. Perlman: Yes, mortgage loans. Potter Stewart: That first than the -- Stuart D. Perlman: Normally, it’s set forth in the statute. We cite to these particular investment where these people have been -- what type of loans they are permitted to make. What type of a --? Potter Stewart: Well, everybody has -- ordinary commercial banks have limitations but what I’m trying to get at is what kind of limitations? Stuart D. Perlman: Well, the percentages. Potter Stewart: The kind I’m talking about mortgage loans or residential real property or was it nothing like that? Stuart D. Perlman: Pardon? Potter Stewart: Or what is the limitation -- anything like that. Stuart D. Perlman: Yes there are in the statute -- you say you could only borrow up to 80% of the price value with the property and this is regulated by the Commissioner. He specifically goes into this to make sure that this -- and he has a regulation on this too to be sure that’s carried out that he sends in his auditors and his examiners and makes surprise audits. This is particularly true that -- Potter Stewart: Yes, but may Savings and Loan Association loan money on any property except residential property. Stuart D. Perlman: No. Potter Stewart: Not on apartment houses. Stuart D. Perlman: It may. Potter Stewart: They may -- Stuart D. Perlman: Yes. Potter Stewart: I see. But it must be some kind of residential property, is that it? Stuart D. Perlman: Yes. This is provided in the act that spelled out and these limitations must be -- completely complied with otherwise they’d be violating the statute. That would be inter-election their election of their duties. Therefore, we see in this area that the state regulatory agency is really the ones who do the regulation in the savings loan and that as the concurring opinion by Mr. Justice Brennan in the Variable Annuity case where he said that the Securities Law become much -- less relevant when you have the state regulation. And Congress recognized this as well. Potter Stewart: Are shares in commercial bank securities under the meaning of the 1934 Securities Exchange Act? Stuart D. Perlman: As a matter of fact they were traded Your Honor, yes. They are traded. They were in the over-the-counter market shares -- Potter Stewart: And certainly a commercial bank unless it’s a national bank is under the strictest kind of state regulations, is that it? Stuart D. Perlman: That’s right Your Honor. Potter Stewart: So this argument for whatever its worth certainly shouldn’t -- isn’t conclusive is it -- Stuart D. Perlman: Not necessarily conclusive although Congress was looking to this in this intent. There were certain limitations put on the trade even the bank chairs although there’s a different type of situation with bank’s stock because it is stock. It is a proprietary interest. They have nothing else -- they are only concern with their equity interest. There is not this concept that you have in the mutual savings and loan association. It’s a distinct type of interest that’s more akin as Congress has said and the debates appearing in the 1934 hearings and in the 1963 hearings, it’s more akin to the savings bank deposit. This is the type of thing or the deposit in the savings account in a commercial bank. In this case, we have this as we said one group against the other and it would be quite unclear for one group to prevail, breaking up this concept of mutuality that’s so important in the savings and loan industry. The S.E.C. as Mr. O’Laughlin pointed out did come in and aside with the state in opposition to petitioner’s motion for the appointment of receiver in the District Court. It would be improper and I think the S.E.C. was correct that this would result if they did support the petitioner’s argument for important receiver. It would result in a strain on the federal state relationships in this area, in this sensitive area. The state really does most of the regulation in this area joined with the federal regulatory agencies over and 96% of the dollar amount of these particular cases. You find that not only the Federal Home Loan Bank Board has an interest in this but you have the federal deposit insurance corporation in banks where they have deposits. In fact, we must look to the instant action to see that it was the state that triggered this entire situation when the state director of financial institutions after a surprise examination on this institution, on this association, took and sees the assets of this particular association. It was this surprise order that focused, that brought this entire situation to life that the petitioners would have any knowledge whatsoever. If we look then to the true intent of Congress and balancing the equities as trying to see that all depositors are treated fairly. That is the state which a role is adjusted to this particular situation and this Court has constantly said that in this situation -- where the state role was adjusted to a situation such as particularly in liquidation preceding, it is then we should leave the state remain to regulate the particular interest involved. Historically and traditionally then in conclusion, it has been proven that in this area, the state regulates and not any specific private remedy that a particular individual may have because it hasn’t been used, there hasn’t been any need for this because the state has done this and because of that concept of mutuality in the savings and loans. In fact, the S.E.C. has done very little in this area even though it may have had the power to regulate the -- in certain areas with regard to the antifraud provisions of the Security Act that has done virtually nothing except possibly in the Maryland’s case where you find that there are very little regulation and now as I understand that there is very strong state regulation. Therefore, whenever you have strong state regulations coupled with federal regulation by the Home Loan Bank Board, by the Federal Savings and Loan Corporation, by the Federal Deposit Insurance Corporation. This in it of itself has made it sufficient in this particular area for the association to survive, for a bank to survive for possibly an insurance company to survive and the Securities Act have become much, much less relevant in this area. Potter Stewart: Mr. Perlman, are we in this particular case at least talking about regulation by the Securities and Exchange Commission, aren’t we really just talking about a private right of action in the federal court for fraud or for recession for -- based on fraud? Stuart D. Perlman: That’s correct Your Honor. Potter Stewart: We’re not talking about regulation by this commission? Stuart D. Perlman: Well, if there is found that there are these -- Potter Stewart: -- assigned bureaucratic federal commission in competition with the sovereign state of Illinois, we’re not talking about that in this case are we? Stuart D. Perlman: No Your Honor but its possible if these was found to be a security under the Exchange Act. The S.E.C. would have much broader powers -- would possibly, I don’t conceive of it but it’s possible that they may do certain things that they normally would not have done. Now they have had powers on the Securities Act and then virtually nothing as far as I can see. Now, you’re correct in saying about the specific remedies. Here again, there has been virtually no case. There has been no case law, nothing at all until this case. Potter Stewart: But what we’re talking about is a right of action in the federal court by a purchaser of one of these things by an investor against this company because he said I was defrauded and I want my money back and that’s all we’re talking about whether or not there is such a right of action in the federal court. Stuart D. Perlman: That’s correct Your Honor but -- Potter Stewart: By reason of the 1934 Securities Exchange Act -- Stuart D. Perlman: That’s correct. That’s the issue, yes. Potter Stewart: We’re not talking about regulation by any commission. Stuart D. Perlman: But Your Honor in the cases before this Court -- in this case, true but the thing is this Court has discussed the concept of Securities Acts and the regulation not only in terms of intent of Congress but has said that in its opinions in Variable Annuity case and the majority opinion, in the concurring opinion and recently it was discussed that the state regulation was of primary importance and that’s when the Securities Act become less relevant. Potter Stewart: Well, in VALIC -- in those cases, there was an issue as to -- because there, as the case was decided the way in fact it was decided, there was competitive regulation because of the registration requirements of the 1933 Act. You don’t have any such thing as that here, do we? Stuart D. Perlman: No. But I’m saying that there is a possibility that this could come about and secondly, this private remedy has -- would do create a chaos we think in this particular area because you’d find that there would be many depositors and in this case, petitioners contend 5,000 depositors and savings -- city savings and loan would get 100 cents on a dollar. In other words, approximately 50 -- Potter Stewart: Well, that’s a different point and I understand it. Stuart D. Perlman: Yeah, but this is why the state is quite concerned about this -- because if they would prevail, they will get this $15 million lump sum as opposed to virtually nothing for the approximately 12,000 depositors, 7,000 depositors will get nothing and constantly our office of the attorney general of the city -- the commissioner of savings and loan receives letters daily crying out for these people to get their money and they would get their money now but for this case. This case has held up the liquidation of this particular matter. The disposition cannot be made until such time as there is and to all cases under the statutory law as well as the federal law. We could not pay out any dividend. They are ready now to pay out a liquidating dividend but cannot until such time as this is concluded. Thank you. Earl Warren: Mr. Shure. Arnold I. Shure: I would like to respond to appeal of the unanswered questions and with regard to the regulations that Mr. Perlman is speaking of now. First of all, I see no policy, federal or state which should borrow a man who has been defrauded of his money assuming he has been getting it back again. There is no reason why a shareholder of a corporation which has received moneys through federal officers should have some equity suddenly come up out of nowhere so that he is entitled to participate in his wrongfully secured funds. That’s my first point. The second thing is that one of the reasons our federal remedy is a better one taking it in this particular cases that we have the string of cases going back for a hundred years. We have Case versus Los Angeles, Lumber Company, the Northern Pacific against Boyd that we remember from the reorganization days and those cases held that there is a rule of absolute priorities in equity that you just don’t sit down and do Curbstone equity and let people just keep money or reshuffle the rights and put shareholder ahead of creditors or whatever may be sought. Now with regard to the type of regulation that we have in Illinois that the Attorney General’s office has been speaking of, he says that they can’t buy -- they can’t invest any other money. Justice Stewart asked whether they are limited to investments and homes I believe. The answer is, if we’re going to take what happened here, if we look at page 10 of the brief, we find that they invested a million dollars in a golf course, 806,000 in two golf courses. Potter Stewart: But you’re complaining about that many of -- Arnold I. Shure: Well, this is -- but the answer is -- the answer he gave was wrong, it’s the reverse of the fact. On page 11 of our brief, we have the detailed facts that Justice Fortas was asking about. He said, what are the rights of shareholders, what are the specific, simple little things here. Here they are at the top page 11. Under certain conditions, management can invest more than 45% of the association’s total assets as follows; 45% certain marketable investment securities, 15% at Section 792.8, initial purchase and development of residential property is 10%, 792.7 direct general obligations and certain political subdivisions. Obligations of urban renewal investment corporations, other investments, these are minimal standards and they’re so broad that they can do almost anything and the result is that they can get into all of these sort of things for periods of years and lend and renew $65 million indicating the total number or renewals here without any interference by the state. Now as far as the attitude of the general counsel of the Federal Home Loan Bank Board, the answer is that the Federal Home Loan Bank Board does approve of this idea that these are violations of the ‘34 Act. And the proof of that is that the Federal Home Loan Bank Board sent out a letter to every savings and loan insured association this country suggesting to them that they better check their advertising about a year ago because they were advertising that they were paying five and three quarter percent on their accounts and they really weren’t. The five and three quarter percent was what the result was as the result of the accumulative interest in the last quarter so that as to all periods prior to that, they were in violation. Well, if they didn’t believe that the Act applied, they wouldn’t have written a letter. As far as the question of Justice Fortas as to where in these briefs does it set out the details as to what the rights, privileges and so forth of an investor are, there are five pages of it. Section by section, we recite them in the brief of the petitioners and we give the section references point after point which has been completely ignored here and anyone who wants to read it can find out exactly what you have voting rights. You cannot give irrevocable proxies. It is not true that these proxies are any different. The section and proxies is identical to the section and proxies for a general business corporation in the state of Illinois. It’s word for word the same. Now the fact that a shareholder in Inland Steel or any other corporation doesn’t choose to vote, they just sends that into management year after year because he has confidence in management, doesn’t take away one with from the nature of the security or the nature of his investment. As far as this question that was asked about the brokers under the -- what would happen about the brokers, why do brokers register. The answer of the Attorney General was that, well, they could be reached through the 1933 Act but if we hold that these are not securities, if these are not securities, I believe it was Mr. Justice White who asked that question, they -- the S.E.C. could not reach them under the ‘33 Act. If they’re not securities, it’s been said that they’re not securities under the ‘33 Act or under the ‘34 Act. Now the -- Thurgood Marshall: Did you see any difference between the coverage under the two Acts? Arnold I. Shure: Not one I ought to. The statement was made that this is a class action brought on behalf of shareholders. I think that was Justice Stewart’s question. It this a class action brought on behalf of all the shareholders. The answer is it is not. This is an action by the liquidators of the corporation who are suing for the benefit of the corporation not for the benefit of the shareholders. They have taken the position. They are not going to allow us to recover the moneys and assuming we win of which we claim we were defrauded. Thurgood Marshall: What did you say then? Arnold I. Shure: I say that the liquidators have brought an action there's these people who claim to be lawful -- Earl Warren: (Inaudible) Arnold I. Shure: That’s the state chancery action. It has nothing to do with us. If they win there, they will still oppose us getting our money here assuming we’re right. Potter Stewart: Now what they’re seemed to be in favor of is you’re getting your money ratably with all of the investors in the institution. Arnold I. Shure: That is what they say they want. Potter Stewart: They don’t want you to get a 100% on the dollar and the other investors to get zero on the dollar. Arnold I. Shure: That is correct. Our position is that if this money, 100% of it came out of our pockets to the tune of $18 million which is I believe the amount that was received from this post 1959 people that no part of the money that came from our pocket should go to the shareholders who were shareholders prior to that time regardless of the fact that they may have had suffered and their coffers may have been empty and they were in serious trouble because of the actions of their board directors. They are not entitled to receive our money no differently than in any other corporate or individual situation. We are not on a par with them. As far as what the usual interest is, Justice Fortas asked about that I believe in the Mensik reply brief, they put in a picture of one of the letters and the letters shows on the right is Exhibit 3a or Appendix 3a. It says, 4% on prepaid savings -- on prepaid savings share certificates. Now the suggestion was made that the association may issue a certificate or may issue a savings account book. The Illinois Act makes it mandatory that he insert certificate evidence every share interest. There is no option as far as the right to issue that the association can hold that once that has been prepared and executed and can issue an account book to show what the situation is in this person’s own -- each person own so many shares. The -- as far as the -- I’m sorry. Earl Warren: That’s all right. Arnold I. Shure: I’m looking at my papers and not at the light.

Earl Warren: Number 456, Afroyim, Petitioner, versus Dean Rusk, the Secretary of State. Mr. Ennis. Edward J. Ennis: May it please the Court. This case is here on a writ of certiorari to the United States Court of Appeals of the Second Circuit, which unanimously affirmed a summary judgment of the United States District Court for the Southern District of New York, holding that the petitioner had expatriated himself pursuant to the authority of 401 (e) of the Nationality Act of 1940 by the act of voting in an election in the State of Israel in 1951 for the legislature of the State of Israel. This case was to be argued by the general counsel for the New York Civil Liberties Union Nanette Dembitz-Berman, who wrote the briefs in the case and it is Mrs. Berman's appointment as a judge of the family court of the City of New York that brings me here today. She is very disappointed that she missed this opportunity to address the Court on this subject. The facts are very simple and are stated in a stipulation of facts which appears in the record and -- at page 11 and are simply that the petitioner who was born in Poland in 1893, immigrated to the United States in 1912, was naturalized in 1926 and went to Israel in 1949, a year after that state was established in 1948. And in 1951, he voted for the second Knesset, which was the second election of the legislature of Israel. At that time indeed, when there was no Israeli citizenship at all and that everyone who voted in that election, voted on the basis of their residence in Israel. Indeed, it was that legislature which a year later adopted the first Israeli law of nationality and established Israeli nationality. The District Court, in the basis of the stipulation of facts in which it appeared that the petitioner voluntarily voted in that political election, stated that it was bound by the decision of this court in the Perez case in 1958 and held that he had lost his citizenship as indeed when he applied for a United States passport in 1960 to return to the United States, the consul in Israel so determined and the State Department approved that loss of citizenship and when he did return, he obtained a full hearing, which is part of the record, before the Passport Review Board which affirmed this loss of nationality and then he brought this -- this action. The record does indicate that the man's profession, he was an artist by profession, a painter and sculptor, and indeed in this country, he has some of his paintings which are products of the WPA Art Program in some of our high schools and hospitals. The case presents squarely the constitutionality of this Section 401 (e) of the Nationality Act of 1940, which is repeated in haec verba in Sections 349 of the present Immigration and Nationality Act. Speaker: Wouldn't the -- what you're asking is to overrule Perez? Edward J. Ennis: Over -- yes, overruled Perez, which is now. Mr. Justice Harlan, when I -- I recognize the -- from the facts of the reargument that was ordered in Perez, the 100 pages of opinions on that -- in that case and the Trop case, the 75 of pages of opinion in the Mendoza case which followed a year -- few years later, in which again the court ordered rearguments. When I read the opinions of the Court in those cases and read the records in the briefs, I must say I was nonplussed as to what I've read to the consideration of the Court of this -- again of this issue, which has been obviously so painstakingly considered by the Court. In the short time that is available to me, I felt it would be bootless and of no assistance to the Court to try to review here the formulations of the applicable constitutional doctrine. Most of the justices are sitting here have expressed themselves on the constitutional doctrine. It occurred to me that in my short time, I might assist the Court by examining very briefly the two factual propositions which are, I submit, accepted by the majority of the Court in the present case and which I believe are factually false. One of those propositions in which the Solicitor General bases his argument, one of those propositions is that for an American citizen to vote in a foreign election is an indication of some diminution of his allegiance to the United States and some adherence to a foreign allegiance. The other proposition is that for an American citizen to so vote in a foreign election, in some way embroils the United States in foreign affairs or in some way exacerbates or makes more difficult the handling of foreign affairs. I would submit to Your Honors very briefly that both of those propositions are factually inaccurate. Now, as to the first proposition, that voting in the -- Speaker: Can I interrupt you -- Edward J. Ennis: Certainly. Speaker: Would you agree that the -- taking those two propositions that the constitutional question is this, whether Congress has the power to reasonably or rationally so conclude irrespective of what we or some others might think as the wisdom of the legislation. Edward J. Ennis: I agree -- subject to my basic constitutional position that where we're dealing with citizenship granted by the Fourteenth Amendment, a Congress has much less authority and indeed, my final proposition is that Congress has no authority, under the Constitution to remove United States citizenship that this can only be done by the voluntary act of the United States citizen and all that the power of Congress is, is to regulate the manner in which this voluntary expatriation shall be expressed. Obviously, a man cannot put a note of expatriation on his desk floor and take it out when he wants to. Congress can say that if you wish to adjure allegiance to the United States, if you're abroad, you must do it before a consul. If you are in the United States, you must do it on the forms supplied by the Attorney General of the United States. The limit of Congress' power is to regulate voluntary conduct or conduct which in most instances or in common experience is voluntary. Speaker: What provision of the Constitution which do you derive that annotation? Edward J. Ennis: From the Fourteenth Amendment which provides that every person born in the United States or naturalized alien is a citizen of the United States and the state in which he resides. And from the opinions expressed by some of the justices that this sets up a relationship between the United States and its citizens, which the Congress does not have the power to terminate, that the relationship of citizenship can only be terminated by the act of the individual and that Congress is therefore limited to regulating those voluntary acts. Byron R. White: So there's no -- you -- you go so far as to say that there's just no behavior by the citizen which may -- which Congress may recognize as a -- in effect in expatriation -- Edward J. Ennis: None at all. I believe that -- I believe that it's plain that a naturalization in the foreign state is -- Potter Stewart: Now, why -- Edward J. Ennis: -- the clearest indication of -- Potter Stewart: That may be a clear indication but what if the citizen says, “Now, look, I don't intend to lose my United States citizenship at all. I'm becoming a citizen of another country but there are a lot of dual citizenships in the world. So why should you take this to be an expatriation? I say I'm still a citizen.” Now, how come Congress can recognize that event? Edward J. Ennis: Well, my -- my -- my personally belief that Congress may take conduct which normally connotes a putting off of your United States allegiance and taking on a foreign allegiance and may nominate that may -- as a control of voluntary conduct may say that that is expatriation. Even though the individual says that, “I denied what I'm doing,” has a natural effect -- Byron R. White: So Congress can say that that there's some -- there's some events which will result in involuntary expatriation. Edward J. Ennis: No, I -- well -- we're standing on a very narrow ground, Your Honor, of whether conduct which in common experience is considered voluntary, whether the particular individual who was acting voluntarily and becoming as I said that I don't want this to have the result which the law says it shall have. Now, I say that that's voluntary conduct and all that the Congress is doing and all that it can do constitutionally is recognized this effect -- Potter Stewart: What about the voting? What about voting, if -- Edward J. Ennis: That's what I -- that's what I want to come to. Potter Stewart: If Congress says voting shall result expatriation and the persons who knows that, he goes and votes. Is that voluntary? Edward J. Ennis: But the trouble with that is, Your Honor, is that voting as a factual matter does not indicate a maybe voluntary conduct but it's not voluntary conduct that indicates a lack of allegiance to the United States or the adherence to a foreign state. Now, let me very briefly just state one page of history on this matter. This came into the law in 1940. Our courts, from the founding of the Republic until 1868, in many opinions of this Court and other courts, had considered the whole problem of expatriation and indeed a very strong opinion was held that the common law applied and that allegiance was permanent and there could be no expatriation. This was debated in the courts. There were cases on voting for example. There were three cases, a federal case, a main case, and Iowa case in which the individuals had voted in Canadian elections. The courts unanimously held that voting was not an indication of loss of United States allegiance. These cases are quoted in Borchard's Diplomatic Protection Abroad and cited in our brief. Speaker: Suppose you didn't have the Fourteenth Amendment, would your argument be the same? Edward J. Ennis: Would my argument be the same without the Fourteenth Amendment? Yes, I would -- my argument -- Speaker: Where did you derive this connotation as congressional power and that's it? Edward J. Ennis: I would derive it upon the nature of the relation to count -- the relationship between the Government and its citizens under our Constitution. I would say that the one thing that Congress in achieving its statutory objectives that one sanction that is not available to it unless the Constitution gave to it expressly was the termination of citizenship, the termination of the relation between the state and one of its -- one of its members. Speaker: We have to overrule the decision of this Court in Perez to the statutes. Edward J. Ennis: Are you -- is Your Honor referring to Mackenzie in -- Speaker: Among others, yes. Edward J. Ennis: Well, Your Honor, the opinions of the Court have discussed Mackenzie as a suspension of citizenship during coverture because of the special relationship of the wife as part of the husband. I think that deals with that case so far as Savorgnan case is concerned that this is the case that really I was discussing with Mr. Justice White where a woman becomes naturalized in the foreign state. And although she signed the papers and becomes naturalized and abjures allegiance to the United States, she said “I did it because my husband, the United States -- the Italian consul in St. Louis asked me to do it. I really don't want to lose my citizenship.” I am content to take the position that conduct, which is considered normally as voluntary conduct that merely by -- say so, the individual may not say that it doesn't have the result that law said it does. Tom C. Clark: Mr. Ennis, what was the evil that Congress was trying to prevent? Edward J. Ennis: Well, if Your Honor pleases, an examination of this history indicates that there was no evil that Congress was trying to prevent. Let me try or range you directly, Mr. Justice Clark this way. And on the second factual proposition that our foreign relations might be affected, the truth of the matter is, that voting in foreign elections, there's not the slightest indication that voting in a foreign election had in a -- legally, at the invitation of the foreign government in effect, has any effect on our foreign relations. Let's examine -- Tom C. Clark: That was the basis, wasn't it? The main -- Edward J. Ennis: This was -- this was recited Your Honor, in one short statement which I will refer to. Tom C. Clark: And it appears to me it is true, it real permits, non-residents, non-foreigners to vote. Edward J. Ennis: The voting at that time, Your Honor, was based entirely on residence. There was no Israeli nationality. Tom C. Clark: You did not have to be a nation -- Edward J. Ennis: You did not have to be -- no, you did not have to be foreign national. Tom C. Clark: It couldn't have any effect on the foreign relations with Israel. Edward J. Ennis: Yes, but let me tell -- let me suggest two other instances Your Honor, which perhaps point out your question. This 1940 law is on the books for only one reason. The Chairman of the Immigration of the Judiciary Committee, Immigration Subcommittee, Mr. Dickstein of New York, was exercised by the fact that German aliens, resident aliens and naturalized Germans went back to the czar in 1935 and voted that the czar should be German rather than French. This didn't bother the French government. It didn't bother the German government, it didn't bother the State Department but it certainly bothered Mr. Dickstein and he proposed to the President of the United States that he set up a commission to examine the nationality laws and to codify it. In the course of that codification, a new section which we're dealing with crept into the codification which the -- which was transmitted to the president for the very modest letter by the Secretary of State and the Attorney General to the effect that these are only suggestions for the consideration of Congress. One of these suggestions was voting in a political election in a foreign state or participating in an election of plebiscite to determine the sovereignty of a foreign territory. The entire support for that proposal is in two short paragraphs. In the rest of this report, the other proposals are supported by judicial decisions, by diplomatic decisions, the correspondence between the Secretary of State and foreign governments. This course which we're dealing with has two sentences in it. Along the line, Your Honor, suggested without any factual support whatever and here's what they are. This section is clear, applicable on any case on American votes in a political election in a foreign state whether or not he's a national thereof. Taking an active part in the political affairs of a foreign state by voting in a political election therein is believed to involve a political attachment and practical allegiance thereto, which is in consistent with continued allegiance to the United States whether or not the person in question has acquired the nationality of the foreign state. There was not one iota of factual support for the statement prepared by the State Department, I think by the Assistant Solicitor, Mr. Flournoy, who was the State Department expert for many years on nationality questions. At the suggestion of the -- Mr. Dickstein, the Chairman of the House Immigration Committee, there is -- not only no support for that statement but the factual evidence in the diplomatic history of the United States was at that time that voting in a foreign election was not an indication of throwing offered or any diminution of allegiance to the United States for taking on allegiance to a foreign state. As I've indicated to the Court, the judicial decisions which are the contrary, the diplomatic correspondence which discussed that great length how you could lose United States nationality was limited entirely to naturalization abroad, and residing abroad as part of that naturalization, or adjuring allegiance to the United States. There was no support whatever for that statement. Tom C. Clark: Does Mexico require their voters to be nationals of Mexico? Edward J. Ennis: When Mr. Perez was born in El Paso, voted in a Mexican election for president, I do not know, Your Honor, whether the Mexican law required him to be a -- Tom C. Clark: I thought perhaps you might distinguish the fact that -- Edward J. Ennis: Yes. Tom C. Clark: -- if Perez represented, he was a Mexican which he did at that time -- Edward J. Ennis: Yes. Tom C. Clark: -- while your petitioner in his application or in his brochure that if he files that he was a citizen of the United States, you might distinguish between them rather than saying that you were obliged to overrule Perez. Edward J. Ennis: Well, let me give you one, a bit of factual information. The first page of the record contains Mr. Afroyim's identification booklet which he had a hand in when he voted. That lists him as a citizen of the United States. I mean there wasn't any question that he was a citizen of the United States and only of the United States and that he disclosed this and voted as a citizen. Now, if Your Honor's suggestion is that this case might be distinguished on this basis from the matter of a person who was a citizen of the foreign state, all I can say that the statute as drawn will not support such a distinction and indeed, my last argument and the one that appeal to Mr. Justice Whittaker in the -- in the Perez case, was that in any event the statute that's drawn was too broad because it covered a person, an American citizen who voted in the foreign election whether or not the circumstances indicated any diminution of U.S. allegiance or any taking on of a foreign allegiance. Tom C. Clark: Well, my, my -- I'm suggesting that -- Edward J. Ennis: Of course, I understand that. Tom C. Clark: -- and perhaps said that I would vote that but it appears to me that it has to be voluntary as indicated in Perez by -- if one who said “I'm a citizen of the United States and I would like to vote in your election and they said okay, I -- certainly it would not be a voluntary relinquishment of his citizenship to the United States insofar as your expression is concerned while in Perez, while he is repetitiously or rather he represented the Mexican government he wasn't (Voice Overlap) but it seems to be a volun -- more volunteer there would be in the other case. Edward J. Ennis: Well except, Your Honor, might -- perceive, of course, the distinction Your Honor's suggesting that I do not stand on it. This law has been held to take away the United States citizenship even if you vote in a municipal election as to whether it should be local option that forbear control or not. This law has been -- by the people administering it by the lower trib -- administrative tribunals, they say any voting in a foreign political election or in a plebiscite takes away your United States citizenship and I do not think that Your Honor's distinction will support the constitutionality of this statute because I do not believe that a dual citizen, the voting in a foreign election and exercising his rights under his second citizenship indicates any desire to terminate his United States citizenship. I do not think that factual supports there. At any rate, it is curious that the instance which brought this law into being in this all instance, as I say without any diplomatic or factual or judicial support was this voting in the czar which disturbed me that our Government nor the other two governments involved, the German or the French government. But it's suggested in this one paragraph, which is all that this Court relied on in Perez. In any event, it is not believed that an American national should be permitted to participate in the politics, in the political affairs of a foreign state and at the same time retain his American nationality. The two facts would seem to be inconsistent with each other. I suggest to Your Honors that in view of the complete lack of any authority for that statement, it is purposely extremely tentative in its own terms. It's a suggestion and curiously enough, Congress took this tentative suggestion and passed it without any debate at all and put this into the Nationality Act, which was generally a codification of the former laws and edit this provision without any debate on it. Speaker: Suppose that there'd been a full congressional evidentiary record made that voting in foreign elections had indication embarrassing to the foreign relation to the United States and Congress had asked -- had acted on that kind of a record. What would be your position? Edward J. Ennis: Well, my position would not change for the reason that I do not believe that this extremely limited power of Congress to regulate voluntary expatriation permits Congress to achieve a purpose of the exercise of it power's namely the promotion of good foreign relations. It doesn't put in Congress' hands the weapons of expatriation. Speaker: Well, if you can establish that proposition, you don't have to argue anything else. Edward J. Ennis: I understand that, Your Honor, but that is a -- that is perhaps a more difficult proposition than the -- than what the factual proposition is, that foreign relations are not exacerbated by voting in a foreign election which is usually at the invitation of the foreign government. And if Your Honor will read again the majority in Perez, Mr. Justice Frankfurter, for the Court, has one citation and for the proposition that the foreign relations of the United States might be affected by voting. He cites one article in the American Journal of International Law, Mr. Bruce's article which deals entirely with the question of private persons by propaganda in our soil or in the soil of one nation attacking a foreign government and Mr. Bruce concludes his article by saying, this is the kind of private conduct which cannot be controlled in our country. This is only citations of the Court for the proposition that Congress might reasonably think that voting in a foreign election injured our foreign relations and was a sufficient basis for what Mr. Justice Brennan has called the “drastic and truly terrible remedy of expatriation”. Abe Fortas: Mr. Ennis, how often does this problem arise as practical matter? Edward J. Ennis: Well, Your Honor, we have put in our supplemental brief to our petition for certiorari the number of persons who have lost their citizenship by voting in foreign elections in just the last few years and it runs to a couple of thousand questions, Your Honor. Abe Fortas: Where do they vote? Where do these persons voting? Edward J. Ennis: Unfortunately, I don't have the -- Ms. Dembitz has put them in this memorandum and she obtained these facts from the State Department and the fact -- Abe Fortas: They don't take it -- don't take your time -- Edward J. Ennis: Yes but we -- we don't -- I don't find here, Your Honor, the particular elections that were involved or the particular statement involved. Now, -- Hugo L. Black: Suppose that it had been established as suggested beyond the shadow of a doubt that voting would in a foreign country into some extent effect the foreign relations of this county, would that answer to your argument under the Fourteenth Amendment? Edward J. Ennis: No. Hugo L. Black: To the effect that citizenship is then granted and can only be lost by giving it up? Edward J. Ennis: No, Your Honor, it would not. I have wanted to refer, Your Honor, to this factual basis because frankly, it was the only thing in reading the opinions of the court and in reading all of the briefs, it was the only thing that I had -- that I thought I found that have not been completely explored in the opinions of the Court that namely, that this proposition that voting in the foreign election did indicate some diminution of allegiance or taking on a foreign list was just erroneous and also other factual proposition that our foreign relations are affected. Now, let me give you other example and I will sit down. In addition to this -- Hugo L. Black: May I suggest this? I'm wondering. Edward J. Ennis: Yes. Hugo L. Black: Your interest in that voting as to what effect it would have as I understand it under your Fourteenth Amendment argument is that it is not sufficient to show a voluntary enunciation of citizenship by an American citizen to show that he voted in a foreign election. Edward J. Ennis: Of course not, Your Honor. It doesn't establish any such thing. Hugo L. Black: And your argument under the Fourteenth Amendment as I understand it is based on the fact that it must be a voluntary renunciation of citizenship and while there could be conduct -- could be conduct such as the shaking of the head or something that would in itself show a renunciation, that does not. Edward J. Ennis: That's correct, Your Honor. Hugo L. Black: That under the Fourteenth Amendment, there must be a plain or a valid renunciation of citizenship -- Edward J. Ennis: That's right. Hugo L. Black: -- in order for a citizen that's been stripped of it. Edward J. Ennis: That's correct. Now, I sit down with calling your -- Speaker: Will you regard the Fourteenth Amendment as imposing enunciation of congressional power of your own statement. Edward J. Ennis: Of course, Your Honor. I'll sit down by calling Your Honor's attention to one other factual matter. Congress has recognized that voting in a foreign election in effect does not diminish your relation -- your allegiance to the United States by providing -- by having to amend the Act; to provide that every American citizen who voted in Italy between 1946 and 1948 should be given their citizenship back because it was recognized that often voting of foreign relation, contrary to being against the United States citizenship may be done at the instance of officials of the United States, asking for support of a foreign government by American citizens residing in that territory who are eligible to vote. So that the American citizens, thousands of them, who voted the Italian elections after the war from 1946 to 1948 had been given back their citizenship by Congress, recognizing, I submit, in effect that such voting is not a voluntary giving off up your citizenship. If I have -- I think my time has expired. Earl Warren: Mr. Gordon? Charles Gordon: May it please the Court. This is a suit seeking a declaratory judgment of citizenship. Petitioner is a naturalized citizen who voted in a political election in Israel. He disputes the findings of the lower courts that he thereby lost his citizenship. The facts to some extent were recited by petitioner's counsel but there are a few more that I'd like to call to the Court's attention. Abe Fortas: Is there -- Mr. Gordon, I beg your pardon. Is there a finding that he intended to relinquish his citizenship? Charles Gordon: No, there's a finding that it was voluntary. He -- Abe Fortas: But his voting was voluntary? Charles Gordon: His voting was voluntary. He says that he did not thereby intend to give up citizenship. The Government does not -- did not in the stipulation agree to that. Abe Fortas: Did the Government contest it? Charles Gordon: They did not contest it. They -- the Government says it's immaterial. Abe Fortas: And that's really the issue that we have. In other words, the Government says that it's immaterial whether he intended to or not and he says that it is material. Charles Gordon: Why, I believe that's one of the issues. There are several others that were posed where Congress can impose citizen -- loss of citizenship against his will where the Congress was acting reasonably in making such a determination so forth. Now, to some extent, the facts are reflected as has been indicated in the stipulation of the parties. The stipulation is set forth at pages 11 to 12 of the record. In addition, the certified passport file of the Department of State was incorporated by reference in the motion for summary judgment and was considered by the District Court and by the Court of Appeals. The passport filed is lodged with the clerk of this Court. Petitioner was born in Poland about 1893. He came to the United States in 1912 at the age of 19. He was naturalized as a citizen of the United States in 1926 when he was 33 years old. In 1949, he left the United States with an American passport. He then went to Israel in 1950 and remained there for 14 years. Now, by his stipulation, petitioner concedes that he voluntary voted in the election in 1951 in Israel for the second Knesset or parliament. It appears also from his Israeli identification booklet, which Your Honors will find at pages 1 to 2 of the record that he voted additionally in two other elections 1959 and -- 1955 and 1959 for the third and fourth Knesset. Now, it also appears that following -- Potter Stewart: This case, however, was not decided at all upon his voting in those two later elections, was it? Charles Gordon: I'm not sure. This was the stipulation -- Potter Stewart: Well, they're decided, I thought on a stipulation of fact. Charles Gordon: No. The other -- the State Department record and this booklet, which is at pages 1 and 2 were before the District Court and the Court of Appeals and they did refer to the facts which appear in the State Department record. So the courts were considering that too. And I don't think this Court is limited to determining only on the 1951 election. He voted in three national elections. Potter Stewart: Do I understand in the first to those elections, under the laws of Israel, it was not neces -- it was necessary only to be a resident because indeed there was no such -- Charles Gordon: That is true. Byron R. White: -- thing as Israel nationality. Charles Gordon: That is true. Byron R. White: And that -- but in the second two elections in which it shown that he voted, there was Israel nation -- such a thing as Israel nationality. Charles Gordon: And only Israeli -- Israeli nation -- Byron R. White: That only Israelis could -- Charles Gordon: Could vote. Byron R. White: -- could vote, is that correct? Charles Gordon: And he did vote. Byron R. White: Well now, it's an -- may be important to know on -- what basis this case was decided. I'd understood that it's decided on the stipulation of facts which indicates that which is -- which includes only the first of those three votes. Charles Gordon: Your Honor, the passport file of the Department of State was incorporated by reference in the motion for summary judgment and was considered in the opinion of the District Court and the opinion of the Court of Appeals. I think that was equally before the Court and it is lodged in the files of the clerk of this Court. I don't think the court below -- I think they found that on the basis of that voting alone, they lost but they had build the facts and I think this Court will consider. Abe Fortas: But what -- what do you mean there was a reference to those things in the opinion of the court below? Charles Gordon: Well, they referred to that -- Abe Fortas: I mean, really -- really there ought to be -- ought to be lot of ambiguity about what is and what's not part of the record should be -- Charles Gordon: I -- I agree with what -- Abe Fortas: -- one of the government case. Charles Gordon: Mr. Justice Fortas, this record is a little ambiguous. Abe Fortas: Well, that's too bad. Charles Gordon: I agree with Your -- Hugo L. Black: But the stipulation is not Mr. Gordon, is it? Charles Gordon: I'm sorry, sir. Hugo L. Black: I think stipulation is not ambiguous and that it says that he voted in '51 in the elections in the second Knesset. Charles Gordon: That is true. He conceded that. Hugo L. Black: Standing about the other. Charles Gordon: No, but they in the record and if Your Honor will look at pages 1 and 2, you'll see that the record shows that he voted in two other elections, 1955 and 1959. Hugo L. Black: They're not involved in here. We don't have the complaint here. Charles Gordon: The complaint is not in the record. Hugo L. Black: Does the complaint mention he other elections? Charles Gordon: No, I don't know if it does or not. He hasn't been very talkative about these other elections. He restricts himself to the first election but he does not deny and it appears in the record that he did vote in the 1955 and 1959 election. Abe Fortas: What do you mean he had been very talkative? Charles Gordon: Well, I guess he has been so talkative in some State Department but in this proceeding, he has restricted -- Abe Fortas: Was he -- was -- is there any oral testimony in this record? Charles Gordon: Yes, sir. There is testimony before the State Department Board of Review, very full testimony. Abe Fortas: Was that part of the record of the record before us? Charles Gordon: It is a part of the record that was before the District Court and the Court of Appeals and is lodged in the office of the clerk, yes. Abe Fortas: So this is not a case it's here on the stipulated facts? Charles Gordon: Not in my view, sir. Abe Fortas: No, I'd like to here your brother Ennis as toward his understanding as in the record because I think it's kind of important -- Charles Gordon: I agreed for, Your Honor. I think it's unfortunate that the record isn't filled up but these materials were before the District Court. They were part of the record considered by the District Court and by the Court of Appeals. Both courts have that record. Tom C. Clark: Where is the testimony? Charles Gordon: I'm sorry, sir. Tom C. Clark: Where is the testimony? Charles Gordon: In the transcript of State Department file which is certified by the District Court and is lodged with the clerk of this Court. Byron R. White: Well, what do you -- did you draw the thing -- a large distinction between the two situations? Charles Gordon: I don't draw such a distinction but I want to cover both that in the event as Mr. Justice Clark has suggested that a distinction might exist in the minds of the Court. I think it covers both situations where he was not a citizen and voted and where he was a citizen who voted. Byron R. White: Well, you say in the last two elections in which he voted, it is necessary to be a national of Israel on both the elections. Charles Gordon: That is true, sir. Byron R. White: How did he evidence that he was national of Israel? Charles Gordon: Well, I'll be glad to describe that to Your Honor. Under the law of Israel, known as the “Law of Return”, all Jewish persons were welcome to Israel; they could become settlers. That law was passed in 1950. He went to Israel a month after that law became effective. In 1952, Israel passed its nationality law, saying that all Jews who had settled in Israel under the Law of Return were automatically Israeli's citizens but they have a right to elect not to accept Israeli citizenship by filing a written election. We have passport which was submitted by the petitioner which shows that Israel regarded him as an Israeli national, issued passport to him and therefore, he did not file such an election. Abe Fortas: Well, is that in the record? Charles Gordon: Not in the record. Byron R. White: And why is it -- Charles Gordon: Unfortunately, this -- Byron R. White: Why isn't it in the record? Charles Gordon: Because -- Byron R. White: Because you wanted -- you wanted to get the issue up here on the -- on that they're voting issue in this or what? Charles Gordon: Well, Your Honor, as I was not in the case at the District Court. As the parties then conceived the issue, it was a simple issue of the constitutionality of the statute based on a single act to voting. But I think that in adjudging this -- Byron R. White: But why shouldn't we take the case like that instead of this other evidence which apparently you didn't -- the Government could have put in the evidence if they wanted to. Charles Gordon: Mr. Justice White, I believe that in issue of this importance is very desirable to get the record as full as possible and I think that if the record were as full as it can be, it would indicate that petitioner has demonstrated his diminution of allegiance to the United States has indicated that he regard himself as a citizen of Israel. Indeed, he did not apply for an American passport for ten years and did apply for an Israel passport and obtained it. Byron R. White: Well, we could, on that evidence so that the Court can hold on this current statute unconstitutional and still -- and still say that he'd lost his citizenship on another ground. Charles Gordon: Well, the only ground that is involved here is voting in the election of Israel. Byron R. White: I know. I mean, that's -- that -- that -- that but this other evidence in the record, you might sustain lost citizenship even though you did it on the basis of voting. Charles Gordon: Well, I -- I -- Byron R. White: You might do it on the basis of becoming -- becoming a citizen of another country. Charles Gordon: By being naturalized and by some voluntarily action as part. That's conceivable, I believe. But at least, insofar as voting is concerned, the decisions of this Court have indicated that in order to sustain the statute, there must be some indication of the diminished allegiance and my view is that the act of the voting in itself, indicates such a diminution. But if it becomes important in the context of this case, I think the facts here if fully developed would demonstrate that the allegiance of the petitioner here is primarily to Israel or was at that time to -- Speaker: Would it be in evidence by a Fourteenth Amendment case? Charles Gordon: I believe that would if that is considered important. In our view of the case, we believe the statute on its face is -- is valid and we would support the statute on that basis. Speaker: Who tried these cases? Charles Gordon: It wasn't tried. It was taken by the Court on stipulation; United States attorney in New York. Speaker: United States attorney represented your case? Charles Gordon: That is right. Speaker: (Inaudible) Charles Gordon: Well, there is an officer there who represents the Immigration Service in the United States Attorney's Office. Earl Warren: So when the case was tried on stipulation of facts and decided on a motion for summary judgment, can the Court enlarge the allegations in the complaint and decided on an issue further than that is in the complaint? Charles Gordon: But, Your Honor, the -- there's a misconception that the case was tried only on the stipulation of facts because with the motion for summary judgment, the Government incorporated by reference the passport file of the Department of State and it was considered by the District Court and the Court of Appeals. Your Honor will notice the opinions of the District Court and the Court of Appeals contain facts which nowhere appear in the stipulation. I myself wondered where they got those facts until I found out that the passport file of Department of State was before the Court. Tom C. Clark: Unless, the petitioner admit that he voted in the other elections. Charles Gordon: No, there's no such admission. Tom C. Clark: I couldn't -- Charles Gordon: The only -- Tom C. Clark: -- get that, then before us of that stipulation only covers one election? Charles Gordon: But the record includes -- Tom C. Clark: But he didn't have a chance to testify -- Charles Gordon: No, no. But it cannot be ignored that this is an official Israeli identification booklet issued to the petitioner. There's no doubt this he submitted. And in it, it contains indications, notations by the Government that he voted in the other two elections. Tom C. Clark: In fact, to me though when you say that the case was submitted on stipulation and the stipulation only includes one election while he would be bound by that stipulation. Charles Gordon: Well, Your Honor, I don't agree that the case was submitted on stipulation. Tom C. Clark: Well, I misunderstood u? Charles Gordon: No, I -- I don't contend that. My view is that the case was submitted on a stipulation and on the certified record of the Department of State, which was incorporated in the Government's motion for summary judgment. Abe Fortas: Well, I show where -- is there anything in the stipulation where can we look at? Charles Gordon: The Department of State passport file, which is in the office of clerk of the court. Abe Fortas: I know it's in the office of the clerk but I say, what is there in the papers that had been submitted to us has any reference to it in your brief? Charles Gordon: Not at all. No reference to it in the brief. Speaker: What's your view of that in your submission which practically would support it? Charles Gordon: Well, my own view, Your Honor, is that this additional material is not relevant. My own view is that the statute is constitutional in a reasonable determination by Congress that there is potential danger to the foreign relations of the United States if the person -- United States citizen votes in the political election of foreign country and if he thereby indicates his diminished allegiance to the United States. Speaker: (Inaudible) Charles Gordon: I'm well aware, Your Honor. Speaker: And therefore, I would suppose that you would be trying to defend the states as well on some kind of the basis of case that you'd make it appropriate to this Court and not to have to base the case at least the decision to this Court or do that much substantive if they're not -- if they can be avoided in overruling in some other perhaps (Inaudible). Charles Gordon: I've been well aware to that situation, Your Honor, that's why I stressed these additional facts which I think -- Speaker: By substantive means if you now say, you won't have to worry about what the additional record is saying, doesn't it? Charles Gordon: I didn't quite say that, Your Honor. I said that in my view, I don't need the additional record but I'm aware that in the view of some of the justices, these facts may be important. My view is that the Perez case is still the law that this Court is not modifying, that it is sound and that on the basis of the Perez case, the mere fact that there was voting in a foreign political election, voluntary voting is enough to cause expatriation. Potter Stewart: Do I understand -- did I understand you correctly to say that the true facts of this case, not perhaps the facts of record but facts about this petitioner or that he has voluntarily now become a citizen of Israel and has an Israeli passport? Charles Gordon: Yes, two Israeli passports and he -- the voluntary becoming a citizen of Israel was a sort of a nega -- negative -- Potter Stewart: By declining to say he didn't want to be -- Charles Gordon: That's right. Yes, he didn't file any specific declaration saying, “I want to become a citizen” but he didn't take advantage of the other opportunity for recollection. I may say that in the State Department -- Potter Stewart: And he has a passport of Israel now? Charles Gordon: Yes, I have it here. Abe Fortas: And this is the first time these facts have been called of this Court's attention? Charles Gordon: Oh! Yes, Your Honor. Abe Fortas: What? Charles Gordon: It is certainly so that this is not been called to the attention of the Court previously. I discovered this in my researches. Abe Fortas: Well, as new member of this Court and I wasn't here at the time of Perez. I had ordered considerable time to your papers. Now, what you're telling me that there are facts and circumstances here that you contend a part of the record before us and which had not been called our attention? Charles Gordon: Well, Your Honor, this was -- Abe Fortas: Fortunately, you see I didn't have the benefit of your oral document before today. That usually happens. That we hear oral argument only when it's made to us so I didn't -- these facts were not called tp our attention. Charles Gordon: Your Honor, I offer my apologies. I think this is certainly a fault on our part. These facts were discovered by me in my research in preparing for the case. I deemed them to be quite important as the members of the Court do in the disposition of this case and I thought it was my duty to bring to the attention of the Court. I think it would be unfortunate if this case were decided without a full apprehension of the facts in this case. Speaker: You have a brief on these facts? Charles Gordon: No, these facts are not briefed. These -- the -- Speaker: Do I understand that -- Charles Gordon: Well, Your Honor, the -- part of them are on my brief. Speaker: But you just said that's not in your brief. Charles Gordon: Your Honor, part of them are referred to the brief. The fact that there was voting in the two additional elections is referred to at least twice in the brief. Speaker: The materials themselves do rely on your print of it -- Charles Gordon: Except for these passports. These passports weren't submitted by petitioner to the Immigration and Naturalization Service and they are in the Immigration record. They were never before the Court. I mentioned them only because petitioner is seeking a declaratory judgment that he is a citizen and if these documents, which bear I think on his citizenship status are not brought before the Court. The Court may enter a judgment declaring him to be a citizen when he actually is not. I'm sorry the argument went off on this pageant but it seems to me that it was our duty to bring these facts to the attention of the Court. Well, I -- I go back to the argument. I want to emphasize the possibility that in this case and unfortunately some of these facts are not fully developed in the record. All of them are in the record except for this passport. The indications that petitioner intended to become a citizen of Israel. I repeat, in 1950, he went to Israel. He lived there for 14 years. He did not apply for a renewal of his American passport which expired in 1950. He did not expired -- applied for renewal for 10 years. He did not register with the American embassy or consulate. He did obtain this Israeli identification booklet in 1951. In 1952, after the new nationality law became effective, he did obtain an Israeli passport. He voted in three national elections. It seems to me that under those circumstances, of course, he didn't asked to retain his American citizenship when the new Israeli nationality law went into effect. It seems to me that under those circumstances, petitioner has indicated that his primary allegiance is to Israel and not to the United States. Now, I want to -- Earl Warren: As to this record that you say should now be before us but hasn't -- Charles Gordon: Well, some -- most of it is before the Court, in my view. Earl Warren: Well, as to this record of the State Department, was that a part of the stipulation? Charles Gordon: No, it was a part of the motion for summary judgment incorporated by reference in the motion. Earl Warren: Is there any objection by the petitioner? Charles Gordon: No. Earl Warren: To the record going in? Charles Gordon: No, not as far as I'm aware. Byron R. White: Well, what veracity in the motion -- for the motion for summary judgment do you suppose just an incorporation by reference gives these facts? Earl Warren: Well, the entire file was before the Court. Byron R. White: I don't care whether it was before the Court or not but what is this -- what is this motion for summary judgment based on? Based on some uncontroverted facts, I suppose. Earl Warren: Well -- Byron R. White: I suppose everything -- every single word in that file, you expect the other side will accept without controversy? Earl Warren: Well, there are parts of the file that may not relevant to this determination. Byron R. White: I don't care about the relevancy. How about the truth? You say that every fact in that file has been accepted by the court below? Charles Gordon: No, I -- I wouldn't say that. Byron R. White: Well, which one? Charles Gordon: I think that the facts -- Byron R. White: The one that you want? Charles Gordon: No, there are certain facts that relate to his status. Byron R. White: If the Government wanted to declare him with a summary judgment and attach some affidavits and give the other side the opportunity to controvert them that might have been one thing. But here is a blanket of reference to a file. It might have all sorts of things and even contradictory material. Charles Gordon: Well, Mr. Justice White, this is not uncommon in immigration proceedings. Byron R. White: I don't care whether it's common or uncommon. I just want to know about that -- about what facts you expect the Court to operate on when you -- all you do is make a broad reference to -- to some file. Charles Gordon: Some of the facts are in the record, Your Honor. This is the Israeli identi -- (Voice Overlap) Byron R. White: -- facts. Charles Gordon: It's a booklet of his. It's a -- an identification booklet relating to the petitioner. Byron R. White: Well, how do you really know that for example, he voted in the last -- in the last two elections? Charles Gordon: Well, it is -- this is his booklet which he submitted to us. Abe Fortas: Was there any finding of fact by the District Court on this? Charles Gordon: No, the only -- Abe Fortas: You've gone way beyond any findings of fact by the District Court, haven't you? What you're really telling us is that the District Court passed upon a hypothetical case and that what's before us now is really a hypothetical case. That's what you're telling us. Charles Gordon: No, Mr. Justice Fortas. Abe Fortas: Now, if you confine yourself to the findings of the District Court about two-thirds of what you've been telling us would have to be eliminated -- Charles Gordon: Mr. Justice Fortas -- Abe Fortas: -- from the factual terms, isn't that right? Charles Gordon: No. No, I don't agree, Mr. Justice Fortas. I believe the District Court passed on an actual case because it is conceded that petitioner voted in the election of 1951. The District Court and the Court of Appeals found that that was enough. And my view is, also that that is enough but some members of the Court may feel that the additional facts which I have suggested are relevant to the consideration of this case. My view is, that on the stipulation itself is concession that he voted voluntarily in a political election in Israel that under the terms of statute and under the terms of Perez caused him to lose his citizenship. Now if the Court agrees that this alone is sufficient, then the case is over. There's no need to consider these additional facts. If the Court -- Earl Warren: Mr. Gordon, if you're not satisfied to rest on the pleadings of this case and the facts that therein alleged but want to premise your case on something that happened years after that, why didn't you dismiss this case and start another proceeding that would have -- that have brought those into play? Charles Gordon: Well, Your Honor, when these facts came to light in my research, this was the time I was preparing for argument. They were not fully developed in the courts below. The records were before the court. The court referred to some of these facts. Earl Warren: If you didn't come -- they didn't come into your purview until you're preparing for argument in this case, how can you say that they got the careful attention of the courts below? Charles Gordon: The facts -- some of the facts were referred to in the opinions of the court. They are not in the stipulation. Some of these additional facts. And I was mystified as I said, when I read the opinions of the courts of where they got these facts until I learned that the court had the benefit of the certified record of the State Department. This booklet incidentally was not part of the stipulation. The book, of which is on pages 1 and 2. That was in the State Department record and was extracted from that record. Were not adding anything to the facts which are considered by the court below. The fact is, that these -- the certified record of the State Department should have been printed because it was considered by the court -- District Court and the Court of Appeals but those -- that record is in the office of the clerk of this Court and it was considered by the court below. I'm not really dragging this in at the last minute. They were considered. They should have been briefed more fully. Speaker: It wasn't a premise on the statement of about stating Perez in these facts. Charles Gordon: That is exactly right. Speaker: They didn't have to use that position, they shall be deliberately defined whether there is sufficient inquiry to include (Inaudible) or not? Charles Gordon: That is right. Speaker: That's the posture in which this case exactly, isn't it? Charles Gordon: That is the posture in which the determination to affirm might be entered if there question of reversal and a determination that statute is unconstitutional, it seems to me that the additional facts may be relevant in the consideration of a majority that would vote that way. Abe Fortas: Well, I really -- I really don't want to be overly critical but what it sounds -- it sounds to me as if what you're telling us and you've got before us two records. One record, if we are willing to affirm but quite another in a much more extensive record, if we are so misguided in your point of view is to reverse. Now, that's kind of a novel concept as first concerned but may be I'm just not adequately informed as to procedure. Charles Gordon: Well, Mr. Justice Fortas, I would say that differently. In my view, the record in its present shape is sufficient and in my view, the record in its present shape requires an affirmance of the lower courts. In my view, the statute as it was upheld in Perez contemplates that the mere fact of voting in a foreign political election, voluntary voting as is conceded here causes a citizen to lose his nationality. They found correct in that, then there's nothing further in the case. But I suggest these additional facts in the event the Court may determine their relevance. Earl Warren: Are you satisfied to submit your case on the -- on the original complaint in the original stipulation? Charles Gordon: Well, I -- I'm also satisfied to submit it on the motion for summary judgment. I don't think we're going to exclude it. Earl Warren: I know. Does that raise the issue that you intended to bring here to this Court? Charles Gordon: That definitely is the only issue that we thought we are bringing to this Court. Earl Warren: Then you ought to be satisfied to rest on it, should you? Charles Gordon: Well, if Your Honor feels that my duty to this Court permits me to exclude these facts, that's alright but I thought the Court would want to know these facts. The only reason I brought them to your attention is that they may be significant in the determination of this issue. And they were before the District Courts. The courts did consider them and refer to them. Byron R. White: How do you know that fact? Charles Gordon: Well -- Byron R. White: We don't know courts considered it, all you know that it is part of the -- Charles Gordon: No, there -- there are some additional circumstances. The Court mentioned some -- some of the background of this individual to which I've referred in the opinions, they were not in the stipulation. Byron R. White: But neither in the court below mentioned any voting except the voting in one year. Charles Gordon: Because that -- that was the only issue they thought was significant. That alone, they said, was sufficient to uphold the statute. Byron R. White: Well, I know but they have -- neither court -- certainly the District Court never found any fact with respect to these other two years. Charles Gordon: That is perfectly right, Your Honor, but the District Court found that one fact alone. I think the District Court indicated that it wasn't necessary to go any further; that this fact alone was sufficient to cause loss of citizenship. Byron R. White: I don't know how we're going to sit up here and say that even if we wanted to, how -- how we could say that what facts were. We don't know whether they're facts or not. Charles Gordon: Well, if those facts are deemed broad, in my view, they're not relevant. In the view of the Government at that time they entered into stipulation, in the view of the District Court, in the view of the Court of Appeals, those additional facts are not relevant. And in my view, if the Court agrees, then there's nothing further to the case. Then the statute is constitutional and then petitioner lost his citizenship. It seems to me that -- Earl Warren: A jumping a few hurdles so, isn't it? Charles Gordon: Well, I think we can leave the other material aside if the Court agrees with me in that position. If the Court finds that voting in a foreign political election under Section 401 (e) under the Perez case itself expatriate him then there's nothing further to consider. Earl Warren: We don't need these facts then that you've been -- Charles Gordon: That is right. Earl Warren: -- taking up all your time on? Charles Gordon: Well, I'm trying to be a little predictive as to what might be relevant in the minds of some of the justices. And, I'm trying to bring to the attention really the facts that were considered in the District Court. Earl Warren: But are you trying to expound real issue here that petitioner's citizenship depends upon this one act of voting in that Israelian election? Charles Gordon: Well -- Earl Warren: Are you trying to muddy the waters so that we can't decide it on that simple issue that was in the complaint only and that concerning which you have stipulation between the parties on which the case was to be tried? Charles Gordon: Well, Your Honor, I'm not trying to muddy the waters. I am trying to give the entire the record as it was considered by the District Court and only part of it appears in the stipulation. This is only one part of it. Earl Warren: But nobody knew about it until you finally discovered it in preparing for your argument. Charles Gordon: No. Your Honor, that is not so. The District Court and the Court of Appeals knew about it. It was before them. No, this wasn't hidden from anybody. The only regret I have is that they weren't printed in the record because they were before the court below. This is not something I dreamed up. It was considered fully in the court below. Abe Fortas: Mr. Gordon, isn't it a fact that when stipulation of fact is presented to a court and the Court rather amounts to a request to the Court to decide the case on the basis of these are the facts in stipulation. If they were preliminary motions, a motion for summary judgment or motion to dismiss to which affidavit were attached or as you get here, you attach record. And thereafter, a stipulation of fact is presented to the Court by the parties. Isn't it customary for the court to decide the case on the basis of stipulation of facts without reference to the affidavits or whatever may be attached to the motion for summary judgment? Is that the way we run law business? Charles Gordon: Mr. Justice Fortas, I would say it would depend on the context and on the understanding of the Court. Abe Fortas: If the parties in the -- in the stipulation of fact, went to the Court also to consider the affidavits or a transcript that was involved in some of the preliminary motions, there would be a reference to that. That would be incorporated in the stipulation of fact. Charles Gordon: Well, I -- I agree that that's a possibility but the motion for summary judgment -- Abe Fortas: And now you're here telling us -- you're here talking to us about this case in which those stipulation of facts and you're also using a phrase that was “before the Court”, some other documents that were involved in the preliminary motions. Now, I submit to you that what lawyers do before trial courts and then appellate courts, case that's involved that's decided on the basis of stipulation of fact is to assume that the Court attended to the material included in the stipulation of fact. And this is some other reference, some other provisions as something else is said here and you might have put there might be a nature in the file with the clerk. But that doesn't mean that it was before the court in the sense of being a part of a factual record to which the Court devoted its attention in deciding the case. Speaker: I thought what you are doing. You are quite contented on the stipulation of this Court from the secret (Inaudible). Charles Gordon: Mr. Justice Harlan, I fully agree. I thought if I did not bring him -- Speaker: That's what I understand your position. Charles Gordon: That is my position and my position is that knowing of these facts and knowing that they may be relevant in the minds of some of the justices, it was my obligation to bring them to the attention of the Court. Earl Warren: Are you asking us to remand it? Charles Gordon: No. I'm standing on the statute. I'm standing on the opinions of the courts below. I don't believe, in my view of the statute that these facts are relevant. In my view of the statute, the mere fact of voting is sufficient to cause expatriation. Speaker: Perhaps, we have one common ground in that (Inaudible). Charles Gordon: Well, I realized that there are some possibilities that it might not stand and I therefore feel that these facts may be significant in the minds of some of the justices. Earl Warren: Very well. Edward J. Ennis: Mr. Chief Justice, I have no further argument but I've been a member of this Court for 30 years and I would not submit and request this Court to rule an Act of Congress unconstitutional and improper record. What's been said here about passport is entirely out of order and in two minutes, I can make it perfectly clear to the Court that you have a proper record and a proper issue. The -- Earl Warren: You may take five minutes then. Edward J. Ennis: Your Honor, under the Nationality Act and the laws of nationality, there are some 15 grounds. Now the way it's determined whether a person has lost it's nationality. He goes through a passport. He goes to the consul. This printed form, Your Honor, Certificate of Laws and Nationality, he gives an affidavit. It's made out. Here's the certificate that he lost his nationality by voting in an election on July 30 of 1951 not that he used the passport there who was naturalized in some other country. That's a precise issue. And the Certificate of Nationality was issued. Now, what is this business on the record? When he got to the United States, now I learned from my friend here that he got here on Israeli passport. Well, may be that's the only he could get here when in 1960, the United States consul said he'd lost his citizenship and that he -- and he came here to bring the suit to get it back. Now, what happens? When the consul issues this Certificate of Nationality, you have under the State Department regulations an appeal to the Passport Review Board. This is a transcript of the record, 100 pages in which to Mr. Afroyim himself without counsel went before these three members of the board and there were president in addition to the three members: the chief of the foreign operations division and specialist on Israeli affairs. Now, they talked to Mr. Afroyim for a 100 pages and they talked on one issue. Did you lose your nationality when you voted in the one election in 1951? Now, in the basis of the record and their affirmance of the consul's action, he brought an action in the District Court and his attorney, and he insist the United States attorney assisted by the attorney for the District Court as well the Immigration Service, do stipulation of the facts. Now on page 11 it says that, “On November 14, 1960, the American consul in Haiti ruled he had lost his -- that he had expatriated himself on July 30 of 1951 by voting in a political election in a foreign state. That's all that was in the case. It was whether that vote lost his nationality. Now, in addition to the stipulation, the Government brought in at the hearing before the district judge the administrative file offered in evidence. It's limited to the 1950 -- to the -- 1951 issue. We made no objection, his attorney at that time. And this is part of the record and it's in this Court. But still, the issue is only one simple thing. Did you lose your citizenship by voting in 1951? Now, my friend, Mr. Gordon called me and he said, “I found out that your client had a passport, an Israeli passport.” I said, “Charles”, I said this, “I don't -- I didn't know that.” I said, “This has got nothing to do with the case.” The Nationality Act does not make having a foreign passport. It was in -- by the way, it was in described to the '40 Act. It was stricken out by Congress using a foreign passport. I said, “Charles, it's not in the record. The record is limited -- I'm perfectly happy. I have the record included this 100 pages discussion about this 1951 loss of nationality. I said, “These passports which you discovered from the Immigration file”, which the Solicitor General of the United States has not relied on in his brief and you want to bring this in, it can only have one purpose to prejudice this Court against this individual and I object. And if you do it, I will tell the Court it's improper and I object”, which I'm telling the Court. Now, I submit to Your Honor, that if this -- that this Court has a complete record here on which to rule whether Mr. Afroyim lost his nationality by his vote 1951. If he did not lose it by his vote in 1951, the Department State of the United States is perfectly free to tell him that he lost it by having a passport, by voting in a 1952 election, by voting in a 1953 election or any other ground which they want to imply although its not expressed in the loss of nationality provisions. This is a separate proceeding. This isn't a matter at large to decide whether Mr. Afroyim lost his nationality by four or five of the 20 Acts set there. It's to decide whether he lost it by voting in 1951. And this record is 100 percent complete on that issue because it's a 100 pages of passport review testimony limited to that issue. These passports are not in this case; they have no business in the case and they're -- here they merely confused issue and why. Because the Government perhaps now feels that since as part of the passport record, as part of this appeal record, there was this identification document which everybody who resides in Israel gets and that has in it an indication that he voted in a municipal election and in other elections. But the Department of State, knowing this, did not decide to wholly was expatriated for those elections. This -- the Department of State decided and all we have here is the decision whether he lost his nationality by voting in the 1951 election, there's nothing else in the case and this record is entirely complete for this Court to decide whether Perez is a law of the United States.

Warren E. Burger: We will hear arguments next in number 19, United States against Marion and Cratch. Mr. Greenawalt, you may proceed whenever you are ready. R. Kent Greenawalt: Mr. Chief Justice and may it please the Court. This case is on direct appeal from an order of the United States District Court for the District of Colombia, dismissing an indictment on the ground that the government had failed to afford a speedy trial. The government appealed directly to this Court pursuant to the old Criminal Appeals Act 18 U.S.C. Section 3731, under the provision that permits an appeal from a judge decision or judgment sustaining a motion and bar when the defendant has not been put in jeopardy. Appellees were indicted on April 21st, 1970 on 19 counts of mail fraud; wire fraud and transportation of falsely made or altered security. The indictment charges that appellees in operating a home improvement company called Allied Enterprises to fraud the home owners in various respects, including persuading the designed deeds of trust on their homes in promissory notes by falsely concealing the nature of these documents from the homeowners. The indictment charges of the fraudulent scheme continued until February 1967, but the last particular act, mentioned in the indictment, occurred on January 19, 1966. After the indictment, appellee Marion made a motion to dismiss the indictment for failure to afford a speedy trial, which is set out on pages 12-14 of the appendix, claiming that the failure to indict sooner constituted a violation of his rights under the Fifth and Sixth Amendment. On June 8th 1970, Judge Hart considered the motion to dismiss that developed in these proceedings that in February 1967, the Federal Trade Commission had issued cease-and-desist order against Allied Enterprises and Marion. And then in the series of articles in late September and early October 1967, the Washington Post had written about the activities of approximately a dozen home improvement companies which the articles claimed were defrauding the public, particularly and get a variance. The activities of Allied Enterprises were described in one of these series of articles. The articles also indicated that United States Attorney was generally aware of the abuses that it reported and as he planned an investigation. The articles did not indicate that an investigation or to bringing of criminal charges was planned in respect to any specific company or individuals. Either in the summer of 1968, according to Mr. Marion or early in 1969, according to the Assistant US attorney, the records of Allied Enterprises were turned over by Marion to the US Attorney’s office. At the proceedings before Judge Hart, Mr. Jackson, representing Marion argued that given the public knowledge of the activities of Allied Enterprises, the failure to return the indictment until more than four years after the last noted event and more than two-and-a-half years after the articles, violated Marion’s rights to a speedy trial under the Sixth Amendment. Mr. Franco, the Assistant US attorney stated that the Government's position at the motion should be dismissed in the absence of showing a prejudice. He indicated that so far as he knew the reason of indictment that had not been returned sooner was under staffing and a heavy case load. Judge Hart did not write an opinion, he indicated in an oral statement which is set out at Page 39 of the Appendix that in the absence of a justifiable reason for the delay from 1967 in a lightly prejudiced cause there was a lack of speedy prosecution and he granted the motion to dismiss. Appellees did not allege and Judge Hart did not find any specific prejudice to appellee, such as the death of a key witness or the destruction of a particular document. Judge Hart stated that, “The ability to remember to build up in one's recollection, to produce the necessary defense is bound to have been seriously prejudiced by the delay.” This case presents the question whether in this kind of complex fraud prosecution, a defendant’s rights to a speedy trial or due process are violated per se by a lapse of two-and-a-half years between the time it is assumed that the prosecutor’s office has knowledge of complaints that might conceivably lead to a criminal prosecution, a lapse of two-and-a-half years between that time and the return of the indictment. I say that the case poses the questions of whether the lapse is per se a denial of constitutional rights because there is no showing on this record that defendant suffered any particular prejudice or that the Government acted purposefully, arbitrarily or even negligently in not bringing the case before the grand jury sooner. We believe that there is not nor should there be such a per se rule. Lapses in time between offense and formal accusation are, as this Court said in United States versus Ewell, governed primarily by the statute of limitation. A potential defendant is further protected by the rule that guilt must be proved beyond a reasonable doubt. A heavy burden on the Government that will ordinarily become greater as the time between offense and trial increases. I shall argue that the Sixth Amendment does not apply before any formal accusatory action is taken by the Government that the Due Process Clause may reach certain exceptional circumstances in which time has elapsed before a formal accusation, but the due process is not denied unless there is substantial and special prejudice to a potential defendant and serious misconduct by the Government. That neither substantial prejudice nor serious misconduct have been alleged here, much less shown and that therefore the judgment should be reversed and the indictment reinstated. Potter Stewart: Mr. Greenawalt there is the general five year statute limitation. R. Kent Greenawalt: Yes, yes Your Honor. Potter Stewart: And that was -- R. Kent Greenawalt: That was applicable. Potter Stewart: General statute was applicable to this case. R. Kent Greenawalt: Yes, yes. Potter Stewart: Did it not use to be three years? R. Kent Greenawalt: Yes, I think originally it was two years and then it was made three years and then made five years. Potter Stewart: How long ago was it made five years, do you know? R. Kent Greenawalt: I do not recall Your Honor. I believe that is in the brief but -- Potter Stewart: And then there are some special statutes and limitations I think for some criminal, federal criminal offenses. R. Kent Greenawalt: Yes, I think some many types -- Potter Stewart: And I think in homicide there is no statute limitation. R. Kent Greenawalt: That is correct. For homicide and some, I think the treason that in other words, in some tax offenses the statute of limitation is six years. There is a preliminary question of appealability in this case. I believe our reply brief and the original brief indicate clearly why appellee’s motion before Judge Hart was a motion in bar within the meaning in Section 3731, and I did not plan to discuss that point further. Appellees suggest that the constitutional questions need not be reach here because Judge Hart made a discretionary ruling under Rule 48 (b) of the Federal Rules of Criminal Procedure. Again, I think the record and briefs indicate clearly that the rule was not and could not have been the source of this dismissal. And so, I move now to the constitutional issues. In our view, the Sixth Amendment does not apply until the Government has taken some formal accusatory action against the potential defendant. In terms, it states that the accused shall enjoy the right to a speedy and public trial. It does not relate to the speed with which one has made an accused. Appellees suggest that the time one becomes an accused, should be moved back for speedy trial purposes to some point before a formal action, such as when the government focuses on a potential defendant or has sufficient evidence to indict. Such an interpretation is unwarranted by language or history or any prior decisions of this Court and it would be most unwise for reasons like those which persuaded the Court to refuse to draw a similar line in Hoffa versus United States. There are many reasons why a prosecutor may decide not to prosecute. Perhaps, in the typical instance, it is known that a crime has been committed, but the prosecutor thinks he does not have enough evidence to achieve a conviction against a particular potential defendant. But there are many other reasons for not going forward, especially in this kind of complex prosecution for fraud. Not all frauds are criminal and the prosecutor may doubt it. The scheme involves falls on the criminal side of the line, where that he can establish to a jury their falls on a criminal side of the line, or he may doubt even though he is quite certain, he could get a conviction of whether the damage done to the public is great enough to justify using an available criminal sanction, or if there is a state offense he may wait to see if a state prosecution is going to go forward. If he is sure that some company representatives have participated in a fraud, he maybe unsure which officials of the company are in fact culpable and which he can prove to be culpable to the jury's satisfaction. Putting this altogether, the prosecutor’s decision, whether to prosecute a particular person may not be made until an investigation is progressed far beyond the point of focus or sufficient evidence to indict. We do not believe that a Court can reconstruct in retrospect when either of those points is reached, and even if it could, it would not make sense to require indictment soon after either of those points have been reach and before an investigation is been completed. Suppose for example, that in this kind of case probable cause exists on the basis of consumer complaints in documentary evidence, that the United States Attorney judges that a conviction cannot be obtained unless there is an inside witness who is willing to testify to the fraudulent plan as a whole and can also testify the conversation that have been taken place in the -- Thurgood Marshall: Mr. Greenawalt. R. Kent Greenawalt: Yes, Your Honor. Thurgood Marshall: I hate to interrupt you but was there any of this before Judge Hart, any of this argument? As I read it, all of the -- I hate to use the word defense, but the only explanation the Government gave was they were understaffed. R. Kent Greenawalt: That is correct Mr. Justice Marshall. Thurgood Marshall: So, he did not have the benefit of any of this? R. Kent Greenawalt: Let me make two points in response to that Mr. Justice Marshall. First, the argument I am making now is not an argument about this particular case, but an argument as to whether in general, the Sixth Amendment should be read to say that a speedy trial -- that one becomes an accused for speedy trial purposes at some point before formal accusatory action is made by the Government. And so what I am making now is a general argument about the Sixth Amendment. In terms of this particular case, I think there are two facts that -- in terms of as far as record before Judge Hart. One is that Mr. Franco who argued before Judge Hart in these proceedings was not a member of the US Attorney’s office at the time most of this took place and he frankly admitted that he really did not know what had happened in terms of this particular investigation, but that he had been told there was understaffing in a very heavy case load. The second point is that the Government took the position, I think quite justifiably on the basis of any decisions of this Court and of the great majority of other Federal Courts, took the position that unless there was some specific prejudice. Appellees here are not even alleged something that would rise either to a violation of the Sixth Amendment or to the Fifth Amendment. And so, he relied primarily on that failure to show any specific prejudice in arguing before Judge Hart. So, I think that he did not think it was relevant assuming if there was not a purposeful delay, what the reasons for delay were and I think that is part of the explanation why that is not more fully developed in those proceedings. Speaker: May I ask you, is the Government going so far as to suggest that if formal action is taken before the statute of limitation runs out, then there can not be a violation of the Sixth Amendment? R. Kent Greenawalt: Yes, yes it would be a question of defining what formal accusatory action meant. Speaker: Well, let us assume it, will either information or indictment, in a five year statute, is the Government suggesting that if an indictment or an information is brought down on the day before the statue runs out, then that -- there can then be no basis for a claim of the Sixth Amendment violation? R. Kent Greenawalt: No, we can see that the Sixth Amendment is applicable to some formal accusation before an indictment, such as a complaint, an arrest followed by incarceration. Speaker: What I am trying to get here at is no formal actions is taken at all the day before the -- R. Kent Greenawalt: Yes, that is our contention that the Sixth Amendment has no application. Speaker: But, conceding that there maybe a Fifth Amendment? R. Kent Greenawalt: Yes, we do believe the Due Process Clause covers -- Speaker: Now this depending however on the showing of prejudice? R. Kent Greenawalt: Yes, Your Honor. Speaker: Only on that basis. R. Kent Greenawalt: Our contention is that in most kinds of cases what must be shown is both specific prejudice and serious government misconduct. Now, I think it is a little more complicated in the sense that if the government's conduct is really grouse, then perhaps the showing of prejudice might not have to be so great. If the showing of prejudice is tremendously great, it might even be conceivable that no matter how good the government's explanation, a prosecution could not go forward. Speaker: But, this in any event, would be exclusively a due process basis? R. Kent Greenawalt: Yes, Your Honor. Speaker: And not a Sixth Amendment? R. Kent Greenawalt: Yes, Your Honor. Byron R. White: I suppose you are going to get to that. R. Kent Greenawalt: I am, yes, Mr. Justice White. To return very briefly to the example that I was suggesting which is that probable cause exists, that the the prosecutor does not think he can successfully prosecute without an inside witness. Then let us suppose two years later, but within the statute of limitation, an inside witness is willing to testify. Is prosecution to be barred simply because probable cause existed two years earlier? We do not believe there is any good reason to distinguish cases in which the prosecution has little or no evidence from those as which there is probable cause, but insufficient evidence to convict in which the prosecutor will decide not to go forward. If indictments are brought whenever a probable cause exist, the result would be a great waste of resources in the criminal process, and more important, very serious misfortune to those persons who were indicted but never tried and convicted, because the government indicts because it realizes that this is the probable cause stage and then decides it does not have enough evidence to convict and dismisses the case. Well, that is a serious misfortune to the fellow that is indicted. Mr. Justice Brennan, in a concurring opinion Dickey versus Florida suggested a somewhat different point, that is the possibility that one might become an accused “after the government decides to prosecute and then have sufficient evidence for arrest and indictment.” It is our position that that point also is too difficult to determine. That is a tentative decision to prosecute, and is typically subject to change particularly in this kind of case as an investigation unfolds. If that is thought to be the standard however, there is no reason to suppose on this record that a decision was made to prosecute these appellees until the case was -- shortly before the case was brought to the grand jury. And that is on this record, you are going to find that is suggested standard, there is no reason to think that Sixth Amendment is implicated in this case. I turn now to the Due Process Clause. It is our position referring extraordinary circumstances of the statute of limitation sets the time limit in which the government can act against the potential defendant. We do however believe, that in certain exceptional circumstances, the Due Process Clause may bar a conviction. For example, if the government purposely delays, some ill witness to be known to be favorable, the defendant has a chance to die and the lack of that witness is prejudicial, we would believe that that would appropriately constitute a denial of due process, but absolutely precluding conviction for an offense is a drastic remedy, much more drastic than is involved in the implementation of most other constitutional rights, and we think it should be involved only in such exceptional circumstances. Any lapse in time between offense and trial may affect a trial to some extent. The defendant’s primary protections, as the Court has indicated and as I stated it earlier, are in the statute of limitations and the reasonable doubt requirement. It is not contended by appellees in this case that if the government had simply remained ignorant about its activities that trial had might be afforded would be a denial of due process, nor did they contend that they have suffered any greater prejudice than would defendants in a similar situation where the government had remained ignorance for three years after the offense had taken place. Indeed, the possibility of prejudice here could be a bit less. Essentially, their claim comes down to this, because the government had awareness of some complaints and was involved in cases of higher priority, we were denied due process even though the government has been totally ignorant of what we were doing, we will not be denied due process. We do not believe the right to a fair trial turns on such a distinction only if delay is oppressive and purposeful and causes specific prejudice should due process be held to bar an indictment within the statute of limitation. We further think that if the Due Process Clause is read to entail nice distinctions of time, subtle degrees of prejudice and the reasonableness of the prosecutor's ordering of priorities in this area, the courts will be involved in time consuming collateral proceedings which will help to defeat the overall objects rather than help it of an expeditious determination of guilt or innocence. Turning out to the showing in this case, appellees have made no persuasive showing of prejudice. Theories in Ewell are claimed as insubstantial, speculative and premature. They have not suffered from the incarceration and the anxiety in concern that formal accusation they bring. The government's case, it is said, is based on large part on documents as to these elapse in time is irrelevant. Insofar as testimony make in turn specific conversation between salesman of the company and homeowners, it is highly unlikely that the salesmen who have many transactions each day would remember specific conversation, months or even weeks after the conversation. What company officials would recall would be their normal motive business operation. And there is no reason to suppose that that has been forgotten here, especially since appellees have had abundant notice that their operations were subject to attack first to the F.T.C. inquiries, then to the newspaper articles, then to a series of civil complaints, and finally, from turning over the records of the United States Attorney. It is incredible to suppose that they have not carefully considered and reconsidered how they carried on their business. Moreover, they are free to call any of the homeowner clients they have had and do not think they have been defrauded. It is even possible that there will not be a substantial discrepancy as to the crucial fact that this case goes to a trial,, since Mr. Jackson indicated on Pages 28-29 of the Appendix that at least about many of the basic operations of the company, there was not a dispute as to the fact. If appellees have suffered prejudice, that can be demonstrated at their trial and in a very small number of cases in which convictions have been overturned because of a lapse in time before arrest or indictment. The Court has made that determination with the record of trial in front of it, such as in the Ross case. Secondly, appellees have not subjective, much less demonstrated, the kind of government delay, which should be held to be unjustifiable. We have to suppose on the basis of the sparse record that the limited staff was initially focusing on complaints concerning companies deemed to greater social danger and that later considerable time was spent in developing this complex case. Fraud cases of this kind, and a number of the Court of Appeals have recognized this, are notoriously difficult and time consuming to develop. A Court simply is not in position of assessing whether an ordering of priorities is desirable. Unless there is some special reason to suppose that this ordering is being performed in an arbitrary way, the Court should not consider pre indictment lapse caused by limited resources to be a form of unjustifiable delay. If this position is rejected and an examination is to be made of the ordering of priorities, which we do not think is necessary, then surely it should be done in a full hearing which will allow development in this case that the facts concerning possible prejudice and the government's ordering of priorities. But it is essentially our position that the allegations here do not even make out a claim of constitutional violation and we thus contend that the case, the judgment should be reversed and the case should be remanded, so that the indictment maybe reinstated. Mr. Chief Justice, I would like to reserver the remaining of my time for rebuttal. Warren E. Burger: Very well, you have about six minutes I think. Mr. Jackson. Thomas Penfield Jackson: Mr. Chief Justice and may it please the Court. On June 8th, 1970 District Judge George Hart dismissed the indictment of Marion and Cratch using his words for lack of speedy prosecution in this case. That formula of words can either be a paraphrase of the Sixth Amendment requirement of a speedy trial; it could be an exercise of the inherent discretionary power of the Court to dismiss for want of prosecution; or it could conceivably have been an exercise of power conferred especially upon the Court by Rule 48 (b) conferring power upon the District Judge to dismiss for unnecessary delay in presenting the charge to the grand jury. With the exception of the jurisdictional issue, which I do not intend to take any protected time with, the principal issue raised by this appeal underlies all of the various predicates, the possible predicates for Judge Hart’s decision, which is whether any significance whatsoever is to be given to the elapse of time between the commission of an alleged defense and the date on which the indictment is filed in determining whether an accused should be required to stand trial on criminal charges, assuming, however, that there is technical compliance with the statute of limitations. Briefly, it is the appellees position that the filing of the indictment is really, merely a ministerial formality which is exclusively or virtually exclusively within the control of the government, and the government should not be given unlimited and unsupervised used of the entire period of limitations to assemble its case. And then to indict only when it is in effect ready for immediate trial. It is hardly necessary to emphasize the attention being paid to the problem of speedy trial today in this country and rules and statutes are being formulated in a number of jurisdictions to provide that once the prosecution has been formally commenced by the filing of an indictment, then specific periods of time limitations should be followed, following the formal accusation by indictment, and it is our position that there will be a frustration of those rules if the government can indulge itself during the entire period of the five year period of limitations during which time it assembled its case which is largely in secret, largely beyond the scrutiny of the defendant and probably will remain beyond the scrutiny -- Thurgood Marshall: Mr. Jackson, did you say the day after the crime has been discovered and the government says five years after the crime has been discovered, where do we come down? Thomas Penfield Jackson: Our -- Thurgood Marshall: Do you agree that there is no evidence in either one side or the other? The government does explain its delay and you do not show any interest, is that right? Thomas Penfield Jackson: That is correct. We have shown -- Thurgood Marshall: And we have just the fact of the date, that is all we have. Thomas Penfield Jackson: Well, we submit Your Honor that the -- Thurgood Marshall: You know, we will send in (Inaudible), it would come down to two-and-a-half, would it not? Thomas Penfield Jackson: Yes, Your Honor. Thurgood Marshall: But we can not do that -- we can not do that with constitution. Thomas Penfield Jackson: We do not expect that that will be the result in this case or it should be the result. The government contends that it was understaffed. In the 1960’s, the US Attorney’s office did not have sufficient staff to prosecute them. So there is the scale of explanation on the part of the government. Warren E. Burger: Well, we are not compliant to that explanation if we -- for the matters we can judicially notice, are we? That is argument; that was not evidence. Thomas Penfield Jackson: I think that is correct Your Honor, but it is the only explanation that the government has offered throughout for its delay and bringing the prosecution in this case. Warren E. Burger: Well, we will have no trial, so there was no occasion to give them anything here except the legal arguments. Thomas Penfield Jackson: But the government did not proffer or offer any explanation other than what it is, what it -- Warren E. Burger: I do not read this record to the judge’s action of indicting anybody to go into the facts, you cut off by saying the prejudice is bound to have occurred. Thomas Penfield Jackson: I think he did. Warren E. Burger: And probably an invitation to pursue the inquiry. Thomas Penfield Jackson: I think his conclusion was that he himself took judicial notice if you will of the fact that there is an attrition of human memory over the lapse of time particularly of one of the magnitude of which we are speaking here and that he did not need any formal demonstration from the witness stand of actual prejudice. He did certainly give the government an opportunity to explain why it had taken so long to do so and the only explanation which was offered was that in argument by the Assistant US Attorney who argued the case who could have had he had evidence of other reasons presented that evidence at that time. I do not believe that the record can be read as providing for an abrupt interruption by Judge Hart of, Mr. Franco. I think he extended him all the courtesy and the opportunity to make his case that he needed to do. I do not see that the government has been denied him opportunity and the government, of course, knew that the facts that we were representing to the Court have been made in the motions papers and could have responded had it wished to do so with other facts of its own. In 1965-1966 the, Mr. Marion was the proprietor of the business firm which sold homeowner home intercom system to homeowners in the district and without going into the business practices in any great detail, by the second week of December of the year 1966, the Federal Trade Commission at that time had reasonable grounds to believe that there had been a violation of the law and they proceeded against Mr. Marion. Mr. Marion did not contest those proceedings and by the first week of February 1967, the Federal Trade Commission issued a cease-and-desist order, and so all of the information about the business practices which the government has characterized as a complex fraud case, all of this information was in the possession of a government. Nothing what else, whatsoever, nothing else, whatsoever occurred from February of 1967 until October of 1967 when the newspaper articles coupled with editorials which vehemently demanded prosecution of the People Newspaper articles, though were the culprits, exposed these business practices to public view and actually branded them as fraudulent. On October 4th, 1967 on the front page of this morning newspaper Mr. Marion and the entire Washington DC Metropolitan area saw him publicly denounced as a cheat and a fraud. Dealing with the -- the question is to whether or not there is a showing of prejudice in this case and I indicated to you sir in your response to your question that there is a showing of actual prejudice. In that, there is an attrition or it can be assumed that there is an attrition of human memory and a lapse of human memory. As a graphic illustration of that, at the same time that these articles were appearing in the newspaper, the 1967 world series was being played, and Judge Hart was asked to conceive with the difficulty of remembering the details of the 1967 world series which had occurred in 1967, not 1965-1966 as the events, the 23 month so called business fraud which the government alleges in this indictment and it is difficult I think for all of us to remember the details of events that far in offense. Potter Stewart: They all have -- I think if you had played in the world series of 1967, he remembered the details very well. Thomas Penfield Jackson: If indeed you had played that and there is no showing that Mr. Marion played -- Potter Stewart: And your client guarantedly was involved in this case. Thomas Penfield Jackson: That is correct. Potter Stewart: It was in the side line, high standards for a newspaper reader. Thomas Penfield Jackson: Well, that remains to be seen Your Honor since the case is not been tried. Potter Stewart: I think the allegation is that your client was involved in this. Thomas Penfield Jackson: It was -- and that he was involved, yes, whether or not he was involved in the so called criminal activities; it is another matter. Potter Stewart: And that is we tried, of course. Thomas Penfield Jackson: These articles however, were filled with anonymous quotations attributed to the United States Attorney to the effect that a special fraud squad had been setup that the chief of that fraud squad had been relieved of all other duties and was to be concentrating on these cases, thereafter exclusively, and that he also indicated or is quoted as having indicated that he expected indictments within two weeks. But nothing happened within the next two weeks or the next two months and it was not until by Marion’s recollection of the following summer that anything whatever occurred, the government remembers that it was winter, a year when it occurred and that was an informal inquiry from the Assistant United States Attorney, in charge of the case to bring records and documents down to the office. Now, we do not know how voluminous these records were or at least it does not appear off record how voluminous they were but it can be inferred from the record that they were of no greater quality than to have required one trip by one man to take them to the Assistant United States Attorney's office, which he did, and he conferred with Mr. Glanzer the Assistant United States Attorney in charge of this matter, and he did so at some lenght. Again, nothing happened. An entire year passed and more and finally, in March of 1970, Mr. Marion -- Thurgood Marshall: As of that time, should he be indicted then? Thomas Penfield Jackson: Your Honor, our position is that it is a rule or ought to be a rule of reason. The question is when did the government objectively have noticed that a crime had been committed by the one they intended to bring to trial for and once that rule of reason is applied, which cannot be any hard and fast rule -- Thurgood Marshall: Was your rule was the conspiracy? Thomas Penfield Jackson: I am sorry Your Honor; I did not understand the question. Thurgood Marshall: There is a possibility of eight people conspiring, you assume there is one, you do not know the other seven. You can not indict that one right then and there? Thomas Penfield Jackson: I do not think so Your Honor, I think again that would be one of the factors to be considered and when the government ought to proceed for an indictment. Thurgood Marshall: But do you think that every indictment now, that you expect the Court to find out whether it should have been handed up in June instead of August? Thomas Penfield Jackson: No, Your Honor. I think in the vast run of cases it did not occur. Thurgood Marshall: Well, what is your -- this is the third time, I am still trying to get what is your rule? Thomas Penfield Jackson: Our rule -- Thomas Penfield Jackson: The rule that we believe ought to be applied is one of notice, simple of notice to the government, consisting with all of the various factors which bear upon the rapidity with which a case ought to be brought to prosecution. Thurgood Marshall: Federal Trade Commission did not give notice? Thomas Penfield Jackson: It did give the defendant notice -- Thurgood Marshall: It gave you a cease-and-desist notice. Thomas Penfield Jackson: Our position is that, it is the notice to the government, when does the government objectively know -- Thurgood Marshall: But did not the government assume that you had ceased-and-desisted? Thomas Penfield Jackson: I am sure that it could assume that it had ceased-and-desisted, yes sir, yes Your Honor and that in fact was the case. Thurgood Marshall: They did not have to indict then, did they? Thomas Penfield Jackson: I do not believe so Your Honor. Thurgood Marshall: Well, when? Thomas Penfield Jackson: Within a reasonable time thereafter. Thurgood Marshall: What time? Thomas Penfield Jackson: Again, it would be consistent with all of the facts of the case that the government have -- was there a fugitive defendant, for example. Thurgood Marshall: Well, I assume that you said to the District Court, to Judge Hart, that two-and-a-half years is pro se too long period. Thomas Penfield Jackson: No, Your Honor. Thurgood Marshall: Per se, I mean per se? Thomas Penfield Jackson: Per se, except to the extent that prejudice maybe inferred or presumed from the lapse of time in the attrition of his memory, his ability to respond to these stale charges. Thurgood Marshall: So now if that rule is applied then anybody that is indicted four years after the crime automatic files a motion and is dismissed? Thomas Penfield Jackson: I do not believe so, Your Honor. Thurgood Marshall: All mail fraud cases? Thomas Penfield Jackson: Again, not in all mail fraud cases. Thurgood Marshall: The means burden put on the government to show why it took four years? Thomas Penfield Jackson: I think the burden, ultimately, would devolves upon the government to show why they have waited after the defendant had assumed the burden of showing that the government had objective notice of the existence of the crime and that it -- Thurgood Marshall: And that was four-and-a-half years after that, clearly, that is all the defendant shows? Thomas Penfield Jackson: In a case such as this, I would think so. Thurgood Marshall: And if the government does not remand it this way? Thomas Penfield Jackson: If the government does not sustain its burden of explaining why the delay was as extensive as it was, given those circumstances. Thurgood Marshall: You got any case you can cite on this? Thomas Penfield Jackson: Well, Your Honor, perhaps, the most recent exposition of the considerations involved is Mr. Justice Brennan's concurring opinion in the Dickey versus Florida case in which all of these considerations are explored. Thurgood Marshall: Did he say per se automatically? Thomas Penfield Jackson: No, Your Honor I do not believe he said per se. Thurgood Marshall: (Inaudible) Thomas Penfield Jackson: He did not say that it was a per se rule but we are not contending for a per se rule, we are simply contending for a rule in which there is a rule of reason as to the time which the government is to be advised to go forward. Thurgood Marshall: (Inaudible) that most stop fraud and other types of cases, in mail fraud cases, they barely get it in before the statute of limitation. Thomas Penfield Jackson: If the government had had a reason for delaying four years in this case, it could have been advanced before Judge Hart and was not. Thurgood Marshall: Yes, but that is not the ground that you did listed, you just listed on the grounds that two-and-a-half years is too long; that is what he said. Thomas Penfield Jackson: He found that there was bound to have been an attrition of the memory of the defendants in this case. Thurgood Marshall: Do you want us to sustain that? Thomas Penfield Jackson: Yes, Your Honor I do. Thurgood Marshall: Which means it makes way to all two-and-a-half year indictments to go out as of now? Thomas Penfield Jackson: Well, I do not know where the period two-and-a-half years derives, Your Honor, that last event charged in the indictment, charge occurred in January of 1967. Thurgood Marshall: Well, all four-and-a-half years indictments go out. Thomas Penfield Jackson: I do not believe that this requires a per se rule as to four year delays. Warren E. Burger: On what evidence did Judge Hart break make that finding? Thomas Penfield Jackson: The finding as to the attrition of the individual’s memory? Warren E. Burger: Yes. Thomas Penfield Jackson: I think he presumed it. Warren E. Burger: Yes. Thomas Penfield Jackson: He had no evidence, that is correct, no testimony as to actual prejudice. Speaker: Mr. Jackson, as your argument of rule of reasonomg, is that predicated under Sixth Clause or the Due Process clause? Thomas Penfield Jackson: Our argument here is predicated upon the Sixth Amendment while there is conceivably could be a due process argument based upon extreme circumstances. Warren E. Burger: You were discussing Dickey against Florida a little bit earlier. Thomas Penfield Jackson: No they do not Your Honor. Warren E. Burger: The reasons for the delay by the State of Florida in that case was that the man was, Dickey was in a federal prison and it was pointed out in the Court's opinion, they could have reached him anytime and brought him down for the trial, but they just deliberately waited until he was released and to be released from the federal penitentiary. Thomas Penfield Jackson: That is correct Your Honor although there are -- it was not too long prior to that, the Dickey versus Florida that there was substantial question as to whether or not there was an obligation on the State to request an individual -- Warren E. Burger: All I am suggesting is Dickey against Florida, in its facts, does not have much to do with this case, does it? Thomas Penfield Jackson: If the facts are clearly distinguishable there is no question about that Your Honor. Potter Stewart: That would be -- what did the legislative history shows? Thomas Penfield Jackson: Legislative history shows -- Potter Stewart: Does it show what you just said? Thomas Penfield Jackson: Yes, Your Honor, it is cited in our brief. Warren E. Burger: But we have to assume from that this extension from three years to five years was thoughtlessly done without any concern for the realities. Thomas Penfield Jackson: I do not suggest that it was thoughtlessly done. Warren E. Burger: All of these rules that you are suggesting such as the Second Circuit rule and recent actions in other areas have had to do with bringing cases on for trial after indictment have been off? Thomas Penfield Jackson: That is correct Your Honor and our position -- Warren E. Burger: None of those things reached the problem we are dealing with here. Thomas Penfield Jackson: None of those cases, none of those rules reached them and in fact, our position is that they will be frustrated, vitiated in effect, if the government has the entire five year hiatus of the period of limitations to do whatever it needs to do to prepare its case, and then and only when it is ready to go to trial, it obtains the indictment and then announces immediately, we are ready for trial against the defendant who may have been during a four year period unaware of -- Byron R. White: Who these accuses would be? Thomas Penfield Jackson: What evidence would be offered to support those accusations and how in the world he could undertake to disprove the allegations that would be made against him. Warren E. Burger: Thank you Mr. Jackson. R. Kent Greenawalt: Mr. Chief Justice and may it please the Court. Warren E. Burger: Thank you Mr. Greenawalt.

William H. Rehnquist: We'll hear argument first in No. 86-369, General Motors Corporation v. United States. Mr. Garrett. Theodore L. Garrett: Mr. Chief Justice, and may it please the Court: This case involves central issues concerning the adoption and the enforcement of state air control regulations under the Clean Air Act. The question presented is, in a case where a state has revised its regulations, whether EPA may bring a suit to enforce the original unrevised regulations and to collect penalties without first complying with its statutory duty to act to approve or disapprove the revision. We request that the decision below be reversed because it allows EPA to veto state regulatory choices through an enforcement mechanism without following the procedures and requirements of the statute. We submit that this procedure EPA is following creates a regulatory limbo which frustrates the efforts of states and companies to respond to changing conditions. Now, I want to clarify at the outset that our point is not simply that EPA took too long in acting on the revision in question here. Our point is a more fundamental one than that. We submit that Congress established a very careful sequence in the statute, first, for the state promulgation of state implementation plans and revisions to those plans, secondly, for limited and timely EPA review of those plans and, only after that, for enforcement. We submit that by skipping that second step, the limited and timely review, EPA has put the cart before the horse, if you will. Now, in this case, the Commonwealth of Massachusetts gave General Motors an extension of time, from 1985 to 1987, 1987 being the attainment deadline in the Clean Air Act that's relevant here and, indeed, it was the deadline for all of Massachusetts, as granted by EPA. The purpose of the extension was to allow General Motors to replace an older painting facility that it had in Framingham, Massachusetts and instead to build a new more modern facility with substantially lower emissions. EPA had previously approved similar extensions of time through state plan revisions for other companies in 1984 and 1985, and the Agency did so pursuant to a policy that it had announced in 1981. In this particular case, EPA waited while General Motors built its plant. It completed the new facility at great expense in July of 1987, and then when the new facility was built and the old facility was shut down, EPA filed a lawsuit in August of 1987 to collect penalties for the period of time during which the company had operated the old paint shop. It did so without taking any action... any final action on a revision. Now, we submit that General Motors should have been entitled to comply with the Commonwealth's revision and should have not been penalized for doing so until EPA took action on the revision. Sandra Day O'Connor: Well, Mr. Garrett, the statute, does it not, makes the terms of the original plan enforceable until a revision is approved, as I understand it. Theodore L. Garrett: Are you referring to Section 110(d) of the statute, Your Honor? Sandra Day O'Connor: Uh-huh. Theodore L. Garrett: Your Honor, it seems to us that the government's argument with respect to that section proves a little bit too much, and it's somewhat a mechanical and artificial reading of the statute. And the reason we say that is because it does not deal with EPA's corresponding duty under the statute to comply with its obligations to review a plan in a timely way. We submit that the Congress-- Sandra Day O'Connor: Well, of course, the SG takes the position that there is no four-month deadline requirement for action on proposed revisions. And I suppose you would be first to acknowledge that the language of the statutory provisions could be interpreted as the Solicitor General suggests, as not requiring revisions to be approved within four months. Theodore L. Garrett: --We disagree on that point, Your Honor. But there's a more fundamental point that I would like to emphasize. I think that there can be no doubt under the statute, because it uses the word EPA has a duty to act on the plan and plan revisions. And we're saying that EPA has breached that duty act. Whether it's four months or a reasonable time-- Sandra Day O'Connor: Well-- Theodore L. Garrett: --they should be acting before they bring lawsuits. Sandra Day O'Connor: --But the... the language of the statute dealing with the four months says the administrator shall within four months after the date required for submission of a plan under Paragraph 1. Now, that doesn't appear to refer to any revisions. Theodore L. Garrett: The... if you're referring to Subsection (a)(3), that section deals entirely with revisions, and we believe-- Sandra Day O'Connor: But (a)(3) says that the administrator will approve any revision if he determines that it meets the requirements of Paragraph 2. Not that he meets the requirements by acting, but that the plan meets the requirements. Theodore L. Garrett: --The language of the statute, I think, Your Honor, we have to be careful not to try to parse it a little bit too fine but to look to the overall intent of it. In our reply brief we pointed out one example where EPA does not interpret the language to refer only to the requirements of the plan. And in particular the first sentence of Section (a)(2) states that the administrator may approve or disapprove a plan or a portion of a plan. There is no reference to a portion of a plan in Section (3)(a). But yet the administrator in the public service case has said Congress basically intended these two provisions to work the same way and the administrator has the same obligations and responsibilities under (a)(2) as it does under (a)(3). Sandra Day O'Connor: Well, I... I guess my question is specifically whether you would acknowledge that the language of the statute could be read as the Solicitor General says it should be read. Theodore L. Garrett: Our view, Your Honor, is that the language is intended to be a provision of incorporation, and it's plain, to us anyway, that Congress intended to incorporate all of (a)(2) into (a)(3). Sandra Day O'Connor: But it could be read otherwise? Theodore L. Garrett: I don't think so, Your Honor. Sandra Day O'Connor: No? Theodore L. Garrett: I really don't. I think it's a very strained reading for the government to say that every provision of (a)(2) is incorporated in (a)(3) with the exception of the four-month rule. And if you go word by word almost to see what provisions the government believes are incorporated and which are not, they believe that everything is incorporated except the four-month rule. I don't think that there's any indication in the statute that Congress intended to carve out that one provision. And we think that all of the lower courts and all of the amici that have filed briefs with this Court are correct in assuming that Congress intended that. And we think that the proof of the pudding is Section 110(g) of the Act, which we've pointed out in our brief requires EPA to comply with the plan revisions... to act on certain plan revisions, quote, (a)(3). But again-- Antonin Scalia: It says... it says the required period, what four-month period has been required. Theodore L. Garrett: --Our position, Your Honor, is that the only reference that's logical is the required period for EPA to act on the revisions under Section (a)(3). Antonin Scalia: But that's... that's a required period after the... the SIPs must be submitted. That was four months after the Act was originally passed... after the date that the Act required states to submit plans. And as the Act originally passed, it said four months after that date the administrator must have acted on those plans. Theodore L. Garrett: That's correct, Your Honor, and the statute does-- Antonin Scalia: That is the only required four-month period. Four months... not after the plans were filed. The plans could have been filed before that... that period, couldn't they? They could have been filed right after the Act was passed. So the four-month period might indeed have been... I don't know when the Act was passed, it might have been an eight-month period. It was four months after the plans were required to be filed, not four months after they were filed. Theodore L. Garrett: --Again, Your Honor, there's some distinctions that could be made. I think that the government argues that plans are never required after the original plans and, therefore, that can't apply. I think-- Antonin Scalia: It makes sense to me. Why isn't that true? Theodore L. Garrett: --It assumes that Congress really didn't intend that there be prompt action on revisions and that revisions somehow were less important than the original plans. Antonin Scalia: No. It just assumes that Congress... that Congress for prompt action relied upon the Administrative Procedure Act which... which assures prompt action in all other areas. Theodore L. Garrett: Let's assume-- Antonin Scalia: And the four-month provision was just to get this Act off and running really fast. That's all. Theodore L. Garrett: --Let's assume for the moment that the four-month provision is not applicable and that EPA's duty is to act within a reasonable time. Antonin Scalia: Good. I was going to ask you what... what you think that leads to. Theodore L. Garrett: What that leads to is this, Your Honor, and this is the point I was trying to make a moment ago. Under the Court's decision in the Train v. NRDC case, EPA must approve a revision if it satisfies the basic requirements of the statute. And what EPA has done here is that they've invented a new option. What they do is they exercise a pocket veto by ignoring a revision while bringing a suit to enforce the old plan. This, in effect, disapproves the revision without any of the restrictions on EPA authority that are in the statute. And indeed, it provides incentives for EPA to delay further in order to advance its enforcement action. Now, by proceeding in this way, it seems to us, that EPA is leaving the states and industry in a regulatory limbo. It undercuts state efforts to develop and enforce revised plans for improved control strategies. It removes any incentives that industry would have to accept and implement revisions that would make progress. And we submit that these consequences are totally inconsistent with the goals of the Act, and they are inconsistent with the basic obligation that EPA has in the statute where it says the administrator shall approve any revision. And even if it's not four months, even if it's a reasonable time, he's obligated to approve that revision if it meets the basic requirements of the Act because the states have the primarily role in establishing a mission limitations. And by exercising this pocket veto what the Agency is doing is writing the states out of the statute and saying we're going to ignore what you do and we're going to bring enforcement action to enforce our choices and not yours. Sandra Day O'Connor: Well, in circumstances as in this case, who should have the burden of proving that the revision meets the requirements and therefore has to be approved? Could that be established as a matter of defense by your client if an enforcement action is brought based on the original plan? Theodore L. Garrett: That was the remedy that the court of appeals suggested... or, at least one of the two remedies that the court of appeals suggested, Your Honor. And we respectfully suggest that that's not very meaningful. Let's think about what would be involved in doing that. Under the government's approach, the district court would be required to consider whether the revised plan was, quote, "clearly approvable or clearly not approvable. " and it would be doing so well before the Agency itself had acted. For example, in the Cyanamid case which we rely on heavily in our briefs, that was a 1982 plan revision. The court of appeals handed down its decision in 1987 after a full round of administrative proceedings concerning the amount of the penalty. To this day there's been no final decision by EPA on that SIP revision. It seems to us that this approach of requiring a district court judge to make a decision as to whether a plan was clearly approvable or not really turns notions of primary jurisdiction on their head. The Agency should be making that determination first. And that's the basic problem that we've got. Antonin Scalia: The problem, Mr. Garrett, is once you abandon the form... well, you haven't abandoned it. But once you assume I don't agree with... with your four-month clear line, industry isn't helped very much by simply adopting a reasonable time rule and say that after a reasonable time for approval has elapsed the industry is thereafter excused from... from complying with the original SIP and... and can act as though the revised SIP has been approved. Theodore L. Garrett: That-- Antonin Scalia: Reasonable time will vary enormously from... from one case to another. The Agency says it goes from something like three months to... what, 18 at the outside? Something like-- Theodore L. Garrett: --That's quite right, Your Honor. And that's not our position, by the way. And let me try to make it clear if I haven't. Antonin Scalia: --No, I know it's not your primary position. But... but you... you... but you offered it as a fallback position. That even if... even if we don't agree with your four-month clear line, still in all, the Agency had an obligation to act within a reasonable time. And at least after that reasonable time elapses, the same consequences should ensue. That is, that the company should be able to comply with the revised plan rather than the original plan. Theodore L. Garrett: No, Your Honor, we go a step further than that. Our position is that EPA has a fundamental duty under the statute to first act on the revision, up or down, before it brings an enforcement action. And we're not going to ask the district courts to look at whether there was a reasonable time on the four-month rule. We think that the four-month rule is very important because it underscores the urgency of EPA to act, but there can be no question to us that the statute imposes a mandatory duty on EPA to act on those plans and that they should be prohibited from bringing an enforcement action. Antonin Scalia: Even before the four months expires? Theodore L. Garrett: Yes, Your Honor. During that period of time EPA should be making a neutral, unbiased decision on whether that plan-- Antonin Scalia: I see. I see what you're saying. Theodore L. Garrett: --was approvable or not. It shouldn't be... they shouldn't be rushing to court to enforce a regulation when there hasn't been a... determination made under the statute as to what regulation ought to be enforced. Sandra Day O'Connor: Well, Mr. Garrett, what language in the statute would you point to to support that view that that's a requirement and that the EPA may not resort to enforcement actions? Is there any particular provision? Theodore L. Garrett: Your Honor, there is not a particular provision in the sense of language saying that EPA may not bring an enforcement action. However, we suggest that... several things. That the mandatory in the language in the statute saying that they are obligated to approve, the language in the statute saying in several places... in the preamble to the case and to the statute in the declaration of findings and purpose... that the prevention and control of pollution at its source is the primarily responsibility of the state and local governments, and in Section 7407(a) which says that each state shall have the primary responsibility for assuring air quality within its entire geographic area. The states don't have that authority if EPA is allowed to just ignore state plans, pick and choose among revisions and original plans, and if it prefers the original plan rather than the revision for any reason or no reason at all, without following the statutory procedures, to just go ahead and enforce the original plan. We submit that that is so contrary to the fundamental workings of the statute that this Court should devise a remedy to deal with that situation. Sandra Day O'Connor: Well, they... they can enforce neither the original plan, because there's a revision pending, nor the revised plan, because that hasn't yet been approved. So it's... it's just a free-for-all during... during the period while the revision is pending. You can't enforce anything. All the rules are gone. Is that... is that the regime that... that would follow? Theodore L. Garrett: The... to some extent, Your Honor, the revision certainly would be enforceable in state court. Antonin Scalia: Oh, it would? It would? Theodore L. Garrett: We believe so, Your Honor. In fact-- Antonin Scalia: You know, all... all these revisions are not going to be in your client's favor. What if a state adopts... proposes a revised plan that tightens the environmental restrictions? The regime you're arguing for is that the state can impose upon... upon industry those... those additional restrictions even though they haven't been approved by EPA? Theodore L. Garrett: --Yes, Your Honor. As a matter of fact-- Antonin Scalia: Wow, that's... that's high risk. Theodore L. Garrett: --The Clean Air Act... the way it's structured, Your Honor, requires that before a state submits a plan to EPA that it be adopted as a matter of state law and they be able to show EPA at the time that it's submitted that it's been promulgated and enforced. And the states go through substantial procedures of their own to establish these revisions. They're required by statute to have public hearings. And in this case Massachusetts did have hearings. The public was invited; the American Lung Association appeared and did not object to the revision. EPA had advance notice of this. These revisions aren't a surprise. EPA had been talking to the Commonwealth about this; they appeared at the hearings. They had some technical comments, but they did not object. Massachusetts believed that it satisfied all of its concerns, and after considering all of the concerns of interested parties and the public, the state decided that it was in the best interest of the citizens of the state to go ahead with this revision, to allow General Motors to build a more modern, lower emission facility and extend the deadline to the statutory deadline that EPA had already approved. We submit that-- Harry A. Blackmun: On the other hand, Massachusetts, your Commonwealth, is opposing you here, isn't it? Theodore L. Garrett: --Yes, and that's very puzzling, Your Honor. We would urge the Court to look at the brief filed by the National Governors' Association. We think that it's much more representative of the views of state and local officials concerning these issues. The Massachusetts brief is frankly puzzling and incomprehensible to us. The... I can elaborate some more, if you'd like. [Laughter] Harry A. Blackmun: I'd like to some elaboration on one point, Mr.-- --I'm only pointing out that your own... the state involved is on the other side. Theodore L. Garrett: The... Massachusetts certainly believed, and still believes that the plan revision involved was in the public interest, and I would on that point urge the Court to look at the 1987 comments by the State of Massachusetts that we've lodged with the Clerk of the Court. When EPA had eventually proposed to disapprove the plan, the State of Massachusetts filed very vigorous comments with EPA saying that this is a good revision and your concerns are unwarranted. We want this approved. John Paul Stevens: May I ask this question about the interplay between the state and the Federal authority? If you focus on Section 110(g), which provides... gives the governor the power to suspend enforcement if he makes the finding that it's necessary to prevent the closing of a plant and so forth. It seems to me that extra precaution there would be totally unnecessary in view... if your view of the basic statutory scheme is correct, that the state could accomplish it without that planning. I'd like you to comment on that portion. Theodore L. Garrett: Certainly, Your Honor. We have two responses to that. One is that we and the government disagree on the interpretation of that language of 110(g). We believe that that was an emergency provision that was designed to deal with imminent plant closings and in a situation where the state really couldn't even afford to wait the four months. So what Congress did was allow the states the authority to, in those situations, suspend immediately without waiting for the four-month period to... to-- John Paul Stevens: No, but they would then have to at least make... make the finding that they approved the revision, just as they do in an ordinary revision situation. Theodore L. Garrett: --Well, eventually EPA would, but during the-- John Paul Stevens: No, not the EPA. I'm talking that the governor would, the state would. Theodore L. Garrett: --Oh, yes. John Paul Stevens: So why couldn't... but if they've done that, and then your basic view of the state authority prevailed, why would they need to make any other finding because that in itself would become the law until EPA acted? Theodore L. Garrett: We would urge the Court to not read Section 110(g) as an exclusive remedy, basically, which is our second provision. There are a number of provisions in the statute, 110(g), 110(f), that provide for special relief. In fact, the Train case, which we rely very heavily on, involved just that kind of an issue. There was a provision for certain kinds of variances in the statute that the State of Georgia wanted to provide. But the State of Georgia wanted to do it by a SIP revision rather than using 110(f). And they said that that was the exclusive provision in the statute. If you could do it by a SIP revision, why have a SIP revision? And this Court held no, that the SIP revisions are the basic mechanism under the Act for states to make these kinds of choices. And the fact that Congress may have provided some particular remedies doesn't make them exclusive. So we would say that the fact that Section 110(g) of the statute is there doesn't at all conflict with the remedy that we're urging. In fact, in some way we think that since Congress never thought about this problem, it supports it. Byron R. White: Mr. Garrett, what is the... what happens when an original plan is submitted and the EPA doesn't comply with the express four-month requirement for approval or disapproval? Theodore L. Garrett: The very first plans under the Clean Air Act? I think, quite frankly, Your Honor, that-- Byron R. White: Does the plan then become effective-- Theodore L. Garrett: --No. Byron R. White: --just... just by default? Theodore L. Garrett: I think that the... my impression is that when we're talking about the original 70 Clean Air Act, that the states were trying to get the plans into EPA in a hurry, that EPA tried to act in four months. I don't believe they acted in four months in every case. And eventually EPA ended up approving and disapproving the various plans. Byron R. White: But the plan doesn't automatically go into effect after four months? Theodore L. Garrett: That's correct. Byron R. White: Well, I don't think your... I take it your position is that... that when the revision is submitted and it is... it is... say, it isn't approved or disapproved within four months but finally it is disapproved, then, I take it, the company has to comply with the original plan from there on. Theodore L. Garrett: That's correct. Byron R. White: From there on? Theodore L. Garrett: That's correct. Byron R. White: But you say that they... until then they may not be fined-- Theodore L. Garrett: That's right. Byron R. White: --for their noncompliance? Theodore L. Garrett: And the reason is-- Byron R. White: Meanwhile. Theodore L. Garrett: --That's correct, Your Honor. Byron R. White: And that's true even if they act within four months? Suppose they act within four months and disapprove, and you say they nevertheless may not be fined for the... for their noncompliance with the original plan up till then? Theodore L. Garrett: That's right, although as a practical matter that situation would virtually never arise. Byron R. White: Well, that's your position anyway. Theodore L. Garrett: Yes. Under the statute they're required to give 30 days' notice. Byron R. White: Uh-huh. Theodore L. Garrett: And then they can bring an enforcement action if violations occur beyond the 30th day. So the likelihood of that hypothetical would ever arise and a suit would be filed within the four months is quite remote. Byron R. White: Well, it is... well, it's not unlikely that they... that they'll take longer than four months, obviously. And once they... once... even though they disapprove and then you have to comply from then on with the original plan, you say they may not fine you for the... for the period up until disapproval? Theodore L. Garrett: That's right. What we're saying, Your Honor, is that the company needs someplace to look as to its compliance obligations. And in a situation where the state-- Byron R. White: Well, but that's not... that's not very hard, I wouldn't think, until the plan... until the revision is approved-- Theodore L. Garrett: --Well, if it's-- Byron R. White: --you've been under an obligation. Theodore L. Garrett: --It's hard in two respects. If you believe that state choices are really supposed to have primacy under the statute, and indeed the state can go into state court and enforce the revision against the company, we think that it's fundamentally unfair to put a company in that position of being subject to conflicting obligations-- Byron R. White: Well, I know, but your position is that... let's assume there was an express four months limit for a revision and let's say that EPA had never exceeded four months, you say that... that the company should be able to assume that the revision will be approved at least within that four-month period, because you... you say you're... you just don't have... you're excused from compliance with the original plan for... for up till four months. Theodore L. Garrett: --What we're saying... now, the Cyanamid court actually adopted a slightly different approach. They said you could start the clock running after the four months. Byron R. White: Well, I know, but your position is-- Theodore L. Garrett: Our position is that the company should look to state law and be expected to follow what the state adopted after public hearings until EPA makes a decision one way or the other, because EPA is in a state of neutrality at that point and the company ought to be able to assume-- Byron R. White: --But the statute requires before... before a state plan goes into effect originally, or a revision, the statute requires approval. Theodore L. Garrett: --That's correct, Your Honor. And what we're saying is that the other alternative which would allow EPA in effect to veto state plans that are very well considered plans adopted after public hearings and by the entity of government that Congress really entrusted to make these decisions, would basically switch the presumption... it would be... you'd have a situation where all state plans are presumed disapproved under the statute even though EPA had not made any showing that there were any grounds for such disapproval. Byron R. White: So you... you say the... the court of appeals didn't... didn't go far enough? Theodore L. Garrett: Yes, Your Honor. Byron R. White: Yeah. You think another court of appeals has got the best of it? What is it, the Fifth Circuit or-- Theodore L. Garrett: The Fifth Circuit approach is the approach that comes closest to our position, yes. I'd like to reserve my time-- Antonin Scalia: --It is... it is the consequence of your position, if I understand it, that during the period that... that a revision is pending the Federal Government cannot enforce anything? It can neither enforce the old plan nor the revised plan. It must rely entirely upon the states for... upon the state for enforcement? Theodore L. Garrett: --With... with one small qualification. If there are common elements of the two... in other-- Antonin Scalia: Right. Theodore L. Garrett: --words, if the original plan says A plus B and they've been revised-- Antonin Scalia: Right. Theodore L. Garrett: --and the plan says A plus C and it's intended that there is some separate element, yes, certainly the Agency can enforce under that circumstance. But basically where there's... to the extent that there's a revision, what we're saying is that the states can enforce the revision and EPA should be barred from enforcement. And that bar serves as a salutary purpose. It serves to encourage the Agency to act promptly so that there can be a consensus between the Federal and state governments as to what should be enforced. If I may, I'd like to reserve my remaining time for rebuttal. William H. Rehnquist: Thank you, Mr. Garrett. Mr. Wallace. Lawrence G. Wallace: Thank you, Mr. Chief Justice, and may it please the Court: I would like to preface my remarks by pointing out that the time limitations that were specified in the Act in 1970 in order to get the states to make prompt submissions and EPA to move on them within four months were designed to get into place protections of the public health which were not yet in place under the previous versions of the Clean Air Act. And enforcement authority was included in the 1970 Act so that these protections of the public health of the breathing public would be in place and enforceable. The enforcement authority was given both to the EPA and to citizen suits, and citizen suits could also be brought by the states under the definition of who is a person in the Act who can bring a citizens' suit. But the primary enforcement authority was in the EPA. In order to bring a citizens' suit, the EPA first must be notified and the citizen suit can proceed only if the EPA has not brought a suit and is not diligently prosecuting it. So that Petitioner's submission at oral argument would turn around the explicit priorities of the enforcement provisions as well as undermine the basic purpose of what after all was entitled the Clean Air Act, which was to get protections for the breathing public in place. Sandra Day O'Connor: Mr. Wallace, would you agree that the EPA is required to act within a reasonable time on proposed revisions? Lawrence G. Wallace: Absolutely. That is part of our submission, that it is a duty imposed by the Administrative Procedure Act in-- Sandra Day O'Connor: Well, what is a company to do if the EPA does not act on a proposed revision and when the facts show that the revision clearly meets the standards of the Act and must be approved ultimately? Now, that's... that's the alleged position that the Petitioner is in. And whether or not it's true, let's assume that's true. Then should the EPA be able to, under those circumstances, continue to enforce the older plan? Lawrence G. Wallace: --I think the court of appeals reached the correct answer, which is, yes, with two qualifications. One is that in determining what penalties, if any, are appropriate, all of these questions of the equities of the particular case will be taken into account in the penalty proceeding. And the other is that mandamus actions do lie to get the EPA to act. But I must point out that in this case the EPA has disapproved this proposed revision, so that it is not exactly Petitioner's situation that is posed in the hypothetical. And as a matter of fact, a case is pending now in the Court of Appeals for the First Circuit in which Petitioner is challenging the disapproval. We recount that in our brief. So I'd like now to point out that if we analyze Petitioner's claim and the American Cyanamid rule adopted by the Fifth Circuit in relation to the statute that is before the Court, the extraordinary lack of legal footing for this claim is revealed. And our analysis proceeds in five short steps, which I can summarize very briefly. The first is that it is undisputed and cannot be disputed under this Court's decision in Train that Petitioner's legal obligation under the statute is to comply with the requirements of a SIP that is in place. That's what the Court held in Train. And here the SIP was adopted... the state implementation plan was adopted by Massachusetts and approved by EPA to address Massachusetts' very serious ozone problem. Two, the Act explicitly confers authority on the government to bring an enforcement suit against a source of emissions for failure to comply with the requirements of the SIP. Now, number three-- Byron R. White: xxx in that regard, suppose the EPA approves a revision and... but meanwhile, obviously, the... the... or, it so happens that the company has not been living up to the unrevised plan, to the original one, can you then fine the company for that period up till approval of the revision? Lawrence G. Wallace: --A suit could be brought. There is enforcement authority. The Act is concerned with damage to the public health that occurs-- Byron R. White: So your answer to the question is yes? Lawrence G. Wallace: --Yes. Byron R. White: Yes. Lawrence G. Wallace: Although, as a matter of enforcement policy, EPA does not ordinarily bring such suits. We've pointed that out in footnote 32 of our brief on page 29 and explained the enforcement policy that EPA has been following. Now, to return to my brief analysis here-- Antonin Scalia: Of course, the company here had no real reason to think that that policy would apply because fairly early on, as I recall, there was indication that EPA would oppose this... this revision anyway. Lawrence G. Wallace: --EPA even testified in the state proceedings that it had doubts about it. And there was considerable communication between the state and Federal authorities, as there should be. This is an Act that contemplates cooperation between the state and Federal authorities. Of course, EPA could not state a concluded view in the state proceedings, but it did certainly indicate its doubts. And it urged the state authorities to pursue the course they did, which was to try to negotiated a so-called delayed compliance order, which would have required General Motors before making this major technological change to take some steps to improve the emissions situation as it was existing. It would have set up a schedule of improvements. But those negotiations failed. Antonin Scalia: In a way, Mr. Wallace, your position would be better for purposes of this case if you didn't have that humane enforcement policy. That is to say, if it was your policy to go after lawbreakers whether or not the manner in which they were breaking the law was later approved, because it seems to me one of the strongest arguments that General Motors has here is that your attitude towards the revision will... will be affected by the fact that you bring a prosecution. While the revision is pending, you... you come into court to prosecute somebody for violating it, it's very difficult later to say, yeah, it was a good idea after all, they were violating what was a stupid law and... and... you know, you're not inclined to approve the submission. Lawrence G. Wallace: Or the scheme-- Antonin Scalia: Now, that wouldn't be a problem if you prosecuted everybody anyway, see? [Laughter] Lawrence G. Wallace: --Even if we thought it appropriate to prosecute everybody, it would be hard to devote the resources to that endeavor. And the scheme Congress adopted is one which does not remove prosecutorial discretion and still confers the responsibility to pass on these proposed revisions. And we think of it the other way around. If somebody is making satisfactory progress, that's not the place to devote our limited enforcement resources, even though the progress may not be ideal and there might actually be legal liability. It's just the-- Byron R. White: What do you have? About three more to go? Lawrence G. Wallace: --Well, in this little analysis I thought I would mention these three more points. Number three, the Petitioner is asking the courts to erect a bar to the exercise of the government's explicit enforcement authority even though no such bar appears in the text of the statute itself or is adverted to in any way in the legislative history of the Act. Nothing is pointed to that shows that it was at all contemplated by Congress in enacting it. And at least the American Cyanamid court... and Petitioner hasn't totally renounced it... that court based this judicially created enforcement bar on EPA's failure to complete regulatory action on a proposed SIP revision within a four-month period supposedly required by the statute even though that alleged four-month requirement also does not appear in the text of the statute and is not adverted to in any way in the legislative history of the statute. And my fifth point in this brief analysis is that Petitioner seeks to justify its proposed judicial building of inference on inference here to supersede the statutory text on the ground that otherwise the Act's overall policy of state and Federal cooperation will be distorted to the prejudice of the states. And yet Massachusetts, the state whose interests are involved here, joined by 12 other states, has filed a brief in this Court stating, for very cogent reasons... and I commend this brief to the Court's attention... that their interests are better served by the government's ability to enforce the Act according to its terms. And it-- Byron R. White: xxx National Governors' Association position? Lawrence G. Wallace: --Well, that brief was earlier filed, and I think the Massachusetts brief which was filed along with ours as a bottom-side brief took into account that submission and improved on it considerably. The... the chief problem that we have with the National Governors' Association brief is-- Byron R. White: Well, it doesn't agree with you. That's one problem. [Laughter] Lawrence G. Wallace: --is... well, it goes part way. It says there should be no enforcement bar, but it assigns... it would have the Court assign to the district court in the penalty proceeding-- Byron R. White: Yeah? Lawrence G. Wallace: --the entire authority that the Act places in the court of appeals in reviewing EPA's action in disapproving a proposed SIP. It equates the role of the reviewing court reviewing administrative action under this Court's decision in Harrison against PPG Industries, with the proper role of the district court in one of these enforcement proceedings. So, I would have to commend the Massachusetts brief as the better reasoned of the two briefs, with all respect. Now, in developing a couple of these points briefly, there is a sixth point that I hope to make, and that is that even if it would ever be appropriate for courts to erect an enforcement bar in the circumstances I have outlined, it would not be appropriate here, in this Act it would be a misfit that would be out of phase with other provisions and policies of the Act. Now-- --Well, on that point, it is true that Section 110(g) creates just such an enforcement bar in a particular situation. So it's not a totally wild suggestion. It... it is... it is the fact that an enforcement bar in limited circumstances has been provided by Congress in the Act which, under this Court's jurisprudence, cuts more in our favor than against our point because it shows that Congress, when it thought it was appropriate, knew how to draft an enforcement bar, did draft an enforcement bar-- John Paul Stevens: Well, you say it knew how to draft it, but what was it saying when it talked about the required four-month period in that very section? Lawrence G. Wallace: --Well-- John Paul Stevens: How good was its draftsmanship? Lawrence G. Wallace: --We... we have addressed that in our brief to the best of our ability. We-- John Paul Stevens: Which suggests to me that you don't think it was very good draftsmanship. That's my very point. [Laughter] Lawrence G. Wallace: --We suggest that the way that provision evolved may be an explanation of why there was a reference to a required four-month period. The provision was dealing entirely with this temporary emergency suspension authority that it... it deals with and that was the focus of congressional attention. And the conclusion that we have come to is that it contemplates that in those situations EPA should act within four months. But it does not in terms impose a four-month requirement nor is there a requirement elsewhere imposed in the Act, nor was it adopted at the time the 1970 provisions that Petitioner is relying on were adopted. So, this is a... a... something that-- John Paul Stevens: Well, even if they're not all adopted at the same time, they're all part of the same statute now. Lawrence G. Wallace: --That is correct. John Paul Stevens: Yes. Lawrence G. Wallace: And they can shed light on one another. And we have attempted to reconcile all of the provisions of the Act in a way that will help them to fit together. There is legislative consideration now of further amendments to the Act, and while-- Byron R. White: It wouldn't make any... I... it wouldn't... wouldn't your position be exactly the same if there was an express four months provision for approval of a plan? Lawrence G. Wallace: --It certainly would. Byron R. White: So-- Lawrence G. Wallace: That there should be no enforcement bar nonetheless. Byron R. White: --Exactly. Lawrence G. Wallace: And as a matter of fact, we are entirely content with the judgment of the court of appeals, even though we think the court of appeals was wrong in saying-- Byron R. White: Well, every court of appeals has implied a four-month period, contrary to your view. Lawrence G. Wallace: --Well, we hesitated because of that. But even though they have all said the emperor is draped in that, we cannot find it in the statute. We don't-- Byron R. White: Well, yes, but-- Lawrence G. Wallace: --think it makes-- Byron R. White: --your position-- Lawrence G. Wallace: --much sense. Byron R. White: --Your position remains the same on enforcement. Lawrence G. Wallace: It... it remains the same as the First Circuit's position. Byron R. White: Then, if it does, I don't know why you are... you lie down for the court of appeals' view that... that your enforcement power really is limited by the discretion of a judge to keep you from fining this company if it makes certain determinations. Lawrence G. Wallace: Well, see... well, we agree with the court of appeals that the question in the penalty phase is whether there was unreasonable delay by EPA to the prejudice of... the company and how that should be taken into account. And the... the four-month interpretation is largely beside the point. To some extent it may mean that four months is by definition not unreasonable, if the statute has specified a four-month period. But we think it can be distracting because it's not there, it's impractical. There were very plausible reasons for Congress to make a difference between the time for acting on the initial submissions and the time for acting on proposed revisions. And we don't think that distraction should be part of this Court's analysis. There's certain-- Antonin Scalia: Mr. Wallace, could you explain to me again what... what effect you do give to... to the... to the reference to the required four-month period in (g)(1)? What effect do you give to that? Lawrence G. Wallace: --We... we take that-- Antonin Scalia: You say that-- Lawrence G. Wallace: --as a guide that in the situation when the state brings to our attention that it's a temporary emergency suspension-type of situation, where the governor is at least contemplating invoking that authority, that EPA is supposed to act within four months. Antonin Scalia: --And the suspension only lasts within... for four months? Lawrence G. Wallace: He can then suspend it for four months. As we read that statute, that is after the four-month period within... in which it is pending before EPA. That statute is set forth in the appendix to our brief. Antonin Scalia: (1)(a), right. Lawrence G. Wallace: On the very first page of the appendix to our brief. And the governor's authority-- Antonin Scalia: Right. Lawrence G. Wallace: --after the little inset part-- Antonin Scalia: Right. Lawrence G. Wallace: --it says, which the administrator has not approved or disapproved under this section within the required four-month period. So it seems to us plain on the face of it that the governor's suspension authority arises if the administrator has not approved or disapproved within four months. And it just doesn't precede that. And that is why the court of appeals was correct in saying that this provision in 1977 indicated that Congress thought no enforcement bar would otherwise be available and Congress had to provide a limited enforcement bar for this situation of the temporary emergency suspensions. And even there where they thought an enforcement bar would be warranted, they limited it to a four-month suspension. Antonin Scalia: I see. Lawrence G. Wallace: So the court of appeals felt that in interpreting the Act as not otherwise allowing the courts to impose an enforcement bar, it was reconciling the '77 amendments with the '70 Act. In fact, the court of appeals really understated it because otherwise the '77 amendment would be that the temporary emergency suspensions would have only a four-month enforcement bar and other proposed revisions would have an indefinite enforcement bar. Anthony M. Kennedy: But getting back to the statute, you simply take the words "the required" and say they're synonymous with the word "a"? Lawrence G. Wallace: Well-- Anthony M. Kennedy: "Within a four-month period"? Lawrence G. Wallace: --We think... yes. The answer is yes and we think that it evolved because there was a requirement at one time in the House version of that bill in 1977. And there may not have been an adjustment in the statutory language. But that has to be surmise on anyone's part. The background of the... of the consideration of that amendment would suggest why it may be worded that way, Mr. Justice. And that's the best we can say about it. Antonin Scalia: Mr. Wallace, I'm... I'm a little surprised that the government is so lackadaisical about, you know, whether it's four months or who cares whether it's a four-month requirement or not. You're clearly not even trying to meet the four-month requirement. I mean, if it's a provision of law, you should be breaking your back to meet it. But you come in here and say, well, you know, maybe it's four months, maybe it isn't four months, what do we care. Lawrence G. Wallace: Mr. Justice, I thought we were quite clearly saying that the four-month requirement does not apply and would be impractical to try to apply-- Antonin Scalia: But you said you're perfectly content to accept a lower court's decision on that and all the other courts of appeals which have said you're supposed to be acting within four months. Lawrence G. Wallace: --If... if-- Antonin Scalia: I would think that that's... that's the part of this case you should be most upset with. If you... If I conveyed that impression, I... I did not mean to convey that impression. We are not content to accept that reading of the statute. It happens to be immaterial to the judgment of the court of appeals in this case which we're defending, which is that no enforcement bar should apply and that the question in the penalty phase is whether EPA delayed unreasonably in the circumstances of the particular case. The case, as GM charges... it is really true that EPA is not even trying to comply with the four-month period. Lawrence G. Wallace: --Well, we don't believe it applies to us, and that is our submission to this Court. We're not, in our view, violating the statute. It certainly is not an express requirement of the statute, and we've explained in some detail in our brief why the notice and comment procedure under the Administrative Procedure Act, the difficulties in making the scientific determinations that must precede the proposed approval or disapproval that's to be published to institute the notice and comment procedure, the fact that methodologies vary so much among the states that it's often necessary for both the EPA regional office and for the national staff to be involved because of-- Antonin Scalia: But... but, Mr. Wallace, you say it's not part of the statute, but it is a part of the statute as construed by several courts of appeals, which normally creates some kind of a duty to comply. Lawrence G. Wallace: --Well, we're... we're doing the best we can, but we... we-- Antonin Scalia: No, you're not. You're not even trying to do it within four months. Lawrence G. Wallace: --Well, we-- Antonin Scalia: You're not even trying. Partly because you know it can't be done, but... but-- [Laughter] Lawrence G. Wallace: --We're... the-- Antonin Scalia: Well, maybe it's very-- Lawrence G. Wallace: --There are other obligations under the Act, substantive obligations in the way we're to handle these proposed revisions, which have to be reconciled with whatever time limit the courts might think is the statutory guide to regulatory action. I... I... I will say that this question is getting explicit consideration in the current amendments, which are still in an early stage. But the Senate committee, the Senate Environment Committee, has reported out a bill which is now on the floor of the Senate. That bill is S. 1630, and for the first time it explicitly does have a time limitation for EPA's consideration of proposed revisions, and it's 12 months-- Antonin Scalia: --Well-- Lawrence G. Wallace: --in... in the bill as it now exists. And there is another provision-- Antonin Scalia: --Is this bill drafted by the same guy that put in the required four-month period? [Laughter] Lawrence G. Wallace: --And there is another provision that relates to the issue of this case, and I will read that sentence to the Court. It is... says, "Notwithstanding any other provision of this Act, each provision of such implementation plan and each permanent effect under such plan shall remain in effect and shall be enforced under this Act until a revision of such plan is approved by the administrator or a plan as promulgated by the administrator under Subsection (f). " where he has to promulgate a Federal plan. So, in addition to the 12-month requirement, the bill, as it's now pending, repudiates the American Cyanamid rule even in the context of a 12-month benchmark. Antonin Scalia: By way of anticipatory subsequent legislative history? Lawrence G. Wallace: Well, I... I'm-- [Laughter] --just pointing out that Congress is dealing with... with the question explicitly now, and it perhaps corroborates our point that our interpretation of the present Act is not so implausible that the courts would be justified in reading into it two provisions that are not there, one a four-month requirement and the other an enforcement bar. Since neither the legislative history nor the text of the Act would support the erection of those requirements by the courts, the only possible justification would be that the Act would be so implausible without them that the courts have to feel themselves under a duty to impose them. Harry A. Blackmun: Maybe, again, Mr. Wallace, we're dealing with very bad draftsmanship in Congress. It's not the first time. Lawrence G. Wallace: Not... not the first time. Congress has many responsibilities, just as the EPA does and others in the government do. Now, I want to point out in the very limited time that I have a very important point made in the Massachusetts brief, if I may, which is footnote 13 on page 23 of that brief, which is the most cogent point that has been made in response to the attempt to distinguish this Court's decision in Brock against Pierce County on the ground that here the enforcement authority would be barred only temporarily and can be regained after EPA takes action on the proposed revision. And Massachusetts and the sister states point out very properly that the Act applies to a large variety of problems, including some that endanger human health, such as the carbon-monoxide problem, where hourly measurements have been required, that temporary suspensions would be... of enforcement authority would be an extreme misfit in this Act dealing with very serious problems of public health. John Paul Stevens: Yeah, but they're only temporary enforcement after the state has said, we think it's perfectly safe to do it. Lawrence G. Wallace: That is-- John Paul Stevens: So then emergency you're talking is rather unlikely to arise. Lawrence G. Wallace: --Well, still and all, we're talking about interpreting an act that applies to a variety of emissions, some of which are much more serious in their short-term effects than others, and mistakes are made in these submissions, and mistakes that can have serious consequences. The citizens' suit provision is another one that-- William H. Rehnquist: I think you've answered the question, Mr. Wallace. Mr. Garrett, do you have rebuttal? Theodore L. Garrett: Just a few brief points, Your Honor. In response to the last point concerning emergencies, it should be understood that our position is that EPA does have authority under a separate provision of the statute to deal with those, and we would not claim a bar to deal with those kinds of emergencies. Our request for a bar only deals with state implementation plans. With respect to the commingling point and Mr. Wallace's comments about the government policy with respect to the negotiations of a DCO, the negotiations were simply that the government wanted GM to pay penalties as a price for getting the SIP revision. They weren't asking GM to make any other improvements or do anything else. They had just changed their policies on whether or not SIP revisions could be allowed for these purposes as a revision or whether a DCO with penalties was the appropriate remedy. And I would urge the Court to look at the Hannish memo... it's a May 1986 memorandum by an EPA official that we've lodged with the Court. It demonstrates the moving target problem in our brief. Mr. Wallace said that the Cyanamid remedy, or the temporary bar on enforcement is an extreme remedy. Well, we would submit to the Court that the mandamus remedy, or the First Circuit's remedies, are much more intrusive and extreme than the remedy that we propose. William H. Rehnquist: Thank you, Mr. Garrett. The case is submitted.

John G. Roberts, Jr.: We'll hear argument this morning in Case 14-181, Gobeille v. Liberty Mutual Insurance Company. Ms. Asay. Bridget C. Asay: Mr. Chief Justice, and may it please the Court: Under -- under the principles this Court adopted in Travelers, Vermont's collection of health care data is not preempted. The database statute does not affect ERISA plans in any way that undermines ERISA's core objectives, does not require plans to offer benefits, affect the financing or fiduciary standards for plans, or change the way the plans administer benefits to their members. Vermont is merely collecting standardized data that Blue Cross necessarily generates and already provides to the State for itself and other entities. Anthony M. Kennedy: And it hasn't been argued by Liberty, and we can ask them about that, that this is burdensome, that it might be different from State to State and so forth, and it may be that this sounds more in conflict preemption than statutory preemption. But can you just answer a few questions? Does this apply to people that are not residents in Vermont but that have been treated in Vermont? And does it also apply to people that are outside of -- that are Vermonters but are treated outside Vermont? I mean, what -- who is the universe to whom these -- this applies? And it seems to me that that would be difficult for plans to -- to figure out. Bridget C. Asay: As implemented by the board, Your Honor, the -- the database requirements apply to Vermonters receiving health care services from a covered insurer regardless of their location, so both inside Vermont and outside Vermont, if it's paid for by a covered insurer. It does not -- the board has chosen not to require data from non-Vermont residents receiving care in Vermont. With respect to the -- to the burden and with respect to the burden issue -- Antonin Scalia: You say it's chosen to. Does the statute authorize it to? Bridget C. Asay: The statute authorizes it to do either, Your Honor. Antonin Scalia: We -- we -- we ought to consider that, don't you think? Bridget C. Asay: I don't -- I don't believe so, Your Honor, because the -- the program that has been challenged here by Liberty Mutual is the program as it has been implemented by the board, and that -- that is how it has been implemented. And this kind of generally applicable health care regulation is not preempted for the reasons that this Court has expressed in a series of decisions, including Travelers, De Buono, Mackey, and Dillingham. Ruth Bader Ginsburg: What of the point that Justice Kennedy suggested, that -- that States can have different reporting requirements? So it's a little bit like Egelhoff in that respect, that if there were uniform requirements, that would be less burdensome, but if each State has its own specifications, then that becomes burdensome and costly. Bridget C. Asay: Your Honor, two responses to that. The first is that there is simply no evidence in this record that there is any cognizable burden on the third-party administrators who are health care insurers who generate this data and are providing it already in their capacity as insurers. Second, certainly some States may choose to do these programs differently, but as several of the amicus briefs explain, including the brief from the National Association of Health Data Organizations, these are carefully designed programs that track the electronic transaction rule under HIPAA that provides national standards for electronic claims transactions. Anthony M. Kennedy: Suppose States had different reporting requirements and the plan showed -- they haven't -- I don't think showed, but suppose they showed that this was burdensome. Does that affect the analysis of the preemption question? Bridget C. Asay: Only in this way, Your Honor: I think that the Court's holding in Travelers can be distilled to basically three questions. The first question is: Does the plan -- does the State law specifically and directly regulate ERISA plans only? That's not at issue in this case. It does not. The second question is whether the State is regulating in an area that Congress reserved to the States or is regulating in an area with which ERISA is principally concerned. And here the State is engaging in classic health care regulation, so on that question the answer is no. And then Travelers leaves open -- Antonin Scalia: Excuse me. You could say that it's engaged in health care regulation. You could also say it's -- it is engaged in data collection. And if you say the latter, that is something that -- that ERISA covers. Bridget C. Asay: Your Honor, ERISA governs plan financial reporting and plan disclosures to the members. It -- primarily the reporting requirements that ERISA sets out are about the plan finances: actuarial statements, statements of audited financial statements, information about how the plan is -- about the -- the degree of the plan's financial soundness. And nothing that Vermont is doing has anything to do -- Samuel A. Alito, Jr.: Is that still true -- John G. Roberts, Jr.: Well -- Samuel A. Alito, Jr.: -- after the Affordable Care Act? Doesn't the Affordable Care Act include in ERISA a section authorizing the Secretary to gather information from plans for the purpose of improving health outcomes? Bridget C. Asay: Yes. The Affordable Care Act made a technical amendment to ERISA, which in turn incorporated the Act's amendments to the Public Health Services Act. Those do not change the test for ERISA preemption. They're not part of the plan's annual reporting to the Department of Labor. There's a couple of reasons for that. One is that the Affordable Care Act itself has a -- has a -- an -- almost an anti-preemption provision, a provision that says that the Affordable Care Act only prevents those State laws that prevent the application of the Act. Part 7 of ERISA also, which has those amendments in it, is not part of ERISA as it was originally passed. That was added by HIPAA. And Part 7 itself has a provision that says it does not -- Samuel A. Alito, Jr.: But why does it matter -- Bridget C. Asay: -- affect the -- Samuel A. Alito, Jr.: -- why does it matter whether it was in ERISA as originally passed? It is in ERISA now. And it is sort of true that there is an anti-preemption provision, but there is also a provision in the Affordable Care Act that says that the -- the provisions that are added have no effect on the ERISA preemption provision. Bridget C. Asay: That's right, Your Honor. Samuel A. Alito, Jr.: So what do you make of that? Bridget C. Asay: What I make of that is that it does not change the test for preemption either way. And when -- when Congress passed the Affordable Care Act, Travelers had been on the books for years. The standards set forth in Travelers, which reserved, to the State's, health care regulation, was understood by -- by Traveler -- was understood by Congress, and it was not changed. And this program that -- that Vermont has adopted is a classic health care regulation. The data -- Stephen G. Breyer: It is health care regulation. Vermont also has laws that govern fiduciaries. So could they have a statute which says all fiduciaries, including fiduciaries -- ERISA fiduciaries must report -- fill out the following forms about how they -- how they invest their money. Can they do that? Bridget C. Asay: They could -- they could have a standard for -- Stephen G. Breyer: No, no, no. Can they do just what I said? Is -- or is that preempted? Bridget C. Asay: It would be preempted -- Stephen G. Breyer: Correct. Bridget C. Asay: -- as applied to the ERISA plan. Stephen G. Breyer: Now, suppose, instead of that, what they say is, what we would like is that all fiduciaries of ERISA plans send us each month a report of all of the benefits under the retirement plan that they have paid to any member. Can they do that? Bridget C. Asay: Your Honor, I think the answer to that probably depends on the area in which the State is regulating. Stephen G. Breyer: So what they're doing is they have their -- their Secretary of Health and Human Services that would like to know how wealthy or poor the workers are. So that's why they do it. Bridget C. Asay: I think that would prevent a very close question. Stephen G. Breyer: You think that's a close question? Bridget C. Asay: That is a close question. Stephen G. Breyer: Gee, I see case after case here that says that reporting requirements are a central function. You know, I -- you've read them just as well as I. And -- and it seems to me surprising that they can do that. Isn't that the job of the Labor Department. Bridget C. Asay: I think that is primarily the job of the Labor Department. And I -- I say that it -- Stephen G. Breyer: Because obviously, my question -- it's a good answer, because you're saying I'm not getting anywhere with this line of -- because you're -- because I'm going to say what about health care. That's the next question. My actual question I'm driving at is this: You should have the information. I have no doubt about that. But the question is whether you have to go to the Labor Department first or HHS and say, we want uniform rules here, or whether they have to come to you when the rules of 50 States turn out to be a mess. And you -- you -- you say you want to go first and let them come after me, and I think the other side says no. If you want to do what you want to do, go to the Labor Department, get a national rule that gives you large range to get what you want. Bridget C. Asay: And -- Stephen G. Breyer: And I don't know the answer to that question. That's why I ask it. Bridget C. Asay: And, Your Honor, the answer to that question is that, because this is classic health care regulation for which States are responsible -- insurance rate review, budget review, health care research -- it is an area in which States are permitted to regulate. And they're permitted to regulate even slightly differently from State to State. And as the Department of Labor, the Federal government agrees with us that this is an area that ERISA leaves to the States, even though it involves data collection, because ERISA cannot possibly have been intended to sweep away all collection of information from plans by States. Congress adopted a deliberately expansive definition of a welfare benefit plan and ERISA that includes, not just the direct provision of medical care, but also day care centers, apprenticeship programs, prepaid legal services. These are all areas in which when plans would act, they would necessarily be providing information to States. Samuel A. Alito, Jr.: I -- I see that -- I -- I see that argument as to ERISA as originally enacted, but I am very troubled by the fact that it now authorizes the collection of data for the purpose of improving health outcomes -- health care outcomes. I -- I don't see how that -- unless the anti-preemption provision saves the day, I don't see how that does not undermine your principal argument, which is that ERISA may preempt reporting of financial data and that sort of thing, but it doesn't preempt the collection of data regarding health care. Bridget C. Asay: Your Honor, the -- the scope of ERISA's preemption provision in 1144 is governed by what Congress intended when it passed ERISA in 1974. And the later amendments to ERISA regarding group health plans include the language that says, "does not affect or modify that standard." And so this Court, when it is considering the scope of the -- of the areas that Congress left to the States in 1974 -- Samuel A. Alito, Jr.: I really don't see how that can possibly be. If Congress enacted an amendment tomorrow that says one of the core purposes of ERISA is to collect health care information, and here is a -- here is the health care collecting requirement, you would say, well, that's not preempted, because that wasn't the purpose when they enacted the preemption provision, originally. Bridget C. Asay: I would certainly say that was not preempted if it was added to Part 7, which says that Part 7 does not affect the test for ERISA preemption in 1144. Antonin Scalia: Well, saying it doesn't affect the test is quite different from saying that -- that -- that nothing changes. The test remains the same, but now, that test is applied to collection, which -- which the Labor Department is itself conducting, or is itself authorized to conduct. That's not changing the test. It's simply -- it's simply changing the facts to which the test has been applied -- or the law to which the test has been applied. Bridget C. Asay: It would change the test, Your Honor, because if ERISA was now considered to have a broader, expansive scope that intruded into health care, that would change this Court's settled precedent in Travelers and De Buono. And again, Congress -- Antonin Scalia: Well, that doesn't change the test. Our test would still be the same whether it's a core function of ERISA or not, and -- and it has made it a core function of ERISA. Bridget C. Asay: It has not made it a core function of ERISA. It has -- there were -- it's the Affordable Care Act's amendment to ERISA, and again, there's also in addition to Part 7's preemption language, there is the Affordable Care Act's anti-preemption language, and to think that when Congress passed the Affordable Care Act, which contemplated a robust Federal-State partnership in health experimentation, which included language that authorized the Department of Health and Human Services to provide Medicare -- Stephen G. Breyer: But this is no problem for you. All you have to do is go to DOL or HHS. The State representative says, this is what we want to do, will you please promulgate a regulation. -- you can do it maybe in 90 days or 120 days -- which says that this and similar things are fine. And in our opinion, it is not -- it is not preempted. I think you could do that. That's my opinion. I may be the only one who thinks that. So I -- I think it's just a question of which forms you have to go through. But if we take you and say, I'm going to ask -- I'm really asking the government this question, because I don't see why they're on your side, and they'll have an answer to that. See, I want to find out. But what I want to find out is this: The factor I saw was 93 million people have these plans. And if 93 million people have these plans, there can be 50 States with 50 different sets of regulations imposing a huge financial burden upon health care. And were that to happen, suddenly all the people we're trying to help under this plan will find themselves much worse off, and purely for bureaucratic reasons. If I take their side of it, I can have some assurance that the purpose of Congress in these statutes will be fulfilled, because there will not be unnecessary, conflicting reporting requirements, which sound like nothing, but they're very expensive to -- to actually implement. Now, that's my basic problem. The same question for you, for the government, and for the other side, but the other side will agree with the way I put the question. Bridget C. Asay: And if I may try responding this way, Your Honor. The -- the notion that it's more efficient for the Department of Labor to collect a subset of standardized -- Stephen G. Breyer: You're not going to collect anything. All they're going to say is in our reg, you have permission to go and impose these requirements. But by having to go to them first, we prevent the conflicting requirements of 50 different systems. Bridget C. Asay: And it's possible that they may be able to do that. I'm not sure where that authority would come from -- Antonin Scalia: It -- it -- it isn't clear that they're able to do that, is it? Bridget C. Asay: No. Antonin Scalia: It isn't clear that a Federal agency can eliminate preemption by simply saying, okay, you can go ahead and do it. Stephen G. Breyer: I'm only asking. My point -- Antonin Scalia: Even though it's otherwise preempted under the statute, we say it's okay. I -- I think that's not a -- not a -- not a clear -- a clear question. Bridget C. Asay: It's -- I think it's not clear that they can do that. And again, I think the question for the Court is not what the Department of Labor can do, but what Congress reserved to the States. Anthony M. Kennedy: I -- I know your time is running up, but consider two cases. Case one: Vermont is the only State that requires this. Case two: 50 states requirement -- require this and it's all different and it's burdensome. Same preemption analysis? Bridget C. Asay: Yes, Your Honor, same preemption analysis as in Travelers and De Buono and Mackey. Anthony M. Kennedy: And same result? Bridget C. Asay: Yes, Your Honor, same result. As in Mackey, where this Court held that State garnishment litigation procedures as applied to the very benefits that the plan was paying out were permissible. Clearly, those were going to vary State by State, and involve the plans in State-by-State regulation. Sonia Sotomayor: On rebuttal, because I don't want to eat up more of your time, would you go through the -- through more careful -- more slowly, the fact that this information is all electronic, all of it already set out in the HIPAA regulations. And so it's just a question of -- and -- and now, all reporting is being done in one system, ICD-10, right? Everybody has to use the one computer system. Bridget C. Asay: I am not actually familiar with that, but I will -- if I may reserve my remaining time. John G. Roberts, Jr.: Thank you, counsel. Bridget C. Asay: Thank you. John G. Roberts, Jr.: Mr. Bash. John F. Bash: Mr. Chief Justice, and may it please the Court: I would like to start, if I could, with Justice Breyer's questions, and then hopefully I can move on to Justice Alito's questions about the ACA and Justice Kennedy's questions about the burden here. Let me set out how we see the interaction of the preemption framework and recordkeeping requirements, and then turn to what I think DOL's role is here. Both sides agree, essentially, that ERISA plans can be subject to some reporting requirements, probably many reporting requirements, incident to State laws in other substantive fields. So, for example, the Solicitor General gave the example of day care centers. ERISA plans can run day care centers. I don't think anyone doubts that you can have all sorts of reporting requirements to make sure the staff is trained, the facilities are safe. And so forth. This Court's case in De Buono upheld a tax imposed on employer contributions to an ERISA medical benefit plan that provided the medical benefits directly. And we told the Court at the time that that tax had all sorts of reporting requirements. So essentially, the question is here, where to draw the line between reporting requirements that are permissible and those that are nonpermissible. As I take Respondent's view, it's that they're -- it's certain information that is so core to the plan that you simply can't have State law reporting requirements about that information. I don't think that can be right. Take, for example, real property held in trust by a pension plan. DOL requires reporting on that. Obviously, you need to know the assets the pension plan has, but certainly a State taxing authority can require reporting about that same information to assess a property tax. The same was true with the tax in De Buono. The same is true, by the way, in Dillingham. That was a case about an ERISA-run apprentice program. And California law said, you either follow our standards for apprenticeship, or you have to pay a higher wage. I mean, that was as core as you get. It was literally the way the apprenticeship program was set up. So I don't think the test can be whether the information is, in some sense, core to ERISA. I think the test has to be, is this reporting requirement incident to a law in the field governed by ERISA, -- vesting, funding, fiduciary duties and so forth -- or is it incident to a law in health care, or in day care center regulation? Here, I don't think anyone disputes: This information is used for hospital budget review, for health insurance rate review, for medical research. There's no question that it's incident to classic State health care regulation. Elena Kagan: Why isn't there also a requirement that the law just not be burdensome over a certain level? John F. Bash: It -- it is, Justice Kagan. And I -- I think I cut short my test. The first inquiry is: Is this incident to a field that ERISA doesn't govern? I think that's satisfied here. But then there's still another question under Travelers, which looked to both purpose and effects of whether the effect of the law is so burdensome that effectively frustrates or impedes the design of ERISA plans or the administration of ERISA plans. And I think a law like this that imposes reporting requirements on a claim could theoretically be that burdensome. And so when -- Anthony M. Kennedy: How is that any different than conflict preemption? How does that give any special effect to the statute here? I mean, you could make that argument if there was no preemption provision. John F. Bash: Well, I -- I think the way it's different than conflict preemption, or at least one way,1. Is that if it actually is in the core field governed by ERISA, I mean, if the State said, we just want to make sure these pension plans are well-funded, so we're going to ask for reports incident to that role, it would be preempted even if the requirements weren't particularly burdensome. I mean, the Court has never held that in a specific case, but I think the Court's analysis leans towards that direction. So it could either be within the preempted field, in which case it relates to ERISA plans and it's out, or it could be so burdensome that it effectively frustrates the purpose of a uniform ERISA -- Antonin Scalia: The former sounds to me like standard field preemption and the latter like standard conflict preemption. John F. Bash: Well, I think there have been -- Antonin Scalia: Is that what you're saying? John F. Bash: There have been some well-written separate opinions in this area that -- Antonin Scalia: I know that. (Laughter.) John F. Bash: I don't think -- I don't think -- and here's what I would say about that: I mean, I know your opinion and the opinion of a few other justices have suggested we should shift to field preemption. I think if the Court were to say what we've been doing all along is field preemption, and it makes more sense doctrinally to classify it that way, from the Department of Labor's perspective, that would be fine. I think we would be a little bit concerned if the Court signaled to lower courts in its opinion that it was marking a big shift in its jurisprudence that could destabilize the law. We think -- Stephen G. Breyer: Why aren't you on the other side of the case? That is, I was fine with you until I read a few of these amicus briefs, and then suddenly I saw 93 million people. And there are associations all over the place that are worried about this problem. And they have a big chart where they show the possibilities of -- of conflict. You yourself are worried about conflict. Conflict among States in requirements means money. A lot of money. That's what they say, and that's plausible. So what I want to know is: What do you all propose to do about that in the U.S. government? One thing to do about it -- and I've looked up the regs, so maybe Justice Scalia disagrees, but I'm talking about what I think. All right? The -- the -- it seems like they would have authority to issue regs either way; blocking, or getting permission first. That's where I ended up, and that's what I wanted your view about. You see what I'm saying? John F. Bash: I see what you're saying. There's two pieces there, whether this actually has a burden and what we could do about it if there was. I didn't mean to suggest we think it has a burden. It's the view of the Department of Justice that the significant burden has not been shown -- the Department of Labor that the significant burden has not been shown here. So that starting premise, we do not agree with that. All I'm saying is that if a party could show that burden, that would raise a substantial preemption question and would be highly relevant to the preemption analysis. Elena Kagan: Then why hasn't that burden been shown? John F. Bash: Respondent submitted nothing below. I mean, really. They submitted an Internet fax sheet -- Elena Kagan: There's something very intuitive about their argument, and it's -- it's essentially what Justice Kennedy said. It's -- it's when 50 States devise 50 different requirements for this, different formatting, different particular information requested, that just all adds up to a lot of hassle, which all adds up to a lot of money. John F. Bash: Two points. I mean, first it seems far less burdensome than State laws this Court has already upheld, or that State laws that I think most people would agree have to be upheld. I mean, the tax -- or the surcharge in Travelers -- that was the case where you bought commercial insurance, you had to pay a surcharge up to 24 percent more on medical purchases, that's unbelievably burdensome, and surely had reporting requirements associated with it. And having to pay vastly different surcharges in 50 States could be burdensome too. What this Court's precedents have said, including Travelers and Dillingham and De Buono is that a mere burden is not enough. What has to be shown is that it interferes with the administration of benefits. So in Egelhoff -- John G. Roberts, Jr.: Well, but a consistent theme in our cases, when you say a mere burden is not enough, is that the government wants employers to, one, set things up -- they don't have to -- and two, they want the money to go to benefits, not to go to administrative and bureaucracy expenses. Is it your view in analyzing this question, do we look at what would happen if 50 States adopted different programs, or do we look at just Vermont because Vermont happens to be first? John F. Bash: The former. Our view is you have to contemplate the 50 States would adopt different regimes? John G. Roberts, Jr.: Yeah, I think that's right. So you don't think 50 different regimes of reporting is going to require a significant diversion of money away from benefits to administration? John F. Bash: Not -- not on this record. Mr. Chief Justice, recall -- John G. Roberts, Jr.: What kind of a record do you need to show that? John F. Bash: Well -- John G. Roberts, Jr.: Of course you can't have a record of what 50 States are doing if it's a hypothetical question. John F. Bash: Well, I think there's a couple ways Respondent could have made the showing here. I mean, at minimum, Respondent could have had its own third-party administrator come in and say these reporting requirements are burdensome; this is what we've had to do. We've had to change the way we process claims because they're so burdensome. I suspect they could not have made that showing -- Stephen G. Breyer: But you have pages 26 and 27 of the Blue Cross Blue Shield brief. And there they have a big chart, and there are all these organizations out there that are trying, like the Uniform Law Commissioners, to create uniformity. That's why I say that's why I'm puzzled as to what to do. Am I supposed to write an opinion that says even though Blue Cross Blue Shield feels it's a big mess and trying to straighten it out, they didn't make the right record in the Vermont trial court? How do I write that opinion? John F. Bash: Going to the -- the chart point, I mean, the chart actually doesn't show conflicting requirements. Most of the counterpoints they have is like not required. I don't think there are conflicting requirements. And even if you look at the end of the Blue Cross Blue Shield brief, they never actually say this is -- Stephen G. Breyer: I mean, I'm serious. How do I write the opinion? I suppose it could happen, but it hasn't happened yet. How do I write the opinion? John F. Bash: I think -- I think the opinion is written like this: One, this is a reporting requirement incident to a field that is not governed by ERISA, health care regulation. It's presumptively valid, but we're going to look and see if Respondent has made a showing that it's so burdensome, it fundamentally changes the way plans are administered or designed. Respondent has not made that showing here. That is how the opinion is written. I mean, this Court has never actually said that a burden is so bad that it's preempted, even if it operates in a field outside of ERISA. It has suggested in dicta that it's possible, but that is inherently a factual determination, and it's hard to see how the Court could reach that conclusion without some factual showing -- John G. Roberts, Jr.: So we go through at one point -- all of a sudden there -- the 11th State that does this, and it's the 11 different things, we say is that a burden? Is that a sufficient burden? We say no. But then when 30 States do it, maybe it's a different answer. That seems like a very odd preemption analysis. John F. Bash: Well, I -- I don't think it should turn on that, Mr. Chief Justice. I do think it's appropriate for a court to consider what if 50 States impose different requirements like this. But just like 50 different States might have different requirements for daycare centers, or for prepaid legal services, that, I don't think, is the sort of burden -- John G. Roberts, Jr.: Well, but this goes to basic, very comprehensive reporting of data. It's not simply, well, if you run a daycare center, you have to comply with the rules about daycare centers. Of course you do. It's quite different. One of the things ERISA plans do is report data and compile data. And it seems to me that the analysis that says, well, daycare centers you can. That seems a little bit off basis. John F. Bash: May I respond, Mr. Chief Justice? John G. Roberts, Jr.: No. Of course you can. (Laughter.) John G. Roberts, Jr.: Please. John F. Bash: I think that the -- I'll try to do it in two sentences. I think that the burden here is far less substantial than the burden of complying with State apprenticeship regulations for the way you designed the program in Dillingham. Here, most self-insured plans use third-party administrators. And often those third-party administrators are insurance companies that already have the infrastructure in place for reporting requirements as applied to them which cannot be preempted under ERISA. John G. Roberts, Jr.: Thank you, counsel. Mr. Waxman. Seth P. Waxman: Mr. Chief Justice, and may it please the Court: A signal goal of ERISA enacted in 1974 was to foster employee benefit plans that could operate nationally under nationally uniform rules of administration, first and foremost, rules about recordkeeping and reporting. Now, of course ERISA plans, like other regular businesses, are subject to ancillary regulation like maintaining a safe workplace, paying minimum wage and prevailing wage laws, paying their State real estate taxes on their headquarters, and if they choose to run a hospital, run a law firm for their legal services, benefit program, run a childcare center, they are subject to local regulation like other providers of those local services. But in every single case in this Court, and every lower court decision that I have found in which courts have upheld, State by State, reporting requirements, it has always been incident to a substantive obligation that the State could impose. And no one contends that Vermont could impose substantive regulations on the claims that Liberty Mutual pays under its employment plan. Now, I want to go to the point of -- Elena Kagan: Mr. Waxman, why was it that you introduced absolutely no evidence of burden in the lower courts here? Seth P. Waxman: That is not true, Justice Kagan. What -- we did not introduce any evidence about what it would cost us in dollars and cents to have Blue Cross Blue Shield comply with the Vermont request that is the subject to the subpoena. But we did introduce substantial evidence in the record below, and -- and some of it is included in the Joint Appendix, and all the pages that are extra long folded in, about what it is that we have to do, both in Vermont and in the then 15 other States that imposed very, very different reporting obligations. So we didn't put a dollars and cents in, but we did make the lower court, the district court, on its request, very aware of this very substantial burden. And Congress, in determining -- in -- in deciding to, in exchange for blanket Federal regulation of these fostered national plans, to grant a very broad preemption provision that says this is going to be Federal regulation -- Stephen G. Breyer: What about the converse -- Seth P. Waxman: -- not State regulation. Stephen G. Breyer: What about the converse? What about the converse point for you that I was making before? The number that jumped out from the page is the 93 million people this affects. Now, that's a huge number, and therefore the risk of conflicting regulations is serious -- Seth P. Waxman: It's -- Stephen G. Breyer: -- in raising costs. That's for you. But they say it hasn't been shown yet -- Seth P. Waxman: Well, that -- Stephen G. Breyer: -- so I ask you: If it does come about, if it should come about and you lost this case, why can't your clients go right to the Department of Labor, whose regulations I've read, or possibly ACCA, and say, we want you to impose a uniform national data collection system or the equivalent, put limits, and then preempt the conflicting State limits? Now, it may be other members of the Court do not agree with this approach, but I've written a case, MetroMedia, where I think the agencies have a lot of power there, and I think they have more capacity to decide this kind of thing than a group of judges. So what about that for you? Seth P. Waxman: Justice Breyer, on a couple of points: First, in the lower court and in this Court, neither party on the other side has disputed what I think is the self-evident proposition, that the Department of Labor and now the Department of Labor and the Department of Health and Human Services, absolutely have the statutory authority under ERISA to impose the kind of recordkeeping and reporting requirements that Vermont and now 17 or 19 other States do. They have never disavowed that. The -- the SG's brief at both the invitation stage and the merits stage sort of coyly suggests that that's right, and -- Elena Kagan: Well, that sounds like a one-size-fits-all solution, and there's some value to States being able to think about their own health care needs. Seth P. Waxman: Of course. Elena Kagan: And to think about what things they want. So I mean, just again, let's go back to this burden because it is a very intuitive idea that you have on your side: 50 different States; that's a lot of money. But I guess I wonder why it is a lot of money. I mean, as I understand what's going on here, that all the data that's being requested is data that Blue Cross Blue Shield generates anyway. That all the data that's being requested is data that Blue Cross Blue Shield reports for other people. That really this is a formatting question, even with respect to the wide variety of States, that the States have started getting their formatting more uniform. So I -- I mean, you know, it's -- you can say it's 93 million people, but, you know, in the end what's the cost? Seth P. Waxman: Oh. Elena Kagan: And why don't you have it in the record? Seth P. Waxman: Okay. I -- there is not a -- with respect to burden, Congress, in enacting the preemption provision and their -- we -- we've cited to the Court place after place in the conference reports, the House reports, the statements of the sponsors, the recognition in -- in repealing the Disclosure Act, which set a reporting -- a national reporting floor and allowed the States to add onto it and record evidence before Congress that small plans were spending up to 40 percent of their entire assets on State reporting. Congress made the determination that this Court has reflected in many, many of its decisions, including Egelhoff, that the very fact that there could be 50 different State regulations is the burden that the preemption provision is designed to address. And the notion -- and that -- Ruth Bader Ginsburg: Well, we know -- we know, Mr. Waxman, that Blue -- Blue Cross is providing this information with respect to individuals that its own plans insure, and we're told that it is providing the information for other self-insured ERISA plans who didn't make this objection. So do we know at least what is the burden of providing that information for the other self-insured ERISA plans that Blue Cross is -- is providing the information for? Seth P. Waxman: Justice Ginsburg, the Blue Cross Blue Shield Association has actually filed a brief in its -- in this case, and it explains at great detail, as does the brief of the multi-employer plans, which like Liberty Mutual operate in 50 States, about the burden, about the fact that Blue Cross Blue Shield doesn't have all this information in the normal course, the multi-employer plans don't have it, and Blue Cross Blue Shield, as a third-party administrator, has told this Court just exactly how burdensome and how expensive it is. Of course they could do it for Liberty Mutual in Vermont. The only question is how much it's going to cost and how much they're going to charge. But look, for example, at since this -- since this litigation began, the Commonwealth of Massachusetts has now told Liberty Mutual that it wants reporting under its APCD statute. And as we recount at page 36 of our brief, their regulations require, among other things, the premiums the plan charges, its actuarial assumptions, the summary of its plan designs, the plan's reserves, its surplus, its provider payments, its provider levels, and information about medical procedures whose claims are denied. And the chart that we submitted in the district court reflects the wide variation in States. There is -- the -- the burden that Congress foresaw is coming to play before our very eyes as States -- more and more States adopt these mandatory plans. John G. Roberts, Jr.: Is that information, the -- the -- the laundry list you went through, is that already available at Blue Cross Blue Shield and being reported somewhere else? Seth P. Waxman: No, it is not. Absolutely not. And the Blue Cross Blue Shield Association amicus brief reports that. The multi-employer plan brief reports that they only -- that their plans generally have about 70 to 80 percent of the information that's required by any one of these States. And to go to -- I think it was Justice Breyer's hypothetical -- look, the same rules that apply here are going to apply to pension plans. And the State of Vermont, like many other States now, is concerned not just about health care costs and delivering good health care outcomes, but it's concerned about the financial well-being of its senior citizens. And in fact, they've asked the Department of Labor to permit State -- States to operate their own ERISA pension plans for their residents. Now, they could pass a database statute that says, we're really concerned about whether elderly, you know, Vermonters are going to have enough money in their elder years, and we know that 93 million people are covered by employer pension plans, and we just want you to report -- you can pay whatever you want, but we want you to keep records and report to us about what your plan is and how much money people are going to have when they retire. Every single dollar -- Stephen G. Breyer: Why can't you do this? Seth P. Waxman: Well, every -- Stephen G. Breyer: Why can't you -- why can't you simply go -- and the statute says, 1143(a)(1) -- the statute says that the Secretary of Labor and the authorities -- broad in these -- has authority to undertake surveys and collect, compile, analyze, publish data information and statistics on welfare plans. Okay? That's ERISA welfare plans. So you go to them. Seth P. Waxman: Well -- Stephen G. Breyer: And you say, DOL, we want you to promulgate a reg that says you will collect some of this information, but even if you collect -- don't collect it all, you let the States collect the rest. Seth P. Waxman: Just -- Stephen G. Breyer: Now, they can prevent it from being burdensome. Seth P. Waxman: Justice Breyer, I know how exciting it is to get in the middle of a jurisprudential debate between you and Justice Scalia. Stephen G. Breyer: But this -- Stephen G. Breyer: I don't see -- this is not -- go ahead. Seth P. Waxman: I'm -- my -- my fingers are tingling at the prospect. I am not sure -- (Laughter.) Seth P. Waxman: I am not sure that the Department of Labor has the regulatory authority to essentially excuse the preemption provision, but -- and you don't have to just go to the provision of ERISA that you quoted -- in 1024(a)(2)(B) of ERISA, it authorizes the Secretary of Labor to require the production of, quote, "any information or data from an ERISA plan where he finds that such data or information is necessary to carry out the purposes of this subchapter." And adverting to Justice Alito's comments, in the AHCA, the Secretary has the authority to require the production of -- from plans of, quote, "any other information as determined appropriate by the Secretary." So the notion that preemption here is sort of like an -- operates like an accordion -- if the Department of Labor has the authority to get it but hasn't chosen to exercise, it's not preempted; but if they did promulgate a regulation, either of your color or Justice Scalia's color, that it would be preempted -- is a crazy -- is a crazy notion. Stephen G. Breyer: You might think this is not sane, but what I'm -- the way I'm seeing it here is there are two competing problems. One is they should be able to get information like this in the States. But two, there is a problem of burden. And I think there are probably 100 or 200 people in Department of Labor and HHS that could write regs that reconcile those problems and allow both. But I can't, because I'm a judge. So what I'm trying to figure out is how to interpret this statute in a way that achieves those objectives. Seth P. Waxman: How to interpret this statute as to say that in exchange for blanket Federal regulation of these plans, now augmented in the context of health care plans by the Affordable Care Act, the -- by the Federal government, the States are preempted from regulating the core functions of what an ERISA plan does. And there is nothing more core than the payment of benefits. If the State is attempting to regulate, whether it's by substantively regulating or imposing a recordkeeping or reporting obligation about the very activity that defines it as an -- as an ERISA plan, the payment of benefits, that State law necessarily relates to, because it has a connection with, an ERISA plan. And frankly, it's pretty ironic that the Petitioner and the government claim on the one hand that it is so important to get this information from these plans because 60 percent of all citizens in the United States get their health care from these self-funded plans, and yet requiring them to keep the particular records that the State wants and to report it on a quarterly, annually, or monthly basis, has no relation to or connection with the plan. I don't understand how both of those thoughts can inhere at the same time. Elena Kagan: Mr. Waxman, I guess I just don't understand this argument. I -- I -- I mean, I -- I understand completely that there should be some restriction on overly burdensome State regulations of whatever kind. You know, it could be taxes, it could be day care, it could be anything. Right? But why is it that this regulation falls in a different category than taxes or childcare or anything else? Because the State here clearly is not attempting to, and is not regulating, payment of benefits. It's doing something that has an effect on your operations, no doubt, but the State is operating in a completely separate area for completely separate purposes in a way that does not trump or conflict with, or anything else, the choices that ERISA has made as to payment of benefits. Seth P. Waxman: Okay. I -- I want to -- I want to come to the end and dispute that premise that you -- the end of your question. But if the -- if you look at this Court's cases that have set about to evaluate the burden, or at least included, as in the last section of Travelers, a section that says of course if this were terribly burdensome there might be another question, those are cases -- and it's Travelers, Dillingham, and De Buono. We all agree on that -- those were all cases in which there was a burden being placed on an entity that wasn't -- in Travelers it was hospitals; in De Buono it was hospitals; in Dillingham it was apprenticeship programs, all of which affected the price that ERISA plans might have to pay to get benefits or services from those kinds of providers. And so it took several sentences in each of those -- several paragraphs in each of those opinions even to explain how putting a tax on the non-Blue Cross insurance plans in Travelers, or respecting the prevailing wage rate in California, actually had an effect on any ERISA plan anyway, because they weren't regulation of the plans, per se. They were indirect regulations. And when the regulation is indirect, that is, it is not a regulation that is directed at the very activity that makes the plan an ERISA plan, you do look at burden. And indirect regulation obviously can occur. But if -- as this Court explained in the last section of Travelers, if it's too burdensome, it might be preempted. But where the regulation is direct, where the State is requiring reporting because the self -- because the self-insured plan is engaged in the very activity that brings it under ERISA that qualifies it as an ERISA plan, that obviously relates to and has a connection with the plan, and is preempted. Ruth Bader Ginsburg: You're -- you're saying that the State simply cannot have an all -- all-payer database, that that's out because ERISA precludes it, even though it's going to leave a big hole in the information that the State has about that health care being given to its citizens, Seth P. Waxman: I don't think that that's at all the case, Justice Ginsburg, and I don't want to be misunderstood about this. The State of Vermont, just to take one example: The database statute authorizes the relevant Secretary to obtain this information from everybody, not only who pays for health care in Vermont, but the hospitals and clinics that provide it. But the Secretary, the executive official has chosen not to require that information from hospitals and clinics and doctors in Vermont. There is also no doubt that if all-payer claims databases so badly need the information from self-funded plans, and it turns out that the self-funded plan -- a significant number of self-funded plans say no, that's preempted, the Federal government has all the authority it needs to get that information and require that that information be provided, either to the Secretary and then to the States, or directly to the States. And in fact, they can do what often happens in areas of field preemption and express preemption, which is to make it worth the plan's while. You know? They can offer all sorts of benefits to self-employed plans to provide this information if it's so important. What's interesting when we're talking about what is or isn't in the record in this case, is no explanation whatsoever from the State of Vermont at any stage as to why they haven't requested the actual providers of these health care services to provide the information and that it is inadequate. I mean, the -- the -- the only exchange I can recall is in the Second Circuit oral argument transcript, which is recorded and discussed in Judge -- Judge Straub's dissenting opinion, the State was asked, you know, look, how important is it to get the -- the -- the district judge -- I think it was the district judge -- Anthony M. Kennedy: Well -- well, as -- as you're explaining this, it just seems to me it's much easier to ask the plan provider than to ask 15 doctors in -- in -- in one small town, and 50 others, and all the patients -- Seth P. Waxman: You know -- Anthony M. Kennedy: -- unless I misunderstand your point -- Seth P. Waxman: No, you're not. Anthony M. Kennedy: -- it seems to me it's much -- much easier. Seth P. Waxman: It -- perhaps it's easier, but here's the point. And this is the insight of the ERISA preemption provision: The hospitals in Vermont, the clinics in Vermont, the medical practices in Vermont are not subject to varying regulation in 50 different States. They operate locally. They're subject to State regulation. Here, we're talking about plans that Congress wanted to encourage that would do something new, that would provide health care benefits and other employee benefits on a national basis, and in order to foster that, to subject them to a single set of reporting, recordkeeping, and regulatory obligations. And that, it seems to me, is the insight of ERISA. And it was the -- the bargain that ERISA plainly struck. I -- I simply noted in response to Justice Ginsburg's question that the State statute gives them the authority to do it. There aren't that many hospitals in Vermont. They already have all the information about what services are or aren't being provided. The State could have said, no, no, no. We absolutely can't get by without this. But the representation at oral argument in front of the judge, which has already been transcribed and is in the record, the State -- the lawyer representing the State -- the judge was sort of trying to settle this case and said, you know, how much do you really need this information? And the response was, we don't really need it. This is just a couple of employees. This is just one plan. But there's a principle here. And we agree with that. And we also agree with the representations of my friends on the other side that the question for this Court -- it has to take account of the possibility, which is the emerging reality, that all 50 States and the District of Columbia and Puerto Rico will have their own mandatory all-payer claims databases that will require different things. And if I can just anticipate Justice Sotomayor's question reserved for rebuttal to -- to the State of Vermont, our brief explains, and the Blue Cross Blue Shield brief also explains, how there are -- of the hundreds of data fields that Vermont alone requires, there are dozens of them as to which there is no ICD -- whatever the -- the -- the agreed national format is. There are dozens and dozens of them as to which there is no HIPAA standard, no HIPAA guarantee of confidentiality. And this is just one State. If you look, as I said, at the Massachusetts APCD statute, which is the only other State that's actually come to Liberty Mutual so far, and look at our discussion of it on Page 36, the stuff that they are asking for is so obviously critical to what the plan does. Ruth Bader Ginsburg: But this is -- this information is provided by Blue Cross for some self-insured plans, right? Seth P. Waxman: I believe that -- I believe that the record shows that Blue Cross Blue Shield provides this information to Vermont, not only on behalf of itself as an insurer, but also some other -- Ruth Bader Ginsburg: And do we know -- do we know what costs Blue Shield then passes on to those other self-insured plans? Seth P. Waxman: We don't know it. We were not able to get it from Blue Cross at the time the case was before the district judge. But in any event, as the Chief Justice's question suggests, the -- this issue doesn't end at Vermont. It -- it has to take account of a burden that Congress was very, very aware of, it was very cognizant of the regime under the Repeal Disclosure Act, and the costs of plans that are trying to be national plans complying with 50 different State regulations. And I really commend to the Court the amicus brief filed by the multi-employer plans in this case. These are plans that are essentially union-sponsored plans. They are not fancy plans. Every dollar that they have to spend comply -- gathering the data that each State -- that different States say they have to have comes directly out of the benefits that they can pay. Just as if -- if Vermont decides next week, if it wins this case, that it wants to get information about pension plans, and how they're being administered, and what benefits are being provided and not provided, those are all 100 percent self-funded plans. If my employer has to provide all that information, that is coming out of my 401(k) benefits. Elena Kagan: Mr. Waxman, could a State pass a tax law that requires information about -- about pension disbursements, about claim payments, about assets held in trust? Could a State do that? Seth P. Waxman: I don't think that a State -- when you're saying requested information or imposing a tax? Elena Kagan: A tax law that requires information of various kinds. Seth P. Waxman: I don't think a -- I don't think a State can impose a tax on benefits that are -- Elena Kagan: Not impose a tax, that requires information in order to ensure that the State is taxing the right things. Seth P. Waxman: In other words, we want to tax the benefits that you're getting -- Elena Kagan: Do you think that a State tax law can't require any information about any of the things that ERISA does, that the plans do, pension disbursements, assets, claim payments, nothing? Seth P. Waxman: I -- I think not. I think that the State -- I mean, I don't think this case turns on it, but thinking about it, if the State could say, look, we just want to know all the benefits that you pay every one of our residents, I think that would be preempted. As I say, that's -- that's not what's going on here. And even if I'm wrong about it, it seems to me that this is quite different. You know, there is a lot of discussion on the other side of, you know, this just requires the press of a button and all the information goes. And our brief goes on for pages and pages, and the other amici -- amicus briefs show how that is so far from true. In order to comply with these, it's not just a question of saying, oh, yes, we paid Seth Waxman $300 in benefits last year. This requires that we keep records that we don't keep, and that we display them and provide information in ways that we don't, and that differ from one State to another. And for those reasons, unless the Court has questions, I will submit that the judgment should be affirmed. John G. Roberts, Jr.: Thank you, counsel. Ms. Asay, you have three minutes remaining. Bridget C. Asay: Thank you. I'd like to begin with Justice Sotomayor's question about the standardized data, because I think that ties in nicely with many questions from the Court about the question of burden. So the way that electronic claims transactions work is not something that the State of Vermont invented. It's part of HIPAA. It's a Federal regulation called the Electronic Transaction Rule, and it sets standardized coding and formatting requirements for the transaction between the payer and the provider. And we -- we don't even have to look to the regulation for that, although that's in 45 C.F.R. Part 160, but it's actually in the record at Joint Appendix 66. This is the agreement between Blue Cross and Liberty Mutual, which says that Blue Cross shall be capable of transmitting electronic data for which transaction standards have been promulgated in compliance with HIPAA Electronic Transactions Rule and shall, to the extent possible, transmit electronic data in accordance with that rule. That is how third-party administrators work, and that is why self-insured plans nearly always have a third-party administrator, which is typically a health insurer to process claims, because although it may look on the surface as though these reporting requirements and the -- the data collection seems very complicated, it's complicated not because of anything Vermont has done. It's because there is the standardized national standard for how this data is collected, which is fairly specific, fairly detailed, and they're already doing it. And it is generating a pool of tremendously helpful data that has incredible potential to help States and the Federal government figure out ways to bend the cost curve and improve the provision of health care delivery to everyone in the country. The Affordable Care Act expressly contemplated that States would do this kind of experimentation. It authorized the Federal government to provide Medicare claims data to the States. It authorized -- it created the Center for Medicare and Medicaid Innovation, which then authorized States to experiment, to develop new models for delivery, which then need to be tested and evaluated. And the United States has explained in its brief that those programs depend upon the collection of all-payer data, which is something only the States are doing. The promise here is enormous, and the fact -- and the loss of this data to the plans would be tremendous. I would like to address briefly one issue that my friend raised, which is the question of provider data. Vermont does, in fact, collect provider data, and we've collected it for a very long time. It's called hospital discharge data, and it was one of the first data sets that researchers looked to. But it's not as helpful as all-payer data, and here's why. Hospitals don't have information that tracks care across an episode of care. If someone has their knee replaced, it starts with the doctor's visit, their surgery. There's an anesthesiologist. There's a stay at a rehab facility. There's follow-up physical therapy. And if you're trying to compare outcomes and costs for a procedure like that, it's the payer, the centralized payer, as Justice Kennedy said, who has all that information. There's only a few of them. That is the real power of the data, and it's not in the hospital data. Thank you. John G. Roberts, Jr.: Thank you, counsel. The case is submitted.

William H. Rehnquist: We'll hear argument now in No. 92-621, Donald Neal Rake v. William J. Rade... Wade, pardon me. Mr. Carpenter. David W. Carpenter: Thank you, Mr. Chief Justice, and may it please the Court: The Tenth Circuit in this matter has just plainly missed the mark. They have adopted a case of this term... or this Court, the Ron Pair case, United States v. Ron Pair Enterprises Inc., which only superficially bears any relationship to the facts framed here. But having committed that mistake, the Tenth Circuit has compounded that error by misreading the Ron Pair decision so as to require the petitioners to pay interest not only on an arrearage in a Chapter 13 plan, bankruptcy plan, but also with respect to fees, costs, and other charges. And that is found in the final paragraph of the Tenth Circuit opinion. The Ron Pair decision of this Court specifically holds, by reason of its grammatical construction, that interest is to be paid only upon the allowed secured claim, and is grammatically separated from the contractually required fees, costs, and other charges. So in any event, and I... the brief of the respondent and also the Government failed to rebut this point. The Tenth Circuit court of appeals must be reversed, at least for the purpose of correcting this issue. Otherwise, we believe that the Ron Pair decision does not even apply to the facts framed in a Chapter 13 cure scenario. First, the case of Ron Pair dealt exclusively with whether or not there was a distinction between a consensual versus a nonconsensual lien on an oversecured claim, and if that distinction made any difference with regard to paying interest as required under section 506(b) under a Chapter 11 plan of reorganization. Secondly, Ron Pair did not involve the specific framework of Chapter 13. It is a Chapter 11 proceeding, and there are certain statutory limitations in Chapter 13, specifically section 1322(b)(2), that are inapplicable in every Chapter 11 proceeding. Third, Ron Pair did not involve a long-term debt, as that term is... is not employed, but intended under Chapter 13. Byron R. White: Are you to talk about the statutory provisions? David W. Carpenter: Yes, Justice White, as I am. This... the statutory provision, section 506(b), requires that where a claim is oversecured the allowed secured claim must be paid interest and must also be paid its contractually provided for fees, costs, and other charges. We feel that section 506(b), however, does not apply in the cure scenario found under Chapter 13, specifically section 1322(b)(5). William H. Rehnquist: In the what scenario? I didn't get what adjective you used. David W. Carpenter: I'm sorry. A cure scenario where a debtor in a Chapter 13 proceeding has fallen delinquent in home mortgage payments and desires to cure that arrearage, or cure that default. Under section 1322(b)(5), the Code provides that he may... he or she may do so, and maintain regular payments. That is the upshot of 1322(b)(5). That particular paragraph applies only to what I have termed long-term debts; that is to say, a debt whose normal maturity date would not come to pass until completion of all Chapter 13 plan payments. Byron R. White: In what... and you rely on 1322(b)(2). David W. Carpenter: I rely on 1322(b)(2), yes, Justice White. I also rely on 1322(b)(3) and (b)(5). Byron R. White: Well, you say... you say that 1322(b)(2) prohibits modification of the terms of the mortgage. David W. Carpenter: It prohibits plan modification, Justice White. It does not prohibit Code modification of the home mortgage. And by home mortgage I, of course, refer to a... an allowed secured claim that is secured solely by real property which constitutes the debtors principal residence. Byron R. White: Well, by extending the time for payments you certainly are... are modifying the terms of the mortgage, aren't you? David W. Carpenter: No, Justice White. Byron R. White: The plan... the plan provides for extended payments, doesn't it? David W. Carpenter: The plan provides that in order to effect a cure-- Byron R. White: Uh-hum. David W. Carpenter: --Under section 1322, the cure must be effected within a reasonable time. Byron R. White: Uh-hum. David W. Carpenter: That is not further defined in the Code. In practice, it is implied to be not longer than the length of the Chapter 13 plan, which could be anywhere from 1 month to 5 years. William H. Rehnquist: Well, certainly the acceleration clauses in the... in the mortgage... typical mortgage, then, are... are set aside. David W. Carpenter: Your Honor, Mr. Chief Justice, the... the... what is set aside is the right to immediately foreclose and accelerate. This, however, is not a plan modification as petitioners view it. It is a modification that is imposed by the Bankruptcy Code itself, section 1322(b)(5). William H. Rehnquist: You say that requires that? David W. Carpenter: I'm saying that if the debtors choose to avail themselves of the cure provisions of paragraph (b)(5), that it is the Code and not the plan which constitutes the modification. It does have the... the limiting language, "notwithstanding the provisions of section 1322(b)(2). " Antonin Scalia: But the plan says how... how far deferred it's going to be, doesn't it? David W. Carpenter: The plan-- Antonin Scalia: The Code doesn't... doesn't provide for an automatic answer. David W. Carpenter: --No-- Antonin Scalia: So it's either done by the plan or it's not done. David W. Carpenter: --That is correct, Justice Scalia. However, the treatment is not initiated by the plan per se, it is initiated by the Code. Antonin Scalia: Well you can say that about any treatment of anything under the plan. The Code authorizes a plan to... to adjust any indebtedness, right? David W. Carpenter: Uh-- Antonin Scalia: So, I mean, I don't know why this is any different from any other indebtedness under it, as far as that goes. David W. Carpenter: --I do acknowledge your point, Justice Scalia, and that is... that is a valid point. However, we feel that that is not the end of the story, if you will. Antonin Scalia: Can I ask... it seems to me that the crucial language in this is... it seems to me that the crucial language is whether... what we're really arguing about is whether this is an allowed secured claim provided for by the plan, right? David W. Carpenter: I do not necessarily acknowledge that as being a correct statement, Justice Scalia. Antonin Scalia: You don't. David W. Carpenter: I think that-- Antonin Scalia: Well, what do you think the crucial language is? David W. Carpenter: --I think that by virtue of effecting a cure under section 1322(b)(5), the debtors elects to maintain payments, and hence as to the maintained payments there is a continuation of the preexisting, prebankruptcy contract. And therefore that contract is not provided for by the plan. It is only the cure aspect that is dealt with inside the plan. Antonin Scalia: Well, it... I'm... let me begin with 1325, anyway. 1325 provides that you give current value, and you make sure that current value isn't diminished as for anything... as for any... any distribution on account of the claim covered by the plan, distributed under the plan. David W. Carpenter: That is correct, Justice Scalia. Antonin Scalia: And you were arguing, at least at one point in your... in your brief, that this is not a claim provided for by the plan. You're saying it's a claim that exists on its own as a simple contractual obligation that's been preserved, right? David W. Carpenter: Yes. Yes, Justice Scalia. There's authority to that effect among the circuits. Antonin Scalia: Well-- David W. Carpenter: However, it is my position that section 1325 is not even invoked when a cure under section 1322(b)(5) is effected, because maintenance of the payments implies with it necessary contractual payment of interest on the allowed secured claim. Antonin Scalia: --If that is so, how do you explain the language of 1328, which says that "The court shall grant the debtor a discharge of all debts provided for by the plan. " okay, "except any debt provided for under 1322(b)(5). " So 1328 refers to 1322(b)(5) as a debt "provided for by the plan". David W. Carpenter: Yes, Justice Scalia, it does. And I believe that that... I think the congressional intent there is to... and I don't want to particularly get hung up on the phrase "provided for by the plan"-- Antonin Scalia: Well, I do. It seems to me central to the... to the case. David W. Carpenter: --My belief is that Congress, in section 1328, indicated that where there will be a... a continuation of a long-term debt past the end of the plan, it would be inappropriate, whether secure or unsecured, to... to allow a discharge. I will... I will concede that 1328 does refer to provision by the plan under 1322(b)(5). Antonin Scalia: Do you have some interpretation of that language, of 1328, that is consistent with your argument here? David W. Carpenter: No, Justice... Mr. Chief-Justice, I do not. I believe that... that the term 1325, because maintenance of the payments under 1322(b)(5) will necessarily require maintenance of the existing prefiling contractual rate of interest that would be paid on... on the allowed secured claim. Antonin Scalia: So then you feel that 1325 may be inconsistent with that part of 1328. David W. Carpenter: To that extent I do believe it is, Your Honor. Specifically, I would like to draw the Court's attention to the meaning of the word cure. Cure is found in various places throughout the Bankruptcy Code. It is found in section 365 dealing with executory contracts and unexpired leases. It is also found in section 1124 dealing with prepetition defaults and various types of claims or interests. It is found in two places in section 1322, one in paragraph (b)(3) and one in paragraph (b)(5). (B)(5), of course, refers to debts that would mature subsequent to the final payment under a Chapter 13 plan, which leaves (b)(3), a fortiori, to apply, although not... so limited by its terms, it would not have any meaning apart from relating only to a short-term debt, one that would normally mature within the scope of the Chapter 13 plan. The provisions in section 365 and 1124 that deal with cure both require the debtor, as a function of cure under those sections, to not only cure the default, but to compensate the claimant for any monetary loss and to assure future performance under the cured default. That language is conspicuously absent from the two provisions in section 1322. There is no requirement of compensation, no requirement of assurance. There is merely either the curing or waiving of a default under section 1322(b)(3), or the curing of the default under (b)(5). We feel that Congress' intentional elimination of the compensation and assurance language found in 365 and 1124 indicate clearly that the time value money, which would equate to the compensation factor in 365 and 1124, are specifically to be disregarded under cures either under section 1322(b)(3) or (b)(5). There's additional language in the section 1322(b)(5) that specifically requires the cure to be effected within a, quote, reasonable time. That is not, as I indicated, further elaborated in the Code, but is nonetheless, I believe, Congress' intention that the bankruptcy court, which is, in the best of all possible circumstances, on a case-by-case basis, to make a factual determination of what should constitute a reasonable time. That, I believe, is consistent with the framework of the Bankruptcy Code in general and harmonizes all of the apparently and superficially conflicting sections of the Bankruptcy Code in Chapter 13. But since there are various competing interests, the mortgagee has an interest and that competes with the interests of the debtor. But more importantly, and perhaps more to the point, the general unsecured creditors have a very distinct interest in whether or not interest must be paid in curing arrearages. The general unsecured creditors essentially get whatever's left over at the end of a Chapter 13 plan unless the Chapter 13 debtor is so well heeled that he may fully fund the plan, notwithstanding what objections might be raised, and pay unsecured creditors 100 percent of their face amount of their claims. In those fairly rare instances... I do note, by the way, that petitioners Yell are in a 100 percent plan. But in those fairly rare instances, if interest is required to be paid, then that interest is going to be essentially borne on the backs of the general unsecured creditors. Since they have no vote in whether or not a Chapter 13 plan would be confirmed, I think the interests of the general unsecured creditors are being preserved by the bankruptcy court in allowing a cure without interest. I think that section 506(b) does not apply to the case before the court today, for the reason that I believe section 506(b) is a general statute, one of general application. In fact, that has been a determination found by the Third Circuit in the case of Wilson v. Commonwealth Mortgage Corporation, found at 895 Federal Reporter, Second Series, at page 128. Chapter 5, along with chapters 1 and 2, tend to, if you will, float over the entire administration of a bankruptcy proceeding to provide a general administrative guidance, and is to give way where there are specific instances of apparent conflict between Chapter 5 and, in this case, Chapter 13. In any event, I would note that there is no language in section 506 which would tend to determine anything relative to what is necessary under a cure. I would like to point out that the... of course, the position of the petitioners is supported by the majority of the circuits that have ruled on this issue, as well as the leading treatise in the bankruptcy field, that of Collier's, and, to the view of the petitioners, is the only way to harmonize all of the various competing sections in Chapter 13. We feel that the respondent's view cannot harmonize both 506(b) and 1325 with the nonmodification rule of section 1322(b)(2). We also feel that the respondent is seeking here to expand his contractual rights in a way that is not authorized under section 1322(b)(2). The respondent's own contract is a form drawn up by his assignor for the purpose of determining the relative rights of the parties at its inception. It specifically dealt with the issue of default and delinquency by providing for late payment penalties. We feel that this amounts to a private remedy, and is... if section 506(b) does apply, is the functional equivalent to the interest requirement under section 506(b). We have a very strong feeling that the Tenth Circuit opinion has skewed inappropriately the very delicate balance struck by Congress in dealing with the competing interests that I've previously mentioned. The home mortgage contract, by and large in this country, is a contract of adhesion. Debtors, mortgagors, have virtually no power to effect change in the language drawn up by the mortgagee on its form contract. The mortgagee has the ability to protect itself from the application of section 1322(b)(2) by merely requiring that delinquent installments shall continue to bear interest at a specified rate or at the contract rate, until paid. That is not what was done. What was done is that the mortgagee determined that a late payment should bear with it a penalty of either $5 or 5 percent of the penalty, whichever payment was less. We also feel that the opinion of the-- Antonin Scalia: And would you say that if they adopted such a provision and such a provision provided for 10 percent interest, and the legal rate of interest that would otherwise apply under the Bankruptcy Code was less than that, that they'd get the higher amount of interest? David W. Carpenter: --I do, Your Honor. Antonin Scalia: In bankruptcy? David W. Carpenter: Yes, Justice Scalia, I believe that it would by reason of section 1322(b)(2). Antonin Scalia: Uh-hum. David W. Carpenter: And I believe the... the courts that have followed the position of the petitioners here have determined that where the contract of the parties calls for interest, interest must be paid on those arrearages. Where the contract is silent, it should stay silent. William H. Rehnquist: Well, if you're going to follow just the contract, certainly if the mortgagee here had been allowed to accelerate, the accelerated principal would have borne interest, would it not? David W. Carpenter: Yes. Yes, sir, Mr. Justice... Mr. Chief Justice, it would. William H. Rehnquist: So to that extent, the mortgagee is being deprived of something that he would have had under the contract. David W. Carpenter: Yes, Mr. Chief Justice, that is correct. And virtually every creditor is denied something in the bankruptcy scenario. In the case of the home mortgage, it is the right to accelerate and foreclose. William H. Rehnquist: Yes. But I thought your argument was that we ought to hold these people to the terms of their contract. David W. Carpenter: With respect to whether or not interest should be paid. William H. Rehnquist: But not to the other provisions. David W. Carpenter: Not to the other provision. That would require congressional enactment to overrule, or to repeal, rather, section 1322(b)(5). If it please the Court, I would like to defer my additional time for rebuttal. William H. Rehnquist: Very well, Mr. Carpenter. Mr. Johnson, we'll hear from you. Lawrence A.G. Johnson: Mr. Chief Justice, and may it please the Court: One of the confusions has been the lack of attention to text in the interpretation of the Bankruptcy Code. Ron Pair was singular in breaking that, in that the courts looked at the text and said we're going to follow the text, that legislative history is not relevant where there's no ambiguity, this is a clear statute. 506(b) only provides for interest postpetition. It doesn't have any... really, any relevance to the fact of what's going to be after confirmation. 1322(b)... I mean (b)(5) calls for a cure. In my research, cure was first found in Louisville v. Radford. Cure says, "cure the default". In most instances in Chapter 13 bankruptcies, there's a race to the court. The mortgagee has accelerated, he's filed foreclosure and obtained a valid judgment in the State court. When the Chapter 13 is filed, 362 stays his right to accelerate, to foreclose, to take possession, as you will. These are serious modifications that are found under 362. 506(b) only provides pre-Code recognition under Vanston Bondholders to his right of interest postpetition, whereas any other creditors, under secured creditors, unsecured creditors, are not entitled to interest. So (b)(5) only has that application. It's when you get to section 1322(b)(2) that it calls for interest upon the allowed claim. Antonin Scalia: Excuse me. (B)(5) only has that application, or 506(b) only has that application. Lawrence A.G. Johnson: 506(b). Antonin Scalia: (B) only has that application. Lawrence A.G. Johnson: 506(b), Justice Scalia, gives you interest under Vanston, pre-Code, from postpetition up to the time of confirmation. Antonin Scalia: When you concluded that, you said so (b)(5) only has that application, and I thought you were talking about 1322(b)(5). Lawrence A.G. Johnson: I'm talking about... 1325(b)(2) is the time value statute that applies to the forced loan that is brought upon the mortgagee. We are forced to endure delay in payment for a period of 3, now getting more and more, 5 years. Now, when we talk about the approved claim that we're talking about, or the allowed claim, one must look at official form 10 of the bankruptcy forms for filing a claim in a Chapter 13 case. It's two-horned. You file for what your balance is due, then you file for what your arrearages are. Depending upon the nature of acceleration, your arrearages may not include anything but interest. However, if you filed a foreclosure action and you had to advance insurance, had to advance title report, court costs, endure... incur attorney fees; sometimes in a... in a contested case they can be quite substantial. Those are part of the arrearage claim. There are two claims when you... when you have this term 13. You have an allowed claim for the balance due upon the mortgage. Then if you have $5,000 or $6,000 in arrearages that you incurred prepetition in acceleration in the State court, those are part of what comes under 1322(b)(5), cure. That cure was dealt with by Congress in the 10 years that the committee was to undergo the modernization of the Bankruptcy Code. They came across with a sweeping statement that the Bankruptcy Code could modify... and that term is likewise first used in Louisville v. Radford. They could modify secured claims. Well, that's not really clear what that term "modify" means, except that Radford said "modify" means modify substantive claims, and that includes many factors. For instance, the very essence of a mortgage is full payment with interest. That was discussed at length in the Radford case. And whether or not the payment of interest is a substantive right subject to modification was not clear. But when this committee report was approved by the House and sent to the Senate, it still contained this... this broad sweeping power of Congress under the Code to be able to modify secured claims. Mr. Vaughn from the American Bankers' Association and Mr. Wies from the American Mortgage Bankers' Association appeared at the Senate hearings and objected not to the deacceleration clause of 1322(b)(5). They objected to two things: the bifurcation and the modification of the home mortgage. So the Senate then had a compromise amendment that went back, and that was what is now the present Code provision, that you can modify secured claims under (b)(2), but not secured claims where you have a first lien upon the principal residence of the debtor. Now, that says nothing about whether you're an unsecured creditor or an oversecured creditor. It means that because of the social purpose, the good acts that the mortgage association does in encouraging homeownership and protecting mortgage... mortgages, that we're going to protect mortgages, these particular mortgages, against modification. And as I set out in my brief, there are all sorts of violence that's being performed under the excuse that we're not modifying. As Justice... Chief Justice Rehnquist said, when you're deaccelerating, you're certainly modifying a right. You're modifying the right to accelerate, you're modifying the right to proceed to foreclosure. But then, what other things can be modified? Well, here we have a right to be paid in full, to have our lien pass through bankruptcy, as in Dewsnup v. Timm. We have a right to full payment with interest, and we believe that these are substantive rights. Yet, as you will hear next month, if I have a mortgage for $50,000 on a $100,000 piece of property, I can be stripped $50,000. In other words, my mortgage is there unsecured as to $50,000 and secured to $50,000, but the courts say that that's not modification. Hence the confusion and hence why we are here in this particular case, dealing with interest on arrearages. This Court has had a long-standing rule that was started back in the thirties where in Billings v. United States, at 232 U.S. 261, it said, "It was long ago here decided, in view of the true conception of interest, that a statute was not necessary to compel its payment where, in accordance with the principles of equity and justice and enforcement of an obligation, interest should be allowed. " It was strange that in the history of the world, in the law of Moses, the 12 tablets of Rome, even the Church of England found that the exaction of interest was ungodly. And it wasn't until the common law in the United States that interest was allowed by the courts, and certainly a departure from the common law of England at the time the Constitution was written. So interest, in the Federal context, has always been allowed by the courts in the breach of an obligation where you had an expectation of payment. Now, 1322(b)(5) really says to the debtor pay what you owe now if you have an arrearage, and it's equivalent to pay what you owe over a period of time with time value interest. But if you pay in full what you owe over a period of time without time value interest, it's not equivalent to, quote, pay what you owe now. There is a question begging in this case as to what rate of interest. Are we going to have the State law application of interest or are we going to have a Federal application of interest? Byron R. White: What section do you rely on specifically to give you a right to interest? Lawrence A.G. Johnson: 1325(b)(2). Byron R. White: You don't think 506(b)'s got anything to do with it. Lawrence A.G. Johnson: 506(b). Byron R. White: (b). Lawrence A.G. Johnson: 506(b) is the oversecured creditor postpetition right to be paid interest. That is a general statute. However, it would be illogical, I think, to say that 506(b) could not be used as justification for payment over a period of 5 years to an oversecured creditor. But I feel that the explicit language of Congress in 1325(b)(2) provides for time value interest. David H. Souter: Do you... do you accept the Government's argument in its footnote 7, I guess, that 506(b) wouldn't apply after confirmation because it has the effect of, in effect, allowing a claim, and the time for that has then passed? Lawrence A.G. Johnson: I adopt the Government's interpretation that 506(b)... (b)(2) provides only for interest postpetition. John Paul Stevens: Of course, they say the opposite on page 15, so you can... you can... you can adopt their view without losing anything. [Laughter] Lawrence A.G. Johnson: Thank you. William H. Rehnquist: Do you... will you tell me again the section that you say you rely on? You said 1325(b)(2). Lawrence A.G. Johnson: 1325(b)(2) is found at page A-5 of the petitioners' petition for certiorari, set out in full there on page A-5. It says that the... "Except as provided in subsection (b), the court shall confirm a plan if, (A), the holder of such claim has accepted the plan. " William H. Rehnquist: Wait... wait a minute. Where are you reading from? Lawrence A.G. Johnson: A-5 of the petition for certiorari. William H. Rehnquist: Well, whereabouts on A-5? Lawrence A.G. Johnson: (ii) under... under (B) on A-5, where it starts "the value". William H. Rehnquist: Yes, okay. Lawrence A.G. Johnson: "As of the effective date of the plan, of property to be distributed under the plan on account of such claim is not less than the allowed amount of such claim. " William H. Rehnquist: That's... that would be section 1325(a)(B)(ii). Lawrence A.G. Johnson: (a)(B)(ii). That is also synonymous with 1129 under Chapter 11 plans, which in the legislative history Congress said is to be identical to the Chapter 13 provision. The difference being, however, that in a Chapter 11 plan, a creditor can propose a plan. However, in a Chapter 13 plan a creditor cannot propose a plan, and 1322(b)(2) is meant to protect the creditor. Byron R. White: So, for what period or periods of time are you asking interest? Lawrence A.G. Johnson: Well, actually, since I'm an oversecured creditor. Byron R. White: Yes. Lawrence A.G. Johnson: I'm entitled to that minimal amount of interest from the time the petition is filed until the plan is confirmed, which is normally a month or two. If there are amendments, it might run as far as 3 months. That's not much money. The big money is where I'm forced to make a loan to the debtor for 5 years, and so that's the basis of which we are asking for interest. Byron R. White: And there's no question, at repetition you would have a right to interest. Lawrence A.G. Johnson: There's no question as to that. And, again, we get another question begging, what if I'm an undersecured creditor? Byron R. White: Yes, yes. Lawrence A.G. Johnson: I think under 1325, an undersecured creditor is likewise entitled to interest, even though... and, see, it's not even mentioned whether you're an oversecured creditor or an undersecured creditor in 1325. Now-- John Paul Stevens: You say there's no question about your right to it if... prepetition interest, but under State law you wouldn't get interest on the arrearage, would you? Lawrence A.G. Johnson: --Oh, yes. Under State law I would get Treasury plus 4 points. John Paul Stevens: On the... on the arrearage. Lawrence A.G. Johnson: On the arrearage. John Paul Stevens: Even though it's not provided for in the contract. Lawrence A.G. Johnson: Right. It's not in the contract, but in Oklahoma, if you apply State law... and I don't want to get into that trap. I don't think that State law interest would apply in this case, nor do I think this Court should apply a rule of State law application of interest. The reason why is because it would encourage forum shopping, it would cause windfalls. John Paul Stevens: But you can't forum shop for your home mortgage. You can't move the home around. Lawrence A.G. Johnson: Well, if you move out of State and you get another venue and they don't object-- John Paul Stevens: It has to be the principal residence, doesn't it. Lawrence A.G. Johnson: --Principal residence of the debtor. Byron R. White: You have to... you filed a claim in this case. Lawrence A.G. Johnson: Yes. Byron R. White: And you asked for... you asked for interest on the arrearages, I suppose. Lawrence A.G. Johnson: Yes. Byron R. White: Was it allowed as a secured claim? Lawrence A.G. Johnson: It's an allowed claim. Yes, sir, it's an allowed claim. Byron R. White: All right, all right. And at what rate? Lawrence A.G. Johnson: That was not handled in the lower court. I kick myself that we didn't raise this question-- Byron R. White: Yeah. Lawrence A.G. Johnson: --Because I hate to come back on what interest rate. Byron R. White: That's all right. Lawrence A.G. Johnson: Is it going to be State law, is it going to be Federal law? I think it should be Federal law. If it's Federal law, then I think there should either be one of two rules. Byron R. White: So what... 506... 506 gives you interest postpetition. Lawrence A.G. Johnson: Yes. Byron R. White: At what rate? Lawrence A.G. Johnson: Quiet. It's silent. [Laughter] Byron R. White: All right. So, but-- Lawrence A.G. Johnson: Commonly, it's market rate, 8 percent. Byron R. White: --All right, all right. And that's what you're asking for your... in this case, for all of the interest you claim. Lawrence A.G. Johnson: Yes. But, I'm again... I want to urge in the 5 minutes I have, I want to urge that there's nothing cutting across any State interest by applying a Federal rule of interest in this case-- Byron R. White: Right. Lawrence A.G. Johnson: --Where Congress has been silent. I ask that there be a Federal rule and that the Federal Court here apply a uniform interest rate under the bankrupt... under the constitutional uniformity. Byron R. White: Now, do you support the judgment of the Tenth Circuit? Lawrence A.G. Johnson: Yes, I do. Byron R. White: And the rationale? Lawrence A.G. Johnson: No. The rationale is a little shady under 506(b). I'm sorry, but I'm here under 1325. Byron R. White: So you want it affirmed on another... on another basis. Lawrence A.G. Johnson: Yes. Antonin Scalia: I think... fees and expenses, was there interest allowed on those too? Lawrence A.G. Johnson: Yes, because that's part of my, quote, allowed claim. Antonin Scalia: That's part of your allowed. Lawrence A.G. Johnson: That's something that really should be hammered across, is that when I file a claim, I file a claim for interest, I file a claim for $35,000 due on the mortgage, then if... I file a claim also for the arrearages, which can be interest, taxes advanced, insurance advanced, court costs, and attorney fees. And interest is allowed on attorney fees under Federal law. Byron R. White: So you think if we just... if we followed the rationale of the Tenth Circuit we would be in error. Lawrence A.G. Johnson: I don't want to say that, Justice White. [Laughter] I want to say that you would pick another, more rational ground to establish the rule of law. Byron R. White: But you wouldn't mind... you wouldn't mind if we agreed with the Tenth Circuit. Lawrence A.G. Johnson: No, sir, no. John Paul Stevens: But you do... but under the Tenth Circuit rationale you wouldn't get interest on the fees, would you? Lawrence A.G. Johnson: Yes, I would. John Paul Stevens: I thought they relied on 506(b). Lawrence A.G. Johnson: Well, but under 506(b)... and I don't want to trample on Justice O'Connor's comma. John Paul Stevens: But the fees are after the comma. Lawrence A.G. Johnson: But in 506(b) they all go together. John Paul Stevens: Oh, no, the comma-- Lawrence A.G. Johnson: Interest is an unqualified right. John Paul Stevens: --You ignore the comma in 506(b) for your purposes, then. That's not what the Court did in Ron Pair. Lawrence A.G. Johnson: Well, in Ron Pair the comma was not ignored, no. It set it off as a separate clause and says "and if the agreement so provides. " attorney fees and so on. John Paul Stevens: Yeah, I understand. Lawrence A.G. Johnson: No, I got interest on all of that and I think I'm entitled to interest under it, and would be under the Federal rule. William H. Rehnquist: Mr. Johnson, I don't see anywhere in your... either of the questions presented by the petitioner for certiorari, where any question regarding the rate of interest is presented. Lawrence A.G. Johnson: No, but in deciding this case, I believe that the Court should grab that one feature, because it's a very integral part of the question. It doesn't give a full and complete disposition of the case unless you say we're going to apply a Federal rule of evidence in this case. William H. Rehnquist: You mean a Federal rule of interest. Lawrence A.G. Johnson: Yeah, the Federal rule of interest, and you're going to apply a uniform rate of interest, and it will either be, one, contract rate, market rate... the contract rate is, after all, what the parties bargain for... or you will apply a Treasury bill rate over-- William H. Rehnquist: Did you brief the... did you brief the question of the rate of interest? Lawrence A.G. Johnson: --No, sir, I did not. William H. Rehnquist: And you're asking... so you're asking us to decide it without it being raised in the petition for certiorari, without your having briefed it. Lawrence A.G. Johnson: I'm doing it under the equity powers of this Court, that in order to decide a case you will decide it completely. Because it is leaving a very rough ground behind. In other words, when we go back-- Byron R. White: Well, you say on the provisions of the Bankruptcy Code, which is Federal law. Lawrence A.G. Johnson: --But the Bankruptcy Code is silent as to the rate. The Bankruptcy Code is silent as to whether State law will apply or Federal law will apply as to interest. If it's silent, I think that this Court should fill that gap, and I don't think that's asking too much, because there's going to be extensive litigation. There's already extensive litigation in the lower courts as to what the rate it. William H. Rehnquist: Thank you, Mr. Johnson. Mr. Mann, we'll hear from you. Ronald J. Mann: Thank you, Mr. Chief Justice, and may it please the Court: This case considers the availability of interest for oversecured creditors in Chapter 13 bankruptcy cases. In our view, the problem is resolved by the precise wording of three related statutory provisions, sections 506(b), 1322(b)(5), and 1325(a)(5) of the Bankruptcy Code. I'd like to look first at the language of the statute and then address a number of points raised by petitioner. The first part of the question is whether interest is available, what I'll call preconfirmation interest, from the date the petition is filed until the effective date of the plan. In our view, that's governed by section 506(b) of the Bankruptcy Code. I understand from Justice Scalia there may have been some ambiguity in our brief, but I don't think that there's... I did not mean anything in our brief to suggest that that provision would apply after the date of confirmation. I'm somewhat puzzled as to what in my brief might suggest that view, but that's certainly not our view. Antonin Scalia: Well, you say... well, never mind. Ronald J. Mann: In our view, section-- Antonin Scalia: You seem to say that on page 15. You say, "and thus the interest provided under section 506(b) must be paid to compensate creditors for the delay occasioned by a cure permitted-- " Ronald J. Mann: --Occasioned by the pendency of the bankruptcy case, by which I refer to the pendency-- Antonin Scalia: --That's not what you say on 15. You say it "must be paid to compensate creditors for the delay occasioned by a cure permitted by 1322(b)(5). " that's what you say on 15. You stick with footnote 7, though, anyway. Ronald J. Mann: --I stick with footnote 7 and I meant the portion-- Antonin Scalia: Okay. Ronald J. Mann: --That sentence referred to the portion of the cure that occurs before the plan is confirmed. 1325 covers the portion after the plan. But looking at the preconfirmation interest, the relevant statute is section 506(b), and this is on page 1a of our appendix. The first operative clause of that statute provides that there shall be allowed to the holder of an oversecured claim interest on such claim; it states that without qualification. As the Court explained in Ron Pair, this section should be read as having two different clauses. The first provides for interest in all cases and the second clause, after the comma, provides for reasonable fees, costs, and charges, but only to the extent that they're provided for under the agreement under which the claim arose. Now, this case involves a claim for interest. Therefore, the bankruptcy courts should have allowed the claim for interest without regard to the terms of the agreement under which the claim arose. Now, there's been some discussion as to how that works with respect to fees, costs, and other charges. If there was an allowed secured claim for something that would be a fees, costs, or other charges provided for under the agreement, section 506(b) would allow interest on that claim, because it provides for interest on your allowed secured claim. You would look to the agreement and determine that he might have an allowed secured claim, for example, if he had been required to advance taxes on the real property. And then under 506(b) he would be entitled to interest if he was oversecured and had an allowed secured claim for that. Antonin Scalia: But why... I don't... isn't that always the case? Everything after the comma will always... will always bring you back to before the comma. Ronald J. Mann: But the question of the part after the comma is that if the agreement does not provide that you're entitled, for example, to collect compensation from a debtor for a certain type of fee, for example title searches. If under State law, under their mortgage they have not asked to be compensated for that, Federal law does not grant them a right to that. The only way that they could collect compensation for attorney fees, insurance advances, advances to pay taxes, is if the agreement under which the claim arose provides for that. Antonin Scalia: But if it does provide for that, it is part of the claim anyway. Ronald J. Mann: It is part of their allowed secured claim. Antonin Scalia: So it's a strange provision. Ronald J. Mann: It is a strange provision, and I think the Court's opinion in Ron Pair reflected that. Turning to the availability of interest for the period after the plan, which as petitioner and respondent both agree, is really the important monetary aspect of the case. We agree with Justice Scalia that this really turns on the language of section 1325(a)(5), and that's at page 2a of our appendix. And what it says is "with respect to each allowed secured claim provided for by the plan. " the debt... the creditor is entitled to present value payments. In this case, it's acknowledged that the claim is an allowed secured claim, and it seems to us quite clear that the claim was provided for by the plan. The plans are set forth in the joint appendix, and they state that the arrearages will be paid out over specified monthly periods and stated monthly installments. Under any natural reading of the phrase 1325(a)(5). I'd like to address two other points that have come up. The first one is with respect to the suggestion that in other provisions of the Bankruptcy Code, specifically sections 1124 and 365, Congress expressly provided for compensation for delay, but somehow in this case the statute is any less clear. The argument is made at some length in the amicus brief filed in support of petitioners that the problem with that argument is that it looks solely to section 1322(b)(5). The place where Congress provides for compensation for delay in this context is 1325(a)(5), and as I've mentioned, this claim is clearly covered by that section, and it just as clearly provides for compensation for delay as any of the other provisions. John Paul Stevens: If it is so clear that it covers the compensation for delay in payment, why do you suppose they didn't tell us how to figure out the interest rate? Ronald J. Mann: There are no provisions in the Bankruptcy Code that discuss the topic of exactly what the rate of interest should be. And I... I do agree with respondent that it is quite an important question. It also seems quite clearly not to be before the Court in this case. The lower courts are struggling with it, and there are quite a number of approaches that could be taken. But I do think it's fair to say that under any reading of the statute after Ron Pair, there are clearly some cases in which interest is going to be paid under the Bankruptcy Code to oversecured creditors, and the statute simply does not state what the interest rate is. John Paul Stevens: Of course, if we'd ignored the common interest rule in... after interest in Ron Pair, we wouldn't have this problem, because the interest would have been set by the instrument itself then. Ronald J. Mann: If Ron Pair had been decided the other way, that would deal with the problem for pre... preconfirmation. John Paul Stevens: We wouldn't have this problem, yeah. Ronald J. Mann: But it seems quite clear... I think you would agree that under section 1325(a)(5), somebody is going to be receiving compensation for delay under that provision. The opinion in Inwood of Timbers... Timbers of Inwood Forest strongly suggests that's the purpose of the provision, and I think all the people that have looked at that provision understand that it provides compensation for delay. The question in this case is simply whether the claim at issue here is covered. And finally, one thing I would like to... to add to emphasize the reasons why it makes sense for there to be interest created by these various provisions, we have to remember that section 502(b)(2) of the Bankruptcy Code disallows all claims for interest after the petition has been filed. So the availability of interest before the petition under the contract of the parties is not particularly relevant to the issues that are before the Court here, because the Code has expressly disallowed those claims. So the only way that a creditor, in our view, would be entitled to interest after the bankruptcy petition has been filed is if he can identify a provision in the Bankruptcy Code that entitles him to compensation for delay. It's a uniform bankruptcy law and Congress has enacted uniform provisions to compensate people for delay during the pendency of bankruptcy proceedings. John Paul Stevens: Tell me, what is the provision that disallows interest generally again? Ronald J. Mann: It's section 502(b)(2). John Paul Stevens: 502(b)(2). Ronald J. Mann: If there are no further questions, I thank the Court. William H. Rehnquist: Thank you, Mr. Mann. Mr. Carpenter, you have 10 minutes remaining. David W. Carpenter: Thank you, Mr. Chief Justice, and may it please the Court: Interest on an arrearage of a home mortgage in the early years of that mortgage is essentially interest on interest. Very little of the monthly payment made to a mortgagee constitutes a reduction of principal or an allocation to an escrow for insurance or taxes, where those are escrowed in a monthly mortgage payment. There's been a great deal of discussion by respondent with respect to the legislative history giving rise to the current status of the Bankruptcy Code. I assert that there are no provisions of the Bankruptcy Code present before this Court today that are unambiguous... or, excuse me, that are ambiguous, and therefore resort to legislative history is without merit and should not be indulged in by the Court, and this Court has so determined on several occasions. John Paul Stevens: Does that mean you think the legislative history is against you? David W. Carpenter: No, Justice Stevens, I do not. I think that the legislative history, however, is not particularly instructive or enlightening in light of the actual language used by Congress in enacting the various chapters... or sections of the Bankruptcy Code with which we're dealing today. Other than deacceleration of a home mortgage and the right to foreclose pending continuation or maintenance of payments under a Chapter 13 plan, there is no modification of a home mortgage, and that is consistent with the interaction of sections 1322(b)(2) and (b)(5). There just may not be any modifications of the home mortgage except to allow a cure. Therefore, the respondent's argument with respect to what else can be modified in his mortgage, and especially raising the specter of the Fifth Circuit case of Nobelman which is currently pending before this Court, are irrelevant to the issues today. John Paul Stevens: Excuse me. Gee, if you take that position, strictly speaking, to allow a cure is simply to allow you, right now, to pony up all the money that's due. That's allowing a cure. David W. Carpenter: That-- John Paul Stevens: You-- David W. Carpenter: --I disagree, Justice Scalia, I'm sorry. John Paul Stevens: --What? David W. Carpenter: I disagree for this reason. Section 1322(b)(5) specifically limits the application of 1322(b)(2). It permits cure within a reasonable time, and that is what I believe Congress intended for the bankruptcy courts on a specific case-by-case basis, fact-specific case, to determine. In certain cases it would be 36, perhaps even as many as 60 months, a 5-year plan. In certain cases it might only be 10 months. In fact, if there's not a very extensive arrearage, the... I believe the bankruptcy rules, as they relate to distributions by a Chapter 13 trustee, prohibit payments of less than $15. And so if there's a $150 arrearage that is due as of the date of filing of the petition, it could not be stretched out past 6 months, unless there's an exorbitant amount of interest that this Court would ultimately determine is appropriate. John Paul Stevens: May I ask you a question on this modification issue? As I understand the claim here, it's just for the arrearages, it's not for the balance due on the entire note. And the... if... in your view, if they fail to make... comply with the plan, covering... making the cure in monthly payments over a period of time, would the mortgagee retain the right to accelerate the basic note and foreclose? David W. Carpenter: Only upon application to the bankruptcy court, Mr. Justice Stevens, relating to relief from the automatic stay under section 362. John Paul Stevens: I see. And what if-- David W. Carpenter: And-- John Paul Stevens: --But after... I'm assuming after confirmation of the plan, and they go... makes payments say... I think under this it's 5 years, wasn't it, to pay this off, or whatever period. David W. Carpenter: --I don't-- John Paul Stevens: But 2 or 3 years later he misses a payment, and then the mortgagee would still have the right to accelerate, wouldn't they, to foreclose. David W. Carpenter: --He would have the right, yes, Justice-- John Paul Stevens: Subject to approval of the bankruptcy court. David W. Carpenter: --Yes, Justice Stevens. He would have to file an application for relief from the automatic stay. John Paul Stevens: So there has not been a modification that included a surrender of the right to accelerate. David W. Carpenter: Not a complete and total surrender for all purposes. John Paul Stevens: Just a postponement of it, if they-- David W. Carpenter: Postponement pending maintenance of the payments under section (b)(5), 1322(b)(5), yes, sir. Antonin Scalia: --Mr. Carpenter, I had... I had understood that the purpose of 1322(b)(2) was to give some special status to home mortgages, to make that an especially attractive investment. But... but what you propose makes it an especially unattractive investment. It's the only one in which you can make a modification to the plan and not provide for present value, isn't that right? David W. Carpenter: That is correct, Justice Scalia. Antonin Scalia: Why would Congress want to single out home mortgages for that special disability? I mean it makes it an especially unattractive investment. David W. Carpenter: I don't know that it makes it unattractive. There is certainly no evidence before the Court, at any of the levels bringing this matter to a head today, that would reflect that position. Section 1322(b)(2) is a two-edged sword, and that's exactly what Judge Ginsberg, in the in re Stamper case cited in our authorities, held. That there is... there is no right to modify either in favor of the creditor or in a manner detrimental to the creditor. It just cannot be modified other than the interplay of section 1322(b)(5). Antonin Scalia: Well, it can be modified, but only in one way, to the advantage... to the advantage of the... of the debtor. David W. Carpenter: I think-- Antonin Scalia: By... by extending the payments and allowing no interest on those payments, whereas every other oversecured creditor, you have to allow interest on the payments. David W. Carpenter: --That is correct, Justice Scalia. The difference here is that I believe Congress has struck a very delicate balance among the various competing interests, as I said. What drives a Chapter 13 bankruptcy, that it does not... does not have sufficient revenues to pay all creditors in full, are the claims of the general unsecured creditors. To the extent that they must bear the burden of paying the interest... because it is not money that goes back to the debtor under any scenario. It is paid to the general unsecured creditors, and where they can only receive less than 100 percent of their allowed claims, then they pay that interest. Congress has struck this delicate balance among all the competing interests. The amount of debt-- William H. Rehnquist: But why should Congress... you're saying Congress may favor the general creditors, but why should Congress single out the home mortgagee for disfavorable treatment as compared to other secured claimants? David W. Carpenter: --Well, Mr. Chief Justice, they were singled out for especially beneficial treatment under section 1322(b)(2) because under a Chapter 13 plan a ny claim of any sort, other than a home mortgage, may be modified, and that is usually to the... to the detriment of the creditor. And so they are protected to the extent that their underlying claim cannot be modified other than the... the-- William H. Rehnquist: Well, other than the ways you say it can be. David W. Carpenter: --The deacceleration and the... and the holding off of foreclosure, yes, sir. Again, I would... I would remind the Court that it is within the strict power of mortgagees generally, and the respondent here specifically, to modify their underlying documents. There is no question that... the well reasoned circuit opinions and Judge Ginsberg opinion specifically state that where the contract would provide for interest on an arrearage, that that must be honored under a cure of... under section 1322(b)(5), because of its interplay with (b)(2). But where a creditor, for whatever reason, elects not to, you know, place that particular provision in his contract, he is stuck with his bargain. What is happening today is the respondent is asking for this Court to expand his contractual rights, and that is what Congress has closed the door on. Congress has said you may not expand the rights of the home mortgage. You may not contract them, but you may not expand them. John Paul Stevens: Mr. Carpenter, your adversary says that they would get this interest as a matter of State law, so it wouldn't be expansion. David W. Carpenter: That is... that statement was made, Mr. Justice Stevens, but in actuality the... the interest that was provided... that was mentioned, the Treasury rate plus 4 points, is the State judgment rate, not a default rate. It is... there is no judgment rate, or there's no interest rate that would be provided prior to a State court judgment. Only upon completion of a foreclosure proceeding, pending the sheriff's sale at a foreclosure, would there be any postjudgment T-bill plus or Treasury rate plus 4. John Paul Stevens: No, but if they did foreclose and you got a judgment, then they would get this interest, wouldn't they? David W. Carpenter: Yes, for the brief period of time until such time as the sheriff was able to appraise, sell-- John Paul Stevens: Right. David W. Carpenter: --The property and the court confirmed it, under Oklahoma procedure. That's a fairly brief period of time. John Paul Stevens: Well maybe so, but at least conceptually it does compensate them for the delay. David W. Carpenter: Under that scenario, yes. That is, however, fairly late in the foreclosure procedures. We are asking that this Court specifically overturn, reverse the Tenth Circuit. Their reliance upon section 506(b) is not applicable. They even misread this Court's opinion in Ron Pair in requiring interest on costs, fees, and other charges, and specifically the-- John Paul Stevens: Do you agree... let me just be sure I understand. You argue, of course, that 1325(a)(5)(a)(2) is not applicable. David W. Carpenter: --It is not applicable because, Your Honor-- John Paul Stevens: Now, do you agree, though, that if it were applicable, it would compel a payment of interest on the arrearage? David W. Carpenter: --No, sir, I do not believe that it would be applicable even-- John Paul Stevens: Well, I know... don't say it's not applicable. That's not my question. David W. Carpenter: --Yes, sir. John Paul Stevens: If it were applicable, would you agree that interest was due? David W. Carpenter: No, Mr. Justice Stevens, I would not, for the simple reason that section 1322(b)(2) prohibits that modification and a maintenance of payments under 1322(b)(5) maintains the existing payment structure that existed prefiling, repetition, and does not extend to... and does not even invoke section 1325. William H. Rehnquist: Thank you, Mr. Carpenter. David W. Carpenter: Thank you, Mr. Chief Justice. William H. Rehnquist: The case is submitted.

Warren E. Burger: Number 70-130 United States against Scotland Neck and 70-187, Mr. Lawrence you may proceed whenever you are ready. Lawrence G. Wallace: Thank you Mr. Chief Justice and may it please the court. I pointed out yesterday that with a dual school system still in effect in Halifax County in 1969, 15 years after Brown, the county turned away from the recommendations of the State Department of Public Instruction and from its agreement with the Department of Justice both of which looked toward dis-establishment of that dual school system and instead through Chapter 31 of the 1969 Session Laws, there was carved out a small separate school district for Scotland Neck, while as a mathematical matter, the removal of these 695 students could have only a limited effect on the racial percentages for the county system as whole, the effect would be very substantial in the immediate vicinity of Scotland Neck and I was about to turn to the fold out math in this large sized appendix filed by the petitioners in the consolidated case at page 12B where there is some indication of what the effect of Chapter 31's implementation would be in the immediate vicinity of Scotland Neck within District 1 of the state's Interim Plan. The impact particularly is on the student assignments to the Scotland Neck School and to the Brawley School. The two grade 1 to 12 schools that have been conducted by this county system less than one mile apart from each other. Brawley being an all Black school and Scotland Neck the traditionally White school. The assignment figures printed on this map were compiled by the County Board of Education. The map was submitted by the County Board as an exhibit to a motion of theirs. And if Chapter 31 had been implemented, these figures show that Brawley School would be more than 90% Black while the Scotland Neck School would be 57% White and 43% Black. By contrast -- Potter Stewart: I don't -- what is it? The total of 366, I am talking about Brawley, Brawley was 9 White children and 350 -- Lawrence G. Wallace: Those are the figures for Bakers School, the 366. Brawley figures are underneath 805 Negro, 83 White. So more than 90% of the assigned students. Potter Stewart: The total of 888 and what's the C-944? Lawrence G. Wallace: That's the capacity of the facility. The total is 888. Well, it's slightly less than 90%, I am sorry I am mathematically was slightly off there. But close to 90% of the students would be Black at Brawley and at Scotland Neck it would be 57% White and 43% Black. By contrast, under the Interim Plan, which the State Department of Public Instruction had recommended, the assignments to Brawley would be slightly less than 70% Black and those to Scotland Neck more than 66% Black, a very similar ratio. Potter Stewart: In the county as the whole, it's about --? Lawrence G. Wallace: 77% Black, 22% White. Potter Stewart: And 1% percent Indian? Lawrence G. Wallace: That's correct Your Honor. And there was also a transfer plan adapted by the Scotland Neck City Board of Education, but struck down as unconstitutional by the Court of Appeals which would have increased the disparity under Chapter 31 even more on the basis of the first application filed. The Scotland Neck School would have gone up to 74% White. The Chapter 31 has not gone into effect, because the Court of Appeals stayed its mandate pending this court's decision and the schools are now operating under a modified version of the state's Interim Plan which we have described in some detail on page 14 of our brief in footnote 25. Now the vice of Chapter 31 as we see it, is very similar to the vice of the North Carolina Anti-Busing Law struck down by this court last term in North Carolina Board of Education against Swann. Chapter 31 would substantially impair, would be an obstacle to disestablishment of the dual school system in the Scotland Neck Brawley area of this county school system. It would fence off most of the Black students in that area from the traditionally White only Scotland Neck School and would fence off most of the Whites in that area from the nearby formerly all Black Brawley School. As the District Court said, its effect would be to create a refuge from desegregation for White students of the Halifax County School System. The resulting projected 90% Black enrollment at Brawley and 57% White enrollment at Scotland Neck School seems to us to bring into play the presumption against schools that are substantially disproportionate in their racial composition that this court last term said in the other Swann case applies in the context of disestablishing a dual system. The Court of Appeals held that so long as this modification of the racial balance fall short of resegregation and is accomplished by means of the creation of a new school district, the court should not interfere if there are legitimate educational purposes and the primary purpose is not racial. But we see nothing warranting this novel and difficult to apply test and the mere fact that the zoning here was accomplished by a new district line rather than by ordinary school assignment's zone lines. William H. Rehnquist: Mr. Wallace, do you disagree with the assessment of the courts below as to the purpose for which this was done? Or are you saying conceding that they are correct as to the purpose nonetheless the legal result which you urge for? Lawrence G. Wallace: Well, we think that inquiry into primary purpose which is a very difficult one is really irrelevant to how the case should be decided. The District Court said it could not say which of the purposes it found was the primary purpose. The Court of Appeals nonetheless proceeded to apply its primary purpose standard actually announced in the companion case which is next to be argued in (Inaudible) case. We don't see that the fact that new district line has been interposed rather than the ordinary method of the assigning students within the district should bring a different test into play than the test this court has applied right along in the context of school desegregation cases. Last term, for example, the court held in Davis against the School Commissioners of Mobile County that it was error for a Federal Court in remedying a dual school system to treat the eastern part of metropolitan Mobile an isolation from the rest of the school district. If a different result would have been required, had the state interposed a new district line cutting off that eastern portion, the principle of that case and many of the court's desegregation cases would indeed be evanescent. Potter Stewart: Well, Mr. Wallace if in the Mobile case those had been two separate school districts, [Voice Overlap] the result would have been quite different? Lawrence G. Wallace: That was before the court was a single school district. Potter Stewart: Well, before the court here is quite a different problem. Lawrence G. Wallace: Well, that's the question whether it is really a different problem, because the state has now put a new district line and while this district was in the process of being desegregated and the process of having the school system disestablished, that's why I say the case would be the same if Alabama had put that line in the metropolitan Mobile area. Byron R. White: With the same historical contextual environment that this case actually has? Lawrence G. Wallace: Well, that's correct, but the cases would be very similar then and if a different result would have been required in Mobile, had that change in state law been made -- Byron R. White: Well, that's the question before the court. Lawrence G. Wallace: That's the question before the court, but we are pointing out that it would mean that the principles that we thought were established in the Mobile case would be one that could easily be avoided. Warren E. Burger: I am not sure I have your response clearly in mind Mr. Wallace, let me see if get it. If in the Mobile case the area on the far side of the railroad tracks had been treated as a separate unit by the courts in the fifth circuit. If in that case that part of Mobile had been separated by a lawful process from the city of Mobile itself, then would we have factually comparable case to what we have here? Lawrence G. Wallace: A very similar case. If in the course, in the process of desegregating that system and disestablishing the dual system that had been operating throughout that area, the state had interposed a new district line cutting off that portion, a rather similar problem to this case would be presented that was the analogy that I was pointing out. Warren E. Burger: And that could be physically the same, however factually in the two cases the change in Mobile would have had a very drastic impact on school compositions, would it not? Lawrence G. Wallace: Well, that is certainly true. Warren E. Burger: Much more so than here. Lawrence G. Wallace: Much more so throughout the area as a whole. Here, the impact is very drastic on the relatively small number of students in the immediate area of Scotland Neck. Warren E. Burger: Would you call it very drastic here? What is the percentage impact? Lawrence G. Wallace: Well, the Black students in that area have by law been excluded from attending the only White only school there, the only traditionally White school and now 90% of that would still be excluded. Warren E. Burger: Not drastic in numbers though? Lawrence G. Wallace: Not in -- well, we are dealing only with a small number of students in this case, that's the fact of the case. The state chose to separate out an extremely small little school district here. So naturally we are not talking about large numbers. But we are talking about individuals with constitutional rights here. In our view the test should be that of this court's Green Decision. That when in disestablishing a dual school system more promising courses of action are open to the state. The state has a heavy burden to justify its choice of a less effective method. Essentially, the test would be whether a school assignment zone would have been properly drawn this way in the absence of splitting the district up, because the district was in the process of disestablishing a dual system and we think it plain that the burden on the state, on to the Green case has not been satisfied here. It is relevant first of all that the new Scotland Neck school district with only 695 students is far smaller than the state's own standards concerning the desirable and minimally acceptable size for school districts. On page 12 of our brief, we have set out the evidence and record on that. This has been made even more anomalous by the fact that both Halifax County and the town of Scotland Neck are losing population, are decreasing in size according to the 1960 and 1970 census figures; not normally the situation where you would be breaking up rather than consolidating school districts. Purposes found by the district court for Chapter 31 also fall far short in our view of an inadequate justification, more local control over the schools if desired can be achieved without selecting out so abnormally small a new district with so great a racial effect on the desegregation process in the immediate vicinity. And the need for increasing school expenditures does not in our view justify fencing off the only traditionally White school and most of the White students from the other school and the surrounding area and making the improvements only in that school. The only other purpose found by the District Court was prevention of anticipated White flight from the public schools. In Monroe against The Board of Commissioners, one of the three cases of the Green trilogy. That this court emphatically rejected the contention that was strongly made there that fear of White flight can justify perpetuation of some aspects of vestiges of the dual school system. That holding, we believe was soundly based on the teaching of Brown and Cooper against Aaron that community acceptance is not to be the measure of the constitutional rights of school children. And there is no reason that we can say the part of from holding here, the respondents emphasized that they have submitted post trial affidavits of school enrollment figures to show that considerable White flight has materialized in this district. Potter Stewart: Am I correct in my recollection Mr. Wallace that in the Charlotte-Mecklenburg opinion last term, we said that the danger of White flight is something that a district court could quite appropriately recognize and try to prevent in its desegregation decree, the danger of resegregation, which is what White flight causes? Am I wrong? I just don't remember it. But my recollection is that there was -- that the opinion addressed itself to that problem. Lawrence G. Wallace: I thought that; that was in the other context that it wouldn’t be an adequate remedy to setup a situation whereby anticipated rather minor changes in residential patterns would lead to quick resegregation. Potter Stewart: I don't have all of the really complicated facts in last year's school board in mind, and I haven't reread it, but the transfer of those students out to the high school on the periphery in the community was approved by this court as an appropriate action that the District Judge took, and his purpose of taking that action was to, as I remember it, to prevent White flight which leads to resegregation. That's what resegregation means, isn’t it? Lawrence G. Wallace: Well, I thought that resegregation was largely a matter of action that the state has taken, that leads to resegregation. Potter Stewart: Maybe we don't agree on the meaning of that rather new word, but I thought that it was a word that described a phenomenon i.e. White flight and the result of White flight. Byron R. White: I assume that was known to the school district here at all before, but in the process of drafting a remedy the District Court had or had simply said that there would be an attendance district in exactly the same shape as Scotland Neck. Now why would have that been improper? Lawrence G. Wallace: Well, because as here you have these two traditionally 1 through 12 school located only three quarters of the mile apart. The Blacks had all been assigned to one, the Whites all attended the other. The process of trying to desegregate and to disestablish the duality of these two schools under this court's decision, is a process of trying to break down this overwhelming historic racial identification of the two school. It seems to us that when one of them is, because of the peculiar configuration of the assignment zone that's drawn left with 90% Black population, when most of the Blacks are excluded from the assignment zone to the White school and the White school is trying to be predominantly White. That hasn't broken down the racial identification of the two school when other alternatives are readily available, that was what the court said in Green. Byron R. White: You aren't proposing any general rule however that in no circumstances when a county is adopting a desegregation plan, where the county is 80% Black, 20% White, that there never could be under such a plan, a school attendance zone with 50-50 White and Black. Lawrence G. Wallace: Not at all. We are not contending for any principal racial balance from one school. Byron R. White: It's just the particular facts that -- Lawrence G. Wallace: It's the particular facts here. Byron R. White: Or it's Scotland Neck? Lawrence G. Wallace: There are obviously alternative means available that would be more effective in disestablishing the dual identification of these schools as the White school and Black school, and no adequate justification has been shown for adopting this less effective method which seems to us to perpetuate the duality. Byron R. White: As Mr. Wallace, am I correct that many years ago Scotland Neck was a separate district. Lawrence G. Wallace: Prior to 1936, Your Honor. Byron R. White: But you have a historical fact here which is not often present. Suppose it never had been enveloped into the county system, would your case be different today? Lawrence G. Wallace: I think it will raise very different issues about the propriety as a remedial matter of extending the remedy across long established and long observed district lines. Here the state has interposed a new district line within the district that was in the process of disestablishing its dual system. Byron R. White: Do you feel it would be a different case? Lawrence G. Wallace: It would be a different case. That doesn't necessarily mean a different result, but it's not a case that we are addressing here. In conclusion, I would just like to say about the submissions that the respondents have made as to the post trial White flight that has occurred. Of course, this is -- we don't know where these children have gone or how long or what they would have done, had Chapter 31 been implemented. This is all assuming that these affidavits are accurate. But basically, we believe that these affidavits should not affect the decision here and that it is as important for this court today as it always has been to reject the preposition of the course to Appellate decision in school desegregation cases, can be influenced by community resistance to desegregation decrease, whether that resistance has taken upon as it had in some instances of bus burnings or boycotts or as it reportedly has here taken the form of withdrawal of some of the students from the schools. Thank you. Warren E. Burger: Thank you Mr. Wallace. Mr. Stein, it's you Mr. Stein? Adam Stein: Yes, sir. Warren E. Burger: Mr. Wallace had 25 minutes and you had 20, but he has I think somewhat over time. So that has cut into the time alloted to you. Mr. Marshall, have you separated out. I think there is only about 10 minutes left. Is there not? You have about 10 minutes left. I just want to be sure that we have them declared. Adam Stein: Mr. Chief Justice, may it please the court. I represent the petitioners in 70-187 Pattie Black Cotton and Others who intervened these plaintiffs in the District Court. They are Black children and their parents who had traditionally attended the Brawley School, and are the children who are most immediately affected in terms of their constitutional rights. We think that what is most important about this case, is the facts and we agree with the government that the most important facts in the case are those which show the impact of Chapter 31 in the Scotland Neck area. The map behind me is an enlargement of the map referred to before at page 12B of the appendix which shows that impact. Potter Stewart: Specifically, it's the impact on Brawley, is it? Adam Stein: It's the impact on Brawley -- Potter Stewart: As well as on Baker? Adam Stein: As well as on all the formerly Black schools in the area. Under segregation -- Potter Stewart: But isn't it primarily? And you were talking about the Scotland Neck area that would be Brawley primarily? Adam Stein: Yes, Mr. Justice Stewart. Under segregation the Scotland Neck school served this entire area for grades 1 to 12. Potter Stewart: For White children? Adam Stein: For White children. Black children at the high school level from the same area went to the Brawley school. The other four schools were Black elementary schools feeding into the Brawley school. In the immediate area of Scotland Neck, Black children went to the Brawley school. In that situation the town lines of Scotland Neck had nothing whatsoever to do with pupil assignment. Therefore, you can see that the White children in the whole area, half of them, about 400 came into town, crossed the town lines, Black children in the town crossed town lines to go to the Brawley school located just across the town boundary, and indeed all the White children in the city, in the elementary grades also crossed the town lines, because the junior high school campus of the Scotland Neck school was located just outside of the town line down here about the same distance from the main campus of the Scotland Neck school as the Brawley school is. It was this situation which the State Department of Public Instruction in its plan sought remedy. And the remedy proposed there was a very simple neutral kind of assignment plan. That is instead of having two high schools to serve exactly the same area; one for White and one for Black, and both of them too small under state's standards, the Scotland Neck school traditionally serving 300 White children and the Brawley school traditionally serving about 600 children. The state proposal consolidated those schools. So the plan is modified such that all of the children in this area which was then designated District 1 would go to grades 10 through 12 at the Scotland Neck School, children in grades 9 would go to the Brawley school, and the elementary children would be assigned according to neutral attendance zones as shown on the map. Thus there is an impact as well as the difference between what would happen at Brawley and Scotland Neck, because the elementary children who attend schools where the ratios reflect the residential patterns of the outlying areas some more of varying ratio, would under the state plan go to high school at schools where the ratios would reflect the entire area. However, if Chapter 31 is implemented, then they would go to the Brawley school, a school which was traditionally Black and which would have a very much more -- much Blacker ratio than the neighboring Scotland Neck. If we would think that if there were pressures towards Whites flight in this situation, that they would certainly be accentuated on those White children, half of the children in the area who would know that under Chapter 31 they would never be attending the traditionally White school. I pointed out that the boundary lines were always ignored as to pupil assignment. We've pointed out in our brief that indeed the boundary lines of the Halifax district were ignored to promote segregation, White, Black, and Indian children regularly crossing the Halifax County lines. Now, we think that the major impact of Chapter 31 can be seen in the impact on the Brawley School and on the Scotland Neck School. The White and Black school are clearly identifiable as White and Black schools after Chapter 31 is implemented. We would like to point out that a principal feature of this plan of the secession was the transfer tuition arrangement. That was known by the legislature, that was publicly expressed in the newspaper, representative Gregory from the area who was a proponent who spoke of this in the press. There was no secret about that and the plan was to collect all the White children into the Scotland Neck school and that in fact is what had happened when this case came on for preliminary injunction hearing in the summer of 1968. Something like 98% of the White children in the area would always go to Scotland Neck school were again going to go to the Scotland Neck school. So the plan was for all of them. Without the transfer it's for half of them, but the impact we say is very substantial. Nonetheless, and it's particularly substantial in terms of the interest of my clients who live in that area. Byron R. White: We need for you to prevail, do we have to disagree with the Court of Appeals on whether the legislature had any knowledge or considered the transfer plan. Adam Stein: No, Mr. Justice White, I don't think that that needs to be reached but that was a -- Byron R. White: The effective figure though, 90% figure, is as adequate for your arguments, isn't it? Adam Stein: We certainly think so. But what we would say is that there is more. I mean, there are more facts suggesting -- Byron R. White: Well, the Court of Appeals has found against you? Adam Stein: Well, but that was a finding contradicting, a finding by the District Court -- Byron R. White: That is where when the Court of Appeals is found contrary to what you're telling us. Adam Stein: That's right. It is. And I would point out that the unit proposed here is by far -- would be by far the smallest school administrative unit in the state of North Carolina. When Chapter 31 was passed, it was the first new unit to be created since 1953, and since 1953, there has been a great movement of consolidation of units in the state serving state policies which hold that small units are inefficient, expensive and don't produce quality education. I would just ask the Court to take a look at the maps so that you can see what the plan looks like visually. We would suggest that it is very awkward to create the segregation we complain of, i.e., the Brawley zone looks like a donut surrounding the town of Scotland Neck. We had understood that awkwardness and inconvenience might be appropriate in moving towards disestablishing the dual system. But we would suggest that an awkward assignment arrangement is certainly inappropriate where that promotes continued segregation. In conclusion, I would say that we think as the United States has argued, that this case is controlled by the decision last term in North Carolina Board of Education against Swann, and we would urge reversal of the Court of Appeals and affirmance of the District Court's injunction. Warren E. Burger: Thank you Mr. Stein. Mr. Joyner. William T. Joyner: Mr. Chief Justice and may it please the Court. I had intended to emphasize two basic facts that we think are very important here. Number one, the quality of the community support. Number two, the proof of the unrealistic nature of the district plan and that it has failed of its purpose as shown by experience. Then I wanted to go into the analysis of the two plans presented to the District Court. In view of the other arguments and in view of some questions from the bench I would like to state what I think is our position. It's our position number one, that as between the plans, before the District Court, one I call the Scotland Neck plan and the other the District Court plan. Even if there had been no danger of White flight, the Scotland Neck plan was superior as a desegregation measure and should have been judged by the Court. If there is any doubt about that, it's our second position, that has between the two plans, the Scotland Neck plan promised realistically to work and to work now, largely because of the community support. The district plan would almost (Inaudible) from the start. Now, let me lay this as the foundations of our argument. As I understand that there is a great difference between desegregation and integration and that the jurisdiction of the Court to take part as almost profoundly and 180 degree turn from Brawley, which says it's constitutional to assign by race or color. We could say that it is unconstitutional not to assign by race and that the answer is that there is found a remaining vestige of the evil of law-imposed segregation. And that remaining vestige must be uprooted and that the measure adopted to destroy that remaining vestige must have a realistic opportunity to succeed and now let us see what the remaining vestige is in this case. There is no evidence in this case of any defect or remaining vestige of state-imposed segregation, except two things. In the Scotland Neck, where the resident population of -- student population of 400 White and 300 Black. In 1968, 1969 or before that, only approximately 39 Black students had exercised their freedom of choice and about 325 White students resident outside of Scotland Neck had exercised that choice to come into Scotland Neck. Now, it's entirely possible and we do not contest the fact that because of that failure of freedom of choice was a mental attitude, a reluctance to enter school, dominate in which another race was highly predominant. And that, that mental attitude was in part, we concede a remaining vestige of state-imposed segregation. That was the thing to be attacked and that the question to be decided by the District Court was whether the Scotland Neck plan or the District plan was better designed to change that mental attitude to be a corrected measure and our basic position is that the District Court had the opportunity to accept the Scotland Neck plan or reject it and it rejected it. It had the opportunity to accept it and had they accepted it, there would have been one school in the district that was truly a unitary school. Now the opponents have said you had a White school in Scotland Neck and a Black school in Brawley. We contend that that is not correct, you cannot designate 5743 as a White school and the probabilities are tremendously strong that the attendants would be approximately 50%. Potter Stewart: It would be the only school in the county would it not, that would not b majority Negro? William T. Joyner: Right. That's correct. And we say that, that was the community support as a tremendous chance of success and if it succeeds, it can be a model or it can be proof to the public that Blacks and Whites can work together successfully and in harmony to give quality education. Now, good deal has been said about the Brawley. Scotland Neck situation. I want to address myself to that, that seems to be the principal contention I would rather say. Now what was the failure, what was the wrong that was done? The wrong that was done by the state-imposed segregation was referenced to Brawley, whereas the Scotland Neck was using the Brawley school to take care of the Black resident pupils in the Scotland Neck. Potter Stewart: And to do what? William T. Joyner: To follow the state-imposed segregation, the school in the Scotland Neck was attended only by Whites and the Black pupils living in the Scotland Neck went to Brawley and Scotland Neck did make use of Brawley to that extent. It didn't have to put up two schools within it'153, Tilton and Others against Richardson, findlaws borders. Now if that is the wrong, then that wrong was completely cured by the statute because by the statute and after the first further filed by the Scotland Neck board, the plan of the Board announced in that answer and proclaimed by advertiser, was to take all of those 300 Black students that had been going to Brawley, most of them as a part of the remaining vestige of state-imposed segregation and assignment to Scotland Neck and to assign to Scotland Neck it's resident Whites and the transfer situation doesn't enter into the constitutionality at all because the Board announced in its answer and in its first and in its advertisement, that the transfers in and out would be according to a plan approved by the Court, but the statement were made yet that the Brawley people who were excluded from Scotland Neck, they're not excluded from Scotland Neck at all. They have the right of freedom of choice to come into Scotland Neck in accordance with such plan as the District Court may approve. Now, something has been said about presumptions. As I understand in the Swann case there are two types of presumptions; number 1, that there is a presumption based on disparity of racial imbalance, that there is a remaining vestige, that is a presumption. Well, that presumption has been followed here because we have accepted that and we have set forward a plan adapted by the statute to correct that situation. So that presumption has been met. There's another presumption and that is a presumption of bad faith on the part of members of an organization, where there has been state-imposed segregation. Now we contend that, that presumption has been overcome by the unchallenged great weight of the testimony -- there's contradictory testimony, as to the good faith of the members of this community. Let me go on very briefly over that. In the testimony of Mr. Powell -- and usually it's in the index, in the appendix, a resident of Scotland Neck, a Black member of the Board. He testified that he came back at New York where he had an important job or good-paying job in the Post Office Department to accept employment in Rocky Mount, and to live in the Scotland Neck, some 20-25 miles Rocky Mount. And significantly he said, he came back in almost all these words, because he wanted to find better schools for his children, because he could have more influence on the school in a small community and because the people of Scotland Neck were interested in improving the quality of their school. That's also in evidence in the deposition of Mr. Hendrik Lee Harrison taken by the government. That the people of Scotland Neck have never rebelled against desegregation. They have never fought it, they've never had any incidents, they've had excellent race relations, but they've been tremendously concerned about the quality of their school and one of the concerns about the quality of the school was they threatened the White flight, flight of White students. And let me emphasize that, I think, the record supports the conclusion that the fear of White flight and the occurrence of White flight was not due to a reluctance to associate with members of the earlier race. That fear of White flight was that it would impair the quality of the schools, and the White flight is occasioned and caused primarily of the fear of the declining quality of the schools. He testified that the people in the Scotland Neck did not think White flight was any answer to the situation. They did not think -- Potter Stewart: White flight in this case would not have been a move to the suburbs or to a different area, who would have been sending children to private schools, is that it? William T. Joyner: That's right and the private schools, they think the private schools are not the answer, that private schools pose a great threat to the public schools. That wherever there is massive White flight by any group of children, from the public school, the public schools must be impaired. Now, very briefly, but where some of the things, the question of transfers as I said is -- the suit against -- this suit was started in June, in August, I think it was the 16, this defendant Scotland Neck City Board of Education was made a defendant, John was a part of it for the first time and it had to appear before Judge Larkins and Judge Butler, hold the motion for preliminary injunction in four days. They filed a very hastened answer; they got into the court and they found that there was a very serious attack on the question of transfers. They were so anxious to establish a quality school that they did not keep it to undertake any litigation on that. There was permission of the court, they filed an further amended action and they said plainly in that amended answer which is Exhibit A to our brief that we propose to operate a school that will embrace all of the students, Black and White, Resident in Scotland Neck and transfers in and out will be made in accordance with a plan to be approved by the court. In their quest for the answers, they requested the court to retain jurisdiction in order that it could supervise those transfers and In Judge Larkins opinion, he said that they would anticipate no trouble in having those transfers. The injunction would have friezed all the money that had been collected as a special tax. The committee got the permission of the court to advertise or to solicit more contributions to defend the law suit. The board then published an advertisement, a three page advertisement in which it gave a blueprint of its proposed operations. It made it public, it announced to the public that it was their intention to do what the first further answer said and it was their intention to conduct a unitary school without any prejudice whatsoever between Blacks and Whites and to public and to conduct a school in which there would be not discernible lines drawn between that. That also is a blueprint of good faith that was published to the group. More on the question of good faith, when the case came up for final hearing before Judge Larkins and Judge Butler, Scotland Neck examined Mr. Shields, the Chairman of the Board. He testified as to the quality of the race relations in the community, he testified as to the intent of the board, he was examined by Mr. Josey (ph) about everything that was said in that advertisement which, by the way, is appendix B in our brief. He testified that he and every member of the board truly met what they have said and that they continued to have those purposes. He would stand over to the other side to examine and his whole examination is in Exhibit C to our brief. And at the end of his examination about the intent of the Board that's on page 50 of our brief in Exhibit C. Mr. Chairman said alright your witness. Mr. Kennedy represented the Department of Justice, no questions Your Honor. Judge Larkins asked him one question, did you receive any response? His answer was, he received a very favorable response and there were no other questions. Mr. Josey then had sworn the other four members of the Board and he asked each of them, they had heard the testimony of Mr. Shields and they said -- they didn't answer it in that way. He said, that they had heard the testimony and agreed with what he said and agreed with the advertisement and what he said about the advertisement, would they hold up their hand? Everyone had held up the hands as shown by the record on page 15, on our brief attention, tangent to the record. Again, Mr. Josey tended them for cross examination and there was not a question asked. They are committed to the policies set forth in that advertisement. I also point out with reference to that, that in this case that was not introduced by the opponents, by the petitioner here, one witness to question the good faith of the Board and what it said in its first further answer or what it said in its advertisement. As a matter of fact, there was not introduced one witness resident in Scotland Neck or the Scotland Neck area that complained of the Scotland Neck plan or expressed opposition to it. Now, let me go back, or that was a conclusion I would draw from that. Number one, that that un-contradicted evidence, unchallenged evidence, and there is no evidence in the case to the contrary proves completely the good faith of these men who were trying to achieve quality education in Scotland Neck and overcomes the presumption of evil referred to in this one case of a desire to perpetuate segregation or any evil desire. Byron R. White: Mr. Joyner, I am interested in what you think about this. Let's assume for the moment for the moment that all of this county had been either all Black or all White, or at least so much one way or the other that really wouldn't make much a difference, would Scotland Neck still have made itself into a separate school district because of the desire of quality education in the sense that by making itself a separate school district, it could ensure that more money would be spent on the schools than if it were a part of the county. William T. Joyner: Your Honor, that's not merely a question of opinion by me, but there is ample evidence in the record to that effect and there is no evidence to the contrary. On that Mr. Josey answered, that's been more certain than I did, but in my opinion based on the record, there is no question what that Scotland Neck would have asked for a special district entirely irrespective of desegregation because they were not getting sufficient money to support their school, they needed more money. Judge Larkins says in his opinion, they had not been getting what they regarded and what the Court found supported their evidence on equal break from the county. Byron R. White: Why not? William T. Joyner: The county controls most of the funds and the county did not have a special tax, and as I understand it, Mr. Josey can answer this better than I can. They get from the county and a lot more by pupil and they would do that if they were special district but the thing that they wanted was the special tax that would enable them to employ better teachers -- Byron R. White: In North Carolina, after Scotland Neck becomes a city, does it remain subject to the County Schools Act, does the property in the city remains subject to the -- William T. Joyner: Well, I understand. It remains subject to -- the property in Scotland Neck, will pay a County School tax that goes to the County and Scotland Neck's proper proportion part is sent back to Scotland Neck. But this tax would be in addition to that. So this district, it doesn't take any money off, any property off the tax that goes to this County's support. Warren E. Burger: Did they give up? Did the Scotland Neck in the separate school district give up any state resources by this action? William T. Joyner: I am not sure that I understand that -- Warren E. Burger: Well grants from the state, were there are any grants which they received from the state as part of the county system? William T. Joyner: Well, I understand that the County School tax which is paid as a property tax on the property throughout the county including Scotland Neck and that Scotland Neck receives not the portion of the tax that it pays, but it does receive from from the county an allocation for each student enrolled in the Scotland Neck school and that which still continues to be -- that tax would still be paid and the Scotland Neck would have a special tax. Let me just say one thing about Brawley. This Court has said that the objective is to uproot all vestiges of remaining segregation. Well, that primarily has rural students, non-rural students, Scotland Neck primarily is a school for let’s say, for these children in that area. Now the use of Brawley’s, I have said was that it took care of the Scotland Neck’s students. But now, Scotland Neck is not sending a one to Brawley. Scotland Neck is enrolling under the Scotland Neck plan, would enroll everyone of them in its own schools. That is the value of that plan. And my time is nearly up, so I have to be quite brief. The plan is a complete establishment of a unitary school in Scotland Neck and there would be no Black students sent from Scotland Neck to Brawley, enroller still have a freedom of choice to enter the Scotland Neck School, but – and the other two things I was saying, number one; that the Scotland Neck plan as being a better plan than the district plan does set up one school that can be a model and it doesn't assign a single student to it's schools outside of the community in which they live. They all would come in the -- the plan would not cause the irritations and the resistance that the Brawley plan caused. And I have no time to go into this Mr. Josey may go into it, but it's in our brief. We contend and a part of it is set forth specific in our brief that elements of advantage the Scotland Neck plan would have even if there would be no White flight. Now bear in mind, it's our view that if White flight is caused by the loss of confidential that people in maintaining the quality of their schools, that they fear that to get a quality education, they must go to private schools, and that's the danger that exists everywhere. But as a matter of fact, whether that's true or not, the Scotland Neck plan is preferable because the Scotland Neck plan secondly would have a greater opportunity of deterring White Flight, than would the district plan. And I mentioned my time is up. Warren E. Burger: Thank you Mr. Joyner, Mr. Josey. C. Kitchin Josey: Mr. Chief Justice and may it please the court. I would first like to refer to the question that Mr. Justice White adverted to concerning the tax structure in the effect if the Scotland Neck Bill was found constitutional. The tax is levied uniformly throughout the county on ad valorem basis. Then each separate school unit, a manipulated unit, it assigned that portion or that county-based tax on a per pupil ratio. Now in addition, each separate school district, and I think this is true throughout the country. In most cases, have an additional or supplementary tax, which they themselves levy and which they themselves receive. So therefore, separate units, separate administrative units, can and do get a supplementary tax plus, by law must get that -- per pupil basis of the county tax. Now that's one of the problems that this school in Scotland Neck face from the very beginning from 1936 until date. They did not receive their per pupil ratio of a county tax. That was one of the problems. Potter Stewart: But why didn't they? I thought you -- C. Kitchin Josey: Because they were not a separate unit, they were part of the county and the County School Board, once they -- the county school system gets their per pupil ratio basis of the county fact, then of course and this is proper. The school board can spend that money within its unit, anyway it wants to. Potter Stewart: Than lot of money on this school than on that. C. Kitchin Josey: Oh yeah, because and of course in the early days, in 1936, Scotland Neck had prior to that time been a city and they had build their own schools, and they were in better shape, frankly, than the schools throughout the county and for ten years or fifteen years or so, those funds that would normally have gone to Scotland Neck, went to the other parts of the County and we raised no point about it. William H. Rehnquist: Well, Mr. Josey in Scotland Neck a complaint was not simply that Halifax County was not raising enough money overall for education, but that of the money it did raise, Scotland Neck wasn't receiving as much per pupil or per school as other areas in the county. C. Kitchin Josey: That's part of it, but Your Honor, it is true that Halifax County schools as a whole did not receive an adequate amount. We first admit that. Thurgood Marshall: Is there any North Carolina procedure to make them do it? C. Kitchin Josey: I'm not sure. There is no procedure that I know of to make them -- tax that people like they should. Thurgood Marshall: I didn't say that. To make them give the amount of money per pupil that was involved. C. Kitchin Josey: Mr. Justice Marshall, I don't think so, and I'm not sure that, that would be the proper -- Thurgood Marshall: Well, is that a violation of the law or not? C. Kitchin Josey: Well, I think over a period of time we maybe able to bring a lawsuit and enforce and make them give us at least more than we've gotten. However -- Thurgood Marshall: You said it's been going over since '36? C. Kitchin Josey: It has, it has. Thurgood Marshall: Well, how long does take a lawsuit to start? C. Kitchin Josey: Well, I think we could have, I don't believe that-- Thurgood Marshall: Well, why didn't you think it is planned in '37? C. Kitchin Josey: Well, of course, the reason I have seen that they went into the city -- went out of the city system because during the depression, we just didn't have -- we couldn't levy that supplementary tax and we fell back into the county system. In fact, many units did throughout the state, because of the overall state law that permitted them to go into the county system unless they requested to stay out, and this, of course, has been the problem. As a matter of fact, the classrooms in Scotland Neck, the main classroom building, one was built in 1903 and the other was built in 1923. Potter Stewart: Well, the major complaint seems to be that the county was not collecting enough money, taxation to run into the school system, is that what you mean. C. Kitchin Josey: Two-fold, that is fundamental, the first. Potter Stewart: I was just going to come to that and you didn't have enough remedy to propose? C. Kitchin Josey: That's correct. We were a very small part of county. County is approximately 55,0000 in population and we are approximately 3000. Byron R. White: I take it that, from here on Scotland Neck wouldn't be very enthusiastic about raising -- if the Scotland Neck plan were adopted, and there was a separate school district there, Scotland Neck wouldn't be too enthusiastic about raising the overall county tax rates for schools, because as long as the Scotland Neck property remains subject to tax ratio. C. Kitchin Josey: Well, of course, I think we would and I think we have shown in our -- in the facts of this case that we would be interested because we would not-- You'd be getting back more of the county. C. Kitchin Josey: Well, we'd be getting our share. Our per pupil ratio which we never got. Now, the other question I think that came up with Mr. Joyner was did we, in fact, would we have, had it not been for integration and the post-integration, have asked for city separate unit. As a matter of fact, in this case, and in the facts of this case, it is shown that in 1965, and as early as 1963 the plan were laid for separate units. In the legislature of North Carolina in 1965, and this was, of course, before Green and this was the time when there was admittedly no integration of the schools there and no thought that it would have to be integrated. We went to the legislature and entered instant Bill and it passed the highest and the Senator -- and this is in the record. It was felt very strongly that the ruled residents in the vicinity of Scotland Neck, defeated that bill because they didn't want to raise their tax. The people in Scotland Neck have been fighting this problem, certainly for many years. Warren E. Burger: There's nothing unique about this in any part of the country as there, isn't it generally true that people in the towns are prepared to spend more money for education and other services than people in the rural areas? C. Kitchin Josey: I certainly think that's true, it's -- Warren E. Burger: Just true in the northwest part of the country, I used to think as in the southeast. C. Kitchin Josey: It certainly is true in our area, I've been a school board attorney for some time and for instance in the 1957 County School Bond Election, the only school bond election that's passed in Halifax County, since 1936. The school board people and the leaders in the whole county, after vigorous campaign by the school authority, this bond issue passed with a scant county-wide majority of 388 votes county-wide. In general, the rural area of the country voted against this bond issue, and this is Appendix 933. William H. Rehnquist: Mr. Josey! C. Kitchin Josey: Yes. William H. Rehnquist: Under North Carolina Law, did this school board, country school board members had some discretion as to how they will spend money collected by the county tax among the various schools? They aren't required to make a flat per pupil allocation and spend exactly that on each school per year? C. Kitchin Josey: That's correct. They do not and of course as I've explained to Mr. Justice Marshall, I think, they have to do that because after all some places in the county, and no doubt, and I think this is true, Mr. Justice Marshall in our county there's no question that in 1936, 1940, 1945, maybe 1950, the Negro schools were in horrible condition and I am convinced that most of the money certainly in those early days, went for the improvement of Negro schools. They were hold in the (Inaudible) there had been considerable improvements. Thurgood Marshall: You don't have to spell it out for me. C. Kitchin Josey: Well, in the first 10 years, 15 years, the people of Scotland Neck moved in, and the people of Scotland Neck did not complain and I'm confident that that's the reason and basically, no lawsuit was filed, but this thing kept up over 30 years. Potter Stewart: How is the Board of Supervisors of the county elected? C. Kitchin Josey: They are elected by county-wide vote, and this is another problem, Your Honor. There are two city systems in our county already, the city of Roanoke Rapids which is much larger than any other city, the city of Weldon in surrounding area has a city system and those two city systems together, basically have 50% of the votes in the whole county. Thurgood Marshall: Both of them in the same county? C. Kitchin Josey: No sir, Wilson is in Wilson County, which is adjacent to us. Potter Stewart: Do the residents of those two cities vote for the county board of supervisor member? C. Kitchin Josey: They do and that's very unfortunate, but they, you see, can swing and they do swing the vote to the country board of education members up in that area was other than the county. We have -- Potter Stewart: Is county schools board elected by popular votes? C. Kitchin Josey: It is. Potter Stewart: Do they come from districts or from the county at large? C. Kitchin Josey: There are no physical districts, this has been traditional as to generally where they run from, but there is no district, it's state wide, it's a county-wide vote. We have had one member on that board out of five or six or seven member board, seven member, I believe, since 1936 and one member out of seven or eight just does not have the power to accomplish what -- Potter Stewart: You have a county-wide vote both for the Board of Supervisors and the School Board? C. Kitchin Josey: No, we might -- when you say the Board of Supervisors, I assume you mean the County Commissioner? Potter Stewart: I'm thinking about the -- whatever party it is that levies the tax? C. Kitchin Josey: Yes, that's County Commissioner and when you said Board of Supervisors, I didn't quite appreciate that. Ours is called County Commissioner and I assume you said that. Those are elected by districts on a population basis, but you see we're in a end of a county that is of course partially populated and we do have one member board of county commissioners. He doesn't enter Scotland Neck, he goes out far more outside and there again you see, the rule, he's following up and he's the one who's going to stop the practice. Byron R. White: Did you tell just now the County School Board is also elected? C. Kitchin Josey: It's elected, yes, the county-wide, but not by district. Hugo L. Black: It's elected at large and your commissioners are elected by districts and Scotland Neck is in one district. C. Kitchin Josey: Yes. Byron R. White: How many members -- the board of county commissioners are there? C. Kitchin Josey: Well, they are five. They just changed this past legislature to six which weighted it and again in the populous area from their own apparatus. Byron R. White: But have got that bond issue proposals in the last 20 years? C. Kitchin Josey: There have, and the only one that passed was the 1957 bond issue. There have been others but they have been defeated. Byron R. White: How the two major cities that you're talking about is controlling 50% of the votes? I take it the bond issues must have been defeated in those cities or they would have carried. C. Kitchin Josey: When those two cities and those two systems, particularly Roanoke Rapids, when it gets ready for some money on a bond issue, then we are going to be able to pass it. If they say no, they are not ready for it and after all they are getting a supplementary. Byron R. White: And how about the school? Is the school tax, a separate item on the tax bill? I mean, does it take separately, does the School Board certify to the county commissioners a certain assessment? C. Kitchin Josey: Yes, that's correct. Byron R. White: So the commissioners don't have the -- maybe they have the power, but effectively, it's the School Board that sets the tax ratio? C. Kitchin Josey: Oh, no, it's county commissioners and there the County Commissioner sets the rate – sets the budget. Byron R. White: They don't listen to the School Board as to how -- C. Kitchin Josey: Well, they listen, but how much attention they pay to them Mr. Justice White, is very problematical. As a matter of fact, the county commissioners, immediately after the 1957 bond issue, instead of leaving a capital outlay, school tax rate at 60 cents on the 100. Instead of doing that, which they had promised the School Board they were going to do, they reduced it down to 27 cents and it's never gotten back up. It's up to 29 cents since then. So it's less than half of what it was in 1956, because of the school bond issue, and in that issue -- Byron R. White: Do you know how much money per pupil is spent? Let's say in the major cities that you're talking about the two. Do you know how much per pupil is spent? C. Kitchin Josey: We have those figures and they are somewhere in -- I'm not sure about the average. Byron R. White: Is it substantially more than per pupil outside? C. Kitchin Josey: There's no question about it. There's no question about the cities, but more in the education than the rural areas. That's I am sure true throughout -- Byron R. White: So the people in those two cities affected themselves with school with a higher rate than the people in county? C. Kitchin Josey: There's no question about it, yes Sir. You see, this bill, that is now before this court, levies a 50 cents per 100 on proper evaluation in the city of Scotland Neck, that's the highest percentage about North Carolina law that Scotland Neck -- Byron R. White: That would be an addition to this county tax? C. Kitchin Josey: Yes, would be an addition to county tax. Byron R. White: Is that comparable to the extra rate in the other two -- in the other major cities? C. Kitchin Josey: It's more than any of the other two cities. It's more than any -- in the 1957 bond issue, even though Scotland Neck voted for it and had almost half of the total county majority, if Scotland Neck had been a separate unit that time, it would have gotten $190,000 that is based on the per pupil ratio. As a matter of fact, not $1 of those funds were ever spent in the time of Scotland Neck, not $1. Then in 1963, there was a state bond issue, and that's the only state bond issue, (Inaudible) state bond issue. The Halifax County Schools got approximately $1 million. Not $1 of this money was ever spent in the time of Scotland Neck. Of course at that time the people began, as Mr. Justice Marshall suggested, to get disappointed and upset and they then in 1963, drew up a bill and they introduced in the legislature. The people had a long fight with their schools. They made every effort to upgrade their schools. They have certainly not been -- I'm not saying that they were real happy with the Brown decision. I'm not saying that they were happy with the Green decision, but the time of Scotland Neck and its citizens, and I think it's abundant evidence to that effect. Certainly, we're willing to face that problem realistically. Byron R. White: What Scotland Neck is going to do do with school of the (Inaudible) C. Kitchin Josey: Well, if Your Honor, please, that balance schools in the state of North Carolina that are approximately of the similar size, who in accordance with alll rankings, and this was part of the record are in the top, in the state. As a matter of fact, Halifax County School is a 160 out of a 160 unit, is the bottom in the whole state. The number of students that go onto college, that's just one indication of the academic rating of the schools of Halifax County is a 160 out of 160. Byron R. White: But, what's the capacity -- the schools have approximately? C. Kitchin Josey: Approximately 750, approximately same amount that we have proposed with the students. Over 700 -- Byron R. White: Without the transfer plan. Without how many students are going to be in a-- C. Kitchin Josey: Approximately 700. Byron R. White: Well with the transfer plan, how many 1000? C. Kitchin Josey: Well, with the transfer plan, a 1000. Byron R. White: But the transfer plan has been stricken down. C. Kitchin Josey: It's been stricken. Byron R. White: So the Whites who were going to come in or anybody else who want to come in won't be coming in-- C. Kitchin Josey: I'm sure, that's true. There would be a very limited amount of transfer. Now the district court in its opinions stated that it would have no difficultly with this transfer that it could and it proposed two or three different possibilities. One; to let one Black one White come in. In other words keep the balance. But I don't know that the transfer plan is necessary at all, it's just walk them in, walk them out. Byron R. White: I know but will your 50 cents -- I suppose you had planned on 1000 students? C. Kitchin Josey: I assume that-- Byron R. White: Say five out of 1000 students and if it takes 50 cents to run the school with 1000 students, what are you going to do with only 700? Is it -- C. Kitchin Josey: Well, that would be that much more per pupil. In other words, we weren't going to get but-- Byron R. White: Yeah, but you were going to charge for the-- C. Kitchin Josey: Well, that charge would certainly not take care of the-- Byron R. White: But you're going to save money. C. Kitchin Josey: We'll have more per pupil, that's correct. On summary, which we contend describes attitudes and the hopes of the people of the time of Scotland Neck is candidly expressed in the deposition of Frank Shields Chairman of the Scotland Neck's City Board of Education and answer to the question propounded by the government's attorney. I'd like to quote him. That's Appendix, page 436. “I think that the people of Scotland Neck, both Negro and White are moderates. In my talking to people they have felt that integration was inevitable. I would have to say that the thinking of, I don't like the word progressive but the people that really consider problems ahead of their actual taking place, they felt like we ought to be making some preparation for the two races attending the same school. I have personally felt that when you involve something as large as this county, that there's going to be a lot of rough road ahead. Now we have not had any demonstrations here. We have not had any board cuts here. As far as I know, there has been no friction between the two races. But I cannot say that about any other community in Halifax County and I personally have felt that if folks right down here that go ahead and integrate and get it over and get on back to education that is it would be effort well spent. I was aware of and was in agreement with Mr. Harrision when he asked for an integrated high school down here, and that was in 1966 before agreement. I felt and I wasn't by myself. There were others that felt, well, in this way we can go ahead, we will be right. We can go ahead with education. So, I am sure that in our discussion, and I felt like this was, we had tried every method that I knew of to try within the county, to try to go ahead and in this end of the county, I am not talking about independently, but for us to go ahead and move on into integration, I felt like this setting up this school system would bring us in compliance with the law and we could go ahead without interrupting “education”.” We contend that the two judge district court, after several days observing this type of witness, and after sharply questioning them personally concluded that the Scotland Neck City System could and would be operated in a completely nondiscriminatory manner and for the betterment of the education of its students. In its findings of fact, “The Halifax County School Superintendent as saying that the interim plan which the court eventually ordered, could still be implemented if the constitutionality of the Scotland Neck district was upheld. That Halifax County would still get the same amount of money per pupil from the state and from local sources in the county and that the county would have an even better pupil teacher ratio in certain areas of instructions”. The court further added, “If the school district itself were found to be constitutional, it would not be difficult to fashion an acceptable transfer plan by either limiting transfers in and out sets that the Black-White ratio would be the same after accepting transfer or by accepting an equal number of Blacks and Whites”. We earnestly contend -- Thurgood Marshall: Is this voluntary transfer of business? C. Kitchin Josey: No, this would not be voluntary, there would be no transfer overall except by the district court, and I assume that we have agreed in our answer that whatever plan that we would have a transfer would be submitted to the court. Here the case one possibility would be -- Thurgood Marshall: Well, the only question I'm asking is, is this voluntary or not? C. Kitchin Josey: It's not voluntary on our part, we -- Thurgood Marshall: I didn't mean voluntary on your part, I meant voluntary on the student's part, which we paired few decisions about the voluntary plan. C. Kitchin Josey: No, this would definitely not be a free transfer plan, Your Honor, as I said and it would be whatever the court demanded or required in accordance with the decisions that this court has set down. I'm not sure what it would be and I'm not sure that the district court knows yet. But we honestly contend -- Warren E. Burger: Your time has expired, you just got to close. C. Kitchin Josey: We earnestly contend that the North Carolina legislature and the public school leaders of community of Scotland Neck, have presented a plan which will best accomplish in a realistic manner, the letter and spirit of the mandate to dismantle the remaining vestiges of law imposed segregation, root and branch and will at the same time improve the quality of education, what more does the law demand of its citizenship. Thank you. Warren E. Burger: Thank you. Thank you gentlemen. The case is submitted.

Earl Warren: General Stores Corporation, verus Max Shlensky, Securities and Exchange Commission et al Mr. Rosen. Aaron Rosen: Mr. Chief Justice, Justices of the Court. This is an appeal by certiorari for the Court of Appeals Second Circuit. The petitioner, General Stores Corporation, seeks to reverse the -- the decision by an -- a divided bench of that Court which affirmed the District Court. The Court of Appeals held that the debtor in this case, which filed the petition on arrangement under Chapter XI of the Bankruptcy Act with its unsecured commercial and trade creditors, cannot proceed in Chapter XI unless the debtor amended its petition to comply with the requirements for a corporate reorganization under Chapter X. In filing its petition for an arrangement under Chapter XI, the debtor was seeking first an extension of time for the payment of its general, unsecured and commercial trade debts, and during the pendency of the proceeding, it hoped to obtain the liquidation of the balance of its very burdensome leases. General Stores was formerly known as the D. A. Schulte, Inc. It operated a large chain of the small shops selling tobacco and sundry offers. As a result of the gradual change in merchandising in that type of business and perhaps the borrowing habits of the public, the company decided that if it continued in that type of business it meant financial disaster. It decided that it would be necessary that it acquire successfully, established chain drugstore outlets. This aim, on the part of the debtor company, was accomplished in 1953, and in 1954, by the purchase for some $4 million of the Ford Hopkins Company that had about 56 or 57 chains of drugstores. And the purchase of the Stineway Company that had approximately the same number of retail drugstores. Now, the acquisition of these two successfully established chains indicated to the debtor company a return of approximately 17% on the investment or the rather the purchase price. And it should be noted that this 17% was anticipated to be a net return, a close to a net return because of the benefits of the tax laws carry forward that the company hoped to obtain. The continued operation by the debtor of its remaining used units that it had and the very substantial expense that was occasioned by its burdensome leases was gradually resulting in a point arriving where it was unable to pay its commercial and trade debts as they were maturing. In order to obtain the relief from its inability to pay its commercial debts as they were maturing, this debtor filed a petition for an arrangement under Chapter XI. General Stores is a public stock corporation. It has but one class of stock, common. The stock is traded on the American Stock Exchange. Part of the stock is registered with the Securities and Exchange Commission. There are about 2 million shares of this common stock outstanding that has a par value of $1 a share. And there are approximately 7000 shareholders in all, the public. Now, except for this common stock issue, there is no other stock or security whatsoever issued by this debtor. At the time that the petition was filed for an arrangement, the debtor owed about $2 million to the former owners of the stock of the Ford Hopkins Company. This debt, which represented the balance owing on the purchase price, was secured by all of the stock of the Ford Hopkins Company and by all of the stock of the Stineway Drug Company. This is the only secured debt. And, of course, this obligation to this secured creditor was not to be affected by the proposed plan of arrangement. In addition, this debtor owed to general unsecured, merchandise and trade creditors an amount somewhat in excess of $500,000. It also owed to its wholly owned subsidiary, the Stineway Drug Company $1,300,000 representing moneys borrowed from time to time from that company. The assets at the time of the filing of the petition amounted to about $5 million and consisted of the capital stock of the two wholly owned subsidiaries, the Ford Hopkins and the Stineway Drug at about $4 million an inventory cash and other miscellaneous assets of about $1,000,000. Now, the plan of arrangement filed by the General Stores proposed an extension only for the payment of its generally unsecured merchandise and trade debts as follows. 20% in cash upon the confirmation of the plan, 20% annually thereafter over the next four-year period and the only obligations affected by this propose plan of the general unsecured commercial and trade debts. They're represented here by the creditors committee and by the attorney for the wage claimants. The Commission moved in the District Court. Felix Frankfurter: In other words, it was then that the arrangement touched only these unsecured creditors and therefore, if General Stores had gone on with the business subject to eventuality of the (Inaudible) events seems nothing new, the situation of the stockholders will remain the same. Aaron Rosen: Exactly, sir. And there were no other security holders of any kind. Now, the Commission moved in the District Court for leave to intervene in the Chapter XI proceedings. And it asked that the petition be dismissed which was filed for an arrangement unless it was amended to comply with the provisions of Chapter X for corporate reorganization as we understand it. Now, the reasons advanced by the Commission and the basis of its motion is its contention that Chapter XI is not available for corporations with publicly held securities. Felix Frankfurter: Were these the representatives coming from each (Inaudible) Aaron Rosen: No, sir. Mr. Shlensky represented two-tenths of one percent of the outstanding stock. Felix Frankfurter: Did he -- wasn't there a truth meaning it's solely for himself that was (Inaudible) Aaron Rosen: I believe it may have been in this represented capacity. I don't know that detail, sir. It was merely an allegation on this one. Felix Frankfurter: In other words, I want to know that the stockholder -- whether the stockholders were the bargainers objected to it. Aaron Rosen: I -- I can say -- Felix Frankfurter: On Chapter XI arrangement or whether the -- whether the suit really is with the Security and Exchange Commission representing its note within the public interest? Aaron Rosen: Well, I -- I can best answer that question this way. After this stockholder, Shlensky started the proceedings then for the first time, that the Security and Exchange Commission stepped in the case. It was made a party to the proceedings by the motion of this small stockholder. The District Court affirmed by the Court of Appeals granted the motion of the Commission on the grounds that a large corporation with publicly held stock may not have an arrangement -- may not have an arrangement with unsecured creditors regardless of the plan through Chapter XI proceedings but that it must resort to a corporate reorganization through Chapter X so that the appraisal of the Commission could be obtained by the Court. Neither of the courts below found any express statutory provision in Chapter XI which excludes a large corporation with publicly held stock from seeking an arrangement with general unsecured commercial and trade creditors. Both courts and the Commission in this Court rely exclusively upon their interpretation of this Court's decision in the U.S. Realty case. We believe that it must be conceded that nowhere in Chapter XI is it expressly provided that large corporations with publicly held stock issues cannot file a petition for an arrangement under that Chapter. And we believe that it must further be conceded that on -- on at least three occasions, Congress was faced with the suggestion to so legislate and Congress refused to do so. The first occasion was in the formative stages of the Chandler Act in 1936. At that time a special committee of Congress recommended that the acting clue to provision that large corporations with publicly held stock of over 100 stockholders should not be or should be excluded from the benefits of Chapter XI. It was not enacted. The second occasion was in 1940 after the District Court and the Court of Appeals in the U.S. Realty case held that there was no exclusion in Chapter XI from the large corporations with publicly held securities. At that time, a bill was introduced in Congress to exclude such corporations from the benefit of Chapter XI. Congress again failed to enact any such exclusion. The third occasion was in 1952, and that was after this Court's decision in the U.S. Realty case. And particularly after it was noted from Mr. Justice Stone's pointing it out in the U.S. Realty case that there was a lack in the statute of any definition of a large corporation with publicly held securities on which definition the Court could find the basis for an exclusion. Congress at that time codified one aspect of the U.S. Realty decision but again failed to enact in Chapter XI any exclusion against large corporations with publicly held securities. Felix Frankfurter: Mr. Rosen, your burden to establish that or proceeding under Chapter X is forbidden by Chapter X, in order to establish the -- an arrangement under Chapter XI is allowable. Aaron Rosen: Had this corporation filed a petition for reorganization under Chapter X seeking in that proceeding, only an adjustment or extension of its commercial and trade debts, it would not have been filed in good faith. And the statute says that when the Court receives a petition for reorganization and before it approves it, it must find that it's filed in good faith. Felix Frankfurter: Then your position is it couldn't, not that -- Aaron Rosen: Correct. Felix Frankfurter: -- that'll be between X and XI which is -- which is allowable as in XI -- Chapter XI procedure. Aaron Rosen: Yes, sir. And as I'd like to finish my answer to your question, Mr. Justice Frankfurter, it is considered bad faith if the relief requested under Chapter X, had this company filed the petition for reorganization, could have been granted under Chapter XI. Now, if I may, in the absence of any statutory exclusion of large corporations with publicly held securities, what are the substantive criteria for dismissing a proceeding in Chapter XI which would justify excluding certain corporations? The only substantive rule for dismissing a petition is, and it always has been, contained right within the Act in Section 376 and Section 366 of Chapter XI. Section 376 empowers the Court to dismiss the petition wherever the plan fails of confirmation. Section 366 states the conditions of confirmation. Now, the conditions for confirmation at the time of the U.S. Realty case was that the Court be satisfied that the plan was fair and equitable and in the best interest of creditors also feasible. At that time, if the Court was not satisfied in either point, the plan could not be confirmed. And the Court was empowered to dismiss the proceedings right in the Section 376. This was statutory law and that was the law we submit which the majority of this Court applied in the U.S. Realty case. As a matter of substantive law, the majority opinion stated that the most important consideration was that the plan by affecting unsecured guarantee of the mortgage certificate holders without compensating advantage, contributed -- contributed by stockholders couldn't confirm such a plan under any circumstances because it was not fair and equitable under the Boyd and the case in Los -- Los Angeles Lumber case. Secondarily, the Court said, and found, as a matter of discretion, that in view of the Securities Act of 1933, it could not be satisfied as to what was for the best interest of creditor without an appraisal and a report from the Securities and Exchange Commission who, under the Securities Act of 1933, were the special guardians of the particular creditors that were affected by the plan in the U.S. Realty case. Now, what is there in the U.S. Realty case which could justify this Court in excluding the General Stores from the benefits of Chapter XI on the facts, the two cases are entirely different. The decision in the U.S. Realty case, I submit, was based on the facts peculiar for that case. The plan that was submitted in that case had a direct and adverse effect on the public security holders that held the guarantee issued by the security -- by the U.S. Realty Company. Felix Frankfurter: Well, isn't the ultimate that would be here suppose the security that the District Court in that case in the -- under the facts of that case was entitled -- would exercise the jurisdiction preceded of entertaining this with Chapter XI and that the Court of Appeals that that was not on abuse of discretion that -- that the Court of Appeals in reversing that was in error. Aaron Rosen: I agree. Felix Frankfurter: Is that what it gets down to? Aaron Rosen: I agree. Felix Frankfurter: Now, this case -- in this case, the District Court admitted -- the District in this case -- the District Court exercised its jurisdiction not to entertain Chapter XI. Aaron Rosen: Thats correct, and the Court of Appeals sustained it. Felix Frankfurter: As you say that -- did you say that the (Inaudible) Aaron Rosen: Judge Dimock is correct. Felix Frankfurter: Do you -- do you say that Judge Dimock couldn't exercise discretion was so compelled when you raises the question whether he was concerned. While this is -- was an exercise of discretion whether we have the question whether the District Court (Inaudible) Aaron Rosen: Mr. Justice Frankfurter, I strongly submit that nowhere in the statute is there any such discretion granted to the Court. Nowhere in the statute is a large corporation with publicly held securities excluded from the benefits of Chapter XI. And the discretion that was discussed in the U.S. Realty Company case, we interpret as being entirely different. Where there are public security holders affected by a propose plan of arrangement, then, the Court has the discretion of saying, “Well, I can determine now, whether or not, it's for the best interest of creditors which I'm required to do in my discretion. However, if it's a simple case, I'll do it. If it's a complicated case with many stockholders, I prefer to exercise my discretion that the Security and Exchange Commission shall step into the matter because they're the guardians of that particular class of creditors. And give me the benefit of their appraisal as to what they think should or should not be done in the best interest of creditors." In that case at that time, you also had the fair and equitable rule. But the discretion, I think, from a careful analysis of the decision was not whether a large corporation with publicly held securities should be excluded. Felix Frankfurter: Well, the stockholders' interest were involved in that case. Aaron Rosen: In the -- Felix Frankfurter: In the Realty? Aaron Rosen: In the Realty case, not stockholders. It was guaranteed certificate holders and it was the only class of creditor affected, the only class. Now, we maintain that the moving consideration were it excluding the U.S. Realty Company from the benefits of Chapter XI, was of the fact that its plan directly and adversely affected, the unsecured guarantee certificate holders as I mentioned. The Commission, on the other hand, denies that it was the plan which was the moving consideration for the U.S. Realty decision. Instead it contends it was a fact that the U.S. Realty Company was a large corporation with publicly held stock which constituted the moving consideration for excluding it from the benefits of Chapter XI. Felix Frankfurter: Would you think your case was different or this case was different if the ordinary creditors opposed it -- the arrangement? Aaron Rosen: If the ordinary creditors oppose the arrangements, there isn't any -- quite you mean the commercial and trade credit? Felix Frankfurter: Yes. Aaron Rosen: It could never be confirmed. This would automatically be dismissed or adjudicated, whichever the Court determines after a hearing is for the best interest of creditors. Felix Frankfurter: Well then, it would have to go to adjudication? Aaron Rosen: Not necessarily. Under the Act, where a plan for the adjustment or settlement of general unsecured trade creditors, is not confirmed because for whatever the reason may be, as permitted under Section 366, then the Court holds a hearing and determines what's best for creditors. Shall I direct an adjudication and the distribution of assets maintain the possibility of preference actions or such or shall I dismiss it? Where will the benefit of creditors best protected? That's what the Court is required to do. Now, unless the Commission is correct in its interpretation of the U.S. Realty case, that case cannot be controlling in ours. Mr. Justice Stone stated in the U.S. Realty case that most important in his determination is that -- is the fact that the plan proposed by the U.S. Realty did violence to the fair and equitable rule. And that Chapter XI was inadequate to affect stockholders who would, of necessity, be affected by any plan of arrangement. Of course, you just couldn't comply with the fair and equitable rule as the law then existed. Stanley Reed: That -- that time was the fair and equitable rule in both -- Aaron Rosen: In both -- Stanley Reed: -- X and XI Aaron Rosen: It was, sir. And in 1952, the fair and equitable requirement was removed from Section XI as a requirement for confirmation of the plan. Stanley Reed: Will you discuss later why that was removed from the list? I don't want to interrupt your argument. Aaron Rosen: Well, I -- I believe -- I think it will be discussed, sir. Mr. Justice Stone further stated that it didn't appear -- did not appear that any plan could be proposed under the fair and equitable requirement which didn't affect stockholders. It just hadn't. Because you couldn't tear down or pay less to general creditors under that rule without some compensating benefit being paid by the stockholders. It is our contention that the majority holding in the U.S. Realty case is based upon the inadequacy of Chapter XI to confirm the plan that was presented by the U.S. Realty Company in that case. And Mr. Justice Stone, after making the observations which existed in that case that Chapter XI was not intended for the large corporation with public securities, said, "Still more important are the differences in the remedies obtainable under the two chapters which results from the differences in the nature of the two proceedings and in the securities affected by them. We believe that we're confirmed in our opinion as to the basis of the U.S. Realty decision by the fact that Congress, in 1952, changed the standards for confirming a plan in Chapter XI, rather than in enacting any legislation which would exclude large corporations with publicly held stock from the benefits of that chapter. This Court in the U.S. Realty case pointed out that the fair and equitable rule as I stated made it almost impossible to confirm a plan of arrangement without affecting stockholders who therefore, must be permitted to become parties to the proceedings. And that couldn't be done under Chapter XI. In 1952, Congress removed the fair and equitable requirement for confirmation of arrangements under Chapter XI. And it removed the necessity for making stockholders parties affected by the proceeding. Well, I -- I see that my time is getting very close and I would like to state, if I may to the Court, the five important points that we stress for the reversal of the court below. The first is, that there's nothing contained in the statute which excludes large corporations with publicly held securities from the benefits of Chapter XI. My second point is, the only substantive criteria for the dismissal of petitions under Chapter XI are contained within the law itself, Section 376 and Section 366 as I mentioned before. My third point is that, the Court, this Court in the U.S. Realty case did not add to the criteria for dismissal. It merely applied the existing law. And my fourth point is that the result in the U.S. Realty case does not apply to our case at all, because as Justice Stone stated in the U.S. Realty case, the important consideration is the plan which adversely affected the public security holders. And my last and final point, is that the 1952 Amendment, which is Section 328, did not add any additional criteria for the dismissal of the petition by -- by saying large corporations are excluded or certain types of corporations are excluded. It merely added a procedural remedy from that portion of the U.S. Realty case which was codified and nothing else. Thank you, sir. Earl Warren: Mr. Goldweber. Max Goldweber: If the Court please. This is an appeal by the Wage Claimants who formally employed by the petitioner in support of the petitioner's brief before this Court in seeking the reversal of the judgment below in the Circuit Court of Appeals. There are 174 wage claimants here with claims approximating a quarter of a million dollars. There are also priorities totalling some approximate $90,000. Now, pursuant to Chapter XI Section 64 (a) of the Bankruptcy Act, these claimants are entitled to a priority which amounts to this $90,000. Now, under the order and the judgment appealed from, these wage claimants are completely deprived of this priority if the order below and the judgment below are left to stand. Because under the provisions of Chapter X, Section 102 of the Bankruptcy Act, it is specifically provided that Section 64 of the Bankruptcy Act shall not be applicable to proceedings under Chapter X. Now, the order of the District Court is self-executing in that either the petitioner change or amend its petition to Chapter X or it be dismissed. And were to be dismissed, we would automatically lose this priority. Now, the wage earners therefore, would be left at the mercy either of the debtor where he -- were it to amend to Chapter X or at the mercy of the general unsecured creditors were they to file an involuntary petition for bankruptcy. Now, the rights of these wage earners can only be protected by a continuation of the Chapter XI proceedings or by an adjudication of the debtor under the direction of said proceedings be continued as a straight bankruptcy. Now, I need not point out to this Court that the wage earners have been under the special protection of Congress and the courts and there are many, many cases have been cited in our brief in conformity with this. Harold Burton: If the wage earners have claimed for much more than the time they gave him a land, how -- how long do they have to be in the Court, three months or something? Max Goldweber: Three months. Harold Burton: (Inaudible) you -- you have a less than three months wages? Max Goldweber: That's correct. For or up to $600 maximum. And this is a claim for severance pay under a contract between the six operating unions which I represented and the debtor. Harold Burton: That is they claim a longer term? Max Goldweber: Oh, no. No, no. Harold Burton: Only it was the three months? Max Goldweber: Only for the three months as to the priority. Those sums over and above $600 are general -- are general creditors. Harold Burton: It's fairly the same in both either on the X and XI. Max Goldweber: Well, yes. The general unsecured creditors would make no difference as to the priorities. Harold Burton: Do you say under XI, they have a 3 months claim but under the X they don't. Max Goldweber: Under XI Section 64 (a) gives them a priority, to give up to $600. Now, of the quarter million dollars only $90,000 represents a priority approximately $155,000 represents general unsecured creditors. We would come in under both phases of this. However, it is our contention that we do not want to lose this very real advantage we have of having a priority because all of these wage earners no longer work for the petitioner. Many of them have worked as long as 30 years, have spent their lifetime on this particular job. Many of them are not employable elsewhere and this small sum of money represents to many the savings that they may have accumulated over 30 years of employment with the petitioner. Now, it is apparent that the provisions granting these priorities to wage earners are the result of considerations of social policy by the Congress and has been enunciated in several of the cases. And it's our contention that the Court should give special consideration to the congressional policies intended by this statutory enactment. Now, we must consider the impact of the order and judgment appealed from below. We have 174 families affected directly and adversely. Some of these claims total, some odd $2000. Some $1500. These people have not received that money since the debtor has filed its petition on October 18th, 1954, some 15 or 16 months ago. Now, if the petition is amended to a Chapter XI, it is without question established from experience that a Chapter X proceeding would take a considerable time in the appointment of a trustee, his attorney in going on to examine all the books. We might then have a situation where this would continue for an even greater period of time that we have had today. And it is our contention therefore, that since no other creditor seeks the reversal or rather seeks the change from XI to X that the judgment below should be reversed and should be permitted to stay in Chapter XI. Thank you. Earl Warren: Mr. Singer. Leon Singer: May it please the Court. I represent the official Creditors Committee. The creditors in this case comprise in the main three groups. One merchandise and service creditors, the second group, the former employees that Mr. Goldweber mentioned. And the third group, landlords on rejected leases. Now, we've joined even though, we're normally, we are a respondent in the prayer of the debtor for a reversal of the judgment below. Hugo L. Black: Which one of those three groups, did you say you represented? Leon Singer: We represent all, as the official Creditors Committee. Hugo L. Black: You represent all? Leon Singer: We represent all -- Hugo L. Black: Including -- including the wage earners, too? Leon Singer: -- including the wage earners -- Hugo L. Black: You represent -- Leon Singer: -- on their unsecured claims. Now, the creditors in this case feel that the decisions below are oddly irreconcilable with fundamental principle of bankruptcy in corporate law. And that is of the rights of stockholders whether of a close corporation or whether of a corporation whose stock is publicly owned is always subordinate to the rights of creditors. Throughout the decisions below, it would seem that the courts were more concerned with the protection of the stockholders than the protection of the creditors. Now, any plan whether it's one of reorganization under a Chapter X or whether it's one of arrangement under Chapter XI, must we submit these in the best interest of creditors. And the creditors in this case believe that their interest would be best served if these proceedings continue in Chapter XI. And it shall be my burden to demonstrate that point. Now, simply to hold that a large corporation whose stock is publicly owned may not avail itself of the privilege of obtaining an extension of payment or for that matter a composition of its debts does violence to the very intent and purpose of Chapter XI which concededly was to permit an adjustment of unsecured debts with a minimum of delay and a minimum of expense. Otherwise, it would seem, if it may please the Court, would be tantamount to forcing such a corporation to a choice between an involved Chapter X proceeding or liquidation and straight bankruptcy, notwithstanding, that there may not be present either a need or a desire or a possibility of reorganization. Now, the effect of the decisions below, if I may suggest to Your Honors, would require a large listed corporation with stock publicly owned whose assets, and if I may paraphrase the standards suggested by Judge Frank below, whose assets are in excess of a million dollars, perfectly solvent, otherwise, and as to which there isn't the faintest suspicion of the conduct of management and which for example desired and required an extension of its bank obligations or which may desire or require, let us say, a composition or adjustment of damage claims which may have arisen out of an action on anticipatory breach of contract where the corporation concededly receive no benefit. And even though that that class of creditors, a majority, may have indicated a willingness to extend credit to such a corporation. If the decision below stands, that corporation must go through the involved cumbersome expensive procedures of a Chapter X. I don't believe this Court intended that in the Realty case and certainly, there's nothing in the statute which says it. Hugo L. Black: If it wouldn't disturb you, I -- I understand the claim of the wage earners, the term here as to why the creditors would be injured by the taking away their lead. What is the basis for your statement that their other creditors would be injured? Leon Singer: That is the point I'm now arriving at, Judge Black. Hugo L. Black: I understand. Leon Singer: This record discloses that the liquid assets of this debtor, presently, are insufficient to pay unsecured creditors to the full extent of their claims. That is in the record and it became apparent to the Creditors Committee. And the Creditors Committee indicated a willingness to accept less than a hundred cents on the dollar. Now, if we are forced into a Chapter X proceeding where the fair and equitable rule is a requisite (Inaudible) obvious. We're forced either with liquidation or the acceptance, perhaps, of some form of preferred stock or a long deferred payment of these debts and I haven't any hesitance in saying to this Court, I feel that neither a plan which will give to unsecured creditors preferred stock in this corporation, on which will require them to wait years and years for payment of their debts will receive the required two-thirds necessary in a Chapter X. Felix Frankfurter: Why wouldn't the term which you -- which has now been offered which the creditors are accepting under the Chapter XI, be terms available under Chapter X because of fair and equitable would be a part? Leon Singer: I -- I feel that is so. Certainly, -- Felix Frankfurter: Neither proportions (Voice Overlap) -- Leon Singer: The proportions, they would have to be so -- as Judge Stone say, “You have to eliminate the stockholders to apply the fair and equitable rule in a Chapter X proceeding.” Now, -- Felix Frankfurter: There may have to be a risk involved. Leon Singer: That is a risk. Felix Frankfurter: That the policy would be ready. Leon Singer: Definitely, so. Now, I think there's another great risk. The -- there is a very substantial (Inaudible) in this case which is subjected to parole. And that is the stock of the two subsidiaries. There is an equity of $2,000,000 in those subsidiaries. But there is still unpaid approximately $2,000,000 of the original purchase for them. And that stock is held by a trustee and there is a record foreclosure of that security if we're going to a X. I say there's a threatened foreclosure because the trustee has specifically waived the right to foreclose pending termination of these proceedings with the hope that we'd be able to work something else in arrangement. Now, the Commission suggests that, well we shouldn't be bothered by that threat because the District Court has the power to restrain such a foreclosure. I agree that the District Court has such power. But that power rests in discretion. And there's no warranty that the discretion would be exercised in favor of a stay. The Commission also suggests that the trade creditors could voluntarily in a Chapter X proceeding, agree to accept payment of their claims at a discount. I say that, that's not so because absent the consent of every single creditor in the Chapter X proceeding, notwithstanding, that the required two-thirds had consented to take less in the Chapter X proceeding under the doctrine of this Court in the case against Los Angeles. Even though the two-thirds it so agreed, the plan would fall of confirmation. Now, we justly feel that we will be prejudiced by further delay and further dissipation of the assets in this case and I think that it may have been suggested by a question asked. I think that had not these interim appeals, this litigation with respect to our right to have remained in Chapter XI intervened, the debtor, by now, would have had its plan of arrangement confirmed in the ordinary course of events. I should like to -- to add one further point. If as Judge Frank suggests, in his concurring opinion that it's necessary to establish monetary standards to determine what is a large corporation and what is not a large corporation, it would seem to me that the Circuit Court is suggesting something which Congress, in the first instance, should have put in the Act. And the very fact that Judge Frank saw it necessary to delineate what standards constitute a large corporation and what do not I think bares out the fallacy of the opinion itself. Best to force this doubt into a reorganization whereas Judge (Inaudible) points out, there's nothing to reorganize, can bring about only a liquidation of the debtor to the detriment of its creditors and to the complete elimination of its stockholders who bought for one representing, as Mr. Rosen point out, two-tenths of 1% of the entire capital stock of indicated no desire to reorganize this corporation. Hugo L. Black: Did they indicate any desire at all, one way or the other? Leon Singer: Well no, sir. Insofar as this record discloses, this petition was made by Mr. Shlensky in his own right which the statute gives him. Hugo L. Black: I understand that. Leon Singer: And the Securities and Exchange Commission was required to be notified under the statute upon the making of the motion. Hugo L. Black: The question I was asking is related to the statement of that this counsel, would you say they have indicated no desire to have inputted -- Leon Singer: So far as -- Hugo L. Black: Have they indicated any of provisions and is being inputted again? Leon Singer: Insofar as this has come to our attention Judge, none whatsoever. Hugo L. Black: Did the record show how it happened? Leon Singer: The record does not show -- Hugo L. Black: And they have taken no part of any crime? Leon Singer: That is correct. The record shows that other than this particular stockholder, no other stockholder, I'm assuming, in the absence of S.E.C. has taken any part or position in these proceedings. Felix Frankfurter: I'd looked at the petitioner here. And you say this individual name is not applied to and not a representative of it. Leon Singer: That is correct, Your Honor. Earl Warren: Mr. Reich. Mr. Timbers. Williams H. Timbers: May it please the Court. Position of the Securities and Exchange Commission here very simply but fundamentally, that the issue before this Court as to whether Chapter X or Chapter XI of the Bankruptcy Act affords the -- an adequate remedy for the rehabilitation of this debtor, is to be determined on the basis of the statutory language plus the fundamental principles laid down by this Court in the Realty case which, as we understand and still in controls. Felix Frankfurter: May I suggest -- Williams H. Timbers: So of course -- excuse me. Felix Frankfurter: -- it wouldn't be plus if whatever construction was difficult except for a language, we can reconstruct the language (Inaudible) I mean we have to go back to the language whatever that conveys. Williams H. Timbers: The language of the statute. Felix Frankfurter: Yes. Williams H. Timbers: That is correct. But, of course, with reference to the phrase adequate remedy, Your Honor, is what I referred to. This Court did give, I think -- Felix Frankfurter: Now, suppose -- Williams H. Timbers: -- a considerable meaning to that phrase and that decision and we believe that -- Felix Frankfurter: That is really troubled by the word "plus." Williams H. Timbers: I think your observation is -- Your Honor's observation is quite correct. Now, as undoubtedly, the Court has become aware in view of the arguments by the three counsels for the petitioner's side of the case seeking to reverse the courts below, their position in substance is that this case is distinguishable from the Realty case or if the Court doesn't agree with them on that, the Realty case has been overruled or drastically limited by the 1952 Amendments of the Bankruptcy Act. On our side of the case, that is on the respondent side, we both agree that the judgment below should be affirmed. The Commission, on the grounds that I have just stated, the right representing Mr. Shlensky, supports us except that he would put it on the basis of the appropriate exercise of discretion by the District Court. We shall have a word to say on that in a moment. Now, if I may first answer or try to answer Justice Black's question while it is still fresh in mind what to, have asked counsel, spoke to whether there are any stockholders or any stockholder interest as it has expressed itself either against the plan or in favor of the plan other than Mr. Shlensky, may I respectfully point out that under Chapter XI, by virtue of its very terms and in view of its basic function, stockholders have no opportunity to be heard, to be notified, and brought that may appear in the record, know nothing about these proceedings. It is true that Judge Clark in the majority opinion in the court below made this statement and I assume, let's say, finding was supported by the record that -- that the stockholder seemed to be generally opposed to this plan and were worried as to the ultimate outcome of their equity and interest. Now, to be perfectly frank with the Court, I know nothing in the record to support that other than Mr. Shlensky's petition in the position that he has taken in this Court, or has taken in the court below. But that was a consideration in any event taken into account by the court below. Felix Frankfurter: How do we take judicial notice (Inaudible) as a matter of fact stockholders (Inaudible) is very often is a representative action? Williams H. Timbers: I think that is probably so, Your Honor. And if I'm not incorrect, the courts have held that once a stockholder like this brings such a suit know not tasked in the usual representative capacity form that he would not be permitted to discontinue with or withdraw it. It could not be brought off on the theory that he does represent the stockholders as a class. So, I think Your Honor is quite correct. Now, the petitioner's argument to this Court, with respect to the Realty case, breaks down in two ways. First, that it's not applicable because the facts differ. Sure, it differs, we don't have two identical cases but the controlling principles are the same because of this fundamental fact that, I submit, we simply cannot get away from. That is, that this debtor General Stores like U.S. Realty, has a substantial public investor interest which needs protection, cannot get it under Chapter XI but only under Chapter X. And therefore, the language of the statute, the adequate remedy that is required is available only under Chapter X and not under Chapter XI. Have in mind here, we have 7000 public stockholders. That happens to be the same number that we had in the U.S. Realty case. The stock is actively traded on the American Stock Exchange which is, in and of itself, is an indicium of a substantial public interest. Furthermore, it is a company that has had a checkered financial history, using the words of the court below. It had its ups and down and by virtue of the fact that it now has invoked the rehabilitation powers of the Bankruptcy Act. I would respectfully submit to the Court that that alone indicates that there has been a sufficient deterioration in its position, financial position to be of concern and deep concern to the public security holders. Now, the Court may very well inquire but we don't regard their regarded difference and observe a difference between the character of the public investor interest in the Realty case as distinguished from this case. I think that was implicit in Mr. Justice Frankfurter's question earlier. There is a difference in the character of that interest because in the Realty case, there were public debenture holders, public creditors. But that was not the controlling fact nor the decisive factor upon which this Court decided the Realty case. This Court was most articulate in spelling out and we don't propose to re-plead or ask this Court even to reconsider those factors, which in the aggregate constitute this public investor interest. Felix Frankfurter: But it couldn't in the big and small public or private only that it's come out of in the fourth company between the other venues of Chapter XI (Inaudible) Williams H. Timbers: I think this should be said, Your Honor. And incidentally, I think the -- perhaps the accurate or true meaning of the Realty decision provide our differences here may be pointed up by Justice Robert's dissent where he very sharply criticized the majority of this Court for setting up a criteria whereby large corporations could not go into Chapter XI actually resort to Chapter X. Felix Frankfurter: But would it be in respect of -- Williams H. Timbers: And that was rejected by this Court in Realty. Felix Frankfurter: Put it here in active (Inaudible) involved the public corporations and necessary to go under its hem instead of going to -- would that be a good handle for that case? Williams H. Timbers: I think that is, perhaps, the most important single criterion, Mr. Justice Frankfurter. I would say this. That where you've got a large corporation, large public corporation, by that, I assume, you mean with a large number of public security holders that in 90 -- 95% of the cases, Chapter XI does not afford an adequate remedy. I -- we can conceive of cases where there might be a -- a large number of public security holders where the question would be a little closer. For example, if all of the stock were underwater and there was no present equity in favor of the stockholders and you had only stockholders, you certainly would have to reexamine a little bit more carefully to see whether the substantial public investor interest there justified resort to Chapter X. I would submit that even there, it would be important to look at the financial history of the company and to determine whether the -- there was a fair prospect that the stockholders though, having no present equity, might as a result of the thorough reorganization possible under Chapter X, might very well come out with some interest. As indeed, has been done in numerous cases. Hugo L. Black: May I ask you a question to see if I understand you correctly. I'm not sure of this. Williams H. Timbers: Yes, sir. Hugo L. Black: Suppose in this proceeding where a question was raised as to which one it should come on the X or XI, the evidence shows beyond dispute, that it finally shows beyond dispute, that under XI proceedings all creditors would be paid in full, secured and unsecured. Whether if it was drawn into XI proceeding whatever the charge of the -- of going -- going into X proceeding, the extension or something else in connection with the X proceeding would (Inaudible) so that the creditors would not be paid in full. If such a finding were made that's supported by evidence, the one that was challenged. What would be, if you were arguing that under the former case it would have to go through a X? Williams H. Timbers: I would like to answer your question, Justice, specifically and directly as I can, Your Honor. Did I correctly understand you'd assumed the same facts of this case insofar as -- Hugo L. Black: I don't know about this case. I -- Williams H. Timbers: No, I mean insofar as the size and number of stockholders -- Hugo L. Black: Without regard to the size. Take any size you please, any number of stockholders, if you please. You have a challenge and evidence was heard. The Court finds that under the XI proceeding, the creditors will be paid 100 cents on the dollar. It's beyond any shadow of a doubt, that finding is supported by evidence. And that if you move into a X proceeding, the expenses or either a part of it, sold there, the creditors will not be paid in full. Cannot, possibly, be paid in full. Under those circumstances, it is your argument that it was the -- the law requires, that it's, nevertheless, going to a X proceeding, under our United States Realty case? Williams H. Timbers: I'd like to answer this way, if I may, Mr. Justice Black. My short answer is yes. But I think that your -- the Court is entitled to an explanation. And I think the explanation should be very clearly this. That it would be impossible in a Chapter XI proceeding to make the finding or determination that Your Honor's question supposes. Namely, excessive cost, perhaps, standard delay in time in Chapter X. For this reason that you can't have a plan, you can't determine the extent of -- of time, money to be expended nor the adequacy of the relief needed under Chapter X until after the petition's been filed, approved, trustee appointed and the machinery put into operation to bring the plan into effect. Hugo L. Black: How was it found here? The fact, of course, and whatever facts were found? Williams H. Timbers: Well, there are no facts in this record that I know of. And the counsel will correct me if I'm wrong as to any comparative cost or expenses in -- as between Chapters XI and X. And I should say, Your Honor, because it is one of those (Inaudible) around rather loosely and we find it in the briefs here repeated over and over again. That one of the big troubles that Chapter X is it's expensive, cumbersome, time consuming, and -- and surely as they say will result in the dissipation -- further dissipation of the assets of the company. That is not necessarily so. And it has been the experience of this Commission under our -- in our functions under Chapter X for some 16 years now. I guess it is 15 or 16 years now, I guess it is, 15 or 16 years, that reorganizations can be had under Chapter X relatively quickly in as short a space of time as six months. They are not necessarily expensive. And in any -- in any event -- Hugo L. Black: That's -- that's answered by saying that no such finding could be possibly be made. Williams H. Timbers: No such finding can possibly be made nor was made here and the -- Hugo L. Black: Well, assuming that it could just for a moment. Williams H. Timbers: Yes. Hugo L. Black: I had always to hold that all the bankruptcy if I had anything to do with (Inaudible) as the basic primary decision was permanent to see that the creditors were paid before the stockholders got in, is that right or wrong? Williams H. Timbers: That is certainly true in -- under Chapter X -- Hugo L. Black: Under any proceeding? Williams H. Timbers: It is also true under Chapter XI. Hugo L. Black: But individual I suppose. If he owes money that he's not holding things out. Williams H. Timbers: That is true. Hugo L. Black: And the same principle is applied to XI to the corporation? Williams H. Timbers: That is true. Now -- Hugo L. Black: And you don't think you have any burden here and -- and insofar as and I'm asking you because my mind is wholly undecided. Williams H. Timbers: Yes, Your Honor. Hugo L. Black: You don't think you have any burden on the basis of that statement that's representing all the creditors. They're claiming that the -- either the record shows or they contend that it -- it should be permitted to show a company that creditors will be paid off as you let them alone and don't move into another one. But they -- they won't be paid off if you move one to the other. Williams H. Timbers: No, we respectfully submit, Your Honor, that that is not the controlling determination and even if it were so. And may I say parenthetically that -- that the supposition, Your Honor, mentioned right at the beginning that the creditors would be paid in full, is all that this record shows so far as the terms of the plan concerns. We'll see the plan it set forth two pages of the record and it provides for 100% payment of the unsecured creditors, 20% down and 20% over a period of four years. Now, there has been a suggestion in one of their briefs, the Creditors Committee brief that that plan has been amended and it's now, that they are only going to get 40%. There is nothing whatever in the record to support that. But the controlling consideration, Your Honor, is not whether the secured creditors -- the unsecured creditors are going to be paid in full. The Controlling consideration, I submit, depict me in the light of -- the length of the decision of this Court in the Realty case is whether all public and private interests will be protected. And you may very well have a situation in this case or in any comparable case where the secured creditors may fair very well. And still greatly jeopardize the interests of other facets of security (Voice Overlap) -- including -- Hugo L. Black: I can -- I can understand that, if you put it on that basis. Williams H. Timbers: I think that's the basis of Realty. Hugo L. Black: But I can't understand why -- maybe we should as to why we have held anything in that early case that may be original are in class rules, even though the circumstances in fact that the Court can know, that one court will pay the stockholders in full without jeopardize -- I mean the -- the credit is in full, without jeopardizing the stockholders. He knows that. But I can't understand why -- why we should read the statute to say and get under those circumstances that are -- it has to go into the (Inaudible) Williams H. Timbers: The -- the short answer, Your Honor, and I think it's a conclusive answer is that it is impossible to make that determination in this type of proceeding. That is a proceeding where petition has been filed in Chapter XI. It cannot make the comparison between the adequacy of the relief that Chapters X and XI, on the basis of a Chapter XI petition which you'll see in the record, is a very short simple thing with the plan of arrangement attached. It's impossible to determine the adequacy of the relief proposed under that type of plan where you got public security holders without employing the machinery of Chapter X. Now, that is our basic position. It's nothing new. It's simply a reassertion of the position of this Court in the Realty case. Felix Frankfurter: Would you mind -- would it take too much of your time. If it does then (Inaudible) my question? Could you quickly say and this is your expert knowledge, the proceeding what would happen, just outline politically as in outline, how the proceeding will go forward if this were left to XI, and what would happen if it doesn't (Inaudible) Williams H. Timbers: Now, this is the best of my ability, Your Honor. The -- Felix Frankfurter: But you be -- you'll be the judge from an answer to that question and the time it would take (Inaudible) on the argument of your plan? Williams H. Timbers: Well, with the caveat that I necessarily will -- will paint it in broad brush strokes and the -- the risk of leaving out a good deal. I think the essentials are these. Under Chapter XI, petition's been filed. Normally, creditors are given notice. Their acceptances are filed. They can be solicited even before the plan is submitted to the Court. After a hearing by the Court, the plan, if found to be feasible and in the best interest of creditors, would be confirmed. Thereafter, distribution will be made and consummated. Felix Frankfurter: (Inaudible) the proceeding were meant to of just result. Williams H. Timbers: Yes. That I think -- Felix Frankfurter: And that you can take whatever means of federal district judge can and after the proceedings to put questions. Williams H. Timbers: That is -- that is correct. It's in effect a projection of the old -- Felix Frankfurter: (Inaudible) Williams H. Timbers: Equity -- the common law of composition which was codified in Section 12 of the Bankruptcy Act. It's a simple procedure, no question about it. However, the judge in acting upon it is -- Felix Frankfurter: I'm not saying this (Inaudible) in upholding this. He gets an ample opportunity to put in all of the judgment. Williams H. Timbers: None, whatsoever. He has no standing whatsoever in the Court, in the Chapter XI court. I don't suppose it would be heard of the court. He's only -- only right is to intervene the purpose of dismissing or transferring to Chapter X which he did here supported by information. One of the most important things, may I mention in passing, in respect to this streamline arrangement procedure under Chapter XI is that the Court, in making its determination of whether it's feasible, whether it's in the best interest of creditors, makes a determination necessarily base on relatively, poorly informed judgment. If he has a judgment not supported by the facts or anything like the facts that he would have under Chapter X. Stanley Reed: Well, this is the appraisal of the property, isn't it? Williams H. Timbers: There can be an appraisal if necessary. Stanley Reed: And if everybody wants them. Williams H. Timbers: If it's asked for the judge in its -- in his discretion in that. Stanley Reed: And you spoke that in Chapter XI they would look for the benefit of the creditors but then they were protecting denial? Williams H. Timbers: That's right under the -- Stanley Reed: But -- but they could under XI or how I feel can't be under XI to avoid payments to the creditors in full? Williams H. Timbers: Yes. By the terms of the arrangement they can accept less -- Stanley Reed: Well, but the stockholders will save something out of it? Williams H. Timbers: That is -- that is possible. Stanley Reed: Within the purpose of XI to give opportunities to reorganize business to protect the investing public into investing in the stock rather than to creditors? Williams H. Timbers: No, it is not, Your Honor. The purpose is it used to enable the debtor by this simple, in effect, the composition between debtor and creditors to satisfy or scale down the unsecured debts but without disturbing either the stock interest or the security. Stanley Reed: But it's to the sum of those stockholders? Williams H. Timbers: Not necessarily, Your Honor. And that -- Stanley Reed: But that's the only place he can get anything, is it? Williams H. Timbers: No. It -- it is -- Stanley Reed: If -- if there's not enough assets to pay all the creditors and the stockholders -- if -- if the corporation can't pay both of them. Williams H. Timbers: Yes. Stanley Reed: Then it needs to go into XI, I think. Williams H. Timbers: That is right. And, of course, Your Honor's observation is quite correct that upon the surface, it would appear that and in this type of arrangement proposed here would -- Stanley Reed: Benefit the stocks. Williams H. Timbers: -- would benefit the stockholders because they'll get more than if they'd put -- than if the creditors -- Stanley Reed: Well, I think they knew their business. They don't lose -- if you don't lose the management you don't use -- lose the opportunity of investment, development of business and so forth. Williams H. Timbers: Those are considerations. There's no doubt about it. The -- the real question here is whether those considerations are outweighed by the -- the larger interests of public policy which this Court enunciated in the Realty case in which were based upon the legislative history and the language of Chapter X. Now, those larger interests, Your Honor, and I'm coming back to answer Justice Frankfurter's question, I shall not forget it. The larger interests are basically to -- to determine what this company needs in order to obtained the adequate relief or adequate remedy which in -- in accordance to the language of the Bankruptcy Act. And it may very well be that what here appears to be good for the stockholders after a thorough going rehabilitation procedure under Chapter X, may turn out to be completely illusory. As a matter of fact, we've had many -- many Chapter XI arrangements that have been confirmed, the debtor goes out. It's a first aid room, patched job. They're back in a year or so under Chapter X. Then the stockholder's equity has been dissipated and the net result is extremely prejudicial to the stockholders. Felix Frankfurter: Is that what happened in the transition? Williams H. Timbers: We don't know, Your Honor. It's been a -- there's been very little time since that arrangement was confirmed. We've endeavored to have been to it, have not been able to get the information. Earl Warren: Mr. Timbers, what would be the position of the Wage Claimants under -- under number X, Chapter X that is the preferred wage claimants? Would they have the -- Williams H. Timbers: Yes. Earl Warren: -- same status as under XI? Williams H. Timbers: That is our position, Your Honor, as I reinstated in our little supplemental brief. There are priority claimants same as tax payments and despite the -- what appears to be the language of Chapter X that takes out -- takes out from under them, deprives them of the statutory priority in Section 64. The -- our -- our knowledge is based on some experience. There's been no Chapter X court has ever deprived the Wage Claimants of these priorities under the discretion available to the District Judge strictly under the six months rule (Inaudible) the rule in the Second Circuit, prior Wage Claimants have universally been accorded their priority. We know -- Earl Warren: Is -- is it a matter of discretion with the -- with the Court in that situation or -- or does he have a positive right to the priority? Williams H. Timbers: I think it's a mater of discretion and so far as we know it has been exercised uniformly in favor of the Wage Claimants. Earl Warren: But it isn't a matter of discretion under XI. He has a positive priority. Williams H. Timbers: That is correct. Earl Warren: Well, there is a difference then. Williams H. Timbers: Yes, there is, as to the priority claimants, as to the priority wage claimants. May we say this, however, with respect to the central issue before this Court which I've tried to state and I hope is -- that's fairly clear. We do not consider the extent or nature of the wage claims as necessarily controlling, as to whether this case should be in Chapter X or Chapter XI. Adding however that we are assured that the Wage Claimants will be -- will receive just as favorable treatment under Chapter X as under Chapter XI. Hugo L. Black: I don't quite understand that. Maybe it has nothing to do with it. But I don't quite understand how the Court would have the discretion to give priority to one group of creditors over another but the law doesn't do it. And if there is to be a purpose, I should think it's supposed to be fixed by law. Where did that discretion come about? William O. Douglas: What you're saying was the rule of equity the -- the rule of equity practice is somehow (Inaudible) Williams H. Timbers: That's what I tried to say, Mr. Justice Douglas that is the all equity rules sometime -- William O. Douglas: (Inaudible) Williams H. Timbers: That's right. Sometimes referred to as the six months rule which it uniformly -- Hugo L. Black: I happen to know. I think they're offered as amendment in Congress on that very question. That under those old rules, the wage earners didn't sometimes. And other claimants of that type didn't get there. The Court wouldn't give it to them. William O. Douglas: I think that's very unusual but they -- Williams H. Timbers: We know no such instance, Your Honor, certainly in a Chapter X proceeding. Hugo L. Black: I may be wrong but the amendment I offered may have been reference to another matter. But as I recall that -- that they didn't usually get it over time on receivership, equity receivership and bankruptcy, regular bankruptcy, I thought was provided. But how do you get around the fact that here it's been taken out of XI. Williams H. Timbers: The reason for that is -- Hugo L. Black: I don't mean to say it shouldn't be gotten away from but I -- I just don't quite understand how you could do it. Williams H. Timbers: The -- the reason for that as we understand it, was to permit the -- give to the Chapter X court greater flexibility with respect to its handling of a number of different types of claims, one of which was the wage earners claims. And all I can say is that although that priority has been eliminated under Chapter X, it has never prejudiced the wage earners and I would assume if -- if it had, there would have been such pressure brought on Congress that the type of bill Your Honor has spoken, having introduced, would have been introduced. Hugo L. Black: I stated it. I was not sure that I had in that but it was close to that. I forgot exactly what it was. Williams H. Timbers: As a matter of fact these Wage Claimants might very well get more under Chapter X than they would under Chapter XI. And incidentally, their -- Hugo L. Black: How? Williams H. Timbers: They'd be entitled to -- to go back six months instead of the three months period for which they're claiming priority. In other words, their general claim -- the claim as general creditors would be extended to -- to establish their priority for a period of six months rather than three months. Hugo L. Black: Within what ranges can a judge exercise his discretion in determining the purpose (Inaudible) Williams H. Timbers: I suppose it's the usual criteria for a -- an equity judge exercising his discretion. And certainly, it has been done in favor of Wage Claimants and has been done uniformly, not only under Chapter X but going back under 77 (b) in the equity receivership cases as well. I'd like, if I could, in -- in a very short compass to cover one point that I don't think has been covered at all in this point, asked by Justice Reed as to what -- why the amendments to the Bankruptcy Act in 1952 and their effect on this issue before this case, Your Honor, before this Court. Very briefly, the two amendments that are relevant are Section 328 that set is forth, page 29 of the S.E.C.brief that, in effect, codified the procedural rule of the Realty case which gives to the Commission statutory authority to intervene in any Chapter XI proceeding, to move to dismiss or transfer. I think there's no question. I think we're all agreed that amendment did codify that procedural rule of Realty case. The other amendment here relevant is -- Stanley Reed: What is the Section (Inaudible) Section 30 of the bill as to the Section of 328? Williams H. Timbers: That is set forth at page -- Stanley Reed: Well, never mind. I don't want to interrupt you. Speaker: Page 49 of our brief. Williams H. Timbers: 49 of the petitioner's brief, I understand. Now, perhaps, the more important amendments insofar as our discussion here is concerned, is Section 366 which eliminated the fair and equitable requirement of Chapter XI with respect to arrangements. Now, the legislative history on that is set forth, is quoted at page 31 of the Commission brief. We'll not read it because of the shortage of time but I respectfully suggest to the Court that that I -- that legislative history at page 29 of our -- page 31 of our brief, should be read in the light of the other -- the history of the other amendment at page 29 of our brief. 29 and 31 of the S.E.C.brief. The net effect is that Congress said and most articulately, I suggest, page 31 of our brief, that in eliminating the fair and equitable requirement of Chapter XI arrangements, they were writing into the statute, the substantive law of this Court in the Realty case, namely, that a Chapter XI arrangement was intended only for the small corporation where there was a close identity of management and stockholder interest. Judge Clark so stated in his opinion in the Second Circuit, the words that Congress wrote in to the law, the rule of this Court in that case are Judge -- Judge Clark's words. Felix Frankfurter: I must say Williams H. Timbers: -- Now Felix Frankfurter: --I must say that to me it seems odd, is they wanted to legislate into (Inaudible) provide that this applies to more corporations which (Inaudible) Williams H. Timbers: Of course, we're confronted with what Congress did, Your Honor. We -- and we have to bring to the Court's attention -- Felix Frankfurter: Well I'm not -- Williams H. Timbers: -- as best we can -- Felix Frankfurter: I'm just certain. You're making it hard for me to do this. Williams H. Timbers: Well, the argument -- the argument, Your Honor, is -- is very closely tied to the words -- only words that Congress wrote in explaining what it did and in taking -- Felix Frankfurter: That Congress (Inaudible) Williams H. Timbers: Committee of the House. The -- the elimination of Chapter -- of the fair and equitable requirement of Chapter XI in a nutshell simply recognized congressional acceptance of the fact this Court had established in the Realty case that Chapter XI was inappropriate for the large corporation with a substantial public investor interest. And in saying as they did in the committee report that in the light of the Boyd and the (Inaudible) cases, the absolute priority rule cases of this Court it would never be possible to have an arrangement under Chapter XI. And therefore, they eliminated those -- that requirement and expressly stated that it was done for the purpose of squaring the law -- squaring the statute for the decision of law of this Court to limit that -- the use of that Chapter to the small corporation with close identity between management and stockholder interest. Felix Frankfurter: With which report is that? (Inaudible) Harold Burton: Page 29 of -- Williams H. Timbers: Page -- Felix Frankfurter: That's 234. All right. Thank you very much. Williams H. Timbers: Page 31 I think is the -- Felix Frankfurter: That's right. Williams H. Timbers: Mr. Justice Frankfurter, under Chapter X, the procedure if I may say is simply by way of summation is considerably more detailed representing a more thorough, complete rehabilitation than under Chapter XI. I regret that time simply does not permit to step by step, recounting what happens, but may I say so far as issues in this case are concerned, it seems to me the most important things they're available under Chapter XI to protect this substantial public investor interest which we undoubtedly have here. And that I don't think it can be disputed. But first, the appointment of an independent trustee who will supervise the formulation of a plan and will determine, not in the best interest of management, not in the best interest of the secured creditors but taking into account all of the public and private interests, what is necessary to bring about an appropriate rehabilitation of this in the corporation. Felix Frankfurter: On this -- is your position the position of the Commission. In that way you have whatever the big corporation used (Inaudible) or outstanding public utility than an XI may suppose and it's much broader plan. Is that your position? Williams H. Timbers: That is our fundamental position. May I say, however, Your Honor, that it's not quite that simple and the concept that I would respectfully urge that this Court adopt and lay down for the guidance of the lower courts is when there is bound to be a substantial public investor interest, one of the indicia which may be the size of the company, assets, liabilities, the number of stockholders, the character of the debt-structured financial history. They are all facets of the entire overall problem. Now, this Court is undoubtedly aware of the other cases that are -- are pending, not only the possible conflict in the Second Circuit between transition in this case, this same issue is in the Wilcox case in the Sixth Circuit. There is a lower District Court decision which incidentally as a very enlightening decision, printed as Appendix B to the S.E.C. brief came down since our petition here. You have, if I may say just in conclusion, a situation where such confusion has arisen amongst the District Courts and indeed amongst the Courts of Appeals. That we submit that the (Inaudible) graphical map, the Bankruptcy Act has implemented by the excellent trail blaze by the Realty case now needs a replacing with respect to the relatively narrow issue presented to this Court which we submit should be decided on the basis of this Court's reaffirmation of the rule of the Realty case. Felix Frankfurter: I was going to ask you whether the Court point at the public to hold whether it's too small and I find that the case to which you refer, Judge (Inaudible) 333 under the private (Inaudible) Williams H. Timbers: Mr. Justice Frankfurter, I think the short of it is that we -- we would not suggest for a moment that this Court sanction a -- a rule of numbers and numbers gained by the District Court. Numbers may be important. Certainly when there is as many as 7000 as in this case that is almost controlling without any other further considerations. But we also can conceive of the situation where a hundred stockholders might represent a substantial public investor interest. Stanley Reed: Well, is there any -- anything in the -- the case that's -- that the -- this case here that wasn't what appears more important. Is there anything except the extension of time pertaining to debts? Williams H. Timbers: Oh, yes. Here, there is -- their plan provides for a complete satisfaction, complete discharge of the unsecured claims for 40% of the -- at -- at the rate of 40%. They say now -- Stanley Reed: Well, I must have misunderstood counsel. I understood them to say that the extension is provided here. Williams H. Timbers: Well, the plan is set forth attached to the petition, Your Honor, provided for payment of 100% of the unsecured claims over a period of five years. So, that would be in effect a -- an extension arrangement. Now, they tell us in their brief and I'm not taking actions to deal outside of the record that they, in view of new cash reserves that have come in, plan has been amended or going to be amended to provide for a 40% acceptance by all unsecured trade creditors and accepted now. So, I take it that would not be an extension of time arrangement. Thank you. Earl Warren: Mr. Reich. Is Mr. Reich next? A. Alan Reich: Your Honor pleases. We appear here today on behalf of an individual stockholder who has proceeded pursuant of provision of Section 328 of the Act and has brought on by order to show cause a proceeding, why the petitioner should not show cause, why a proceeding should not be dismissed unless steps are taken to comply with provisions of Chapter X. This is an individual stockholder and the purpose for that is very simple. Proceedings have been initiated. Our stockholder was unhappy, asked us to make the application. There was no time, no opportunity to convene of the stockholders and there was no necessity or requirement under the statute that ought to be done. Since then other stockholders have spoken with us with relation to the matter and have indicated some interest in the matter. We have heard from no stock -- from no stockholder any desire that any proceedings be taken with relation to this matter other than what we have done. Our stockholder is unhappy. He was unhappy when the creditors were offered 100 cents. He is unhappy at this particular time when we are told in the brief that creditors may accept 40%. He would be very happy if he knew that upon payment of creditors 100 cents on a dollar or 40% on the dollar, his rights would be preserved. His equities would be protected and that the amount he had invested in stock would be preserved in all respects. However, he doesn't feel that. He doesn't know at this particular time what will happen. We do know as has been pointed out by the Court that here is a corporation which has been in business over a number of years. Then in 77 (b), out of 77 (b), issues corporate stock, issues additional corporate stock and we find ourselves among the stockholders at this particular time. We find that in 1953, when certainly they must have been feeling the pinch capital deficiency. They go out and they buy additional structures. They buy the Stineway Drug Company and they buy this corporation which sells drugs and cosmetics for a total purchase price $4,220,000 of which $800,000 was paid in cash. Felix Frankfurter: In your petition, is there any suggestion of an organization of funds or a misconduct? A. Alan Reich: No sir. Felix Frankfurter: (Inaudible) A. Alan Reich: No, sir. We say that we do not allege that there's any misconduct on the part of the officers. We indicate that there is a strong possibility there may be errors in the judgment. And it's our feeling at this particular time that is the case. Hugo L. Black: Do you raise any issues of fact in your motion to make a X proceedings instead XI? A. Alan Reich: No. The issues, the way we raise sir, are base primarily that as a matter of law, we are entitled to be protected by the safeguards, set for us under Chapter X rather than to be left at the mercies of a combination, and I don't make an improper combination by use of the word, sir between the Creditors Committee and management. Felix Frankfurter: And if -- and if the judgment below should be affirmed and this has to go into X, what will go into X would be the plan that is now in its (Inaudible) being XI at the same time, wouldn't it? A. Alan Reich: Yes, sir. If it went -- no, sir. May I just withdraw that? It would -- if it went into X, we would have an independent trustee who would in the first instance be submitting a plan and that is one of the distinctions between Chapter XI and Chapter X. If I may -- Felix Frankfurter: So far -- A. Alan Reich: Excuse me, sir. Felix Frankfurter: So far as anything that ended in the corporation, there's nothing in the record that indicate anything else (Inaudible) A. Alan Reich: Well, sir we -- we don't know that the corporation would be called upon to submit a plan. The plan would be submitted by the disinterested trustee. And if I may go back a moment to a question which Your Honor asked and which I think may have been answered a little incompletely, the book was followed completely but in the practical standpoint, let me tell Your Honors what occurs in a Chapter XI proceeding. When a Chapter XI proceeding is filed, the major activity occurs outside of the courts. A meeting will generally be called by the counsel for the debtor or possibly a counsel for a group of creditors. At that time those creditors who were invited, and there is no statutory requirement, that you invite more than a handful. But let us assume all creditors are invited. They will designate a Creditors Committee. The Creditors Committee will designate its own accountant. It will negotiate with the debtor and on the basis of the best possible arrangement they can for the protection of creditors, they will finally come up with a plan based on what the creditors expect to receive and what the debtor can pay. We say, that under -- that arrangement may be for the best interest of creditors but does not necessarily make it for our best interest. That assuming, for example, that this 40% is paid, that that 40% may so reduce the assets of this debtor as to leave a mere (Inaudible) for stockholders and simply to delay the time, when this illusory existence of ours, of stockholders ceases. As a matter of fact, the opinion of Judge Clark in referring to the -- this situation says in our view, widespread stockholder interest in the corporation with such a shaky financial history as this one in itself, is in itself sufficient ground for the invocation of Chapter X proceedings. Even the unsecured creditors who are urging the reinstatement of the Chapter XI proceeding petition may come to regret their decision during the interval of postponed payment without interest of their claim for the present proceedings are completely in the control of the debtor corporation on whose financial acumen and bookkeeping accuracy must rest through fairness and feasibility of the proposed arrangement. Too a greater public interest is here at stake to allow the present management of the debtor to secure court ratification of such a plan without having available to all parties the disinterested appraisal and judgment of the Securities and Exchange Commission. Felix Frankfurter: In the Transvision, there was suggestions of -- of dubious conducts by the management. A. Alan Reich: In the Transvision case in which I was one the respondents, the position was entirely different. There may have been a suggestion. There was never where you counsel for the Creditors Committee is of that corporation. We never had the slightest doubt. Even though the S.E.C.raised it and we're on the other side from the S.E.C. in that case. There was never in our mind and never developed in any of our investigation the slightest doubt. Felix Frankfurter: All I know is that I read their opinion. A. Alan Reich: Yes, sir. I say that with respect to the cases that we have here, the S.E.C., the General Stores and the Transvision cases. And we must confess that we differ with the S.E.C. on the Transvision decision. We feel that General Stores followed the U.S. Realty case. And we say that the Court, in refusing certiorari in Transvision, likewise, followed the U.S. Realty case. We feel that the matter is in all squares. Here we have on the S.E.C.case 900,000 shares of stock. In General Stores, we have 2,232,000 shares of stock. In the Transvision case, however, we only had a total of 385,000 shares of common stock and 1773.5 shares at $100 apart. Now, with respect to the distribution in the Realty case as in the General Stores case, there was only a small amount of stock in the hands of the management. There was only, in this case, 127,000 shares as against the 2,232,Mr. Justice Clark. In the Transvision case, also, all of the stock was in the hands of management. It was, in effect, privately held with the exception of 135,000 shares of stock. Felix Frankfurter: That may make a small minority holdings more at the risk of the management and it's through the light of distribution and management hasn't such a grip. A. Alan Reich: Well, sir, we have this particular situation where management itself owns a small block of stock and take this small block of stock and uses it to swing the corporation. Certainly, there is less possibility of danger with respect to corporation as the courts have pointed out. Then where a -- the management itself has a greater financial risk will be hurt by its own actions with respect to the liabilities. The liabilities offered from the guaranteed liabilities in the Realty case was $5,051,000 as against roughly $4 million dollars in this case and only $772,000. The assets in the Realty case were over $7 million. In this case over $5 million. In the Transvision case only $998,000. I believe I have just a few moments. I'd like if I may go back -- Earl Warren: You have -- you have five minutes. A. Alan Reich: Oh, fine. Earl Warren: Five minutes more. A. Alan Reich: That's just fine. The Court, as stated in the Realty case, was given the right, the exercise of discretion. It was contended the Court had no right in the Realty case to determine whether a matter is properly in X or XI. And the Court in the Realty case indicated and I quote, "In this situation we think the Court was as free to determine whether the relief reported by Chapter XI was adequate as it would have been if respondent had filed its petition under Chapter X." But the Court can decide under 146 of Chapter X as to the adequacy of the relief afforded by Chapter XI. They can decide in the exercise of its equity powers under Chapter XI for the purpose of safeguarding the public and private interest involved and protecting its own jurisdiction from misuse. Felix Frankfurter: In other words -- in other words, what you've read are two more sentences goes before and after -- A. Alan Reich: That's right. Felix Frankfurter: -- to prove that it is the majority of the Court to see. It is deemed to be an exercise and that's going to be discretion. A. Alan Reich: That's right, sir. Felix Frankfurter: And now the jurisdiction is exclusive. A. Alan Reich: Well, they -- yes, that's correct.We contend that the standards set for jurisdiction have been set forth very clearly and concisely under the Realty decision. We claim, however, that no hard and fast form has been made into which they have to fit. That is discretionary in the lower court after hearing all of the facts to determine whether or not, within the patterns set forth in the Realty case, this particular case is discretionary. Felix Frankfurter: That is my understanding what the Realty case was. A. Alan Reich: That's right, sir. Now, with respect, however, to the debtors argument that the amendment in 1952 of 328 and 366, the -- the House Report specifically states to what was intended for the purpose of codifying the decision in the Realty case. And it does exactly that. Either that or the language that's used is merely self surplusage. So far as the plan itself is concerned, we would certainly have been guilty of -- if the contention of the appellees here that we are bound to look solely at the plan. And that the factors determine the size and the other standards do not apply were it to apply here, we'd be guilty of latches if we attempted to proceed in XI for this reason. Under Chapter XI, the Congress, in its wisdom, has decided that a plan of arrangement must be filed with the petition. Well, we have found very often with debtor in filing the petition has got the marshal or sheriff right behind them and he rushes down the Court just fast enough. So that the plan may be modified. And we have modified plans of arrangement, the second modified plan, and we have one in this particular case. You have a modified plan. And then maybe a second and a third plan. So that we would never have an opportunity to come in. We feel, sir, that the standards have been set by the Court in the Realty case. That they have been codified by the Court, by the amendments through 328 and 366. That to state that the Court based it solely on the fair and equitable rule prevents a misreading, in my judgment, of the provisions of the Realty case. And under the circumstances, in view of the fact -- the facts seem to be and all aligns with the Realty case, we ask that the decisions below be affirmed. Felix Frankfurter: Mr. Reich -- A. Alan Reich: Yes, sir. Felix Frankfurter: -- we control of that. If I may sense more accurately, the decision was the Realty upholds. I'm going to ask you if I read the record now that I have the report in front of you. A. Alan Reich: Right, sir. Felix Frankfurter: What the amendment of 52 gives as well as to -- to try again by pointing that (Inaudible) from XI to X -- A. Alan Reich: That's right. Felix Frankfurter: -- that you're drawing out and you have to start all over again with all the difficulty that the X transferred from X to XI. And you refill that gap by allowing to transfer instead of a dismissal whether you will be good. A. Alan Reich: That's exactly right. Speaker: Now -- A. Alan Reich: And in addition to that, of course, you would have had the expiration statutes of limitation. Felix Frankfurter: That's what I assume, is in fact the decision. A. Alan Reich: Of course, it was the decision. Earl Warren: Oh, yes. Justice Black -- Hugo L. Black: I'd like to ask you -- A. Alan Reich: Yes, sir. Hugo L. Black: I see the motion to dismiss was made by the Securities and Exchange Commission and their ground was, seemingly, the only ground, provisions of Chapter XI do not apply to a debtor corporation which has securities outstanding in the hands of the public. Now, I understand it from you that -- that I misunderstood you. That that is not your ground. A. Alan Reich: Mr. Justice Black, we don't go as far as the Securities and Exchange Commission if the intention of the S.E.C. is to state that if there are any securities publicly held, if that is their position that any securities, we say no. We say this Court was correct in the Transvision case. That you must apply that as one of the standards that must be applied. I say it is not conclusive that merely because there was $10,000 or $50,000 or $100,000 in securities in the hands of the public, that in my humble judgment is not sufficient. Hugo L. Black: Now -- A. Alan Reich: But I say that, sir, together with the other aspects, spells out a case with Chapter X. Hugo L. Black: In your petition, you've said, you transfer -- A. Alan Reich: Yes, sir. Hugo L. Black: -- you allege that it will be for the best interest of the stockholders that the trustee be appointed pursuant to the provisions of Chapter X -- A. Alan Reich: Yes, sir. Hugo L. Black: -- it will solve. A. Alan Reich: Yes, sir. Hugo L. Black: That was on the basis that there's some discretionary power on the part of the jury. A. Alan Reich: Well, there would be more than discretionary power on the part -- Hugo L. Black: (Voice Overlap) -- A. Alan Reich: -- the Court would be mandated to a point in the sense that -- Hugo L. Black: And if -- if it is to their best interest. And your idea is that the judge held, as it seems to me probably, he did here. That it was for the best interest of all, both stockholders and creditors -- A. Alan Reich: That's right. Hugo L. Black: -- that you have alleged that the matter be transferred. A. Alan Reich: The Court -- Hugo L. Black: Was there -- was there any offer to put on anymore evidence than -- A. Alan Reich: No. Hugo L. Black: -- was put on? A. Alan Reich: No. Judge Dimock -- Judge Dimock in his opinion found -- excuse me. That -- this question -- counsel, may I finish -- Hugo L. Black: The opinion -- A. Alan Reich: No. Judge Dimock in his opinion based on the papers and based on the law, the grant that we made the original application, sir. And the S.E.C. moved to intervene and also holds for answer, a similar petition to dismiss and the motion of the S.E.C. was granted. I would understand that Judge Dimock exercised the -- the discretion in determining that we come within the confines of the Realty case and have presented sufficient facts which shows that the matter is properly in Chapter X with its investigatory powers rather than under Chapter XI. Hugo L. Black: As I read his opinion at one face, I don't have to suggest this moment he made a statement that -- A. Alan Reich: And -- Hugo L. Black: -- do you believe it was in the best interest of the stockholders and the creditors that the matter be transferred. A. Alan Reich: I think it could well be. As a matter of fact, the Circuit Court, sir, in the part of the opinion of Judge Clark that I read from, indicated very clearly that the creditors may well regret this extension. Apparently, the Creditors Committee regretted it before the conclusion and made a new deal. Hugo L. Black: All right. Thank you. A. Alan Reich: Thank you, sir. Earl Warren: Mr. Rosen. Aaron Rosen: (Inaudible) Earl Warren: Yes. Aaron Rosen: If the Court please. With the -- with respect to certain questions which the Court had, may we point out that a description of the proceeding in Chapter XI is contained in at page 23 of our brief. In that case we show how extremely wrong it is to make the statement that all the proceedings in Chapter XI are under the control of the debtor. As a matter of fact, once a debtor files his petition in Chapter XI, the proceeding moves under the control of the Court and the creditors as represented by the Creditors Committee. Now, we believe that is one of the most important distinctions from the way the case is being argued by the S.E.C.and by the stockholder Shlensky. In other words, we, representing the debtor, are here between if you like to fire us. We have the creditors who, as we show in our brief, have real control over this Chapter XI proceeding. And on the other side, we have the S.E.C.who, regardless of the interest of creditors as expressed by them, regardless of the fact that it can be so easily shown that stockholders get a worse deal in this type of case in Chapter X, nevertheless, move ahead and ask that we go into Chapter X. The stockholder Shlensky, petitioning in his own behalf, not joined by anybody else and there is nothing in the record that the stockholders are with him. In fact the record shows just the opposite. The record shows that the things that Shlensky is unhappy about, the investments in the new enterprises were fully presented to the stockholders with proxy statements which were cleared by the S.E.C. And then not a small block of management stock voted for it but the stockholders voted four-to-one and there are 7000 stockholders outstanding. Now, this situation is, that when this motion was made below in the District Court, there were no facts shown. As they said, they didn't even suggest wrong doing. All they said was, “You're in the wrong chapter because you're a large stockholder, because it's a large corporation with publicly held stock and you have -- you have invested in this new drugstore group and you're getting out of the old. As if a matter of business judgment created for some reason or other, a right in the S.E.C.to transfer the management and control of this company from the management to a trustee. Now, that's in effect what they're trying to do in this case. Now, with regard to -- and I only have time just for the U.S. Realty case. In regard to the U.S. Realty case, we want to point out that the majority opinion in that case did express itself in terms of large corporation publicly held, what not, to be in Chapter XI. But the Court by Mr. Justice Stone, did not point out the statute, the basis for such an exclusion. The Court then went on, and this is what we feel is the important thing about the U.S. Realty. Then it went on and said at page 452 at 310 U.S., still more important are the differences in the remedies obtainable under the two chapters which result from differences in the nature of the two proceedings and in the securities which may be affected, affected by the two proceedings. And then Mr. Justice Stone starts quoting the statute and what does he quote? 366, "The standards for the confirmation of a plan and if you can't confirm a plan, Congress said, the Court has the power to dismiss." Now, Mr. Justice Roberts wrote the dissent in that case and expressed himself as unsatisfied with the proposition that a Court in bankruptcy has the equity power to withhold rights which Congress has given to the people. And we ask that that matter be seriously reviewed by this Court. But we don't believe that this Court came to that conclusion in the U.S. Realty case. It certainly wasn't necessary. And Mr. Justice Stone said in unmistakable language, what was the most important consideration. He said, what was the basis of his own decision. Thank you.

Earl Warren: Number 81, Lee E.A.Parker, Petitioner, versus Clarence T. Gladden, Warden. Counsel are you ready? Mr. Schafer. John H. Schafer: Mr. Chief Justice, may it please the Court. The question we have before you on this case is whether the Supreme Court of Oregon was correct in holding that it's Fourteenth Amendment obligation to afford a fair and impartial trial was not violated in affirming a conviction for second degree murder when three jurors were told by an officer of the state during the course of the trial that the defendant was in fact guilty. William J. Brennan, Jr.: Is that the actual language? "Oh, that wicked fellow, he had killed him?" John H. Schafer: You have to think Your Honor that it may have been sifted down a little bit. William J. Brennan, Jr.: Oh, oh. John H. Schafer: It just came through though. I don't know. I can't tell you. It does sound remarkable. William J. Brennan, Jr.: It sounds from an 1890 -- John H. Schafer: I have to agree. William J. Brennan, Jr.: Who done it then? John H. Schafer: I have to agree. The facts in the case are not -- I believe in any dispute whatever. This petitioner was once tried for first degree murder. He was convicted of second degree murder. That conviction was set aside by the Oregon Supreme Court. A new trial was had in which the event occurred which brings the case to this Court. That new trial again resulted in a conviction for second degree murder. Petitioner was sentenced to life imprisonment. That conviction was subsequently affirmed by the Oregon Supreme Court. After that affirmance petitioner instituted pursuant to Oregon Statute a post-conviction hearing in which he alleged a number of things. And in which he proved that in the words of the trial court and -- or the hearing court I should say, I'm reading page 197 of the record. That the bailiff of the State of Oregon said to three jurors, two or three jurors in effect, “Oh, that wicked fellow. He is guilty”, and also said to them, “If you find him guilty and there's anything wrong, the Supreme Court will correct it”. Now in spite of that odd language, there was the finding made by the hearing court that those things were in fact said -- that they were in fact said to two or three jurors. Hugo L. Black: Is this the bailiff who had him judicially charged? John H. Schafer: I was coming to that Your Honor, it is. It is -- Hugo L. Black: In your own words. John H. Schafer: It is that that bailiff had the jury in charge for an eight-day trial. The hearing court went on to find, I think, he didn't have to but he went on to find that these facts in fact had prejudice to the defendant. And consistently with that finding, he ordered that the conviction be set aside and a new trial be granted. The Oregon Supreme Court reversed that finding by the hearing court and affirmed the conviction and reversed the new trial ruling. At that appeal, the state's appeal on the -- on that hearing court's ruling, the federal question was explicitly raised. There's no contention made here that the petitioner did not raise the federal question in the Oregon Supreme Court. The Oregon Supreme Court decision cannot be read in my judgment in any way other than to say in effect that petitioner was afforded a Fourteenth Amendment trial in spite of the fact that an officer of the State of Oregon in effect went into the jury room and told two or three jurors the defendant was guilty. I don't see how the Supreme Court of Oregon decisions to be interpreted in any way and on that interpretation I submit that citations of authority of this Court's prior decisions is almost completely unnecessary. If citation is authority, I should like to call to Your Honors attention the case of Turner versus Louisiana which you decided two terms ago. And in Turner, you may recall that was an 8 to 1 decision with only Justice Clark dissenting. In Turner, two sheriffs who had custody of the jury also testified for the prosecution. And this Court held and on those facts and without more that that was the kind of situation which was so inherently prejudicial to the defendant that it was not consistent with the Fourteenth Amendment obligations on the states. Potter Stewart: Oh, those two sheriffs were potential prosecution witnesses perhaps you said that, right? John H. Schafer: I did say that Your Honor. Yes, I did say it. Potter Stewart: Yes. John H. Schafer: They were prosecution witnesses and they were in custody of this -- of the jury. Potter Stewart: That's the -- that's a difference between that case and this one. John H. Schafer: That's correct Your Honor. Let me say however, in response to Mr. Chief Justice Warren's question. In theory, you had only a three-day trial which those bailiffs or sheriffs were in custody. Here you have an eight-day trial and this bailiff was in constant and intimate contact with that jury for eight solid days. The bailiff then said to the jurors “this defendant is guilty”. Moreover, you have here flat proof of finding a fact made by the hearing court that prejudicial statements were made by the state officer and in turn you hadn't -- didn't have any evidence of that at all. And moreover I think I may fairly say that in this case the jurors deliberated for 26 hours and I think that can fairly be said to indicate some real questions about the ultimate question of guilt or innocence. Now, the state's arguments in support of this holding of the Oregon Supreme Court are I believe without any merit. The state first suggests that finality ought to be accorded to jury verdicts. But there isn't any rule in the State of Oregon which would enshrine jury verdicts to this extent. The State versus Gardner decision of the Oregon Supreme Court a few terms ago very recently in Oregon, lays down the general rule that's been applied in most jurisdictions that that evidence of this kind is admissible to impeach a jury verdict. That evidence of the reasoning process, the thought process of jurors that's not admissible. But evidence of overt acts which can be proved or disproved by other witnesses, that kind of evidence is admissible. That's the law of Oregon. Mr. Justice Brennan when he was on the New Jersey Supreme Court wrote a very detailed and considerate opinion in which basically he came to the same result to the State of New Jersey and that's the general rule and some of the rule of Oregon. And there isn't the kind of rule of finality which the state would now have you believe. And moreover mind you, in this case, the evidence of the bailiff statements did come from jurors. Three jurors testified to the effect these statements were made. But the state never suggested that that evidence because it came from jurors was inadmissible that these jurors were impeaching their verdict and they could not be heard to impeach their verdict. That's not the State Rule in Oregon. The hearing court didn't suggest that and the Oregon Supreme Court didn't suggest that. And moreover, I would say that I think it's quite clear that if this were this rule of Oregon and if this rule were applied to foreclose proof and judicial actions thereon and it may -- suggested by the State, they will be unconstitutionally applied. And you couldn't have a state -- William J. Brennan, Jr.: Oh, I'm (Voice Overlap) -- John H. Schafer: Excuse me, Your Honor. William J. Brennan, Jr.: I just wondered Mr. Schafer, rereading Mr. Justice 08.15 opinion. Do I read this correctly as stating that the question for the Court's decision based on this finding on the post-conviction hearing is whether within the State's statute that that was conduct which deprived the petitioner a fair trial under the Constitutions of the State of Oregon or the Constitution of United States? John H. Schafer: That's correct Your Honor. William J. Brennan, Jr.: And then went on simply to hold that the -- and its judgment, this was not a denial of any federal constitutional right to a fair trial. John H. Schafer: That's their decision Your Honor. And now this -- William J. Brennan, Jr.: And how do we get into admission of -- in some of the issue? John H. Schafer: I would suggest myself to the arguments made by the State in its brief. William J. Brennan, Jr.: I see. John H. Schafer: The State in its brief in a way I'm not quite sure I can definitely state to the Court is suggesting two lines of argument and seems to combine the two into an ultimate conclusion. In other words, it's suggesting the argument of finality which I've just -- been suggesting myself to. And there is also just saying in effect which I want to come to in a second, but anyway there wasn't any prejudice. And then the State in his brief says, what the State -- the Court in Oregon did was to balance these two, and say, we ought to have finality and it really wasn't very much prejudice, so it's all okay. And I'm just taking the two points made by the State in his brief and analyzing separately. Now as they say, the finality argument I think this without a merit. And the State as I have said goes on to say, “Well, anyway there wasn't any prejudice. There wasn't any prejudice here to this defendant”. And there are three things wrong with that argument. The first is as I've said the hearing court found as in fact there was prejudice. And the second thing wrong with it is, there is a long line of decisions of this Court making it perfectly clear we submit that in circumstances such as this, it isn't necessary for a defendant to assume the burden of proving actual prejudice. This Court's decision starting with Tumey versus Ohio running through Turner and Louisiana including Irvin v. Dowd, Estes, Sheppard; all those cases established the proposition that where the circumstances are as here so inherently prejudicial. It isn't necessary in order to establish a constitutional right that the defendant assumed the burden of proving actual prejudice. And finally on this argument of prejudice, I would say simply that the State's argument proves too much. It would have us prove that Mr. Parker was prejudiced. Where the only way left to prove it would be to have a juror come in and say, ”Yes, I was in fact influenced by what that bailiff told me about his guilt”. Well, that's precisely the kind of testimony of course that almost everybody agrees. The rules of -- uniform rules of evidence and everybody else agrees. That kind of evidence is not admissible. So that for those reasons, I don't plan to talk any longer unless there are questions, for those reasons, we believe the State's arguments are without any merit. And -- Speaker: I would like to ask you a question. John H. Schafer: Yes, Mr. Justice Harlan. Speaker: This came to light after the trial? John H. Schafer: That's correct. Speaker: After the jury brought in its verdict and on affidavits from jurors that presumably was secured at the instance of the defendant, I suppose? John H. Schafer: That's correct. Speaker: Do we run into a State rule or that the juries are not allowed to impeach their verdicts? John H. Schafer: Well, that's what the State tries to suggest Your Honor. But -- Speaker: That's a pretty general rule, is it not? John H. Schafer: That's a very general rule and it's not the rule of Oregon because State versus Gardner which we've cited in our brief as I was saying a moment ago, State versus Gardner makes the pretty uniform distinction as to the kinds of proof that are admissible and those that are not, it's our saying. Proof from a juror as mental processes, he can't come into a Court and say, “Gee, I read and understand the Court's instructions and if I had I would have voted the other way”. That's pretty universally condemned. But it's universally held, I believe that a juror can come into a Court and say, “We were offered bribes", or "People said things to us", or any of those other facts, overt facts, overt acts, proof of overt acts which can be proved or disproved to testimonial process. Testimonial process, I should say. Those kinds of facts are admissible and that's the rule of the State of Oregon as I've stated in the State versus Gardner. And that's a rule that Mr. Justice Brennan as I said wrote a decision which nicely summarizes the history of this problem in the cases in -- when he was on the Jersey Court. Byron R. White: What's your (Voice Overlap) -- John H. Schafer: And that's the standard rule. Byron R. White: Is your claim that this conduct without any showing prejudice must be assumed to have affected the jurors? John H. Schafer: I -- my -- our claim is Your Honor that where the circumstances are so likely to cause prejudice, that it's not necessary to prove actual prejudice. Byron R. White: You don't claim for a moment that anybody -- anyone but the two jurors heard it or heard these alleged statements, do you? John H. Schafer: The testimony of the hearing -- post-conviction hearing Mr. Justice White was a little confused and there were three -- Byron R. White: I know but three -- two or three? John H. Schafer: There were two or three. Byron R. White: Two or three but no more -- John H. Schafer: No more than that. No. Byron R. White: And one of them was an alternate? John H. Schafer: Yes. Well, two or three regulars probably heard it and one alternate. Byron R. White: Only a minute -- I thought it was just the most of these two all -- two regulars and one alternate. John H. Schafer: No, Mr. Justice White. The testimony was -- there was no finding made out of it but -- Byron R. White: Well anyway, the same people who heard it were the ones who gave -- who've impeached this verdict? John H. Schafer: That's correct. Byron R. White: And that there's no allegation what so -- they're the ones who were unhappy with the verdict in the first place? John H. Schafer: Well, we don't know that. They -- Byron R. White: But there's no suggestion in their statements or affidavits that they themselves were affected. John H. Schafer: No. No, there's was not. Byron R. White: I mean their testimony, their affidavits were available, and there may have been some -- maybe some presumption or some inference like in Turner or something that when you got something like this you don't really go much further. And when the people who raised it and the only people who raised it, the only people who read it or heard it say, "This was a bad thing and don't go on and say, it was so bad that I was affected". John H. Schafer: Well -- Byron R. White: If it -- the ordinary rule would've apply, let's assume one juror comes in and says, “Here's what the bailiff told me”. Then you asked the juror that, “Did it affect you?” He says, “I should stay not. I held out to the bitter end”. And what -- are you -- then are you supposed to reverse? John H. Schafer: Well, two things if I might say that Mr. Justice White -- Byron R. White: Well, how about that question? John H. Schafer: The first is your assumption of fact is not quite correct on the record but -- Byron R. White: I didn't say -- I asked you a hypothetical. John H. Schafer: I'm sorry. I understood you were addressing yourself to the record. And the second thing as I would say that kind of evidence, yes I was affected, no I wasn't affected. That's inadmissible. I believe in every jurisdiction, if you -- inadmissible under the uniform rules of evidence and perhaps the reason is -- Byron R. White: So which way is -- so that you can apply the Turner Rule or so that you shouldn't apply it? John H. Schafer: So that a juror may not be allowed to impeach his own verdict -- Byron R. White: Alright. John H. Schafer: -- because a juror really is -- Byron R. White: Well then you don't apply the Turner Rule? John H. Schafer: I'm afraid I'm not -- the Turner Rule to my mind means that you assume prejudice because these facts occurred. Now, I'm asking you here to apply the Turner Rule to assume prejudice because three jurors heard an officer of the State say, “This man was guilty”. Byron R. White: And you apply the Turner Rule because the juror who brings it up shouldn't be allowed to say, what's the fact is? John H. Schafer: That's right. That's right Your Honor. Because who want -- Byron R. White: Well, you -- assume he would? John H. Schafer: Assume he was not? Byron R. White: He was. You assume he was a juror. John H. Schafer: I assume he was? Byron R. White: He was prejudice, that's what your argument. We must assume that he was prejudice. John H. Schafer: That he was present? Byron R. White: Prejudiced. John H. Schafer: Prejudiced. Byron R. White: He was always available to say one way or another whether he was? John H. Schafer: That's right. I don't think that we can hear him say whether he was prejudice or not. I think for one thing no juror can adequately say. Who -- what -- one of us can say, what influences us and what doesn't. And isn't a natural tendency to say, I'm not influenced by things I hear. I've got my own mouth -- mind and I can make it up myself. Byron R. White: Now, these are -- are they -- you own unanimous verdicts in Oregon? John H. Schafer: No, they're tended to. As I understand Oregon law -- Byron R. White: These particular two jurors who heard it voted against the conviction. John H. Schafer: No, that was unanimous verdict, I'm sorry. Byron R. White: What was unanimous? John H. Schafer: I'm sorry, unanimous verdict. And I should -- what I wanted to say a minute ago Mr. Justice White was that one of these jurors wasn't able to say one way or the other, whether she had been prejudiced by what she heard. That's in the record. William J. Brennan, Jr.: Mr. Schafer, may I ask you. I noticed that -- John H. Schafer: Page 1 -- excuse me. Excuse me. William J. Brennan, Jr.: That the Court's opinion, I'm looking at 13A of the record cites Ausplund, A-U-S-P-L-U-N-D, an Oregon decision and in its discussion of it concludes with the decision of the Court in effect was that such evidence would not even be received for the reason that it would destroy the finality with the jury's verdict. This gets back to what Mr. Justice Harlan was asking you earlier. I think you answered Justice Harlan that this doesn't suggest that this turned on a state ground namely that a juror would not be allowed by this kind of evidence to impeach his verdict. Doesn't ask this -- the way the Court treats or response suggest that that if that may be the Oregon Rule? John H. Schafer: If I read -- it -- let me say this. If it is the Oregon Rule that you cannot prove this kind of conduct for one reason or another then it seems to me that rule is unconstitutional, if it forecloses the kind of proof and the judicial action necessary to taking thereon as it indicated by this case? If the Oregon law is, that this petitioner cannot prove that a state officer went in and told three jurors that he was guilty during the course of the trial then -- William J. Brennan, Jr.: Well, I gather -- John H. Schafer: -- that rule is applied to be unconstitutional. William J. Brennan, Jr.: I gather since Ausplund was another case of a juror, whom -- three jurors who made affidavits. This means that a juror's evidence to that effect would not be received in evidence. Not that you can't prove it otherwise, but you can't prove it out of the mouths of the jurors who sat on the jury. John H. Schafer: Well Mr. Justice Brennan, no one -- as I said nobody in this case ever said that this juror's testimony wasn't admissible. It wasn't -- William J. Brennan, Jr.: I'm just wondering if this citation of Ausplund as they suggest that it wasn't. And that one ground of the reversal by the Supreme Court was that that kind of evidence could not be received. John H. Schafer: Well, I didn't understand. I only have a fair reading of the decision indicates that and I must say that State versus Gardner which comes subsequent to the Ausplund case. William J. Brennan, Jr.: Yes. John H. Schafer: I think it is really on all fours from your decision Mr. Justice Brennan in the State versus (Inaudible) case. William J. Brennan, Jr.: And you said the (Voice Overlap) -- yes. John H. Schafer: And that indicates I think without any doubt whatever that the Oregon Rule is that this kind of evidence is admissible through jurors or otherwise. And however you read Ausplund; I think it -- if it says that it's overruled by Gardner. And I don't think that this Oregon Court in this case is saying, "We've got adequate state grounds on which to foreclose, on which -- upon which we can foreclose". And otherwise a valid constitutional claim. William J. Brennan, Jr.: When you say, what follow supports you. John H. Schafer: Thank you very much Your Honor. Earl Warren: Mr. Blunt. David H. Blunt: Mr. Chief Justice, may it please the Court. In listening to the counsel's statement of facts, I believe it'd be helpful with the Court to have -- give it a little more background as to the facts in this case. Mr. Parker was tried about eight years ago on the charge of first degree murder and the jury came back with a verdict of second degree. Now, this was appealed, reversed. Second trial was held in 1961. The trial began on Monday April 24th, 1961. It recessed for the weekend on Saturday and Sunday and it came back the following week. And the jury returned its verdict on May 3rd, 1961 which was a Wednesday. Now, the second trial was before a different judge, a different bailiff, and of course a different jury. Now, he was convicted the second time of second degree murder. He moved for a new trial on the basis of a failure of the prosecution who approved the venue in the county. The trial court denied the motion and sentenced Mr. Parker to life imprisonment in the Oregon State Penitentiary. He appealed again and the basis of the appeal was the failure of the trial court to bring in a new trial on the failure to approve venue again. And also a -- an objection to an opening statement of District Attorney alluding to a tape recording which are not later allowed in evidence. Now, this time the Oregon Supreme Court affirmed the conviction on October 8th, 1963. Now at that time, Mr. Parker and his wife, the petitioner in this case, petitioner Mr. Parker embarked upon a campaign to get another trial. Mr. Parker wrote letters to the jurors. He had his wife contact the jurors on the jury list and from the first juror call found the names of other jurors that were holdouts in this 26-hour deliberation. Now, Mr. Parker prepared a tape recording. He had his wife invite three of these jurors over to her home. In fact, she invited everybody over to her home but only three of them came to the home to listen to this tape recording. They had a discussion of the matter and went down to see an attorney that was hred by the petitioner's wife and talk it over with him. He prepared the affidavits and on that basis he submitted a post-conviction petition under the Oregon Post-Conviction Hearing Act in which they alleged a wide variety of misconduct on the part of the jurors, the other jurors. They said some of them were sleeping. He said, the jury room door was left open and the jurors could hear conversations in the hallway. They said that the remarks were made. Now, the post-conviction hearing had all the jurors testified including the bailiffs and the two alternate jurors. Now the -- and there're still a little confusion here as to whether three jurors heard these two remarks, there were two remarks, one was, “Oh, that wicked fellow, he is surely guilty”. The other one was, “If there's anything wrong with your decision the Supreme Court of Oregon will correct it”. Now as to the remark by the bailiff that the petitioner was guilty, this was made to the alternate juror, a woman, and was overheard by a regular juror from the record indicates that she was the longest holdout. The other remark was supposedly made to a man juror with all the men on the jury testified post-conviction, they didn't hear the other remark. This remark supposedly was overheard by another woman juror and the other woman juror who had been the principal holdout. Now the remarks were made during a walk that the jurors took on a Sunday. They were out getting some fresh air and the woman alternate juror expressed concern that the petitioner's case, Mr. Parker is being rerouted. Speaker: (Inaudible) concern about? David H. Blunt: That the petitioner was being rerouted that the -- there was a feeling, general feeling amongst the jurors that the -- they're finding him guilty and the State had not proved this case at least in her own mind beyond a reasonable doubt. Now, the post-conviction hearing court found as a matter of fact that the remarks have been made. We don't question this. This is a finding of fact. Supposedly, the most damaging remark is to the effect that the petitioner is guilty. Now, the post-conviction trial court found also that if these remarks have been brought to the attention of the trial judge he would on his own motion have allowed a new trial. They would have ordered a new trial. Petitioner would not have had even make a motion to this effect. This is the law of Oregon, there's no question of that. On -- if it's brought up timely or even on direct appeal why this would -- would grant the man relief. But this is something that happened two and a half years later. He -- Mr. Parker chose to wait until he lost his second appeal. Then he goes back and tried by this route to get a third trial. Now, the Post-Conviction Hearing Act in Oregon requires a higher standard than the case law regarding motions for new trial that requires a substantial denial of constitutional right. There are reasons for this. Counsel calls it finality perhaps that's the best word we can find this time. He states in his argument that in this Turner versus Louisiana is not a stronger case as Mr. Parker has here. Well, we take exception to this as Mr. Justice Potter pointed out the two bailiffs in that cases were also the principal prosecution witnesses. And they were with the jurors for over three days in that case and the -- this Court rightfully held that in a situation like that you don't have to show prejudices. No question to that. Speaker: He talked about the (Inaudible)? David H. Blunt: No, Your Honor. I'm speaking in terms into the litigation. That's correct Your Honor. Abe Fortas: I'm a -- excuse me sir. But quite -- I don't understand something here. So I understand that the post-conviction trial court held that a -- that the petitioner was entitled to a new trial in regards that these statements had been made and that they were prejudicial. Is that right? David H. Blunt: That's correct Your Honor. Yes. Abe Fortas: Then the Supreme Court of Oregon reversed on the grounds that the trial court -- post-conviction trial court had not correctly applied the post-conviction standards. David H. Blunt: That's correct Your Honor. Abe Fortas: Now, what would be the basis for setting aside the verdict for granting a new trial if the same situation had been called to the attention of the trial judge before sentence? David H. Blunt: Well, Your Honor, I don't think there'd be any questions but that it would have gotten a new trial and (Voice Overlap) -- Abe Fortas: On what basis? David H. Blunt: Well, the general case law is that -- Abe Fortas: Yes. But what's the legal concept? It's a denial of the fair trial, isn't it? That is even (Voice Overlap) -- David H. Blunt: Well, we have a statute so Your Honor that forbids this type of convict expressly. Abe Fortas: Yes. But I say he would've gotten a -- are you saying that it's purely statutory and not constitutional? Or isn't that -- David H. Blunt: I'm not quite sure Mr. Justice Fortas as to whether it would be purely constitutional or purely statutory or perhaps (Voice Overlap) -- Abe Fortas: Well, my point is that I turn to see the -- how -- to raising a question as to whether there is really a difference between the rule that would apply in the course of the trial before a sentence. On the one hand on the post-conviction rule, in your brief on page 3 you said that the Oregon statute and subsection (a) of the post-conviction statute allows relief to be granted when there's a substantial denial of constitutional rights. Is that right? David H. Blunt: Yes, Your Honor. However, the -- it's my opinion Your Honor that a prejudice or substantial denial is a relative thing. Certainly, many things that affect interstate commerce without -- Abe Fortas: You mean a substantial denial of constitutional right to a fair trial means one thing post-conviction and another thing while the trial is still in process? David H. Blunt: Yes, Your Honor. On collateral facts, where you hold a higher standard, yes sir. Earl Warren: Well, how and when could this defendant have raised this question so as to make it meaningful? David H. Blunt: Well, Your Honor, the -- a matter of fact the -- this one juror that was a holdout went to the trial judge after the trial was over and she was conscience stricken as I understand this happens frequently in this type of a trial after a juror go back and talk to the judge and say, “I don't know if I did the right thing or not in giving up -- giving in to the majority here”. She had at that time an opportunity to tell the judge of these remarks. If in fact she had been very much impressed by these things but she didn't do it. She didn't think about these things for two and a half years later at the insistence of the petitioner here and his wife. Earl Warren: Well, but how -- I say at some point, if this is a violation of his constitutional rights to have a fair trial there must have been sometime at which the defendant could have raised that point before the courts, in order to make his right effective. Now, when and how could he have done that in this case? David H. Blunt: Well, he could have moved for a new trial Your Honor any time up to the time the decision affirming his conviction has been rendered (Voice Overlap) -- Earl Warren: Yes, what if he didn't know about it how could he do it? David H. Blunt: Well, Your Honor that does post a problem here then -- these were the -- this decision of the Oregon Supreme Court in the balancing of the two doctrines must be made. Counsel has it -- ruled it sort of a balance, he spoke off. Earl Warren: Valid says what? David H. Blunt: Well, the equities as giving finality to a verdict as against the constitutional right to a fair trial. Earl Warren: Without regard to his right to raise it at all? David H. Blunt: Well, Your Honor, I think what the state is saying here is that he can raise it up to a certain time. Earl Warren: When is that time? That's what I want to know? David H. Blunt: Well, I would say they would probably rely, Your Honor at the -- up to the time the decision affirming his conviction has been handed down. Earl Warren: Does the statute say so? David H. Blunt: No, Your Honor. It does not. Earl Warren: Does your case law say so? David H. Blunt: It is not clear on that exact point Your Honor. Earl Warren: Is there any case in Oregon that says that he does have this right to do it up to that time? David H. Blunt: I don't believe so Your Honor that if any case spells it out. Earl Warren: When -- how -- how is it? Could you tell us -- he can do it? David H. Blunt: This pure conjecture of my parts Your Honor -- Earl Warren: Well then, but certainly you wouldn't expect him to do that if he didn't know about it up to that time, would you? David H. Blunt: No. No in fairness Your Honor, I can't say that. Earl Warren: Is there anything in the findings of the trial court here that to the effect that he did know but didn't exercise his right speedily? David H. Blunt: Not directly, Your Honor. Only through the record itself in this respect -- Earl Warren: So they talked about the findings of the Court. David H. Blunt: No, Your Honor. Earl Warren: So then we can't charge him with any latches, can we? David H. Blunt: I don't believe so Your Honor as such. I believe all the points have been covered. Thank you. Earl Warren: Thank you. Mr. Schafer did you have anything more? John H. Schafer: I would just say in response to Your Honor, Chief Justice to the last question on page 204 of the record. There appears a statement by the Supreme Court of Oregon that it is assuming for the purposes of its decision that the petitioner did raise the issue of misconduct as soon as it could -- as soon as he could.

William H. Rehnquist: We'll hear argument now in No. 98-1701, the United States v. Gary Locke, and 19-8... 98-1706, International Association of Tanker Owners v. Locke. Mr. Benner. C. Jonathan Benner: Mr. Chief Justice, and may it please the Court: From the first day of our existence as a Nation, we've relied on the merchant ships of the United States and foreign nations to bear the vast preponderance of our interstate and our foreign commerce. There have been some amicus submissions on this side of the argument that give you some sense not only of the historic scope of that reliance, but also the present scope and the complexity of the routes that these vessels travel. Each of these vessels is a complex collection of systems and subsystems, both structural and mechanical, but also each depends on the knowledge and skill and judgment of mariners not only from the United States, but from around the world. Each of these vessels is subject to an intricate Federal system of permits, inspections, certifications by personnel of the United States Coast Guard acting pursuant to authority vested in them by the United States Congress. The Founders were very familiar with this industry. They knew it very well. They knew its complexities. They knew its central importance to the commerce of the United States and the economic health of its... of the Nation. And they knew its links to international law. They understood that each vessel carried with it a physical projection of the sovereignty of another Nation and they knew that the citizens aboard that vessel often were from other nations and that along with the possibility of prosperity that came with these maritime transactions, there also was the possibility of conflict with other nations in how we dealt with those vessels when they called at our ports. The United States and Intertanko here seek reversal of a decision from the Ninth Circuit Court of Appeals which I believe for the first time in the history of the United States countenanced an intrusion by a State government, in this case the State of Washington, into areas that are exclusively regulated by the Federal Government. And to define this field at the start, we are relying on the enumeration of subject matters in 46 U.S.C. 3703(a), the design, construction, alteration, repair, maintenance, equipping, personnel qualifications, and manning of the vessels. This is the realm that we believe has strong Federal connotations that must be protected in this case. By inserting itself into these subject matters, our concern is that the State of Washington necessarily displaces Federal judgments governing these vessels and compromises the constitutionally essential supremacy of Federal law in this particular area. The practical-- Sandra Day O'Connor: May I... may I ask you, Mr. Benner, if you take the position that all 13 of the provisions before us here are preempted by Federal law itself or that some of them are preempted by Coast Guard regulation? C. Jonathan Benner: --We take the position that all of them, Justice O'Connor, are preempted by Federal law itself in the subject matters described in 46 U.S.C., section 3703. Sandra Day O'Connor: Some sort of field preemption. C. Jonathan Benner: Yes. We... we do contend... and I'll be very clear about that. Sandra Day O'Connor: Yes. C. Jonathan Benner: There is a condition of field preemption that surrounds that component of the United States Code. Sandra Day O'Connor: So, your first position would be that field preemption applies and we don't have to look further. C. Jonathan Benner: That is correct. Now, like people in our profession have a tendency to do, we have also pointed to express-- Sandra Day O'Connor: A fall-back provision. [Laughter] C. Jonathan Benner: --We... we have also pointed to... to instances in which the United States Coast Guard has spoken expressly preemptively in its regulations and that those express preemptive statements are entitled to deference. Sandra Day O'Connor: And there you rely on Coast Guard regulations that contain language expressly preempting State law? C. Jonathan Benner: Yes, that is correct. The Coast Guard has said on several occasions, in issuing regulations pursuant to title 46 and also to title 33, that it is the Coast Guard's intent to oust differential State action in those areas. Sandra Day O'Connor: But if the Coast Guard were silent on some of these points, you still think there is Federal-- C. Jonathan Benner: Indeed, Justice O'Connor, that is-- John Paul Stevens: --Do you think your position is entirely consistent with our decision in Ray? Your first position. I know your second is. C. Jonathan Benner: --Yes. I... I believe it is, Justice Stevens. The... Ray we rely on heavily, but I... I certainly acknowledge that in Ray the issues you were looking at in that decision were design and construction elements. We are saying here-- John Paul Stevens: Well, but also the Court held that some of the regulations were valid in that-- C. Jonathan Benner: --The... the two that were held valid by the Court in Ray that... that maybe illustrate our point are, one, a tug escort provision, which was not held valid under what we are calling title II, as a shorthand reference, to PWSA, the 3703(a) subject matters, but was held valid under title I of PWSA which was a discretionary element of the law and remains a discretionary element of the law. We read the Court's decision in Ray to say the States do have an ability to act in these discretionary areas... and the tug escort provision was deemed to be one... if the Federal Government has not acted. Now, a salient point in the fact pattern that we present to you here is that in every single element of the challenged State regulations, there is a corresponding Federal regulation. We do not believe-- John Paul Stevens: --Oh, I understand that, but that's your second... that's your fall-back argument. Your first argument is the statute itself, 3703, takes care of everything. C. Jonathan Benner: --That is our argument because we believe that every one of these regulations falls within the understood meaning of design, construction, alteration, repair, maintenance, particularly in this case personnel qualifications and manning and operations. William H. Rehnquist: Why should manning and operations... I mean, why shouldn't the State have something to say about that? C. Jonathan Benner: I think to understand why it's important to the Federal system, Your Honor, that... that all of these things work together, you have to understand the system... the vessel as a system. The section 3703(a) describes a number of elements of the operation of the vessel, all of which link together. What we're concerned about is that if the States can selectively adjust elements of that system, they are not in a position to judge what the impact of that adjustment is. Sandra Day O'Connor: Well, what do you concede is left open to States in this area? What about conditions peculiar to local waters? C. Jonathan Benner: The language, Justice O'Connor, that you find in... in much of the maritime preemption case law that this Court has generated about local conditions seems to be related to such matters as fishing, conservation, that kind of thing, or is... is recited before, in the case of Ray, finding that the tug escort provision was a title I discretionary PWSA matter. We believe that the significance of local conditions-- Ruth Bader Ginsburg: Well, how do we know that the... the provisions of Washington law you are contesting necessarily fall under title II and not under title I? It seems that some title I subjects involve operations. C. Jonathan Benner: --Yes. I... I do acknowledge, Justice Ginsburg, that in title I you have vessel operating requirements as... as part of the statutory description of the field there; whereas, in title II you have operations. We... as a first level answer to your question, we contend it doesn't make any difference to our preemption analysis. We're contending that even title I is heavily preemptive, and if you look at Ray, it's very clear that the Court found that the congressional decision to permit State action with regard to structures included an implicit decision to ban the States from regulating with regard to vessel standards. The thing that saved the tug escort requirement in Ray and which is not applicable here was the absence of a Federal presence in that particular element. The Court said, it may be that the United States will come to regulate that, and when that happens, that will have preemptive effect. But it hadn't happened at the time of the Ray decision. So, our answer is-- Antonin Scalia: I must say I don't understand. It seems to me where you have field preemption, I... I thought that by definition field preemption meant, if you're relying on the statute-- C. Jonathan Benner: --Yes. Antonin Scalia: --which is what you're doing, it means, whether or not the Government acts, we've occupied the field. And if... if we decide there should be no regulation of this, there shall be no regulation. Period. That... and... but you're... you're... you have some kind of a hybrid where... where you claim field preemption but then explain the exception in Ray by saying, well, there was no... you know, there had been no specific rule promulgated there. C. Jonathan Benner: Justice Scalia, we make a distinction between title II of the Ports and Waterways Safety Act and title I of that act. In other words, the one that is mandatory is title II, and in that case, we're claiming field preemption. Antonin Scalia: But Justice Ginsburg's question drew your attention to the fact that you could place these matters under title I.-- C. Jonathan Benner: I... I don't believe you can place all of them under title I. The... the ambiguity about the distinction between title I and title II is the use of the word operating requirements in title I and the word operations in title II. We contend that all of these provisions fall within title II because they're either operations, personnel qualifications, or manning requirements that... and... and we accept your... your proposition that, because we are arguing field preemption, the States are completely barred from entering that area. The confusion... my time is expired. William H. Rehnquist: --Thank you, Mr. Benner. Mr. Frederick, we'll hear from you. David C. Frederick: Thank you, Mr. Chief Justice, and may it please the Court: I'd like to start with the international ramifications of the decision by the court of appeals in this case because under title II of the PWSA, the Secretary is obliged to give reciprocal rights to foreign flag vessels that... that comply with international agreements to which the United States has acceded. And that international reciprocity is tied into the title II fields that Mr. Benner earlier described that are particularly applicable in this case, that those fields, personnel qualifications, manning, operations, and equipment. And the same reasons that this Court held in Ray it applied for design and construction are equally applicable for those fields as well. The Secretary issues a license as-- Sandra Day O'Connor: Well, could we talk about whether it's field preemption or conflict preemption or something else? And how do you read Ray? There were exceptions in Ray. So, it's hard to look at it as a field preemption case. David C. Frederick: --That's-- Sandra Day O'Connor: Where are we? David C. Frederick: --Well, Justice O'Connor, we're in both. And let me try to distinguish for you. Sandra Day O'Connor: Well-- David C. Frederick: Some of the... some of the issues here involve the fields, and they relate to the vessel as a system, what the qualifications are of the personnel aboard, what manning requirements are... are imposed, what kinds of equipment has to be tested at particular times and operational. Those are clearly in the fields. There are international agreements that set standards the Secretary is obliged to give reciprocal rights to. Now, there are other rules, and I would identify three for the Court that arguably... arguably... could be within the local peculiarities of the waterways, and those concern the advance notice of entry, the position plotting, and restricted visibility watchkeeping requirements. I would point out to the Court that the State of Washington here has not attempted to justify in its rationale for these rules that they are related at all to the peculiarities of Washington waters. They apply to the many thousands of miles of Washington waters that are in Puget Sound and out... the underlying... outlying coast. John Paul Stevens: --Well, may I ask... you say visibility and piloting. Was it piloting that you said was involved? David C. Frederick: Watchkeeping. John Paul Stevens: Watchkeeping. Does that mean in the heavy... when the visibility is way down, as it often is in that area, is their three officer on the deck something that would be arguably not subject to field preemption? David C. Frederick: That's... that... it's not subject to field preemption within the statutory fields of title II. Our position is, consistent with Ray, that title I gives the Coast Guard regulatory field preemption so that if-- John Paul Stevens: Well, you say that that would be bad only if it's covered by a Coast Guard regulation. David C. Frederick: --That's correct. And the Court made very clear with the tug escort requirement in that case that if the Coast Guard had issued a tug escort requirement, that that would occupy the field as to tug escorts and would not preempt a... and would not be preemptive of a State rule if there was no Coast Guard regulation. Antonin Scalia: I don't understand how you... how you get into the definition of the field the matter of local conditions. I mean, it seems to me if a manning requirement is... is demanded by local conditions, it is a manning requirement nonetheless. It seems to me you're trying to slip in under the... under the field definition, a totally extraneous matter, and that is whether local conditions, in fact, do justify some exceptions to the field preemption. David C. Frederick: That's why I stressed arguably, Justice Scalia. In our view, most of these rules apply to the vessel as a system. They're not local traffic type rules. Antonin Scalia: That's a more honest... that's... that's a more honest explanation. Right? David C. Frederick: No. And... and, you know, some of them in our view would be deemed manning requirements, but that in any event because... if they are justified as local traffic rules, they are preempted because of contrary Coast Guard determinations to issue a rule as to those kinds of conditions. Ruth Bader Ginsburg: Mr. Frederick, the lower courts didn't get into any of... any of this, and so far, no one has mentioned the basis of their decision which was section 1018. So... so-- David C. Frederick: I would be happy to address the error of the court of appeals' reasoning. In our view, section 1018 of the Oil Pollution Act has no applicability to this case whatsoever. The plain language of that statute, which respondents do not contest our argument... it begins with the phrase, nothing in this act... i.e., nothing in OPA... shall affect the right of the States to impose additional requirements. Nothing in section 1018 affects the ability... the preemptive force of Federal law under the Ports and Waterways Safety Act, the PTSA-- David H. Souter: --Well, Mr. Frederick, if we agree with you on that point and if we also agree that in fact the court gave a rather restricted reading of Ray, simply assuming that its principles went no further than the design and construction, shouldn't we simply at that point vacate and send this thing back rather than in the first instance, as if we were a court of... of first instance, parse our way through every regulation? David C. Frederick: --Justice Souter, that would be an eminently reasonable holding of this Court. We have offered illustrations in our submissions so that the concreteness of the dispute is apparent to the Court, and in our view some of these rules are sufficiently clearly preempted that the Court could hold them so. We've offered those illustrations for the benefit of the Court. We have not attempted to be exhaustive because of the page limits. David H. Souter: But am... am I right that if... that your position is that if we agree with you on 1018 and we agree with you on the restricted reading given to Ray, that those two points are sufficient to require vacation and... and remand? David C. Frederick: Yes, and we would urge the Court to reaffirm the title II/title I preemptive dichotomy that the Court explained in Ray and to show that those issues and subjects in 46 U.S.C. 3703(a) are entitled to the same field preemptive consequences because they basically allow for the same reasons. If I could just point out that vessels move from place to place and nation to nation, and there's no difference in the design and construction of a vessel as there are in the kinds of personnel qualifications that would be at issue for a vessel that would move in such places. Antonin Scalia: Mr. Frederick, before you get too far away from section 1018, doesn't... doesn't section 1018 support the respondent at least to this extent? It doesn't make much sense to say... to be sure, it only deals with the preemptive effect of... of that legislation, but it doesn't make much sense to say the State's authority to regulate... it doesn't make much sense to say this legislation shall not preempt the State's authority to regulate when there was already no extant State authority to regulate because of a prior statute. Doesn't it, in effect, acknowledge that under the prior legislation, there... there was State authority to regulate? David C. Frederick: No, Justice Scalia, for several reasons. First, the Oil Pollution Act addresses pollution not only from vessels but from land-based sources. So, when Congress was attempting to save from preemptive effect preexisting authority, there is clearly State police power with respect to land-based oil pollution. There's no indication at all in the legislative history of... of the Oil Pollution Act, and in particular section 1018 where the conference committee that added that section said expressly that it had no intent to undo Ray v. Atlantic Richfield, which clearly upheld the preemptive scope of the Ports and Waterways Safety Act. Moreover, there are things that are clearly saved by 1018, the response that a State can make to oil pollution, additional liability requirements that a State might impose, penalties for polluters, requirements and certificates of financial responsibility. That doesn't mean that it brings the State on board the vessel to regulate the subjects that have been historically within the realm of Federal regulation. Anthony M. Kennedy: How would you characterize then the principal error of the Ninth Circuit with reference to the savings clause? Was it in its conclusion that the savings clause, because it's in a later act, shows that field preemption is now in doubt or has been narrowed? David C. Frederick: Well, I think there are a couple of errors. The principal one is, as you say, that... that somehow in a later act Congress intended, silently without saying so in a seven-word phrase, to eviscerate literally thousands of pages of Federal statutory and regulatory and international treaty law. There's no indication that... that Congress would have intended to do that. It also read a savings clause so broadly as to eviscerate specific directives contained in Federal law in these other vessel regulation statutes. And we point out the cases from this Court indicating that a savings clause should never be read so broadly as to eviscerate the specific directives given in... in the Federal law. And finally, it just missed it on the plain text of the provision which says, this act means this act. So-- William H. Rehnquist: Mr. Frederick, there's a difference between-- --Mr. Frederick, doesn't the... at least common sense and perhaps some of our earlier cases suggest that when you're talking about field preemption, you would not... you would hesitate to apply it in an area where there are very strong local interests. You know, supposing you say that in a heavy fog in Puget Sound, coming into the Seattle harbor, you have to have a tug. I... I for one would be quite loathe to read some rather general Federal statute as having preempted something like that. David C. Frederick: --Congress specifically took local concerns into consideration in enacting the PWSA title I where it directed the Coast Guard to take into account the views of State and local officials in promulgating local traffic rules. And then after Ray, it amended title II to require the Coast Guard to take into account the views of States in issuing the systems-based regulations. So, there is a role for the States to play. William H. Rehnquist: But a very subordinate one, obviously. David C. Frederick: Well, the Congress made very clear it wanted there to be one decision maker, and there are important international ramifications to that. Because of the international treaties to which we've-- William H. Rehnquist: Well, what would be the international ramifications of saying that... of the State of Washington saying that in a heavy fog coming into Seattle harbor, you had to have a tug? David C. Frederick: --The international ramifications are as follows, Mr. Chief Justice. Under applicable treaties, manning requirements and certain conditions are specified, and the discretion is left to the master to determine how best to get to port. Congress made the decision that because the... of the Coast Guard's expertise and its role in the international maritime field, the Coast Guard could make the decision as to those particular conditions. We would concede, Mr. Chief Justice, if there is no rule where the Coast Guard has specifically looked at this, the State has room to regulate, and in that regard, we may differ somewhat from Intertanko's position. But that's far... a far cry from the encroachment of these State rules onto the vessel that apply extraterritorial, like the drug testing provision which requires drug tests, random drug tests, on vessels that may never come to Washington for many years but require tests to be submitted and sent to the State of Washington-- John Paul Stevens: May I ask, to what extent do the Coast Guard regulations are... to what extent are they uniform or harbor-specific? David C. Frederick: --It varies widely, Justice Stevens. We've got five volumes of the Code of Federal Regulations here, two of which-- John Paul Stevens: But they might have a... just to take an... they might have a regulation that would apply specifically to Puget Sound and nowhere else-- David C. Frederick: --That's correct. John Paul Stevens: --to cover the specific-- David C. Frederick: That's correct, or even to a part of Puget Sound. And we've acknowledged in our reply brief that a tug escort requirement imposed by these BAP rules for a tug escort in and out of Port Angeles is the kind of local operating rule where the Coast Guard has not issued a regulation, and in our view that is not preempted by a Coast Guard regulation promulgated under title I.-- Ruth Bader Ginsburg: --Mr. Frederick, there's another difference between you and Mr. Benner. I hope you clarify that. You say 1018 just says no spill-over effect on the preexisting law, but he goes beyond that and would like us to say that it doesn't have a savings effect even within OPA except for title I. And your brief is silent on that. Do you have a position? David C. Frederick: --Justice Ginsburg, we didn't brief the question because we don't regard it as necessary for the Court to decide. The textual indicator of this act is sufficiently clear to dispose of the question. I've indicated those areas that we think are clearly saved. In title IV, Congress gave certain directives to the Coast Guard to promulgate certain kinds of rules. Our view is that the savings clause doesn't affect the preemptive effect of title IV because the Coast Guard had preexisting preemptive authority under prior statutes, and title IV is simply telling the Coast Guard we want you to exercise that preexisting authority. There is an area in the middle between those aspects of direct vessel regulation and those aspects of financial liability requirements that I outlined before the response to liability where it is a difficult question. And because of the... the concern with not creating unintended consequences for creating our position, we have not taken a position in the abstract about what the phrase, additional requirements with respect to an oil discharge or substantial threat of oil discharge, are. Now, I would also like to add that since Ray a number of important developments have occurred that reaffirm the preemptive force of Ray. In the Court's decision in that case on pages 166 to 68, the Court emphasized that Congress had made international uniformity a key issue. And since Ray was decided, Congress has enacted the PTSA. It has promulgated into positive law title 46 which contains field preemptive elements that we have been talking about, and in the international realm, the SOLAS Convention, the Safety of Life at Sea Convention, has been ratified by the United States. The standards for training certification of watchkeeping have been implemented and enforced by the United States. The MARPOL Convention, which directly relates to pollution by vessels from oil tankers, has been ratified in the United States. And the International Safety Management Code has also been... has also been implemented into United States domestic law. This international regime is a constantly evolving process in which the United States is the leader, and every year a refinement to that process has been made. It would greatly upset uniformity if each State, each... each of the 23 coastal States, were able to pick and choose which Federal requirements they wanted to adopt, which ones they wanted to go beyond. Anthony M. Kennedy: Have we ever said that the ratification of an international convention is sufficient to show field preemption? David C. Frederick: I don't... I don't know of a case on that subject, Justice Kennedy, and I'm not sure that it's relevant for this purpose because Congress, in each instance of those acts... and we've provided the citations in our brief... has not only ratified, but it has directed the Coast Guard to engage in that enforcement. So, the Court would not need to rely on just the ratification of an international treaty for field preemption. And each of those subjects of those international treaties is a subject in title II of the PWSA which-- Anthony M. Kennedy: Are you saying that then... that these new treaties and laws that you refer to show express preemption? David C. Frederick: --No. We... express preemption would be where there was, you know, an express statement that the law was intended to be preempted. Anthony M. Kennedy: How... on... on what aspect of preemption then do these international agreements and obligations bear? David C. Frederick: In two ways. They cover the subjects in title II that are field preemptive and the Secretary is obliged under the statute to honor reciprocal rights. They also are given licenses, and the... the uninterrupted flow of this Court's cases since Gibbons v. Ogden is that a State may not supplement or augment a duly authorized Federal license. 47 U.S.C. 370... 46 U.S.C. 3703 says these treaties require certificates. Anthony M. Kennedy: Well, if they just give effect to a title II field preemption that's already there, then it doesn't add anything to the... to the case. David C. Frederick: Well, it adds in the sense that there are specific provisions here that make very clear the occupation of the field and Congress' intent to do so. If I could reserve the balance of my time, Mr. Chief Justice. William H. Rehnquist: Very well, Mr. Frederick. Mr. Collins, we'll hear from you. William B. Collins: Mr. Chief Justice, and may it please the Court: This case concerns Washington's authority to prevent oil spills from tankers traveling on Puget Sound and in the Columbia River. Congress has not expressly preempted the State's authority to regulate companies that operate oil tankers in Washington, nor do we believe has Congress impliedly expressed a broad intent to preempt State authority in this field. Washington's prevention rules complement Coast Guard rules and the international regime, and there is no conflict. I want to just spend a moment talking about the State's regulatory regime because, contrary I think to the position of the United States and Intertanko, it is a complementary system, not a conflict system. First of all, we regulate by requiring the owners and operators of tankers to file a prevention plan, and that plan must meet certain requirements. Those requirements were developed in... in consultation with both the Coast Guard and the tanker industry, and they involve a lot... many of the rules involve simply operations on local waters, that is, the twisting, narrow waters of Puget Sound. Sandra Day O'Connor: Mr. Collins, do you take the position that the OPA and... what is it... section 1018-- William B. Collins: Yes, Your Honor. Sandra Day O'Connor: --amended the PWSA in some way? William B. Collins: No, we don't, Your Honor. Sandra Day O'Connor: How... how is it possible then that that section has any effect on any preemption affected by PWSA or the other... or PTSA? William B. Collins: Justice O'Connor, our position is that the outcome of this case would be the same even if section 1018 had not been enacted, but we-- Sandra Day O'Connor: Do you defend the treatment given by the Ninth Circuit to the OPA section? William B. Collins: --Well, I think the Ninth Circuit correctly observed that the... section 1018 we believe is an exclamation point indicating Congress' intent not to preempt State regulation in this area. I mean, in the briefs of the United States and Intertanko, they talk about the fact that since the Constitution was adopted, there have been regulations in this area. And sometimes State regulations in this area have been struck down. Other times State regulations in this area have been upheld. Congress is well aware of that fact, and yet Congress has never, in the PTSA or any of the statutes that follow it, expressly preempted the State from regulating in this area. And as this Court is well aware, Congress certainly knows how to express that intent. Sandra Day O'Connor: It's very hard to understand how the Ninth Circuit ruling comports with what we said in Ray. Do you think Ray is still good law? William B. Collins: Oh, yes, Ray is good law and we rely on Ray heavily. But the difference between the parties I think on Ray is that essentially the Government and Intertanko view Ray or view title... title II, what is in 46 U.S.C. 3703(a), as a labeling exercise. That is to say, if they can call a requirement manning or personnel, then they say that it's preempted. But we believe that Ray was not a labeling exercise. The Court in Ray was very careful to do what you have to do in a field preemption case. It took... looked at the purpose and character of the Federal rule; that is, the purpose and character of the design and construction requirement and concluded that in that area there was no room for State regulation because after-- Sandra Day O'Connor: Well, I... I thought there was language in the Ray opinion that title II has twin goals of providing for vessel safety and protecting the marine environment. William B. Collins: --Well, that's correct, Your Honor. Sandra Day O'Connor: And... and there certainly is language in those statutes dealing with the manning of vessels and vessel safety. William B. Collins: Yes. But in analyzing... in other words, in Ray the Court didn't simply say everything listed in title II is subject to field preemption. Rather, it looked carefully at the area of design and construction and decided there was no room for the States. Sandra Day O'Connor: Well, it... it appeared, at least to me, to look to those areas where Congress required the Coast Guard to make regulations. William B. Collins: Well, Your Honor-- Sandra Day O'Connor: And as to that, I don't see what room is left. I mean, Congress spoke pretty clearly there. William B. Collins: --Well, Your Honor, I... I think... I think that that is not the correct reading of Ray because the Court was very... I mean, for example, operations is listed in title II, but the Court was very careful in Ray to distinguish design and construction from other kinds of requirements. So, even though there was a specific statute about pilotage, the Court went out of its way to point out that pilotage was not a design and construction requirement. It looked at the tug escort requirement and said tug escort is not a design and construction requirement. So, the Court didn't-- Ruth Bader Ginsburg: But they also invalidated, didn't they, the requirement that tankers carry State licensed pilots? And that requirement has nothing to do with design and construction. William B. Collins: --For the coast-wise trade. That's correct, Justice Ginsburg. But-- Ruth Bader Ginsburg: So... so, Ray was not limited to design and construction. In quoting the statute, in quoting 3703(a), at least three times the... Justice White's opinion puts together operations, as well as design and construction. William B. Collins: --Your Honor, I believe that in Ray the... the pilotage requirement for the coast-wise trade was struck down because of a specific pilotage statute enacted by Congress and... and that's in fact why the requirement for a pilot for the registered vessels was... was upheld because of a specific statute. But in spite of that specific statute, the Court went out of its way to contrast a pilotage requirement from a design and construction requirement. So, we believe, when you're looking at field preemption in title II, it is not simply a labeling exercise, but you have to take a look at what is the Federal purpose. Now-- Stephen G. Breyer: Is... is it right that you've now given up on the Ninth Circuit? [Laughter] I took their reasoning as being a... a new act, the oil spill act, has a savings clause applicable to the oil spill act, and therefore all these other acts which don't have the savings clause are treated just as if they did. William B. Collins: --Yes, that's right, Your Honor. Stephen G. Breyer: All right. That's what they said. And I couldn't think of any justification for that whatsoever, and I take it you can't either. [Laughter] William B. Collins: I take your point, Your Honor. [Laughter] Stephen G. Breyer: Okay. Now, if we're back to Ray... if we're back to Ray, then... then, as I read Ray... I'm quite interested... now, we're keeping the oil spill act out of this. We're back to Ray. I thought that Ray simply looked at title II and said it all depends in these areas whether the Secretary issues a regulation or not, but if he does issue a regulation, that's the end of that. Now, I thought that they got that from a provision of the statute that said the Secretary shall prescribe regulations for the design, construction, alteration, repair, maintenance, operation, equipping, personnel qualification, and manning of tank vessels. And if I'm right so far... and I'm looking to you to say I'm not... then I can't understand what the difference could possibly be between design regulations, which are right there in the statute, followed by manning regulations, which are four words over, followed by these other subjects, and when I look at the titles of your regulations, I see work hours, languages, training, engineering, watch practices, operating procedures. In other words, they all fit right within those words. So, it seems like Ray, Q.E.D. That's the end of it. We'll send it back so you get a chance to argue, but... but nonetheless, it doesn't look good for you. Now, I'm-- [Laughter] Okay, at least as it responds to those. So now, what... what are your... what are your responses to that? William B. Collins: Well, my response to that is that that wasn't the analysis in Ray, Justice Breyer. The... the Court did not say... I will... I will agree that the Court in Ray did make a reference to the mandatory nature, did point out that title II used the word shall. But it didn't say, okay, how are we going to analyze this? This statute says, the Secretary shall adopt regulations, the list that you gave me. End of case. We don't need to say anything more because that shall means that there is field preemption of everything that follows that word. That's not what the Court did in Ray. It went to take a look at the nature of the design and construction requirement and indicated that State interference... State design and construction requirements would interfere with that Federal purpose. I mean, you can't redesign your oil tanker. Stephen G. Breyer: A little ambiguity. Neither of us means the word shall is their field preemption; rather, the word shall prescribe regulations is there and preemption if, and only if, the Secretary decides to issue a regulation. So, we're both at that point. Right? William B. Collins: Well, I'm not-- Stephen G. Breyer: And you... now you're going to say even if the Secretary does issue a regulation, still there is not necessarily preemption. William B. Collins: --Not necessarily field preemption, Your Honor. We would agree that if the Secretary issues a regulation... I mean, you've got to take a look to see whether there's a conflict. We... under the Supremacy Clause, it's clear that we can't be in conflict with a regulation issued by the Coast Guard. I mean, the easy example-- John Paul Stevens: Now, you... you also disavow that part of the Ninth Circuit's opinion. They argued that the regulations did not preempt. The Ninth Circuit said-- William B. Collins: --Well, I think-- John Paul Stevens: --because there's no... no preemptive authority for the regulations, if I... if I read the opinion correctly. William B. Collins: --Justice Stevens, are you speaking of the... the express... their... their discussion about the Coast Guard's statements of express preemption? John Paul Stevens: Yes. William B. Collins: Yes. Well, I don't think the Ninth Circuit is-- John Paul Stevens: They didn't analyze any of the regulations-- William B. Collins: --No. John Paul Stevens: --because they said the Coast Guard had no authority to issue regulations that would preempt State law. William B. Collins: See, I think that... I think that that is a characterization of the Ninth Circuit's opinion that is not quite accurate. At least what I would say-- John Paul Stevens: It fully explains why they didn't pay any attention to what the regulations said. They didn't even look at them-- William B. Collins: --The-- John Paul Stevens: --having concluded that the Coast Guard was acting outside its delegated authority, insofar as it tried to preempt. William B. Collins: --It-- John Paul Stevens: That's what I... I thought the opinion was quite clear. William B. Collins: --It seems to me, Your Honor, that what the Ninth... in the action below, as Mr. Benner said, their fall-back argument was that some regulations were expressly preempted by the Coast Guard. And the only thing that they pointed to was that the Coast Guard had said we expressly intend to preempt. I mean, that was the limit of their analysis. They didn't look to see whether there was a conflict or whether there was any other problem. I believe that the Ninth Circuit held that just because the Coast Guard declares preemption doesn't mean there is preemption. Obviously, that's an important indicator. If the court... if the Coast Guard says, we think our regulations preempt, then, I mean, that certainly is an important decision about... an important factor in discussing preemption. But we have... think you have to go out and still take a look at the regulations themselves. Ruth Bader Ginsburg: But that's what the Ninth Circuit didn't do. And in defense of that court, can you tell us whether the Ninth Circuit got this idea of the sweeping savings provision of 1018... did they get that idea... did they make it up, or wasn't it argued to them by the State of Washington? William B. Collins: This case is in a-- [Laughter] I... I don't think they quite got it from us, Justice Ginsburg. But this... this case is in... in a somewhat peculiar posture because of the way that it was tried. When the case was first filed, Intertanko brought the action. They invited the United States to come in at the district court level. The United States declined to do so for reasons that I don't know. And Intertanko's theory before the Ninth Circuit and... and the district court, as before this Court, is field preemption, sort of the home run ball. So, they did not go through and try to argue specific conflict preemption. They didn't try to talk about places where the Washington rule and the international rule were, you know, in conflict. They didn't build a record on that point. Later at the Ninth Circuit, the United States entered the case and, frankly, in their briefs have a lot of what they say are illustrative examples of potential conflicts that might exist. But that's not in the record in this case, and that wasn't raised below. So, Justice Souter, you had talked about what should happen to this case if things go south for the State of Washington and whether it should be remanded to... to sort that out. But I think that would be inappropriate in this case. I mean, I think the parties here had their day in court. They didn't build a record and-- David H. Souter: Well, but part of... part of my... my point was... was institutional. I mean, we do not sit as a court of first instance. And a great deal of what we're arguing about now was... was never addressed because of what seems to be these threshold... perhaps threshold errors on the part of the court of appeals. William B. Collins: --So, from our point of view, Your Honor, what we think should happen in this case is the Court should rule that there is no broad field preemption of all of the items that are listed in title II of the Ports and Waterways Safety Act and essentially affirm the result at the Ninth Circuit. Later, if Intertanko-- Stephen G. Breyer: I... I mean, you're saying that you should hold them to some kind of waiver. If your colleagues here in the State Attorneys General's office and they had forgotten to rave... to raise an... no exhaustion point in a... in a habeas case, they would be up here arguing interests of comity of the State of Washington and the big exception to waiver. Now, does Canada and Belgium and 280 sovereign nations not have some kind of... of right to assert their comity in light of their sovereignty in respect to these technical matters like waiver? William B. Collins: --Well, Justice Breyer, I don't think of it so much as... as an issue of waiver. Stephen G. Breyer: Well, you were just saying they hadn't put in the evidence-- William B. Collins: Well-- Stephen G. Breyer: --and they didn't... they didn't take in the international significance of this. There are... there are hundreds of thousands of cases in the courts and they... they didn't apparently take in the significance of it till it got to the appellate level. William B. Collins: --But it... it's... what I would direct you to, I guess, is this Court's decision in Askew where one of the questions in Askew was whether the State of Florida could require certain kinds of equipment on the vessel for purposes of response, and the Court said we're not going to engage in speculation at this point about how this conflict might work out. And later if a case comes to us that presents that conflict or comes to the courts that presents that conflict, then that's when it should be resolved. And we think that's the kind of thing that should happen in this case. John Paul Stevens: I'm not sure that's quite consistent with the record because at page 30a of the Ninth Circuit opinion, they... they refer to the fact that Intertanko did call attention to several regulations as being expressly preempted by Coast Guard regulations, identified some in the text and some in the footnote. So, I don't think you can tell us that the specific conflicts with Coast Guard regulation wasn't brought to the attention of the lower court. William B. Collins: Well, it was brought to the attention of the lower court, Justice Stevens, with Mr. Benner's fall-back argument. That is to say-- John Paul Stevens: Certainly, but that fall-back argument is before us. William B. Collins: --Yes. No, that's right. John Paul Stevens: And they responded to the argument not by disagreeing on the conflict, but by saying, as I understand it, the preemption by regulations does not occur if the agency is acting beyond the scope of its delegated powers. And that was, as I understood their reasoning... and I... I'm still not clear whether you agree with that position or don't. William B. Collins: Well, I think I got... I think I was taken off track when I was responding to your question, so let me try to get back to it. The only thing that was argued below I believe on those points was the simple declaration by the Coast Guard that the State should be excluded. And I think the Ninth Circuit said-- John Paul Stevens: By virtue of the Coast Guard regulation. William B. Collins: --By virtue of the declaration. John Paul Stevens: Well. William B. Collins: But... well... but I think there's a difference, Your Honor. The question is... I do not believe that the Ninth Circuit said that Coast Guard regulations could not preempt State authority, and indeed, if you read it that way, we would disagree with it. It's clear that Coast Guard regulations would preempt the State if there's a... if there's a conflict. But to simply declare... simply declare that the State is preempted, the Ninth Circuit indicated... and we believe is correct... is beyond Coast Guard authority. We do not believe Congress delegated to the Coast Guard the authority to declare field preemption, if you will. William H. Rehnquist: Congress could do that. William B. Collins: Congress could do that. William H. Rehnquist: And you're saying that Congress didn't delegate that function to the Coast Guard. William B. Collins: Right, for field preemption. William H. Rehnquist: Yes. William B. Collins: And so... and that's of some concern to us because if that's the rule, then the Coast Guard can eliminate State participation by simply adopting a rule saying we intend that no State shall adopt any rules or regulations pertaining to oil tankers. And we believe that just that declaration is beyond the Coast Guard authority. William H. Rehnquist: Congress could delegate that to the Coast Guard if it chose. William B. Collins: I think Congress could do that if it... Congress could itself say we intend to exclude the States from this field, and they could-- William H. Rehnquist: What if Congress said in the... in the delegation of the Coast Guard, we authorize the Coast Guard to determine whether or not the States should be excluded from this field? William B. Collins: --I think that would be kind of an express statement that would give the Coast Guard the kind of authority that we do not believe that it has been given. Antonin Scalia: But otherwise you say we should look at title I and... and ask whether the Coast Guard implicitly meant to preclude the States? William B. Collins: No. I think what you have to do under... frankly, under both title I and title II is look to see whether there's a conflict; that is, look at the purpose and object of the congressional enactment and the Coast Guard regulation and look to see if State law is preventing the achieving of that objective, either through physical impossibility... and of course, in this case, there's no contention of physical impossibility... or through preventing the Coast Guard from achieving some important objective. And that kind of a case was not... was not the case that was made below. Anthony M. Kennedy: Is... is uniformity of maritime regulation an important objective? William B. Collins: Well, I think that uniformity is a... is... is an important factor in places where uniformity is needed. Let me give you... let me give you an example about the certificates that... that counsel for the Government talked about. In the international regime with certificates, there are three kinds of certificates. One is for the design and construction, so a flag state will certify that the design of the ship is proper. There's also a certificate for manning, which is the complement of the crew, which is you need one master, one chief mate, a certain number of officers, a certain number of other crew, and that for a tanker of a certain size, there's a certificate that says this is the... the crew that is required. And then there are third certificates which are essentially licenses for the mariners, the crew of those. Uniformity would probably dictate that a State could not say... if the Coast Guard says the crew of the tanker should be 60, I think it would... a State would be preempted from saying, no, the crew of a tanker has to be 70. For like design and construction, it's hard to change the composition of the crew, that is, the number of the crew, when they go from San Francisco to Seattle or come from France to Seattle. But that's very different... and we don't do that. But that's very different from saying, once you have your certified ship and your certified crew and the crew have the proper licenses, that when they come to Washington, they need a tug escort. They need a third officer on the bridge during restricted visibility. Those things do not interfere with the necessary uniformity that probably is required. Sandra Day O'Connor: How about the drug testing requirement? William B. Collins: Well, Your Honor, the drug testing requirement is one where there is no international standard. The treaties are silent on the drug testing issue, and it's a place where the... Intertanko has relied on the express statement of the Coast Guard to force the State out of that area. But one of the reasons we think you have to go beyond the express statements is it's unclear to us exactly why foreign flag-- Sandra Day O'Connor: I would think that would relate directly to manning the vessels in an area where Congress has told the Coast Guard to regulate and the Coast Guard has said what it-- William B. Collins: --I would disagree, Your Honor, that that is a manning requirement. I mean, we're not saying that... what we're... we have... Washington has... the drug... the drug and alcohol has two parts. The first is a local part. We have zero tolerance for drug and alcohol in Washington, so you can't... obviously, you can't use illegal drugs anywhere, and you can't drink in Washington waters. The Coast Guard regulation is more flexible. It allows-- William H. Rehnquist: --Not on land, I take it. William B. Collins: --No. No, I don't think so, Your Honor. [Laughter] The other part is a testing requirement. John Paul Stevens: But if the... if the Coast Guard regulation is not a manning requirement, where did they get the authority to regulate it? William B. Collins: Well, on the drug and alcohol one-- John Paul Stevens: Yes. William B. Collins: --they actually got that from the Oil Pollution Act of 1990 because there's a specific provision in OPA '90... and I think it's... let's see. John Paul Stevens: You're saying that... that the authority to issue manning regulations would not have authorized them to give... to issue the drug and alcohol regulation, except for the... unless that later statute had been passed. That's not persuasive-- William B. Collins: No. I'm not sure that that's accurate, Your Honor. But... but part of the reason that they did it is because Congress told them to in OPA '90. But the difference is the Coast Guard... the big difference is the Coast Guard tests U.S. flag... requires testing of U.S. flag vessels. It doesn't require testing of foreign flag vessels. But we don't see that there's any relationship between that and protecting the environment, running a ship, safety-- Stephen G. Breyer: --What about... what about the requirement that says, as they describe it, all licensed deck officers... I guess that means every one... must speak English and speak a language understood by all the crew, which could be 14 different languages. It may be rather hard to find somebody who... I don't think any of us could satisfy that requirement, but we're not applying to be a deck officer. But... but-- [Laughter] --the... I mean, what about that one? I mean, that sounds a little hard to meet. William B. Collins: --Well, Your-- Stephen G. Breyer: And it also sounds like a manning requirement and it also doesn't, you know-- William B. Collins: --Well, Your Honor, in that situation, we think the Government is simply mistaken. Again, this may be the problem with not having had them at the district court. We have the same requirement for language that the international standard is. So, a deck officer doesn't have to be able to speak 14 languages, but there has to be some common language that the deck officer and the crew speak so when the deck officer gives an order, the crew can carry it out. If the-- William H. Rehnquist: --Was that based on that thing that happened down in New Orleans where... where-- William B. Collins: --Oh, where they ran into the shopping center? William H. Rehnquist: --Yes. William B. Collins: Well-- [Laughter] That... our... I think our regulation was in place before that occurred, but that's the... that's the kind of concern. And in our... in the briefs, we've talked about difficulties in Washington with people not being able to speak English. Anthony M. Kennedy: Getting back to this distinction in drug regulations where it applies to vessels from... I guess American flag vessels and not others, if it's a local regulation, what... what authority does the State have to make a distinction for its regulations depending on the origins of... of the ship? It seems to me that's inherently an interstate determination. William B. Collins: Oh, no, Your Honor. It's the United States that makes the distinction. The United States requires testing of U.S. flag vessels and does not require testing of foreign flag vessels. The Washington rule requires testing of both United States flag vessels and foreign flag vessels. And part of the reason is because we can't think of any safety reason why... you know, do foreign flag crews hold their liquor better? Stephen G. Breyer: Just as long as it's foreign flag. I want to just be a little... does... is Washington saying everybody on a foreign flag vessel has to speak English? William B. Collins: No. Stephen G. Breyer: Or everybody has to speak French? William B. Collins: No. Stephen G. Breyer: What are they saying? William B. Collins: The requirement is the officers have to be able to speak English enough to be able to communicate. There's sort of a-- Stephen G. Breyer: Yes, but I mean, they have, you know, thousands of people. They have deck hands. Some come from France. Some come from Belgium. Some come from... I don't know... 48,000 different countries, and maybe not everybody speaks English down there. Maybe there's somebody who doesn't. So, do they flunk if they don't? William B. Collins: --The deck officers have to be able to speak English, and they also have to be able to speak a common language understood by the crew. And that's the same requirement that the international requirement imposes. And I want to talk just for a second about the... the international requirements. Ruth Bader Ginsburg: Before you do that, you mentioned and you placed considerable reliance on Askew. And as I understand that case, it involved only what is now an undisputed matter, that is, that the States can impose additional liability for an oil spill. I... I didn't understand the holding to be dealing with anything pre-incident. William B. Collins: Your Honor, I think my reference to Askew was a... was to argue that this Court shouldn't just send this back to determine conflict preemption because the conflicts that the Government raises are speculative and weren't raised below, and those are better left for another day. I mean, I don't... Askew I think confirms that States can regulate in the maritime area, but I mean, it's not directly... I mean, we're talking about different kinds of requirements. So, you're correct about that. The... the Government has... has talked about these certificates that I talked about a little bit earlier as a license and has said that States cannot impose any kind of licensing... once something is licensed, then that's the end of it and States can't regulate. And I submit that that is simply not correct. If a State, as I said earlier, if a foreign flag tanker has a license, it can still be subject to nondiscriminatory environmental regulations imposed by the State. And this Court itself in the Florida Lime case indicated that the fact that there was a license didn't mean that you couldn't have other kinds of State regulations. Certainly in the Ogden v. Gibbons case, referred to by counsel, there the State of New York was trying to create a monopoly and exclude commerce. Quite a different system here, where what we're trying to do is preserve the ability of the State to regulate in... in a couple of areas. First of all, things that are local to Washington waters that relate directly to the unique areas of Puget Sound, and secondly, we have requirements that mirror international standards. We think this is awfully important because it's a second set of eyes on the... on the ground... at sea. We conduct annual safety inspections to see if tankers are complying with their prevention plans. In Washington we work very cooperatively with the Coast Guard people there. We give them information, they give us information. The whole system of cooperative federalism working together we think will make the waters safer, and ultimately we think that's what Congress intended. It didn't intend for the Coast Guard to be exclusive except in areas where it needed to be exclusive, the kinds of certificates that I talked about earlier. Therefore, we would ask this Court to affirm the result by the Ninth Circuit and continue to give Washington the authority to regulate and preserve the quality of our waters. William H. Rehnquist: Thank you, Mr. Collins. Mr. Frederick, you have 2 minutes remaining. David C. Frederick: I'd like to make a... a couple of points. First, I direct the Court's attention to three footnotes in our reply brief which I think will help the Court in its opinion in this case. Those are footnotes 4, 12, and 14. Footnote 4 sets out those BAP rules that are directly in fields that we think are preempted under the field preemptive theory of title II. Footnote 12 sets out the BAP rules where there is a subject covered by a license and that includes things like language proficiency which is clearly a personnel qualification and the like. And note 14 is the only one where there arguably might be a reason to remand for purposes of developing a record. I would note that at the district court both sides made consensual motions for summary judgment and viewed this as something that could be decided on the record. As to those subjects in the field, that clearly could be the case here as well. The treaties that I emphasized in my opening presentation reinforce the preemption that Congress specified in title II, and those treaties make very clear the reciprocal rights that must be afforded. What Washington here is... is purporting to be able to do is to imprison and impose civil fines against vessels and their operators for people who don't comply with State rules. That's directly contrary to a long line of this Court's decisions that say that States can't supplement Federal licenses or federally recognized licenses. Now, with respect to language proficiency, counsel is simply incorrect, and I would direct the Court's attention to page 36 of our opening brief where we make very clear that the purpose behind the international STCW requirement is to ensure that the vessel as a system can work appropriately so that those officers on the navigation watch can communicate with the people who will be carrying out the orders. English may, in fact, be the problem in some circumstances and not the solution and that is a reflection of the way the international maritime commerce works. Finally, I would just point out that the flag state controls, and with respect to drug testing and alcohol, there is a Coast Guard regulation that makes clear... it's at 33 C.F.R. 95.020... that no vessel, foreign or otherwise, may operate in U.S. waters by personnel who have an alcohol level above.04. Now, that is indeed different from a zero tolerance level, but that is a determination made by the Coast Guard. William H. Rehnquist: Thank you, Mr. Frederick. The case is submitted.

Warren E. Burger: We will resume arguments in number 1254. Mr. Chase. Evan T. Lawson: Mr. Chief Justice and may it please the Court. My name is Evan Lawson and I represent the appellee in this case. Warren E. Burger: Excuse me Mr. Lawson, our order is on the order list sequence of yesterday. Evan T. Lawson: At the close of argument yesterday, I was considering some of the questions that the Court had asked my brother Mr. Chase. I felt that they justified some immediate answers from me because I have more personal knowledge of the case than he does. A question was raised as to what is a vexillologist. A vexillologist is a flag historian. The particular gentleman who was involved in this case, Mr. Whitney Smith is the Secretary-General of the International Federation of Vexillology and he has written the definitive book on the subject of flags and their history. Speaker: A best seller? Evan T. Lawson: I don’t think it’s a best seller but he did also write the section on flags in all of the encyclopedias which are published in this country. His purpose in testifying was really twofold. Number one, his testimony was directed to whether the flag involved in this case conformed to the official standards and although the record indicates that he testified that it did conform to the official standards. That’s actually a misprint. In fact, he testified that it did not conform to the official standards. Speaker: What is the size? Evan T. Lawson: Well, the proportions, there were no official standards regulating a given size, four by six, three by five. That is not what’s denoted by an official flag. The proportions however, the relation of the height to the width and the size in relative proportion of the stripes and the field with the stars go, are all regulated by a Federal Executive Order pursuant to statute, federal statute. Speaker: Under that order, you can have a flag of any size just long as the proportions are confirmed to the terms of the order. Evan T. Lawson: That’s correct. That’s correct and this flag in this case did not conform to those proportions. Secondly -- Speaker: Well, do you say that forbids the state from making a criminal act that out of flag discretion as long as the State identifies the flag in -- Evan T. Lawson: I am not saying that. However, I think that the State should to avoid vagueness specify whether it is referring to, in fact the flag as defined officially or whether it’s referring to any representation that could look like a flag. Some statutes and some states refer only to representations. Other statutes do not indicate whether they apply to -- strictly the flag or just the stars and stripes design and -- Speaker: Of course in this case, we don’t know what the proportions were because it was either three by five or four by six and those are different -- Evan T. Lawson: That’s correct. Speaker: -- proportions. Evan T. Lawson: However, at the trial -- at the trial Mr. Smith testified that he was familiar with the type of flag that the defendant was supposed to have been wearing. In other words, a small commercially produced cloth flag and he testified that those flags that he was a consultant to the firms which produce those flags and those flags do not conform to the Executive Order. Speaker: Did it appear whether Goguen himself sewed this flag -- Evan T. Lawson: It did not appear. Speaker: -- that is seen in his pants or was manufactured pants with a flag on it? Evan T. Lawson: The record was silent. The pants were not, I can state from my own knowledge, manufactured that way but the record is silent as to whether he sewed them or not. And in fact, that’s something that I wish to bring up at a later time but now that you have mentioned it. My brother has argued rather strenuously that this statute applies to the physical integrity, protecting the physical integrity of the flag. I think that making that argument really highlights the vagueness in this case because it seems to me, at least, that there is no possible justification for saying on the record in this case that this defendant affected the physical integrity of the flag by doing what he did which was merely displaying it. If in fact you assume that he himself sewed it, there is a question as to whether he sewed it publicly. There is no evidence of that which is also an element of the statute. If we treat this as a continuing offense so that he’s sewing and then he’s displaying in some way constitutes a public sewing, even in that, by that stretch of the imagination, now the question of whether sewing something onto a larger piece of cloth, let’s say affects it’s physical integrity and is certainly, seriously open to question. I would strongly argue that it does not further -- Speaker: Mr. Lawson, does any part of your presentation here depend on what you described as this misprint in the record because I can imagine some problem? I gather your opposition counsel wasn’t present at the trial and -- Evan T. Lawson: That’s correct. Speaker: -- oh, that there maybe some problems as to any sort of a stipulation or anything like that. Evan T. Lawson: I don’t think that anything that I have to say this morning really hinges on that misprint on the record. I’d only point out that my brief is -- my brief in the state court is reproduced in the record and in that brief, there is a section dealing with the official flag. I believe it's page 25 of the appendix and in the brief we do refer to the testimony as saying that it did not conform to the official standards with this citation to the bill of exceptions. Warren E. Burger: Well, to the extent it’s important. We must take the record as it comes here. Evan T. Lawson: I agree. Warren E. Burger: Thus, there are ways that you could have corrected that. Evan T. Lawson: I agree and I think that this is really a matter of very small importance to my argument. Second question that was asked was whether there were any prosecutions in Massachusetts under the statue other than this one and my brother was not aware of any. I’m personally aware of at least five. I represented two other individuals who were prosecuted under the statute for displaying flags on various portions of their anatomy; a young woman who had her flag displayed on seat of her pants and a young man who had a flag displayed in a crouch area of his pants. I further represented an individual who was charged with flag burning which is really distinguishable from this case and I am aware of a prosecution of an individual for displaying a flag upside down on a back of a jacket in Massachusetts. I am also aware of another flag burning prosecution in Massachusetts. So that this is by far not the only prosecution and they have actually been enough to raise some significance. Speaker: Has the respondent served any part of that six months sentence? Evan T. Lawson: He served about 13 or 14 days of that sentence. And of course, one of the issues here is whether someone who does what this respondent did should be sentenced to six months in prison. I mentioned this not merely to generate some sympathy for the respondent but also to point out that that in the area of First Amendment rights, there is the rubric of the chilling effect and certainly the widely publicized imprisonment or sentence in this case of six months is clearly a chilling effect to be had. Speaker: But those other prosecutions result in convictions and secondly, if so, is there any record of them in any printed court opinions? Evan T. Lawson: First of all, I can answer the second question first. There is no record of them in any printed court opinions. The girl who I represented who had a flag on the seat of her pants wrote an essay on what the flag means and received a lecture from the judge and had her case as a procedure in Massachusetts Court continuing without a finding. She had a case continued for six months without a finding and after that it was dismissed. The young man who was wearing a flag upside-down on his jacket was fined in the District Court and appealed that to Massachusetts Superior Court for jury trial and that case is still pending. I don’t know the outcome of that case. In one of the flag burning cases which as I say I think I am really not factually on point with this case. The defendant who was a high school student was sentenced to I think three months in the Massachusetts District Court. On appeal to the Superior Court, the Superior Court Judge agreed to continue her case without a finding provided that she would walk from Harvard Square, I think to downtown Boston carrying an American flag and she did that and that was how that case was disposed off. So that some of these cases have been disposed off in non-criminal ways. One case that I’m aware of, the District Court Judge which is the lowest court in Massachusetts ruled that the statute was unconstitutional. But this was before the state court had ruled in the Goguen case and I presume that his ruling is not imported anywhere. Speaker: Tell me, what’s the significance as precedent in Massachusetts practice of a rescript opinion? Evan T. Lawson: It is as good precedent as any opinion. As I say it’s closely akin to -- as Mr. Chase said, closely akin to a per curiam opinion in this Court and this rescript is rather, at least in my experience, is rather strange rescript and that it says a little bit more than the ordinary rescript does. But it says a lot less than of course an opinion which is carefully laid out. Speaker: Was that opinion rendered after in all argument? Evan T. Lawson: Yes, it was. It was rendered after all argument and I might say now that my brother has said that we cannot raise the question of Fourteenth Amendment vagueness here because it wasn’t presented to the state court and asked you to conduct what appears to me to be an essay contest where you grade our briefs and determine whether they’re acceptable as good legal writing. However, in his answer in the Federal District Court below, he admitted that we’d raised the issue and had he not admitted it, had he raised the question of the Fourteenth Amendment vagueness being exhausted in the state court. I might have been in the position to introduce some testimony and some evidence on whether this matter was in fact discussed in oral argument. Speaker: Of course, that’s on the assumption that you raised before Judge Campbell in the District Court, the same things that the First Circuit ultimately went off. Evan T. Lawson: That’s correct and I think that we did. I think if you look at the petition, we raised both vagueness in the Fourteenth Amendment sense of lack of fair notice and we specifically used the phrase made it impossible for law enforcement officers to enforce the statute fairly and we also raised overbreadth in the First Amendment sense. Speaker: Mr. Lawson, you mentioned having tried a couple of flag burning cases, you said they were different factually, obviously they are. If you had a flag burning case here this morning, would you be making the same arguments, one as to vagueness and two as to the First Amendment that you make in your briefs? Evan T. Lawson: Well, I don’t think I can make the flag burning argument as to vagueness because the statute does in fact specifically say that you may not burn a flag in Massachusetts. I would be making the same overbreadth argument. The difference would be in the analysis of the overbreadth argument from the point of view of what is this legitimate state interest if any in passing this kind of legislation. Certainly, if this Court found a legitimate state interest in protecting the physical integrity of the flag, that interest would be served by statute prohibiting flag burning. But would not be served by prosecution and conviction in the case at Bar where there was no conduct affecting the physical integrity of the flag. Speaker: You’re saying that maybe a different state interest in a flag burning case from that in this case? Evan T. Lawson: From that, that’s correct. Form my point of view, there is no different interest. I would urge upon the Court that the state has no interest in protecting flag per se. However, I can see that cases should be litigated in the context in which they arise and that therefore either that this Court could say for example there maybe a state interest in protecting physical integrity but it’s necessary -- it’s not necessary to decide that in this case. Speaker: But your view is that the state has no legitimate interest in protecting a flag from physical or other desecration in anyway whatsoever? Evan T. Lawson: That’s correct and as long as the point is, I will try to develop that argument. I think that the question -- Speaker: We’re assuming, we’re assuming during all of this that the flag is -- not somebody, it doesn’t belong to somebody else. Evan T. Lawson: That’s correct. It belongs to the individual himself. Obviously, statute which prohibited burning or destroying someone else’s property -- Speaker: A big property or somebody else’s property? Evan T. Lawson: It would be perfectly constitutional and that there will be no argument whatsoever that one could destroy public property or someone else’s property in the interest of free speech. I think the analysis really begins with this Court’s decision in Broadrick. In Broadrick which was discussing First Amendment standing. The Court talked about how First Amendment protection becomes attenuated as the fact situation moves along that continuum from the spoken and printed word, to over a conduct which may be otherwise harmful. At one end of a spectrum, you’d have a speech and at the other end of the spectrum, you’d had a political assassination. Both of which are arguable communicative, the speech is clearly protected. The political assassination is clearly unprotected. We argue that the conduct in this case is so closely akin to pure speech under prior decisions of this Court and under the Broadrick analysis that you don’t apply symbolic speech test such as the O’Brien test here. You apply a direct spoken word test and my precedent for that would be for example in the Stromberg case displaying a red flag and the Tinker case wearing a black armband, in the Barnette case refusing to salute the flag. All of those cases involved conduct which is otherwise totally harmless. In the words of Barnette, no rights of any other individuals were infringed upon by the conduct of the appellee and therefore this case should be treated strictly as a free speech case and not as the case involving symbolic speech or conduct. Even if you were to treat this as a symbolic speech case and apply the O’Brien test. I would urge that this statute and the facts in this case both on their face and as applied to this appellee fail the O’Brien test miserably and one area of O’Brien test which was the track that I was on was the question of whether there is a legitimate state interest in protecting the physical integrity of the flag. I can think of but three state interests which you could postulate in protecting the physical integrity of the flag. One would be to protect against breaches of the peace. Clearly this statute is not narrowly drawn enough to do that and secondly, it’s very clear that on the facts of this case, there was no breach of the peace eminent or otherwise. A second state interest might be to protect -- Speaker: The facts of this case such as we have them in a very fragmentary and skimpy way? Evan T. Lawson: Yes. I agree to -- Speaker: When he indicates that he was with the group, was there some sort of demonstration or another? Evan T. Lawson: I think I can amplify on that. There was no general demonstration. There was a normal group of people on the street and when the policeman began questioning Goguen who was talking to this group of people. The people in the group started laughing. But this was not a demonstration by anyone other than Goguen. We contend however that this very clearly was a demonstration of one. And that Goguen himself was expressing opinion. Speaker: Was this so called group, just the strangers who are ordinarily on the street or where they -- Evan T. Lawson: Well, and that -- I think I can amplify in -- Speaker: -- self-appointed group? Evan T. Lawson: I think I can amplify in the record and say that Goguen got out, left his house, walked down town and met some friends of his standing around the street corner and basically that was the group that was involved in this case. But the fact of the matter is that Goguen is still engaging an expressive conduct here. Speaker: What was going on, when the officer? Evan T. Lawson: Well, when the officer arrived Goguen was standing talking to a group of people. Speaker: That is just the casual conversation? Evan T. Lawson: As far as I know that it was just a casual conversation. And that this is something akin to the situation where one of us might place a political bumper sticker on our car for the purpose of expressing some political -- Speaker: And this wasn’t in the context of the Vietnam War protesters, something like that? Evan T. Lawson: Not in the context, not in the limited factual context of the group. However in the context of the times, one can certainly infer that this was at the height of the protest movement. Speaker: Well, are we to suppose that the officer then simply took exception to the fact that the flag was on the seat of the pants? Evan T. Lawson: No. I think not only did the officer take exception to the fact that the flag was on the seat of Goguen’s pants but Goguen obviously conveyed to the officer a powerful feeling of contempt for the flag and in fact, in the facts of this case, there is necessarily a finding by the jury in order to convict Goguen that he was expressing contempt for the flag. Speaker: Merely by wearing it or because of something he was saying? Evan T. Lawson: By the way he was displaying. Speaker: I see. Evan T. Lawson: Now this is very much -- Thurgood Marshall: Well, what was he trying to express? Evan T. Lawson: Well, I don’t think that I can precisely define what he was trying to express. Thurgood Marshall: Well, certainly there is nothing the record. Evan T. Lawson: There is nothing in the record. That’s correct and there was a good reason for that at the time which doesn’t appear in the record. Speaker: Did he testify? Evan T. Lawson: He did not testify on my advice. In any event, what he was trying to express cannot be precisely defined. I will grant you however -- Thurgood Marshall: (Inaudible) and there is nothing in the record to show it. I don’t think you can show it. Evan T. Lawson: Well, I think I can show it from what he did. First of all there is a finding on the part of the jury that he expressed contempt for the flag and this Court had said in Street, that that kind of an expression is constitutionally protected. Precise expression has never been prerequisite for First Amendment protection. I would for example refer you to the Papish case which was decided by this Court in March. In the Papish case, the defendant was displaying a cartoon which showed -- and among other things, she was displaying a cartoon which showed the police officer raping the Statue of Liberty. Thurgood Marshall: But I thought in the Street case we had a whole record of a full trial? Evan T. Lawson: I don’t believe you had a record of the full trial but you certainly had the words of Street which we use in that case. Speaker: That’s right -- Evan T. Lawson: That’s true but what I’m urging upon you is that when you communicate not through words but through the use of symbols. A black armband for example can be ambiguous. A red flag can be ambiguous. Warren E. Burger: But there is no statute about black armbands, is there? Evan T. Lawson: No but in the Tinker case, there was a school regulation forbidding the display for black armband. In the Stromberg case, there was a statute forbidding the display of a red flag and in the Goguen case there was statute forbidding the display of contemptuous feelings about the flag. So that in each case, there is a proscription, an official proscription against the particular symbolic form of expression which the actor is trying to use. Speaker: Are you saying that in the Tinker case, there was a specific school regulation against the wearing of armband? Evan T. Lawson: I don’t believe that it was a specific school regulation against the wearing of armbands, it was a specific school regulation against engaging in certain kinds of conduct which was deemed to be harmful and the school authorities then interpreted the wearing of the black armbands as being harmful. Speaker: Well, apparently I misunderstood your former statement. Evan T. Lawson: I apologize if I misstated it. In the Papish case, this cartoon which shows the police officer raping the Statue of Liberty could certainly be subjected to varied interpretations. It could mean for example, it could be anti-police. It could be anti-law enforcement generally. It could be anti-America and the fact that the cartoon is susceptible of many interpretations did not, in the Papish case relieve it of constitutional protection. Similarly, I’d urge that varied forms of display of the flag which express contempt. Similarly are protected even though you can't precisely define what the particular actor is saying. A classic example is poetry. If each of us read a poem, we might derive a different meaning from the words of the poem. In that sense, the poem is as ambiguous as Goguen’s conduct here but no one would argue that that a poem isn’t constitutionally protected or words to a song. I’d like to get back to the State's interest in prosecuting Goguen. Speaker: Before you do, you’ve talked a couple of times about the Papish case. Evan T. Lawson: It’s not cited in our brief. Speaker: And I’m not familiar with it, do you have a citation? Evan T. Lawson: Yes, I do. It was decided in March of 1973. I have a citation to the Supreme Court reported which is -- Speaker: Part of Branzburg? Evan T. Lawson: Excuse me? Speaker: It wasn't with Branzburg? Evan T. Lawson: I don’t think [Voice Overlap]. Speaker: I don't think you meant that Missouri, do you? Evan T. Lawson: This is Papish versus Board of Curators of Missouri and its 93 Supreme Court 1197. Speaker: Papish v. who? Evan T. Lawson: The Board of Curators of the University if Missouri. Speaker: 1197? Evan T. Lawson: That’s correct. Speaker: And it came from -- by the District Court? The three-judge District Court? Evan T. Lawson: Yes, it did. It was a -- well it came from the Court of Appeals. It was a case involving an expulsion and suit brought to reinstate. Speaker: Do you have the Court of Appeals citation? Evan T. Lawson: 464 Fed. 2d 136. Speaker: Thank you. Evan T. Lawson: The state interest which I would like to discuss is -- Speaker: 1993 Supreme Court 1197. Evan T. Lawson: -- is the States interest in protecting the flag in and off itself as some sort of a symbol. Besides the fact that that the symbolic significance of the flag has been recognized certainly by this Court in Halter and in Barnette, the Court also has recognized that the state has no interest. The Government has no interest in protecting that symbolic significance from use by citizens. Barnette expressly I think said that. Street certainly said that. Chief Judge Lumbard in the Cahn case also examined a hypothetical state interest in protecting the flag as a symbol and found that there was no state interest and of course Judge Coffin in this case arrived at a similar result. Speaker: Which was Judge Lumbard’s case? Evan T. Lawson: Long Island Moratorium -- in Long Island Vietnam Moratorium Committee versus Cahn. Now in arriving at that result -- Speaker: Are the proceedings of the trial at large here the evidence, the transcript to the testimony? Evan T. Lawson: There is no transcript to testimony because none was presented to the Supreme Judicial Court of Massachusetts. In Massachusetts this appeal was pursuant to a bill of exceptions which set forth a summary of the testimony. Speaker: Are there proceedings in the Supreme Judicial Court here? Evan T. Lawson: There are no proceedings. Speaker: I mean any record? Is there record involved? Evan T. Lawson: There is no record of the proceedings. They have only the opinion of the Court, the rescript opinion of the Court. Speaker: So the District Court here didn’t have that record before it? Evan T. Lawson: It had no record before of what it transpired, either in the Supreme Judicial Court or in the State Superior Court where the jury trial took place. William H. Rehnquist: But the Supreme Judicial Court of Massachusetts only had a bill of exceptions. Evan T. Lawson: That’s correct. William H. Rehnquist: It didn’t have a more complete record than the District Court. Evan T. Lawson: That’s correct. It had nothing -- it had nothing more than the bill of exceptions. Speaker: Well, the bill of exceptions is summarized the testimony though. Evan T. Lawson: That’s correct. Speaker: And the District Court didn’t have that report. Evan T. Lawson: Yes. It didn’t have the bill of exceptions report. Speaker: That’s what I want, that’s what I asked. Is the bill of exceptions filed here? Evan T. Lawson: Yes. The bill of exceptions is a part of the appendix here and was before the United States District Court in this case and the Court of Appeals for that matter. I see my time is almost up. One thing that I would suggest to you is that if there is an interest in protecting the flag in and of itself. That interest is subjected to almost limitless extension. If you’re going to protect the flag, why not protect the State Seal as well or the Federal Seal? Why not protect the National Anthem as in fact Michigan has a statute which prohibits playing the national anthem or -- and other than the normal notes or the prescribed notes. Warren E. Burger: There are some statutes prohibiting I think the use of the certain seals for commercial purposes for example, would you regard that an impingement of First Amendment? Evan T. Lawson: No. we don’t -- I don’t quarrel with that at all in slight. Warren E. Burger: Is that because it’s a commercial, a restraint on commercial use? Evan T. Lawson: Well, I would say that that is the reason. I think the rationale behind that reason is that they could -- there is a finding that it’s harmful to have this symbol used for commercial purposes. Warren E. Burger: But you think that’s all right? Evan T. Lawson: I think that that’s all right and I think under the rational or under the Broadrick analysis for example, there is no problem in differentiating between the two because as in here and Broadrick and Street and Stromberg and Tinker. The conduct is harmless. It’s passive. It doesn’t impinge on the rights of anyone else. When you’re talking about using the flag or using the state seal for commercial purposes or using it perhaps reproducing it for purposes of counterfeiting or something of that sort then the conduct moves from the area of being harmless into the area of being harmful and state does have an interest certainly in regulating harmful conduct even if they’re arguably speech elements involved. Warren E. Burger: Well, that and what you’re telling us really is there is no harm in wearing the flag on the seat of your (Inaudible) but there is harm in having seal of the United States used in a commercial enterprise. Let’s say on a pawnshop -- Evan T. Lawson: That’s correct and the reason which the -- Warren E. Burger: -- start selling girly magazines? Evan T. Lawson: That is correct and I think the reason for it, is that a passerby seeing the state seal could be misled for example on to thinking that that whatever the product was, was federally approved or federally sanctioned and then that would be -- could be harmful. Warren E. Burger: Well, that’s the only harm you see in it. It isn’t the matter of the contempt development? Evan T. Lawson: No, I don’t see. I don’t think that from the point of view -- Warren E. Burger: For denigration. There is no denigration factor in your mind in that analysis? Evan T. Lawson: No, there is none. I would agree with that. I don’t think that consistent with the First Amendment and consistent with the history of this country that one can say that that is constitutionally permissible to punish denigration. The whole idea, a flag desecration implies that there is some -- there is some mistake or sacred power connected with the flag and historically of course, it was only at the turn of this century that there was any legislation at all passed regulating conduct relating to the flag. England in a thousand years of history has never regulated conduct concerning its flag. So that our tradition, our democratic tradition I think shies away from that. Thank you. Warren E. Burger: Thank you, Mr. Lawson. You have few minutes left Mr. Chase. Do you have anything further? Charles E. Chase: Yes, Your Honor. May it please the Court. I would just like to address myself to a few points brought out by my brother during his argument. One point he made was the question of whether or not the activity involved in this case amounts to an attack on the physical integrity of the flag and it takes exception with that phrase physical integrity. Speaker: Why? Charles E. Chase: That is the phrase I basically used in my brief but it is not a sacrosanct phrase, it doesn’t exhaust the state interest. I would just cite this Court to the opinion of Hoffman versus United States 445 Fed. 2d 226 where they spoke about conduct that physically dishonors the flag and I think probably that that phrase physically dishonor is more the aspect of this particular case. There was a dishonoring of the flag and it was a physical dishonoring of the flag because of affixing of the flag to the posterior anatomy of this particular individual. Speaker: Well, General Chase just so I can declare -- tell me if I’m wrong. As I understood, the provisions of Section 5, under which Mr. Goguen was convicted, were these, whoever publicly treats contemptuously the flag of the United States, wasn’t that it? Charles E. Chase: Yes, Your Honor. Speaker: Not physically dishonor or physically? Charles E. Chase: Well, Your Honor we would urge the -- Speaker: That was a statutory language? Charles E. Chase: And that was the phrasing in the complaint. Yes, Your Honor. Treat contemptuously. Speaker: Publicly treats contemptuously the flag of the United States. Charles E. Chase: We would as a -- yes, they urge upon this Court. We accepted principle of statutory interpretation which is one been recognized in Massachusetts that when specific words and more general words are associated with each other in a statute. The more general words take on the color and connotation of the more specific and are in that sense. We streak it to the meaning of the more specific words. Speaker: You are in Supreme Court didn’t rely on that, did it? Charles E. Chase: No, Your Honor but that is an accepted principle of statutory construction in Massachusetts and there are four or five cases in our brief showing that principle in operation. I cannot deny that they didn’t mention that principle but I think it’s clear that the phrase “treats contemptuously” is directed at acts of the same type, the same nature namely acts -- Speaker: Such as mutilate, trample upon, defaces. Charles E. Chase: Yes, Your Honor. I believe all three of those first phrases are directed towards physical acts, acts that affect the physical integrity of the flag. My brother also made mention of the fact that the sentence in this case would have a chilling effect upon First Amendment rights. But a chilling effect on what? The conviction here hasn’t outlawed the use of the flag in any manner of means. It has said that facts that desecrate the flag will be punished but there are many other acts that protesters, if they want to use the flag, they can use the flag and also it’s a demonstration. They are just supposed to not desecrate that flag. They can speak all man of violating contemptuous opinions about it as the Supreme Judicial Court noted in this rescript opinion. It cited the Street opinion and said he was not prosecuted for words. It took note that words no matter how contemptuous about the flag are not prosecutable. Speaker: But the physical desecration, what you say the statute is complying to has to be a desecration that publicly cast contempt on the flag, doesn’t it? Charles E. Chase: Yes, Your Honor. Speaker: So that he is still -- it’s still involved in the statute is a communication process? Charles E. Chase: Well, Your Honor -- Speaker: Communication process, the desecration has to be contemptuous of the flag, is that right? Charles E. Chase: Yes, Your Honor but as I point out in my brief, there were certain acts of which the conduct is so egregious saying you do not have to go into any surrounding circumstances at all for man of common intelligence to agree that this -- Speaker: In this case, did the instruction of the jury in this case say that the defendant had that, the jury has to find that defendant intended to cast -- Charles E. Chase: I believe it did Your Honor -- Speaker: They have intended to cast contempt on the flag. Charles E. Chase: They had to find an intent on the part of the defendant to treat the flag contemptuously. Speaker: And at the end that he did it? Charles E. Chase: Yes, Your Honor. That’s my understanding of the rescript opinion and my understanding of the rescript is that the Supreme Judicial Court will require the prosecution to prove intent and any -- Speaker: You just don’t have it and you don’t have an urge, no extent record of the instruction of this case? Charles E. Chase: No, Your Honor, you have the entire record before you including the briefs that were presented to the Supreme Judicial Court. Speaker: Well, I notice that apparently the defendant files certain request for instructions including at least three and four were denied so something less that the defendant requested I gather. Charles E. Chase: You may have what was before the Supreme Judicial Court Your Honor. I’m not entirely sure of everything that was before the Massachusetts Trial Court. William H. Rehnquist: What rule does the Supreme Judicial Court of Massachusetts follow where you appeal on the bill of exceptions? Are you permitted to challenge the giving or refusal to give an instruction? Charles E. Chase: Anything that is contained in the bill of exceptions. Anything that the defendant saves for argument on appeal. In other words, I believe my brother did say the fact that two instructions were refused at the trial but I believe he said those to be argued before the Supreme Court. William H. Rehnquist: But how can the Supreme Judicial Court of Massachusetts pass on that without knowing what other instructions were given because frequently a trial judge’s refusal to give an instruction may be based on the fact he thinks, it’s covered in another instruction. Charles E. Chase: Well, Your Honor, I don’t know but the only thing I can say is this. That the Supreme Judicial Court is bound by the bill of exceptions, they cannot go beyond that and it is up to the parties in the court below to make sure that everything is relevant, it gets into the amended bill of exceptions or bill of exceptions. Warren E. Burger: And that would mean that the prosecution in this case would have had burden of showing what instructions were given if they were resting on the proposition that the rejected instructions were redundant as Mr. Justice Rehnquist suggested. Charles E. Chase: Yes, Your Honor but -- Warren E. Burger: Are you sure you want to answer yes to that? If you have got an appellant that’s trying to show the instruction was erroneously refused. Might it not be up to him to show not only the instruction was refused but that it was not covered by other instructions? Charles E. Chase: Well, Your Honor I would just say this, for my knowledge of how Court Appeals are taken in Massachusetts that the losing party has the burden of putting the material in the record that is going up on the bill of exceptions. The prosecution has no burden to compile that bill of exceptions. The losing party does and then they get together and confer with the trial judge and there is an agreement as to whether or not everything in the bill of exceptions should be there. And it’s generally worked out by agreement with the trial judge in both sides but it’s the losing party who has the initial burden of going forward to compile the bill of exceptions. I see that my time is up. I want to thank the Court. Warren E. Burger: Just one more question, General Chase. I might take it that your argument is in part at least that whatever communication was involved here in the acts of the respondent, it was communication by conduct? Charles E. Chase: Certainly, Your Honor. That is the basis of my argument. I think it seems there is quite clear that whatever communication was involved could have come through much more clearly with some words which would not have been prosecuted. Thank you. Warren E. Burger: Thank you gentlemen. The case is submitted.

Earl Warren: Number 282, Atlantic and Gulf Stevedores, Incorporated, versus Ellerman Lines, Limited, et al. Francis E. Marshall: Mr. Chief Justice -- Earl Warren: Mr. Marshall. Francis E. Marshall: -- and Justices. This matter involves a claim by longshoreman against a shipping company for injury sustained during the course upon loading a vessel in the Port of Philadelphia and in which, the shipowner inflated Atlantic and Gulf Stevedores whom I represent as a third-party defendant claiming indemnity. In briefest terms, these issues were tried in a 10-day trial before jury and the jury found in favor of the plaintiff, the injured longshoreman, against the shipowner on findings of unseaworthiness and also on findings of negligence and at the same time, in answer to a specific interrogatory found that the stevedore did not violate the terms of its contractual obligation to do its work in a reasonably safe, proper and workmanlike manner. Finding in the amount of $100,000 in favor of the plaintiff, judgment by the lower court was entered in favor of the plaintiff and against the shipowner and at the same time, judgment with respect to the indemnity action was entered in favor of the Stevedore. The shipowner appealed to the Third Circuit Court after its motions for judgment N.O.V. or for a new trial had been denied by the trial judge. And the Third Circuit Court in an opinion, April 7, 1961, affirmed plaintiff's judgment against the shipowner, but as to the indemnity action reversed the judgment of the lower trial court which had been entered upon the specific findings of the jury that the shipowner's fault did not arise out of any failure on the part of the stevedore to perform its work in accordance with its contractual obligation. The Third Circuit Court, therefore, reversed the judgment and in its opinion in three separate places, holds that indemnity as a matter of law lies against the stevedore. A petition for rehearing was filed on behalf of Atlantic and Gulf and the Third Circuit Court without opinion denied that petition. A petition for certiorari was filed to this Honorable Court and this Court on October 16, 1961, granted the stevedore's petition for certiorari. I might say parenthetically that there was a companion petition for certiorari filed by the shipowner, challenging the validity of the Circuit Court's affirmance of the judgment in favor of the plaintiff and on the same day that this Honorable Court granted the stevedore's petition for certiorari, it denied the shipowner's petition for certiorari. Petition for certiorari in this case, before your Honorable Court, was to consider three basic questions and the subsidiary questions encompassed therein. The first question was whether or not a matter tried to a jury under a full and complete charge by the trial court which encompassed all the issues in the case whether or not, the Circuit Court by reversing the judgment entered upon that verdict was a violation of the second sentence of the Seventh Amendment which states in positive terms and no fact applied by a jury shall be otherwise reexamined by any court of the United States except in accordance with the common law. The second question we pose for consideration by this Honorable Court is whether or not in the presence of a contract, and I might say that in this case, starting on page 147 (a), Your Honors will see a contract which consumes seven printed pages prepared by the shipowner, entered into by the parties, a contract which spells out the intention intended by those parties, whether in the presence of such a contract, and in the presence of a jury finding, after a 10-day trial, after a full submission of all the issues by the trial court is charged to the jury, whether the Circuit Court erred in reversing the judgment entered in favor of the stevedore without reference to the contract and merely on the holding that if it was negligence for the shipowner and if the jury found negligence of the shipowner as a matter of law, the Court was bound to enter judgment for the shipowner on its indemnity action against the stevedore. The third question we pose to this Honorable Court is whether or not under this same circumstances, a court may do what the Third Circuit Court has done, namely to set aside the findings of a jury and a judgment entered thereon, without a plain showing as this Honorable Court has imposed as a prerequisite in the McAlister case, a showing that the jury verdict was clearly erroneous. Hugo L. Black: What was the ground on which they've said it was clearly erroneous? Francis E. Marshall: If Your Honor please -- Hugo L. Black: May I ask you just that -- Francis E. Marshall: You certainly may. Hugo L. Black: You said in accordance with the rule for the common law, you first have to say what that means -- Francis E. Marshall: Yes. Hugo L. Black: -- and then you have assumed, would tell us why -- what was the ground on which the Court said its there? Francis E. Marshall: If Your Honor please very briefly, the Circuit Court reviewed all the evidence and it had before the question of the shipowner and the question of the shipowner's right against us, reviewed the evidence and said, “There is enough evidence here to hold the shipowner on negligence,” Hugo L. Black: Of the shipowner? Francis E. Marshall: Yes. He then said, in an opinion by Judge Kalodner, “If there is a finding by the jury that this accident was caused by the improper stowage on this vessel then as a matter of law, the ship -- the stevedore should have stopped its operation, and should not have proceeded to one load” and this was not a question for the jury. This is a question which as a matter of law can be determined. Charles E. Whittaker: What are the facts? What -- what happened? Francis E. Marshall: Yes, I'd like to now set forth exactly what the facts are, if Your Honors please, that we have the history of how the matter gets before this Court. Charles E. Whittaker: I mean by that, what was charged as fault or negligence -- Francis E. Marshall: Yes. Charles E. Whittaker: -- that gave rise to the liability to the plaintiff? Francis E. Marshall: If Your Honors please, Leighton Beard, the longshoreman on July 1, 1955, was working in the hold of the vessel. The job at hand was to remove bales of burlap weighing approximately 1000 to 1100 pounds. These bales of burlap were held together tightly by four metal bands approximately one inch in width. Historically, and the evidence clearly demonstrates this, the means by which these bales are removed is to take a winch cable to which there's attached to large ring and to this ring are six long ropes, and to the end of each rope is what looks like a gigantic fishing hook with a flattened edge and the procedure by which cargo this time, under this record, clearly shows has always been done by this method in every port in United States and in Great Britain. We would place, our longshoreman would place two bands -- two hooks, under two bands of each bale and we would raise three bales at a time, because there are six cables, six hooks, two bands on each bale being used as the lifting device. On the staple day, after three hours of operation, one of these drafts rose to a height of approximately 30 to 35 feet at which point, two bands on one bale broke. Hugo L. Black: Who had baled it? Francis E. Marshall: This was baled in India, if Your Honors please. It was a consignment from India. It was not loaded by the stevedore involved in this case but by others under the control and under the direction of the ship as the evidence, Chief Mate Quinn shows. Potter Stewart: Was in that respect, this was similar to the facts from the Waterman case where the cargo had been loaded in the Philippines. Francis E. Marshall: Yes, that is correct that the cargo in Waterman had been loaded in the Philippines. If Your Honor please in this case, we -- we take the position that there is more to our position just that someone else loaded this cargo. What happened was that once this bale fell, its truck cargo that was consigned to the Port of New York because when this vessel came to Philadelphia, any evidence supports this and shows as I think fairly conclusively, there were 63 tons of these bales destined for New York, immediately adjoining 100 tons of these bales destined to Philadelphia, stowed to an equal height. And after the three hours of operation, the New York cargo was of course somewhat higher. The evidence will show two tiers higher and these bales, I might say, are two feet, by three feet, by four feet, so that when this bale dropped, the evidence indicates that it was going up in a perfectly straight vertical lift and there is no question about that. The only witness who actually saw the bale after it began to rise, because obviously once the longshoreman helped bring this out to the center of the hatch and steady the load, they then go under the coaming to secure themselves from a possible fall of any type of cargo. The only witness who saw what happened once this bale started upward, testified on page 22 (b) of this record, that it came up perfectly straight, didn't hook onto anything, didn't bump into anything. This bale then struck the New York cargo and careened off a distance estimated variably up to 12 to 25 feet. And Mr. Leighton Beard, following instructions given to him by his employer was then against the act bulkhead, that this was his day and this bale followed him right to that place and crushed it against the wall and he sustained very serious injuries. The first operation, he lost the leg below the knee, the second above the knee, and finally at the hip level and these were the injuries and the damages that were claimed. Potter Stewart: Was it is that caused the bale to fall? Francis E. Marshall: Your Honors please -- Potter Stewart: Did the strap break? Francis E. Marshall: Both bands on the one bale broke, and the bale therefore fell, catapulted off this New York cargo, careened off in the direction of Leighton Beard and pinned him against the bulkhead. Potter Stewart: And you'd -- and the stevedore had -- had pulled these bales by the strap, putting a hook through the strap and pulled them -- Francis E. Marshall: That's correct. Potter Stewart: -- horizontally -- Francis E. Marshall: That is correct. Potter Stewart: -- to the hatch, from -- from -- along through the twin decks. Is that right? Francis E. Marshall: Yes sir and may I say sir, on that point that five stevedores or five longshoremen with an average of 15 years of experience and five experts with an average experience of 35 years as seamen, as sea captains, as longshoreman, as stevedoring consultants, as safety engineers in maritime matters all testified and this is set forth, the specific page references to their testimony is briefly set forth in a footnote at the bottom of page 6 of our brief. They testified that this is the only possible way by which bales weighing 1000 to 1100 pounds can be withdrawn from the tight stow that imbalanced these bales once they have made the voyage from Karachi, from India over the rough seas and there was testimony that five or six men he could not pull one of those bales out. William J. Brennan, Jr.: What -- Beard prevailed on an allegation of unseaworthiness, is he? Francis E. Marshall: Yes, if Your Honor please. And -- William J. Brennan, Jr.: What -- what was the unseaworthiness alleged? Francis E. Marshall: The plaintiff's claim on the issue of unseaworthiness was, and there was expert evidence to support this theory by the way, that these bands for the purpose of this unloading, a matter which was known by Chief Mate Quinn and the vessel and this company, these bands became part of the ships unloading gear because there was no other way ever used to get these bales out. And since the ship knew that these bales would have to be lifted out and pulled from tight stow by means of these bands and since Captain Arthur, a wit -- an expert of 35 years at sea, testified that this is the only way it could have been done since Chief Mate Quinn, the only witness who testified who was on board the ship on behalf of the Steamship Company testified he knew this was going to be the way, he knew no other way. The theory was therefore, that once these bands broke for any reason, any absence of any evidence that they were rusted that they were worn, that they were -- had been badly used during the manu -- during the banding of them or during the loading of them, the unseaworthiness was the fact that the bands were a part of the ship's unloading gear and broke. Now, the plaintiff's theory with reference to negligence -- William J. Brennan, Jr.: -- the case is before us though, was it on the premise that there's no challenge to that finding of unseaworthiness. Francis E. Marshall: If Your Honor please, the case is before Your Honors for this sole question of whether or not the shipowner under the facts of this case is entitled to indemnity as a matter of law having been found guilty of negligence and guilty of unseaworthiness and at the same time, a jury having found us not to breach our contract (Voice Overlap) William J. Brennan, Jr.: Well, I'm not quite clear about that. I thought Beard prevailed not -- Francis E. Marshall: He did. William J. Brennan, Jr.: -- on unseaworthiness but also on negligence? Francis E. Marshall: Also in negligence; now I was just getting to outline the four theories that the plaintiff advanced against the shipowner on negligence. As a matter of fact, the basic theory was that this Chief Mate testified that though he had been on vessels unloaded by my client for a number of years. Two hours before this accident and there had never been any complaint, never any comment about it before, no challenge to the method, five stevedores said, the only method they ever saw, the only method they knew, five experts said the same thing and not only that this is the costumer in method, but it was the safest possible method, a method in accordance with the Philadelphia Maritime Trade Association Regulations, the plaintiff alleged against the ship. You should not have permitted Atlantic and Gulf to unload this vessel if you, Mr. Quinn, Chief Mate knew that this method, though it may be the best, though it was proper, though it was reasonable, though it was workmanlike, in fact, you criticized this method as dangerous. And an expert testified that you had the duty and the power to stop this operation and if in fact you had a better method, he talked about some method of using slings as they load them in India. This is one of the basis upon which the plaintiff proceeded on negligence. If you, Quinn, thought this was dangerous, you are the Chief Mate, you stood there and watch this operation, and the evidence is clear, Chief Mate Quinn testified in a deposition before trial which is offered in evidence. He stood there, and he watched them work and two hours before this accident it's inconceivable because that might seem to some of us, he calls the port manager, the man in-charge on the vessel and says, “This is a very dangerous method. You want to use slings like they used in India. Charles E. Whittaker: Did the court submit that issue, that method of unloading to the jury as an issue of negligence? Francis E. Marshall: If Your Honor please, at page 39 of our brief, we have quoted the substantial part of the indemnity charge and for those of you have the -- the record before you at pages 171, 172, and 173 (a) of the record, this is laid out in detail, this entire method, if Your Honors please -- Charles E. Whittaker: Well, if it was negligence -- if it was negligence for the master of the ship not to stop that method of unloading, was it workmen like for the stevedore to pursue it? Francis E. Marshall: Yes, if Your Honor please, because five experts so testified, five stevedores -- five longshoremen so testified, this is the only method that had ever been used. Defendant's own expert, the shipowner's own expert testified that the latest improvement in the method that we was use -- that we were using was in fact the improvement that he himself made and defendant's own expert Captain Paul Keeler testified in this record, and his ref -- page reference to his testimony appears at the bottom of six of our brief, that this is not only the -- the customary method but this is the safest method to unload this kind of cargo. Potter Stewart: Now, one thing that -- to drag the bales horizontally up to the hatch by that method, but I should think to then unload them from the hatch would be obvious to anybody who wasn't an expert. It would be much safer rather than just hooking him through that steel strapping, the advance strap or whatever you want to call it rather than doing that to put it in a -- to put it in a sling or on a platform. Francis E. Marshall: Well, if Your Honor please, Mr. Byrne on behalf of the shipowner argued that for a 10-day trial and argued that very completely in his charge to -- in his summation to the jury. The point of it is, we had never heard of this method before, no one else had in this entire trial except Chief Mate Quinn and he said, “This is how they do it in India”. Potter Stewart: Well, that's not the only place they do it. I -- (Voice Overlap) Francis E. Marshall: But the point of it, if Your Honor please, these are 1100 pound bales. These cannot be pulled together like 300 pound bales of wool and when Chief Mate Quinn was pinned down, he was really talking about wool bales weighing 300 pounds. Because you -- even if you got this out to the square of the hatch, if Your Honor please, there was still the problem of moving an 1100 pound bale on to slings where they're lifted and the testimony in this case on that point was, it would take five or six men and then it would be a -- a greater hazard to them than this method. We submit sir that this issue was fully exhausted in a trial of the case, in arguments to the jury, and that the jury decided the case in our favor. Now, I should like the hasting -- in haste to suggest -- Potter Stewart: (Voice Overlap) would you tell us again that -- how and why the jury decided the case against the shipowner? Francis E. Marshall: Well, if Your Honors please, I have three other theories that the plaintiff advanced against the shipowner which I have not yet mentioned and may I just say that not knowing which of these four theories the jury found -- William J. Brennan, Jr.: I want to be clear, your -- it is the fact that the jury found -- for Beard on unseaworthy? Francis E. Marshall: That is correct sir. William J. Brennan, Jr.: Now, you're telling us that they also -- that the jury also found that for Beard on the theory of negligence? Francis E. Marshall: That is correct sir -- William J. Brennan, Jr.: Was there separate question submitted -- Francis E. Marshall: Yes sir. William J. Brennan, Jr.: -- on the theory of negligence? Francis E. Marshall: At the bottom of page 4 and top of page 5. The issue submitted to the jury was these -- William J. Brennan, Jr.: Of -- of what? Francis E. Marshall: Of our brief sir, at the bottom of page 4, after this entire trial and may I say sir that these specific interrogatories were framed after and if Your Honors will look at the record, something like 42 pages of discussions, consultations, arguments, before the judge out of the presence of the jury on how we would encompass all of these issues. The first question was, was unseaworthiness of the defendant a substantial factor in causing injuries to the plaintiff and the jury said, “Yes.” The second question was, was there negligence on the part of the shipowner, which was a substantial factor in causing injuries to the plaintiff and the jury again said, “Yes.” The third question was, in what amount do you assess damages? The answer was $100,000 and now, we come to the crucial question which is before Your Honor, the fourth question to the jury was this. “If you have answered 'yes' to questions one and two, did the fault of the shipowner, Ellerman Lines and the City Line Limited, arise out of any failure on the part of Atlantic and Gulf to do its work in accordance with its contractual obligations and the jury said, “No.” And the fifth question was, if you have answered question number four in the affirmative, was this breach of contract a substantial factor in causing injuries to the plaintiff, and obviously having question -- answered question number four in the negative, this was answered in the negative. And it was on those specific findings of the jury, that Judge Ganey, now a circuit judge of the Third Circuit, entered judgment on behalf of the stevedore in this case. And it was the judgment entered upon those specific findings which Judge Kalodner swept aside and I submit so erroneously, because there were three other grounds of negligence. Number one, that since the shipowner knew in fact that we had to lift these bales out, and since in fact it knew that it had cargo to go to New York and cargo to go to Philadelphia and that the ship would be in New York before it got to Philadelphia, it should not have stowed the New York cargo in such a manner that it was the impediment extending out into the square of the hatch so that when we operated in removing Philadelphia cargo, and the contract specifically says Philadelphia cargo, “No evidence would be at any right to touch that New York cargo.” They must have known that a hazardous condition could possibly result. This was strenuously argued by Mr. Browsky on behalf of the plaintiff in this case. This was a condition existed, committed preexisting before we ever entered upon that vessel. This was argued fully to the jury that they should've put the New York cargo on top, if in fact it had to be unloaded first or the Philadelphia cargo on top if in fact it had to be unloaded first. But to leave us with the situation where under our contract, we're obliged to go aboard that vessel and unload Philadelphia cargo, we were doing just that in a proper workmanlike manner. And may I say sir at this point that our contract specifically said that we shall perform our obligations, quote “with every care and due dispatch to the satisfaction of the shipowner.” It actually goes on and says to the party of the first part charges and so forth, I said -- I substitute the word shipowner because that's untenable, but we will do our work with every care and due dispatch to the satisfaction of the shipowner. Now, witness this, if Your Honors please, what an amazing coincidence it was that Chief Mate Quinn, the top officer on board that vessel chose to stand there and watch us do this operation, appreciating the situation, the fact that New York cargo there, and that it is now two tiers higher than the Philadelphia cargo, he had the duty and the right to stop under expert testimony and Judge Kalodner found this, the jury must have found it, as one possible ground of negligence. If Your Honor please, all we did was to go in there and use a workmanlike, a safe, a customary and approved method and in the course of doing that, this accident happened. Now, under those circumstances, if Your Honor please, the jury could have found that the improper stow was the condition in this case just as the fact that he may have been even a greater expert than we because certainly if the common experience in the United States is that this is the best, safest possible method and we're using it, the mere fact that Quinn injects himself over the case and says, “Oh I think this is dangerous, it might have been done differently of better,” the jury might have picked him up on that if they believe that he said this at all, and said “Okay Mr. Quinn, you know a better method, you're in-charge, you have a higher authority than the shipowner -- than the stevedore under the evidence of this case,” they did it in the safe, reasonable and workmanlike manner. Hugo L. Black: Is that contract in the record? Francis E. Marshall: Yes it is sir, starting at page 147 (a) and may I say, after Justice Black's question, the only other question relating to conduct in this contract, again which takes up seven printed pages is, that if we damage any cargo, we have top pay for it. No indemnity clause and we submit if Your Honor please, that under the decisions of Weyerhaeuser where the District -- the District Court directed a verdict against the stevedore, and on appeal, this Court with unanimous opinion said, “No, you can't do that.” All questions relate into the contract, the intention of the parties whether or not the contract was breached are issues peculiarly for the jury and this Court in Weyerhaeuser went further and said in so many words, even if there is a breach of that contract, even if there is negligence on the part of the stevedore, the indemnity right exist only if there is only absent conduct -- and this is a quote, “absent conduct on the part of the shipowner which would preclude recovery” and this Court said that is an issue for the jury and, if Your Honors please, the latest pronouncement on this very point is the case of McNamara which we've cited in our brief. McNamara said, “Even if there's negligence on the stevedore, even if it maybe a breach of that contract with the shipowner on whether indemnity is to be allowed, there may be conduct on the part of the shipowner which bars indemnity,” and that is an issue to be decided for the jury. We have said in our briefs, if Your Honors please, that this issue has caused great concern and great confusion among the courts because in the Fourth Circuit, in the case of (Inaudible), which are discussed in our brief, judges are trying to decide, well what is conduct, the absence of which will permit indemnity. John M. Harlan II: Could I ask you a question? Francis E. Marshall: Yes sir. John M. Harlan II: I want to see if I understand your argument. What you're suggesting as I get it is that the jury could have found that the negligence of Ellerman and Steamship Company consisted in permitting this loading operation to go on in the face of this New York cargo. In other words, that even though there was no negligence? Francis E. Marshall: Yes, Mr. Justice my basic point is that the negligence of the shipowner had been committed, and was existing the minute New York stow was placed adjoining Philadelphia stow in India. John M. Harlan II: Yes. Francis E. Marshall: You had a condition then committed -- John M. Harlan II: That's right. Francis E. Marshall: -- which if, and may I say this, I argued this to the jury, but I submit sir, that if in fact -- John M. Harlan II: I'm just trying to see whether I understand -- Francis E. Marshall: Yes. John M. Harlan II: -- your point of view, give me a bit of time. Francis E. Marshall: I'm sorry sir. John M. Harlan II: That the negligence that was the basis for the verdict against Ellerman consisted not on using this particular method of towing, vertical towing, but in performing the unloading operation or allowing the unloading operation to be performed with the New York cargo being positioned as it was, and that a verdict in favor of the -- against Ellerman was consistent with their verdict in favor of your client on the theory that your client was not responsible for that stowage, is that it? Francis E. Marshall: Those are two of the points that I gave sir. That is the one issue, the other is the improper stowage in the first instance and though I -- I'd like to assume (Voice Overlap) John M. Harlan II: It's very difficult to understand if the negligence that was found by the jury is against Ellerman consisted in the use of this method of hauling the cargo out, if that was the negligence, it's very hard to see how they could have, at the same time, exonerated your client. Francis E. Marshall: But, if Your Honor please, and this is a great difficulty once you start disturbing jury verdicts. There were two other bases. Number one, Mr. Browsky argued very, very strongly that they should remove this New York cargo when the ship was in New York and offering no explanation as to why they didn't -- this created the negligent condition which hurt Beard. And there was one other point, if Your Honor please, we and the other shelters had no opportunity to inspect these bands down in the hole of this vessel, but the same Chief Quinn, who stood there and watched this unload, stood there when these bales were on the port pier in India and he testified, he was, “in charge of the loading” and that he “inspected the bales in a general way” and those are two additional factors which were strongly argued by Mr. Browsky to this jury. He had the opportunity to inspect or have these bands inspected while they're out in the open in the broad daylight. He knew they were going to be used for unloading and it was negligence on his part to inspect only in a general way. Now, I will close by this comment, if Your Honors please, there having been four separate possible findings of negligence, four separate issues, not knowing which of these, we say that the Court below erred in the opposite direction to the case of Weyerhaeuser where there the lower Court directed the verdict against the -- or in favor of the stevedore. Here, he -- I'm sorry -- Judge Kalodner directs a verdict literally over against us by picking out one of four possible grounds in saying, if it was negligence for the shipowner, it was negligence for the stevedore who by the way still has the protection of the Longshoreman's Act. Potter Stewart: Now, Mr. Marshall there are -- you say now four possible grounds of negligence upon which the jury could hold the shipowner liable. First was the manner of unloading these bales. Francis E. Marshall: First was the improper stowage in India. Potter Stewart: Improper stowage of India. Francis E. Marshall: Improper stowage in India. Potter Stewart: Alright, leading to what? Now what do you mean by improper stowage in India? Francis E. Marshall: Knowing that we would be unloading Philadelphia bales with New York bales extending out to the center of the hatch and not giving us a level operation. Potter Stewart: Now, isn't that up to the stevedore? Francis E. Marshall: No, if Your Honor please. Potter Stewart: Well, and why is it if he -- if he starts to unload, and he sees that it's going to leave a great big mountain of bales -- New York bales and they're going topple, it's up to him to flatten those out, isn't it? Francis E. Marshall: But, if Your Honor please, there was evidence -- there was no evidence offered by the shipowner that we owed any duty with respect to the New York cargo. And the only evidence on this record, may I suggest sir, was that of Fred Nelson, our stevedore (Inaudible) testified, we have no right to touch anything but Philadelphia cargo, and witness the fact sir, if these were, as an American Presidents Line removing a bin that had a locking device broken, or in Ryan, putting the chalk where it belong, or in a Crumady changing this little switch, this shipowner who confronts us with his vessel with 63 tons of bales, we would literally have to undertake outside the rights and duties under this contract the removal of 63 tons of New York cargo. And I submit sir the first New York bale we touched, if it hit Beard, we would have an absolutely indefensible position because our contract -- Potter Stewart: That's true. Francis E. Marshall: We can only touch Philadelphia. Potter Stewart: Your contract didn't say that, did it? Francis E. Marshall: Yes, it did sir. Potter Stewart: It said that you were to unload this ship in a -- in a workmanlike and safe manner and part of that, it seems, I would just think that it could be urged -- Francis E. Marshall: But if Your Honor please. Potter Stewart: -- part of that job would be to see to it that the other cargo was left in a safe position? Francis E. Marshall: If Your Honor please, we submit that it would be a question for the jury as to whether there was any evidence that could have been done more safely than we were (Voice Overlap). Potter Stewart: Well, exactly. That's the reason I don't understand your point two on negligence. It's necessarily negligence confined to the shipowner and now, what's point three? Francis E. Marshall: Point three, if Your Honor please, is the failure to remove the New York cargo when the vessel had previously been in New York. Potter Stewart: You say this is negligence? Francis E. Marshall: I submit sir, it was argued by Mr. Browsky. It was defended by Mr. Byrne. These were issues outside my case. I was defending the indemnity issue that was submitted to the Court in its charge, and I submit sir that this maybe one of the grounds that a jury could have found it upon. (Voice Overlap) Potter Stewart: Why is it negligence if he refused to take -- to fail to take the cargo off the vessel? Francis E. Marshall: Because, if Your Honor please, it was argued by Mr. Browsky had this New York cargo been removed, the unleveled condition wouldn't have been there which caused the bale to precipitate over against Mr. Beard. This is his argument against the shipowner, submitted to the jury under full charge by the Court. Potter Stewart: That's sort of 2 (a) then at the most, isn't it? Then what's a -- what is (Voice Overlap)? Francis E. Marshall: And then the third one if Your Honor -- if that's 2 (a) the third one is, that whereas the evidence shows we had no opportunity to inspect these bands in tightened hold, the ship owner's chief mate indirect evidence, I can give Your Honor the page reference if you wish, testified that he was in-charge of the loading and that he inspected these bales in a general way and the jury may (Voice Overlap). Potter Stewart: Several weeks or months earlier. Francis E. Marshall: This is when the ship was loaded in India. Potter Stewart: In India and now your men, the stevedore's men were down there working with those bales on the very day that the accident happened. Francis E. Marshall: But with a much less opportunity to inspect the bands because at the very least, at least half of the band is not exposed to view because it is in tight stow. And there was no evidence offered by the shipowner that we had to inspect each one of these bands as they came out because this could not be done and unload a vessel that contained several thousand bales. And the evidence, may I say sir -- John M. Harlan II: Well, Judge Kalodner seems to think that the jury was not instructed properly. He says on page 15 (a) of your appendix to the petition of certiorari, he says that it must have been -- it must here be noted that the District Court in its charge to the jury with respect to the indemnity action, they failed to instruct it, that if Atlantic carried on the discharge of the Philadelphia bales in a place unsafe to work, that means by reason of the presence of the New York cargo, I suppose, that it was guilty of the breach of warranty, and then he goes on and says the District Court urged in this respect into its error may be attributed to the fact the jury in its answer to Interrogatory Number 4, put it to Atlantic if there's any failure. Now, my question to you is, was such a request put by your adversary? Francis E. Marshall: No sir. And I challenge sir the statement that this was not submitted to the jury and that it was limited to the bale and hook method because, if Your Honors please, you'll look at page 39 on this question of the criterion, the Court did not say the criterion and it is the hook and bale method as Judge Kalodner did. Here is what the Court said, “Ellerman Steamship Company says to you, that if there is any liability, any liability which we owe Mr. Beard, that condition was created by Atlantic and Gulf Stevedores. This is in the exact middle of page 39. That is your criterion. Did the Atlantic and Gulf Stevedores create the condition which made Ellerman Lines and the City Lines responsible to the plaintiff and to show that he didn't limit this just to the hook and bale method he says, “there again,” as he had said earlier, “you have to run the whole gamut of the facts in the case. You will have to decide whether or not there was an unreasonable discharge of this cargo, an unsafe method used in the discharge of the cargo” and this I think is crucial, “did they,” the stevedore, “breached that contract to do it in a workmanlike manner” and this is the test, if Your Honor please, submitted to the jury, “with the utmost care.” John M. Harlan II: Yes, but that's all very vague and ambiguous now from the jury standpoint, but if this question that Judge Kalodner said, should have been put to the jury but was not put to the jury. Had it been put to the jury, and the jury has brought in a verdict against you, would you be here? Francis E. Marshall: If Your Honors please, I don't rely solely on that one portion of the charge. This issue was more fully put to the jury than this one quote. Obviously, we can't quote the whole charge. I would ask Your Honor, Justice Harlan, to look at page 1 (a) -- John M. Harlan II: But I'm trying to -- what I'm trying to get at is that the respect in which Judge Kalodner says that the instructions were deficient, do they or do not -- this was the failure to give that instruction, represent a denial of the request for such an instruction or is it simply that the judge himself didn't do it? Francis E. Marshall: May I suggest this to you sir? Mr. Byrne, during all of these discussions, never mentioned the New York cargo on which just -- Judge Kalodner hinges his whole finding, never mentioned New York cargo and if you will look at the points for charge submitted by the defendant shipowner, he not only does not mention unsafe place to work, he does not mention New York cargo. John M. Harlan II: That's what I imagined. Francis E. Marshall: Now, if in fact Mr. Byrne wanted a more specific charge, he could've had it and may I say sir, this appears at 182 (a). Now listen to this as to the extent to which the Court instructed the jury. Ladies and gentlemen this is Mr. Byrne's request, and this is during -- after the charge in chief and during these 30 some pages of discussion on the record where we were up at the sidebar trying to hammer out the proper points. John M. Harlan II: What page is this? Francis E. Marshall: 182 (a) starting about one-third way down where it says “To the jury.” Ladies and gentlemen, if you find in the plaintiff's case, Mr. Beard, against the shipping companies that that band broke by virtue of the negligent conduct of a longshoreman, who were putting it together and pulling it out of stow as emphasized by Justice Stewart and taking it up, if there is evidence to so substantiate that, if that negligent conduct was responsible for the break rather than unseaworthiness of the band, whether or not the negligent conduct of the longshoreman resulted in the breaking of the band, I think you have to ask yourself that on both sides of the question. And I won't take the time, but the next two pages, Mr. Byrne asked for two additional specific points and got them over my objection. I submit to you, this issue was fully submitted to the jury, the jury having found in our favor this being an issue peculiarly to be found by jury it ought to stay. John M. Harlan II: Well, it was submitted as fully as your adversary wanted it submitted. Francis E. Marshall: Yes sir particularly since he offered no evidence against us. Hugo L. Black: May I ask you one question, I don't want to delay you but -- Francis E. Marshall: Yes sir. Hugo L. Black: -- do you accept the premise that a finding against the shipowner of unseaworthy by reason of defect in the ways of work and so forth, would justify a finding in favor against the stevedore on the ground of negligence? Francis E. Marshall: If Your Honor please, I view this as one where it is perfectly proper and sustainable to find negligence and unseaworthiness against the vessel and still consistently find in favor of the stevedore. Hugo L. Black: I'm talking about unseaworthiness only. Francis E. Marshall: On unseaworthiness alone, if Your Honor please, recognizing that this case was tried for 10 days and nearly I'd say 80% of the testimony dealt with those bands, experts, we had metallurgist in the case, I would say that if those bands broke and there was no showing that we could or should have found any defect in them, I would say that a finding of unseaworthiness against the vessel could clearly be sustained and on the same posture, there couldn't possibly be any finding that we brought that into play or created the condition. Hugo L. Black: Are the rules the same to finding liability on account of unseaworthiness and on the account of negligence? Francis E. Marshall: If Your Honor please, this is the first maritime case that I've tried for four and a half years. I've been trying to figure this out, but I view it as this. If in fact an unseaworthy condition is created by the ship -- by the stevedore as in Ryan, as in Weyerhaeuser, as in Crumady and as in Waterman, then clearly, if it can be shown and if the fact finder as in all of those cases did found that the stevedore created or caused the condition, violated the contract to inspect or correct as in Ryan where they would have done all of the stevedore's work, all of the shipowner's work then I submit sir in that circumstance caused by the ship -- the stevedore, the unseaworthiness, being the responsibility to ship, indemnity would follow. But in this case, no one ever suggested that we caused the unseaworthiness of these bands and there was no basis for showing that we could have discovered any other -- any possibility that these bands were effective. May I say one thing further and I'll sit down (Voice Overlap) Hugo L. Black: Was there any evidence to show that they could've discovered it? Francis E. Marshall: No sir, and not only that the evidence is clear and again, I refer you to the bottom of page 6 because there are great numbers of page references but they're all very specific, every one of our own stevedores and every one of our experts testified they had never seen a band break or a bale fall on the vertical lift. And Mr. Byrne challenged that issue but I submit, if Your Honor please, at page 22 (b), this was on a vertical lift and at the bottom of page 6, I have documented in this record 40 or 50 page references where that statement is supported by the fact. I would like to now defer to Mr. McHugh, the counsel for amicus curiae of the National Association of Stevedores and I thank you. Earl Warren: Mr. McHugh. Martin J. Mchugh: Mr. Chief Justice, may it please the Court. The National Association of Stevedores appears as amicus curiae in this case to present an issue which we regard as important and which is not otherwise presented here. It's the issue of safety insofar as it constitutes a part of the general maritime law or the admiralty law. Now, I'd like to say at the outset that the association in its participation in this case is not concerned with who should bear the loss in any given factual situation as between shipowner and stevedore. It is concerned, however, with a rule of law which we think will reduce accidents and thus reap to the entire shipping industry, shippers and stevedores alike an economic advantage. Now, basically, the function of molding or creating admiralty law is the concern of this Court. Mr. Justice Brennan and Mr. Justice Frankfurter have had occasion to remark recently that no law and no body of law as the judge made at its origin to such an extent as it's the Law of Admiralty. Safety is an essential and important aspect of that corpus juris. Safety will prevent accidents and we submit that it is as much a function of the admiralty law and indeed all law to prevent the happening of accidents as it is to recompense the wrong. This Court noted that fact I believe in 1946, one of the extended to longshoreman, the very class of workers with which we are engaged here, the warranty -- the traditional warranty of seaworthiness theretofore owing only to seamen. The Court said in the Sieracki against Sea Shipping decision that the maritime service imposes severe hazards on those who are in performance services -- perform in it. William O. Douglas: We don't sit to write law review articles on these things. Martin J. Mchugh: Indeed not in this -- what I'm -- William O. Douglas: (Voice Overlap) this is just a case for us to decide. Martin J. Mchugh: Exactly, Your Honor but I believe that since you are concerned with the molding and creating of admiralty law, you are concerned with the – fashioning it in a way which will prevent accidents and that's my point. I think that there has been misinterpretation and confusion in the courts below and particularly in the Third Circuit Court of Appeals in this case, insofar as the rules laid down in Ryan, Weyerhaeuser in particular and Crumady in particular are concerned in the field of maritime indemnity. What has happened here, I do believe, is that the courts have shaped a rule which holds in essence that no matter what activity, innocent or otherwise, a stevedore has with a defective part of a ship, the shipowner will be entitled to indemnity. Now this, I submit, is wrong because it will encourage shipowners to the -- continue to tender for loading and discharge unsafe equipment. It will absolve of them any responsibility for the gear and equipment on their ships. I do believe that an equal responsibility should be shared by both shipowner and stevedore for safety. Now, Congress has entered this field by a 1958 Amendment to the Longshoreman and Harbor Workers' Compensation Act and vested in the Department of Labor Authority to promulgate rules and regulations in the longshore industry to promote health and safety. But this doesn't mean, I suggest, that the Court should abdicate their traditional responsibility to promote safety too. And I suggest that a rule which grants indemnity where a stevedore has just any association, innocent or otherwise, with a defective part on the vessel, a defective vessel, a defective condition on a vessel, is a rule which increases accidents. It absolves the shipowner from the responsibility for safety. We suggest that the confusion which has grown out of Crumady and Weyerhaeuser in particular should be clarified and what we propose is a rule which says in effect that indemnity shall be granted. In all cases where the substantial cause of the accident resulted in a foreseeable injury arising out of a substandard performance by the stevedore. In an area of activity where the stevedore's skill and competence should have been the major factor in preventing it. In other cases, indemnity should be denied. We say that such a restatement or re-clarification of the rule in Weyerhaeuser and Crumady will place equal responsibility on shipowner for his equipment and equal responsibility on stevedore for his activities. Thank you Your Honor. John M. Harlan II: Did Weyerhaeuser say anything contrary to that? Martin J. Mchugh: No indeed. Weyerhaeuser I believe says exactly what I say. I say that Weyerhaeuser warned shipowners that you must be safe, when it used the term, you will be entitled to indemnity, absent conduct on your part sufficient to preclude it. This was a caveat it seems to me that unless you live up to recognize reasonable standards of safety, you shall be denied indemnity, but it seems to me that the lower courts in some instances have confused this and I think have confused it when Crumady came along. Crumady said that where a stevedore brings into play an unseaworthy condition, he shall be liable to the shipowner for indemnity, but it's important to note that in the Crumady decision, this Court observed that the primary cause of the accident was the negligence of the stevedore. Now here in this case, the court below apparently paid no attention to the fact that the jury found this stevedore free from negligence, the shipowner guilty of negligence and having -- and guilty of tendering an unseaworthy ship. Hugo L. Black: May I ask you one question? Martin J. Mchugh: Yes, Mr. Justice Black. Hugo L. Black: You're here for the National Association of Stevedores? Martin J. Mchugh: Yes sir. Hugo L. Black: Has there been any substantial change in the contracts of employment between the stevedores and the shipowners since the Ryan case? Martin J. Mchugh: I believe not sir. My -- I haven't made an exact study of this but so far as we can determine, there has been no substantial change in the form of contract. Now frequently of course, a study on this subject would be difficult. Hugo L. Black: What I meant, has there been any efforts, that case was based on an implied contractual basis? Has there been any evidence to make a specific contract that would preclude imposition of indemnity? Martin J. Mchugh: To a very limited extent and the effort has been substantially this, that where the party sit down to write a contract, they say that indemnity shall be granted in these circumstances and then define them, and then they continue and say, “These are all of the understandings implied or expressed between the parties,” and that has been an effort I believe to bypass their effect of claim. Hugo L. Black: I didn't find -- I didn't find any such clause in this particular contract. Martin J. Mchugh: There is not sir, absolutely not. Earl Warren: Mr. Byrne. Thomas E. Byrne, Jr.: If the members of the Court please, I would first like to call your attention to the fact that on page 5 of our brief, we have a typographical error in the citation of a case about the -- just below the middle of the case -- of the page, we cite the case of International Drug versus Yankwich and we say that's in 349 F.2d and of course there is not yet a 349 F.2d, it is 249. William J. Brennan, Jr.: What page is it? Thomas E. Byrne, Jr.: Page 5 Your Honor. William J. Brennan, Jr.: Thank you. Thomas E. Byrne, Jr.: I would first like to dispose, if I may, of a procedural question which was raised in a reply brief served upon us last Friday. That raises the question of whether there was a proper 50 (b) situation presented to the Court of Appeals in this case. I would like to first say on this point, and this is, I'm addressing myself solely to the procedural point now, that there was here a request for, what we call in Pennsylvania a binding instruction, you will find it in the defendant's requests for charge, numbers 3 and 7. We specifically asked the District Court at the end of our case or at the end of all evidence rather to direct a verdict in favor of Ellerman and against the Stevedoring Company, the third party defendant. There was no separate paper for a rule 50 (b) motion filed and if under Cone and the Johnson case, we must file a separate 50 (b) paper then the point is correct. The point raised in the petitioner's reply brief is correct because there was no 50 (b) as a separate motion paper filed. We discussed -- we asked Judge Ganey for a directed verdict in writing and orally. Now unfortunately, since this point was never raised either on the post-trial motion arguments before the Court of Appeals or in the petitioner's petition for rehearing before the Court of Appeals or in this Court -- in the petition for certiorari to this Court. No one has printed specifically that portion of the record, in Third Circuit, we used an appendix system, no one printed those portions of the record where that was, but for example, at page 1140 of the original record, the statement appears by myself, if the defendant is liable on that basis, I think that is the clearest kind of a case for an award of indemnity over, and that is in the discussions among counsel immediately preceding the charge of Judge Ganey to the jury. Again, at page 100 -- or 1113 of the original record, and again unfortunately not printed for this Court, I say, “Judge Ganey, I made a motion at the end of the plaintiff's case and I have handed it a written motion for binding instructions. I renew the request but I am also 21 years old plus and I know that with the attitude of the Court of Appeals, I'm wasting my breath.” That may not sound -- Earl Warren: What was that last -- Thomas E. Byrne, Jr.: I said I -- with the attitude of the Court of Appeals toward binding instructions, I'm wasting my breath and the judge said, “That's quite alright,” let the record show it is denied and again, I'm still addressing myself to that procedural question in the light of this point raised in the reply brief filed only on Friday. I don't -- Earl Warren: Now, what do those add up to the things you've just read to? Thomas E. Byrne, Jr.: Sir, they add up to this that there was a written request for a directed verdict for us, we in Pennsylvania called it a point for binding instructions. The point of the decisions of this Court in Johnson and in Cone versus West Virginia Pulp and Paper seems to be that you have to call this matter to the attention of the district judge so that he will know what you want and he will have an opportunity to rule, consider and pass upon it. And I'm simply pointing out to this Court that that was done in this case and that there was a motion for judgment notwithstanding the verdict made in this case. And I am pointing to the fact that before the District Court on the post-trial arguments, it was said in the written briefs that this was the -- a 50 (b) motion. So that I think sir that on that record, we may not -- let me put it this way, that I don't think it is the practice in Pennsylvania or the lawyers from Pennsylvania who practice before the federal court nor is it the practice in the federal court sitting in Pennsylvania to file a separate paper called a 50 (b) motion. We file a request for binding instructions and we file a motion for judgment notwithstanding the verdict -- after a verdict has been entered and those are argued and this was clearly, forcefully argued to Judge Ganey on the post-trial motions. It was called at that point, a point preserved under Rule 50 (b) and it was specifically so stated in the briefs and not controverted by the petitioner until Friday of last week. Therefore, the Court of Appeals as we say was really exercising the judicial function. It held that there was error in the District Court and that the District Court should have directed a verdict in favor of Ellerman and against Atlantic and Gulf at the trial stage and it therefore entered that verdict following appeal. I really point this out because I don't want this case to go off on this procedural point. The -- unfortunately, we did not have a chance to brief it because it was not raised, but that is the posture of it and I think that we fall outside the scope of the Cone and the Johnson decisions of this Court. And now, I would like to address myself to the case as it comes to this Court as I see it on the merits. I listened rather carefully to my opponent's argument and it seemed to me that we did not have presented the case in the posture which it is before this Court. When the Court looks at the record and if the Court has the appendices before -- the record before it, you will see the type of operation which was going on here. There are photographs taken at later dates of hooks and bales. The stow, and the record is perfectly clear that this was all tightly stowed cargo, and as Mr. Justice Stewart suggested in one of his questions earlier, it had to be pulled out of this tight stow by these two hooks in each of two bands. Now, there were four bands, a minimum of four bands on each bale. There was no effort made by the stevedoring company, having pulled the bale out of its tight place in stow and dragged it and drag is the word used by the longshoreman witnesses at page 25 (a) of this record, dragged across the space till -- it was underneath the point from which it was to be lifted. There was no effort made at that point to see whether damage had been done to this part of the packaging. There was no effort made to take the hook out from under the two straps which had been used in the dragging operation and put them under the two hooks which had not been subjective to that strength. It was after all that had taken place that this bale being hoisted out first one band broke and the second weight was all thrown on -- on a single band, it then broke and the bale fell. It struck a ledge of cargo remaining in the hole and I think that part is clear and it rebounded and struck this longshoreman causing him injury. Now in the charge in which this case was submitted to the jury and I don't think it matters what points were argued, I think that the question is to be decided depend upon what evidence is in the record and what issues were submitted to the jury by the charge of the Court. The Court first submitted an issue of whether this was -- the ship was unseaworthy as to cargo. Now, the Court of Appeals said, “We don't approve or we're going to follow the First -- Second Circuit's decision in another case and not extend the shipowner's -- the common carriers warranty as to the packaging around cargo. We're going to decide this case on the basis of negligence.” Then the Court of Appeals looked to what issues had been submitted to this jury for jury determination by the charge of the court to the jury. Those three issues are -- they are -- appear at page 10 of the respondent's brief where briefly the use of the band and what method of discharging and the failure of the ship's mate to stop that method of discharging and a so-called safe place to work theory having to do with permitting cargo to remain under the hatch opening which cargo formed the ledge and which cargo was cargo going to another port. William O. Douglas: That's the so-called New York cargo. Thomas E. Byrne, Jr.: So-called New York cargo. Now at that point, I want to digress, Mr. Justice Stewart in particular to point out that while Mr. Marshall and the petitioner here make a great thing about this so-called New York cargo and why it was there, there is not a scintilla and I repeat there is not a scintilla of evidence that there is anything improper about having half of your hatch so that you have a wider demarcation for one port and one for the other, not a scintilla of evidence that this should have been taken out at some other port. There is not any evidence and therefore, I say that the petitioner can't make some point out of the whole quote -- of simple argument. If you look at the authorities aside from legal authorities on the way you should stow a ship to preserve its, shall I say overall integrity on a voyage, you don't want empty compartments next to full compartments. That's why you have ships break at sea. That's why you -- that's how you impose structural strain on a vessel which was not designed to carry. You must, when you are going to sea, divide the weight which you are carrying and no one witness in this trial said that there was anything wrong with that. As a matter of fact, when the Court looks at the record here and the testimony of the hatch boss, he testified that this split stow is, it is not along the waterfront, is frequently encountered and in a common carrier vessel, it necessarily must be frequently encountered and no one criticized that but the lawyers. Now, I want to make that point. Earl Warren: Is there anything in the -- in the evidence to indicate that while it might have been a proper procedure to -- to stow this New York and Philadelphia this -- New York and Philadelphia cargoes the way they were sort in -- in India having in mind that the New York cargo would come out first that it -- it was negligence not to take the New York cargo up first but to leave this overlap and -- and -- and create a hazard -- Thomas E. Byrne, Jr.: There's no such -- Earl Warren: -- in -- in taking out the Philadelphia cargo. Thomas E. Byrne, Jr.: There is no such evidence and then let me explain this Mr. Chief Justice. You see, if that were so then you would have the same condition in reverse when you're trying to take it out in New York. If you were taking for example a cargo from one end and leaving in New York as you would necessarily do. What was submitted to this jury in this charge, however, was whether this cargo in the square of the hatch and the words of the judge submitting it were should have been shifted or put out of the way. Now that was a charge -- in the charge of the jury, that was a point submitted under which the Court said to the jury, “You may find the shipowner negligent not for the way in which it was originally stowed there but for not shifting it or putting it out of the way.” That was a -- once you get the jury's answer to the unseaworthiness question and focus on the negligence question in this case, you find that there were three varies of negligence submitted to the jury by the trial judge. One is this failure to put out of the way. The other is the band hook method of operation. Earl Warren: What? Thomas E. Byrne, Jr.: The band hook, the use of this method and the third is the failure of the mate, the ship's officer to stop the work which was being performed by the expert stevedoring company which we are engaged to do the work and I think when you get to the guts of this case, that's exactly what you're going to find that there are three theories submitted to the jury. The Court of Appeals examining the charge said this, “The answer to the -- or of the jury to the interrogatory dealing with the stevedore, all that demonstrates is that the stevedore did not create the condition. Now, that is the language in which the district judge submitted the D1 versus D2 situation to the jury. Did anything that Atlantic and Gulf do create the situation? They ruled out or that language ruled out the whole theory of this Court's decision in Crumady versus The Joachim Fisser where you said that it operated upon it a condition preexisting and brought it into play. Now, that was specifically called the attention of the trial judge that that language of his charge ruled that out but we -- all we have is an exception which the charge was not corrected. So that the Court of Appeals examining the issues which the charge submitted to the jury found that the answer of the jury to that interrogatory didn't cover the whole situation because it only covered the one point. It then examined point-by-point each one of the three negligence theories of plaintiff versus Ellerman and it found that as to each, there would necessarily have to be an indemnification. In other words, if the Ellerman -- I'm sorry if Atlantic and Gulf's method of working was wrong, you could not hold Ellerman liable to the plaintiff without at the same time as a matter of law, graving Ellerman indemnity against the actor, the person who was utilizing the unsafe method. Earl Warren: Mr Byrne -- Thomas E. Byrne, Jr.: Yes, sir. Earl Warren: Can you -- can you tell us whether under the contract, the stevedore could or should have removed enough of the -- the New York cargo before taking the Philadelphia cargo out so as to have removed the hazard that cause this injury Thomas E. Byrne, Jr.: Sir, under the contract, he would have been -- he would have been permitted even I think required and we would have had to pay him extra and it so states right in the -- in the contract and the judge submitted that issue to the jury because that's one of the points that was submitted to the jury, was Ellerman negligent in failing to shift or move out of the way. Earl Warren: I understood -- I understood Mr. Marshall to say that under the contract -- Thomas E. Byrne, Jr.: He did say that. Earl Warren: -- if they'd as much as touched this New York cargo and anything had gone wrong that they would have been absolutely liable for -- for any injury. Thomas E. Byrne, Jr.: I understood Mr. Marshall to say the same thing Your Honor and I think he is quite wrong on that and I think you will find it that there is a provision in this contract. Felix Frankfurter: Which -- in what page. Thomas E. Byrne, Jr.: Sir, I will -- may I give you the page after luncheon because it's a seven-page contract and I don't know where that is. Earl Warren: And may I -- may I say this also to you before -- before lunch. Thomas E. Byrne, Jr.: Yes sir. Earl Warren: On your procedural question, you -- you discussed somewhat Pennsylvania cases. Thomas E. Byrne, Jr.: Yes, sir. Earl Warren: Would you -- would you mind giving us a little memo of the -- of the Pennsylvania cases on that -- on that subject? Thomas E. Byrne, Jr.: No, I wouldn't want but I am not in -- I am not sir saying that Pennsylvania law controls. I am not so arguing. I am simply saying that the practice under Rule 50 as to Pennsylvania courts and lawyers is that you file a written request for a binding instruction before the charge. Earl Warren: Yes. Thomas E. Byrne, Jr.: And then if the verdict goes against you, you file a motion for a judgment notwithstanding the verdict after the entry of judgment within the ten days of that rule. We do not file a separate paper in addition to those that we call a 50 (b) motion. Felix Frankfurter: But that -- but that controls -- but that's relevant in your mind to the point that Mr. Marshall made, isn't it? Thomas E. Byrne, Jr.: Mr. Marshall has raised this judgment -- Mr. Justice Frankfurter in a reply brief and I am -- what I am trying to have explain to this Court is that the procedure we adapted is a compliance with Rule 50 (b) as it is interpreted in Philadelphia and in the Third Circuit and that's my point there. Earl Warren: Well, are there state cases on that subject? Felix Frankfurter: That's not all. Thomas E. Byrne, Jr.: Sir, I don't think the state cases would control. Earl Warren: Well, are there favorable cases -- Thomas E. Byrne, Jr.: There are state -- there are state cases there are -- it's a point that's never been raised in the federal court. Felix Frankfurter: You said this is your practice. That's what you said. Thomas E. Byrne, Jr.: We say this is our practice. William J. Brennan, Jr.: In the federal court? Thomas E. Byrne, Jr.: Yes, Your Honor and I say we -- William J. Brennan, Jr.: And you're also saying that there's no -- there's no objection made to the replied brief (Voice Overlap)? Thomas E. Byrne, Jr.: I'm also saying that -- William J. Brennan, Jr.: There's no point in this litigation until that time. Thomas E. Byrne, Jr.: That is correct. Hugo L. Black: Why would that go then? Why would that change? Thomas E. Byrne, Jr.: Why would -- what change -- if it -- it's not raised? Hugo L. Black: They didn't raise it until then (Voice Overlap) Thomas E. Byrne, Jr.: Sir, if it goes to the jurisdiction of the Court of Appeals to do what it did, you've got to raise it. It can be considered at any time. I concede that -- Hugo L. Black: Are you going to submit a brief on that point as to what would be the effects and why you say if the Johnson case and the other cases do not support the argument? Thomas E. Byrne, Jr.: If -- if may, I shall. Hugo L. Black: And I would think that (Inaudible) Earl Warren: Very well -- Thomas E. Byrne, Jr.: Alright sir. Earl Warren: (Voice Overlap) Mr. Marshall you may -- you may also file a memo on it. We don't need a full briefing but if you'll point out to us the cases and the practice that you rely on. Thomas E. Byrne, Jr.: You see, the -- I don't think that this Court's decision in Cone and the Johnson says that you have to file a separate paper called the 50 (b) motion because you wrote both of those decisions if I recall Mr. Justice Black and in both of them, you speak of a motion for judgment notwithstanding the verdict or a judgment N.O.V. and that we did file in this case. And that -- Hugo L. Black: We proceeded as I recall it about a motion specifically setting -- setting out the specific reasons why the -- you are asking for directed verdict. Thomas E. Byrne, Jr.: We do that in our request for charge and in the Johnson case, you point out in a footnote that that is the Pennsylvania practice and if the federal rules seem to adapt the Pennsylvania practice which is in Pennsylvania is by statute, but I will file a memorandum on that point. I do want to discuss the evidence in this case because I think it's important in view of the fact that petitioner doesn't just ask for reversal in this particular case. He asks that this Court state a new rule of law. He does it under the guise of requesting that this Court define what it means or what it meant in the Weyerhaeuser decision when it used the term something about conduct sufficient to precluding conduct of the shipowners, sufficient to preclude indemnity. Hugo L. Black: Now that's what he asked. Are you asking -- will you take the opinion of the court below that repre -- what you're saying now and (Inaudible) as a direction to enter a judgment against the stevedore or as simply a reversal of that judgment for a new trial? Thomas E. Byrne, Jr.: No, sir. I am taking it as the former. I am taking it as a reversal and a direction to the court below to enter judgment. Hugo L. Black: If that's true, you would have to come within 50 (b), wouldn't you? Thomas E. Byrne, Jr.: I would have to come within 50 (b). Hugo L. Black: But if it's not true, you could still rest on the fact as I recall it that you were entitled a new trial under that court. Thomas E. Byrne, Jr.: Oh yes, I think under the Court of Appeals (Voice Overlap) -- Hugo L. Black: That's the difference. Thomas E. Byrne, Jr.: Yes. But now, I say that the direction of the Court of Appeals is just what I asked them to do and what I asked Judge Ganey to do and that entered judgment in favor of Ellerman here as a matter of law. And I say that we have complied with Rule 50 (b) and that I don't think that that rule requires when you have filed a request for binding instructions. You have -- you have discussed, argued this matter to the judge who is going to charge that jury. And thereafter, you filed a motion for judgment notwithstanding the verdict that you are -- Hugo L. Black: And which you did -- which you did. Thomas E. Byrne, Jr.: Oh, yes. And we argued this to the district judge, Mr. Justice Black. That I think was the point of the -- the reason for your decisions in Cone and Johnson. You said that the rule contemplates that the district judge shall exercise his discretion on this point and I say that that point was clear -- was fully briefed and argued to Judge Ganey. Now denied by him, surely it was but that it was before him, surely it was because we argued it and Mr. Marshall argued it, so that the reason why the Court reached the results it did in Cone and Johnson does not exist in this case. I said that I wanted to go to the evidence here. Here, you have a case where, and it is perfectly evident from the examination of the longshoremen themselves, that this stevedoring company did not instruct its men in the proper method of removing cargo such as this. It was conceded at the trial that if you used the same strap to lift the bale that you used to drag it out that you were increasing the risk that that had been damaged in the drag out operation and therefore might break during the lifting operation. It is clear uncontroverted andn Mr. Marshall's statement of the contrary notwithstanding, that you have somewhere between 3% and 5% of these straps will break during this operation and that one bale in 50 will fall as this one did. Now, that's clear in this record. Hugo L. Black: That is however it's done, do I understand? Thomas E. Byrne, Jr.: Now with this drag out -- Hugo L. Black: The drag out. Thomas E. Byrne, Jr.: Yes, yes sir. Earl Warren: We'll recess now.

Earl Warren: Number 269, Marion S. Felter, on behalf of himself and others similarly situated, Petitioner, versus Southern Pacific Company et al. Mr. Wilmarth, you may proceed. Harry E. Wilmarth: Mr. Chief Justice, may it please the Court. This case involves the provisions for the Railway Labor Act and the rights of rail employees under that and more particularly, the sections dealing with “checkoff” agreements. With the permission of the Court, I'll refer to -- to some of the salient provisions of the Act and the features of it before turning to the facts of the case because we believe the facts which were undisputed will have more significance with the Act is dealt with first and then the facts taken out. The specific provisions of the Act involved in this particular case are set forth in an appendix to the brief of the petitioner, being the green brief and in the back of that brief is divider -- blue divider and the provisions of the Act involved here are set out. As a preliminary manner, the Court will observe Section 2 Fourth on the first page of the appendix which is followed by Section 2 Eleventh beginning on the second page of the appendix. Those two sections were enacted at different times. Section 2 Fourth came into the Railway Labor Act in 1934, Section 2 Eleventh came into the Act in 1951. Section 2 Fourth refers and prohibit influencing or coercing rights of self organization by railroads. I refer to it now specifically because near the bottom of that Section has one of the prohibited acts “checkoff” agreements were prohibited. In other words, Congress recognize the fact that “checkoff” agreements as such or where the railroad checks off dues might be a means of influencing employees and rights of self organization. They specifically prohibited “checkoff” agreements or any form of deduction of wages or dues at that time. That continued in the Act until 1951 when Section 2 Eleventh was adopted which permitted certain form of checkoff. Now, I only advert to that situation for this reason. Since 2 Fourth is still in the Act with a blanket prohibition against “checkoff” agreements except to the extent that it is amended by 2 Eleventh. 2 Eleventh would be considered an exception to the general prohibition provided by 2 Fourth. And I would assume that fact would impel this Court to the consideration that 2 Eleventh should be strictly construed as an exception in the statute to the general prohibition. Now, looking at 2 Eleventh, and on pages -- the bottom of page 2 and page 3 of the appendix, we would like to emphasize two or three considerations regarding that section. The first is subsection (b) of 2 Eleventh permits carriers and organizations -- railway labor organizations to enter into “checkoff” agreements and negotiate those agreements. However, a -- a “checkoff” agreement negotiated by a collective bargaining representative does not become applicable to the craft as such as general collective bargaining agreements do. The statute specifically limits a “checkoff” agreement to the members in the organization and doesn't apply generally to the craft as such. For example, absent a union shop contract, the Brotherhood of Railroad Trainmen may represent the craft of Trainmen on the Southern Pacific Railroad. That craft of Trainmen so represented will be bound by collective bargaining contracts made in it -- their behalf by the Brotherhood of Railroad Trainmen. However, among the craft, there may be a number who do not belong to either the Brotherhood of Railroad Trainmen or any railroad organization. Earl Warren: We'll recess now, Mr. --

Earl Warren: Number 161, James P. Mitchell, Secretary of Labor, Petitioner versus Kentucky Finance Company Incorporated, et al. Ms. Margolin? Bessie Margolin: Mr. Chief Justice and Your Honors. The specific question presented by this case is whether the retail or service establishment exemption from both the minimum wage and the overtime requirement for the Fair Labor Standards Act applies to the business of lending money on credit and purchasing conditional sales contracts, and taking life insurance to insure the borrowers, specifically the business of making small loans and discounting condition of sales contract. The broader and underlying issue that's inherent in this specific issue here is whether the 1949 amendment to the original Fair Labor Standards Act, which was enacted in 1938, whether the 1949 amendment so broadened the scope of the so-called retail or service establishment exemption as to make every and any business within the general coverage of the Act eligible to claim this exemption. The exemption and question is quoted on page 2 of the Government's brief in Section 13 (a) (10), and it provides that Section VI and VII, which are the minimum wage and overtime requirements of the Act, shall not apply with respect to any employee employed by any retail or service establishment under certain conditions. One, being more than 50% of its annual dollar volume of sales is -- of services is made within the State in which the establishment is located. And the second condition being that 75% of annual dollar volume of sales or services is not to resale and is recognized as retail sales or services in the particular industry. William J. Brennan, Jr.: Is there any issue on the 50% borrowed here, Ms. Margolin? Bessie Margolin: Well, there's no issue if we get to that. The Government's basic position is that this exemption has no application whatsoever to the business of lending money to credit companies. And therefore, that there is no occasion or need to determine whether or not 50 -- whether the percentage requirements are met so that -- although, the court below found that they did meet -- the Court of Appeals found that they did meet both of those conditions. The Government's basic position is that there's no occasion to go into those conditions. The Court of Appeals -- the business here, respondent's business is located in Louisville, Kentucky and they make loans both in Kentucky and Indiana which was stipulated. There's no question of their engagement in interstate commerce. It was a pretrial stipulation that they were engaged in interstate commerce and then they are in the production of goods for interstate commerce, their employees, sufficiently to be with the subject to this Act unless they came within this exemption. So that the entire evidence was directed to the exemption point. The rather voluminous records is explained by respondent's endeavor to prove that their lending of money and the purchasing of this discount favor thus constitute sales of services within the liberal language of the exemption. The Court of Appeals accepted respondent's construction of this Act, of this provision stating that the literal terms of -- that the statutory language was so clear and unambiguous and so plainly applied to any business that was engaged in the broadest sense of the term “engaged in sales of goods or in performing services,” that it was unnecessary to look to the legislative history to tell -- to determine what Congress meant by this attention. The Government's position is that this exemption does not encompass every conceivable business that might be said to be engaged in service. That it is limited to the particular kinds of businesses that are traditionally regarded as retail, and the services of a light character, except that the establishment of sales, services, instead of goods. This was definitely the interpretation of the original exemption which was enacted at the time of 1938 that the courts have upheld the law restricted interpretation, but it didn't. This exemption was not intended to encompass everything that could, in the economic sense and the broadest sense constitute a service. And it is -- it is clear that before the 1949 amendment, this exemption was given that limited construction both by the Administrator and by the Court. The exemption at that time, read, simply, that any employee engaged in any retail or service establishment, the greater part of who's selling their services -- servicing is in intrastate commerce. In other words, there was no spelling out except in the general terms of the 50% rule, but there was no spelling out of the 75% with respect to retail sales or sales not recognized or recognized as retail in the industry. Congress in enacting the 1949 amendment or -- as -- did as counsel -- as opposing counsel point out was dissatisfied with some of the Administrator's interpretations of this exemption. What counsel does not recognize, however, is that the legislative history makes it perfectly clear that Congress was dissatisfied with only a very limited aspect of those interpretations and the legislative history makes it so clear that Congress had no -- we had felt no dissatisfaction at all with the basic interpretation of the former exemption. That is, that it was limited to certain types of establishments and did not extend to categories in the financial field and the utility field and the real estate or in the insurance field. Legislative history makes that so clear, that we submit, that it is controlling and conclusive, and clearly shows the error of the Court of Appeals. Prior to the decision of the Court of Appeals in the instant case, every court which considered this issue, and that includes the First Circuit Court of Appeals, in the Aetna Finance case and all three District Courts in the Household Finance and Aetna Finance and in the instant case, every court which had considered this issue and examined the legislative history concluded that the legislative history was conclusive on this and as did dissenting judge in the instant case, Judge Miller dissented here. For that reason, in the limited time available, I would like to emphasize the legislative history. As I stated earlier, there was no question that the administrative interpretation prior to the 1949 amendment, was that this exemption had no application to banks, insurance companies, credit companies including personal finance companies, newspapers, telephone companies and the like that those -- those areas of industry according to the Administrator and the judicial interpretations might save because the personal finance company issue had not arisen, specifically of that issue, but the courts have pretty -- pretty generally upheld the basic classifications of the Administrator. When the proposal -- proposed amendment came before Congress, the sponsors explicitly asserted the legislative intent to do nothing to change, and I'm quoting, “to do nothing to change the previous non-exempt status of establishments” such as, and I'm quoting, “banks, insurance companies, credit companies, newspapers, telephone companies, gas and electric utility companies, telegraph companies, et cetera”. Now, this statement was made in the reports of both the House and the Senate as quoted on pages 25 and 26 of the Government's brief. Felix Frankfurter: May I ask this -- as I understand it, the original Act had the exemption or had exemption for retailers, the category that was exempted, the category or retail or service establishment, is that right? Bessie Margolin: That's right. Felix Frankfurter: The 1949 amendment didn't change those categories, did it? Bessie Margolin: That's our point. We didn't -- Felix Frankfurter: Now, therefore -- Bessie Margolin: -- we didn't change it. Felix Frankfurter: --instead of going to the legislative issue of ‘49 to tell me what it didn't change, would you mind stating what the legislative history was of the original Act, particularly in the reports of the Committee giving the de-limited scope to retailer service establishment that you are giving here. Bessie Margolin: Well, the -- the original legislative history I haven't gone into here because this Court had pretty well expressed what it was in the Phillips case and in the Kirschbaum case, and -- Felix Frankfurter: But didn't -- did those cases turn on the -- on the inclusiveness of these terms? Bessie Margolin: Yes, I think those cases did turn on the certain enroll and elected it too, that those terms did not -- were not used in the broad sense, but were used to -- in reference to the corner grocery store, the drug store, the department store, the -- and the beauty shop, the shoe shop, the -- the barber shop, and service establishments comparable to your traditional retail establishments. Never once was anything mentioned about any credit company being a -- or any financial institution or any bank being in that category. Felix Frankfurter: It was the other way around. You are contending that those terms as used by Congress had to define this -- define meaning of which the corner grocery is -- is typical. Bessie Margolin: Well, I'll say what this Court said in the Phillips case was that the reference was to establishments selling merchandise epitomized by the corner grocery, the drug store and the department store. And in the -- the Roland Electric, recognized the Administrator's interpretation that service establishments was a comparable type. Now, what the Administrator said with respect to service establishments was that, those akin to typical, these typical retailer establishments, except that they sell services instead of merchandise, such as restaurants, barber shops, beauty parlors, general homes, shoe repairs shops, et cetera. Felix Frankfurter: (Voice overlap) Bessie Margolin: But the Administrator explicitly said, he explicitly said, that this did not refer in the financial field to banks. It did not refer to utilities. Those were usually and ordinarily put in a different classification and they were so classified in Government standard classifications for the practical use for industry. And that it was obvious that Congress had not intended to include all of those in this one exemption because it has specific -- other specific -- one of the indications was it had other specific exemptions. For example, exempting small weekly newspapers whose circulation was largely within the State, small telephone exchanges. In -- and in these areas of the -- the -- Congress has indicated to what extent in these other areas exemption was to be granted. Felix Frankfurter: What are these -- what are the classifications by these Senators? Where -- you said in other aspects of Government, there are some other classification. What generalized term is there for establishments that are not wholesale in the -- Bessie Margolin: Well, is -- there's real -- there's agriculture, there's real estate, there's financial industries, there's utilities, transportation, they are several well recognized areas. Felix Frankfurter: Now, assuming you're right, that was fixed both by the administrative construction by the Court upholding of them, but as for the original act, this thing -- the amendment isn't changed, the categories to which the exemption is applied. Can you make them -- some changes with reference to those categories? But they didn't change their categories -- Bessie Margolin: That's exactly our point. Felix Frankfurter: That's why I have to think the burden must be heavy to show, they meant to use the old terms with new meanings. Bessie Margolin: Well, that -- that is the contention that they meant to use the old terms with new meanings and to create a self-sufficient, self-contained definition which any business could come in and bring in experts or bring in their own industry people to prove that they regarded their particular type of transaction is retail. Felix Frankfurter: Because, in fact, they enlarged the exempted areas, enlarged the exempted opportunity, is that right? Bessie Margolin: There's no question that Congress, in demanding this exemption, did enlarge it. We don't deny that. We think they enlarged it pretty -- Felix Frankfurter: And regarding it is -- Bessie Margolin: -- pretty substantially. Felix Frankfurter: -- that for that enlargement of the qualifications for exemption, you enlarge the categories of exemption. Bessie Margolin: That is the -- that's -- that's the respondent's case. That enlarging the qualifications for exemption, Congress opened up the whole exemption and just granted a field day and open season to every -- every and every -- every employer that could possibly be subject to the Act to come in and -- and prove and put the Government to -- to rebuttal. As this record indicates, this is a pretty complicated and complex and kind of a -- a battle of the experts that's involved in -- in trying to determine whether a particular transaction is recognized as retail in -- in a particular industry. We say that -- that the whole purpose of the voluminous legislative history and the whole purpose was to disavow any such intent to -- to open this exemption up to everyone. And the -- that the very reason why the legislative history is so voluminous is that the sponsors were required to answer the -- felt required to answer the charges and the criticism, that this would open -- this was going to expand this exemption far beyond anything that -- and -- that the -- the Congress would be willing to pass. Now, in this connection, I'd like to refer to -- to opposing counsel's reference to twice -- two or three times, he mentioned that the Administrator himself said that these amendments were -- was substituting a wholly, completely new definitions of the retail establishments. What counsel failed to note is that the -- that the Administrator's criticism was one of the very reasons why the lengthy debates were held. That the -- the debates took up the Administrator's charges and the sponsors disavowed repeatedly that there was any intent to expand this -- this exemption to any such extent, and specifically stated that they were adopting the Administrator's basic categories. Every reference that they made to the basic categories to be within this exemption was a paraphrase of the Administrator's basic category that the Court will compare it. We have gotten up because the counsel quotes some excerpts from the legislative history too, some general excerpts. We have prepared and it was submitted to the First Circuit in the Aetna case and to the Sixth Circuit below here. The substance of the legislative history and its -- we have filed copies of it in this Court which brings together in one booklet, all of -- virtually all of the legislative history that bears on this particular point. Speaker: Could you pinpoint -- excuse me -- could you pinpoint exactly what it was that you find the 1949 amendment did to the old statute? Bessie Margolin: Yes, the Administrator, in addition to making this distinction in basic category, said that some establishments, many in fact, frequently, establishments which one would regard as retail establishments also make wholesales or nonretail sales. For example a coal -- coal dealer will sell in small amounts, and he'll also sell in coal, load lots to hotels and apartments and industry. And the question was whether a retail -- whether an establishment that might look retail also engaged in a lot of this wholesale, this wholesale, a quantity of sales, sale for business use, whether that would defeat the exemption. The Administrator, taking cognizance of the fact that frequently, an establishment did both -- made both kinds of sale, adopted this 25% tolerance test which is the forerunner of the 75% provision in the amendment. He said that if a -- an establishment made such wholesale or nonretail sales, and it didn't exceed 25% of its total annual dollar volume of business, it would not defeat the exemption. And in connection with applying that test to the categories that he held were eligible, he said that he would treat it as a retail sale, a nonretail sales, sales for industrial use. This is where the so-called consumer use, “business use” test came in. Now, the Supreme Court adopted that view that a retail sale is something ordinarily for consumer use. And in the Roland Electric case, the Supreme Court approved that and stated it in general terms. Now, that was what Congress was dissatisfied with. They felt that there should be more leeway for your dealers, your coal dealers, and your paint dealers and your other shops to be able to engage in more sales for non-consumer use without losing the exemption. Undoubtedly, the sponsors felt that that type of establishment, even if it -- if it sold -- what -- for business use, was still of the traditional type of retail establishment. And therefore, they put in this provision that if they would -- instead of -- of having the consumer use, “business use” test determine, it should be what was recognized in the particular industry. Now, that was what they hold. If you can't read this legislative history without seeing that that was the thing, they were primary -- primarily concerned with, if not solely. And the sponsors themselves repeatedly said that was the only substantial difference between their proposed amendment and what the Administrator had been doing. That was the only substantial difference. And as I say, they repeatedly, explicitly said that credit companies, banks, public utilities, telephone companies were not to be -- were to remain non-exempt. They recognized they were non-exempt and so they were to remain that way. And of -- of -- what I want to point out is that the approach of respondents, the construction respondent's take of this amendment, and of the court below, means not only that credit companies or small loan companies, personal loan companies, not only that those would be eligible for this exemption, but they frankly concede that their reasoning, the manner in which they construed this exemption means that banks, insurance companies, newspapers, telephone companies, utility companies, telegraph companies, transportation companies, all of those can come in and if they can show that the 75% of their services to -- is to consumers or individual use, or that -- even if it isn't, if it's recognized in that particular industry, if they call it retail, they can show that they're entitled to this exemption. I'd like to refer from (Voice overlap) Earl Warren: This had been uniformly against that, Ms. Margolin? Bessie Margolin: The? Earl Warren: The practice -- the administrative practice has been in contrary to that? Bessie Margolin: It's -- it's been uniformly -- these -- this type -- these types of businesses, in fact, the courts have uniformly held that they are within the coverage of the Act. Earl Warren: Yes. Bessie Margolin: And the -- the legislative history on the coverage provisions repeatedly say that the utilities and the insurance -- not the insurance companies, the utilities and the newspapers, they have specifically approved all the decisions holding them subject to the Act. I think when it's realized that the reasoning of respondents carries and necessarily imply that all of these other businesses become eligible for this exemption, there can be no question that Congress has no such intent. Felix Frankfurter: Ms. Margolin, would you enlighten me about the administrative practice. Name businesses that get rulings from the Administrator, as to whoever they are or are not covered in the exemption. Bessie Margolin: Yes. Well, they -- he certainly gives a lot of rulings and they are protected by them. Of course they -- Felix Frankfurter: I mean -- I don't mean bulletin. Bessie Margolin: Yes. He gives -- Felix Frankfurter: He did have a bulletin but made a John Jones where they go write and find out -- Bessie Margolin: Yes he may. Felix Frankfurter: And you say that under the law -- Bessie Margolin: We -- Felix Frankfurter: (Inaudible) Is that right? Bessie Margolin: We tried to -- we tried to advise them as much but of course, the volume sometimes gets too much for us and then sometimes the delay, but they certainly -- we certainly do send out many such opinions advising particular companies of -- of their view of the Act. I might -- Felix Frankfurter: There must be a -- there must be an area where you can't tell right off the bat what it is? Bessie Margolin: Well, of course, there's some -- something that we -- some that we can't always tell, and we frequently say that our best information or advice on the present state of the law is such and such. I would like to reserve the remaining five minutes if I may. Earl Warren: You may. Mr. Levin. Harold H. Levin: Mr. Chief Justice and the Court. (Inaudible) my knowledge. Our position in brief is this. Congress never intended to encompass local activities within the Act. Mr. Justice Frankfurter and other justices of this and the former members of the Court have warned the courts not to absorb by -- by adjudication that which Congress left to the State. And it certainly is clear from the legislative history that local activity which can better be served under the jurisdiction of the States as Mr. Justice Black well knows, because of the statement he made in the -- in the polls of the Senate, that they were left to the States. And our claim is that this is the kind of an activity at the end of the stream of commerce. This does not affect interstate commerce which should be lodged with the States in general. Specifically, we would point out that -- and if Mr. Justice Frankfurter was expressing an opinion, I would have to take objection to it, to differ with him, the categories were not established by the first -- by the enactment of the -- of the Fair Labor Standards Act. The -- Felix Frankfurter: You're saying they were not changed by the amendment? Harold H. Levin: I say they were certainly changed. Felix Frankfurter: It wasn't. Harold H. Levin: They certainly were changed and that it wasn't -- Felix Frankfurter: And it's the same words -- the same words were to be given different context from what they have been given, leaving out what -- what was or was not given. Harold H. Levin: No, I wouldn't say that, Your Honor. I would say that when the original amendment had no definition, the Administrator was free as he did, to make interpretations of his own, and many of them were adopted by this Court. Congress was not only dissatisfied with the consumer versus the “business use” test. It would have been a very simple thing to add two lines to the amendment and say that this -- that the fact that something is sold to -- for business use, it was not to be considered necessarily wholesale or -- yes, wholesale. They were concerned greatly with the broad expansion of the Act in 1949. If, Your Honors, will recall, an amendment was made of the definition of production because that had been too broadened. The Beetle amendment had been virtually killed by the administrative interpretations of the amended Act. When they got around to talking about this retail exemption, the Administrator, appealing his oath, so to speak, had the Lesinski Bill introduced, which was designed to approve of all of the administrative interpretations. But what happened was that the Congress objected and the Harlan Lucas Bill was introduced in its stead, precisely because that the Congress found the interpretations inaccurate. They used such words out of thin air, “Vacillation,” and one of the Senators said, if you -- if you left it to -- to the Administrator, “You would exclude everybody from the exemption and include everybody under the Act whether they were local or not.” And so, they adopted a precise definition and they said specifically, and this is addressed to the statement about category. They said, “We're not going to have the same test in every situation. We're going to go to the industry. And whatever is regarded as retail in the industry is to be regarded as retail. What is regarded as wholesale is to be regarded as wholesale. ” And they said -- Felix Frankfurter: Was there any change made as to what -- what enterprise is to be judged whether it is retail, it doubtless made the changes as to what constitutes retail -- Harold H. Levin: Right. Felix Frankfurter: -- something about that. But if they make any change or if they manifest any change in the starting point, in the base question namely, as to what enterprise you require words -- Harold H. Levin: Well, I think so and of course, that's a matter of interpretation. And if Your Honor pleases, we take the position as did the Court of Appeals. Was -- that when a statute is clear and unambiguous on its face and if you look to the legislative history, and you get confusing answers, as Mr. Justice Frankfurter once said, we have a right to take a look at the statute. Felix Frankfurter: Was it -- was it made -- was that part the exemption? Made any clearer about the ‘49 amendment and it was by the city -- Harold H. Levin: I think most certainly. When the exemption merely read that “An establishment, the greater part of whose sales or services is intrastate, shall be exempt”, it meant nothing. It -- it had no definition, but when it got down to the 1949 amendment, and I'm going to come to legislative history which I'm going to read to you, where not only did they say, “We're going to go further, we're going to define what is retail,” what is a retail service establishment, Your Honor. Those very words were used by the Senate sponsor. And when they went that far, then I say that one has no right to say that the categories were not changed. They left it to the industry to determine what the categories are, and I might say a word about our establishment. It's inaccurate to describe it as one selling insurance or something of that sort or merely buying discount paper. This is a little store, ground floor office, where a poor working person comes in and borrows $5 to $300, the average is $200. They make an application and a telephone call is made to check on the employment record and they are given this money. At high interest rates, I'll agree. But much lower than the -- than the earlier, before the uniform small no longer established, the -- the sharks got after them and got much higher rates of interest. These are regulated by the State. That's one aspect of the business. Testimony is clear and undisputed that the purposes for which these loans were made were for household goods, for school expenses, for clothing, furniture. Nothing could be more local in the sense that this Court or rather retail in the sense that this Court described it when it talked about consumptive purposes rather than business purposes. And by the way, we claim we come under the amendment regardless -- we -- we come under the -- the exemption regardless of whether we are talking about the old or the new law. The courts never tested the ruling of the Administrator on this question. And so, we come to the discount operation. Now, what happens there? A person goes in to buy a radio or a television set and hasn't the money. A telephone call is made to this office and they check the credit of the individual and if the credit is good, the credit is advanced and allowed. We take the paper and we take the -- collect the money on the debt. So that as the court below found, also these establishments are a single unit engaged in lending money to individuals, not the businesses for consumptive purposes. There's no re-lending, no element of resale. Now, that brings us to this question of recognition in the industry, and if the statute is to be interpreted in its plain meaning and -- and language, the question arises whether the industries, the financial industry recognizes this establishment as a retail establishment. Well, we have testimony from Elmer (Inaudible) Trust Company of the First National Bank of Chicago, Mr. (Inaudible) Trust Company of New York and Leon Henderson, they all agreed that there is a very definite distinction in the financial industry between wholesale and retail. And that these small loan offices are regarded as a retail into the industry. That to tonight -- Hugo L. Black: Did you find anything in connection with the hearing's final report that indicated anybody else thought about this at all? Harold H. Levin: No. Mr. Justice Black, I would have come to that right now, this business is about credit companies. Is that what you are referring to, Your Honor? Hugo L. Black: But -- but this people being treated as a wholesalers or retailers. Harold H. Levin: Well, there was nothing said about any particular industry. The only thing that was said, and I agree with my adversary, that mention was made of a number of the categories which she referred to. Well, I call this to Your Honor's attention that at the end of the list of establishments which they mention specifically, the Senate sponsor said, and he talked about taxicab company, (Inaudible) service companies and then he -- and hotels and so forth, and then he goes on to say and other establishments performing local services. That's the end of the -- Hugo L. Black: Who would you think should be a wholesale money lender? Harold H. Levin: The -- the First National Bank of Chicago, whose vice-president testified in the Household case and the testimony came over to this case, lends millions of dollars to the Household Finance Company, which in turn lends it to the individual. In a recent article in the Life magazine, they'd talked about the merger of Morgan & Company with Chase -- no not Chase, First National Bank -- in any event, whatever company is it's -- whatever bank, is it Chase? Speaker: Yeah. Harold H. Levin: I quote it in my brief because I thought it'd be interesting to know that even in the -- even the general public talks about wholesale and retail in the financial industry. They say that both of these companies, both of these banks are wholesalers of credit as distinguished from those who lend money to individuals for consumptive purposes. Earl Warren: There is a small building in the loan association about as much of local in character as you are -- so far as consumptive -- Harold H. Levin: Well except that --. Earl Warren: -- was a concern -- Harold H. Levin: Well, it's a close one but the building and loan association is one which lends money for building purposes, which is something much more substantial than lending money for the buying of radio or television or to pay school expenses. Earl Warren: That is with more money. Harold H. Levin: Well, that's a very important element. In fact, my learned adversary would agree with me that size has a great deal to do with them. In fact, one of the things that the -- Earl Warren: Size of each of the -- Harold H. Levin: The size of the loans, yes, yes. The size of the -- the amount of coal that sell determines in the coal industry whether its wholesale or retail and the size -- size of the loan would definitely determine the -- Earl Warren: When you say loan to a person or a home was hosted, would you? Harold H. Levin: Yes, I think it would be. I think it would be because it's not a small loan. It's not the kind of a loan that -- that it takes care of consumptive purposes, things that people -- people use up immediately. Now -- now then, to the legislative history. The -- in the first place, Mr. Justice Black, when he served as chairman of the Labor Committee of the Senate in connection with the original Act stated, and he is quoted by Congressman Lucas as an introduction to this Act, the bill carefully excludes from its scope -- no, that wasn't it. The -- the bill was not intended to and it did not attempt to fix minimum wages and maximum hours in the very peculiarly local business units of the nation. And then, Mr. Justice Black stated, "Businesses of a purely local type, which serve a particular local community, and which do not send their products into the stream of interstate commerce can better be regulated by the laws of the communities and of the states in which the business units operate. That's as to the original Act. Now, with respect to the 1949 Amendment, Congressman Lucas -- William J. Brennan, Jr.: May I ask you-- may I ask you, is the X dollar as regarded is the one that was said? Harold H. Levin: The 1938 Act, yes. William J. Brennan, Jr.: Is that the one the House said? Harold H. Levin: I beg your pardon? William J. Brennan, Jr.: Is that one House said? Harold H. Levin: Yes. William J. Brennan, Jr.: The one you understood? Harold H. Levin: The one that you spoke of? William J. Brennan, Jr.: It's pretty bad. It's pretty serious to change. Harold H. Levin: I beg your pardon. William J. Brennan, Jr.: I thought is pretty seriously changed in the House. Harold H. Levin: Do you mean at the original Act? William J. Brennan, Jr.: Yes. Harold H. Levin: Well, then I -- I will give the Senate report on the bill which states, “The bill carefully excludes from its scope business in the several states that is of a purely local nature. It leaves to local state and local community their own responsibilities concerning those local service and other business trades that do not substantially influence the stream of interstate commerce, and this establishment certainly doesn't influence the -- the stream of interstate commerce. William J. Brennan, Jr.: As I recall it, I may be wrong, the original bill that I was suggesting then is the same on some of that language. Harold H. Levin: This language. Well this is a Senate -- this is a senate -- William J. Brennan, Jr.: (Inaudible) Harold H. Levin: Your Honor, I am quite sure this is a Senate report on the final bill because it is quoted in one of this Court's cases and that's where I got it from. William J. Brennan, Jr.: Yes. Harold H. Levin: And it ends with a statement for example, the policy in this regard is such that it is not even intended to include in its scope those purely local establishments located near state lines and therefore, the -- the retail exception. Now, Senator Holland -- William J. Brennan, Jr.: Did you find any indication that any other possess that, the one between wholesale and retail into the money? Harold H. Levin: No, I don't think that it was even thought of, but I think I said I was going to take up that credit company business which seems to be bothering some of Your Honors. We had a ruling, Mr. Justice Frankfurter. A ruling was asked by the personal loan companies as to whether or not they were covered by the Act and whether or not they fitted in to the retail exemption. And the ruling encompassed banks, insurance companies, building and loan associations, and personal loan companies, all grouped in that order. Now, the strange thing happened when the question was put, obviously, on half of the Administrator in the courts of the debates as to whether or not this category was to be exempt or not under the amendment. And curiously, there were credit companies which substituted for personal loan companies, which indicates the danger of giving too much reliance on legislative debates, because credit companies, if we read the dictionary, refers you to the commercial credit companies. As we all know, they're obviously wholesalers. Credit companies were thrown in with banks and insurance companies, also obviously wholesalers. Now, my adversary, in her fine brief, says – well, a small loan company is a credit company. Our answer is, so is a pawn shop, so as a credit retail store, or a furniture store which sells goods on credit. But certainly, they were encompassed by this credit company classification. If the Administrator wanted a definite opinion, whether we agree or not that legislative history should be planted so that it can be used at the time of the harvest, makes no difference. But I have no objection to the -- to the legislative history being injected with the question of that kind. But why it wasn't made clear that they were talking about personal loan companies? Exactly the same language is used as in the ruling except for this substitution of credit companies for personal loan company. Felix Frankfurter: What -- could you tell us what the rule -- what ruling you got? Harold H. Levin: What would what? Felix Frankfurter: What ruling did you get? Harold H. Levin: I got a ruling that it was not --- they were not in the exempt list but the Administrator never dared to go to court to test it. Felix Frankfurter: By the way, have there been a ruling on the pawnshop, what are they? Harold H. Levin: Oh, the pawnshops are clearly on the administrative exempt list, also a retail. Felix Frankfurter: Is it like a corner grocery? Harold H. Levin: Oh well, I don't know what he calls it, a corner grocery. He doesn't restrict his -- his exempt list to corner groceries by a long shot, unless Your Honor, thinks, that a crematorium and a dance hall, and a hotel is also a -- are also -- Felix Frankfurter: Have they been all ruled on? They've all been ruled on? Harold H. Levin: All have been ruled on, yes. Felix Frankfurter: (Inaudible) Harold H. Levin: They are all considered exempt retail establishment. Felix Frankfurter: Or anything that have to be included what might be called the neighborhood? Harold H. Levin: No, I think that everything that could -- that would exclude any concept of wholesale. You can't have a wholesale crematorium and you can't have a wholesale loan to an individual to buy his good. Felix Frankfurter: I'm sorry to hear they have some (Inaudible) Harold H. Levin: I beg your pardon? Felix Frankfurter: They could have a wholesale crematorium. Harold H. Levin: I know. I'm sorry to say that too, Your Honor, and I share your view on it. Now, the Senator Holland was asked whether this amendment would add to the number of the exempt people and his answer was no. Insofar as concerns, those who are exempted under the proper meaning of the original Act, the answer will be yes, as to an undetermined number which are included in the field that has been included within the jurisdiction of this Act by interpretive ruling. Now, the word “traditional” was used here that the -- the establishment must be retail in the traditional sense, but this is what the House sponsor said about -- about traditional. He used the word “traditional”. He says, "My amendment clears that up by exempting the establishments which are traditionally regarded as retail. It is only in that sense that it clarifies such doubt that my amendment can be regarded as expanding the present exemption, but in real sense, it is not expanding the exemption but simply confirming it, for those establishments which Congress always intended to exempt” and this was said in the spirit of criticism. “The contrary view must assume” and this is important on the word “traditional,” “that in granting the retail and service establishment exemption, Congress intended to reject what is traditionally recognized as a retail or service, as a retail sale or service, in an industry and to adapt an arbitrary concept of what is retailing or servicing.” Then later, the -- the -- Hugo L. Black: Who said that? Harold H. Levin: I beg your pardon? Hugo L. Black: Who said that? Harold H. Levin: This is the House sponsor as I recall it or is it the Senate sponsor, one of the two. Hugo L. Black: Are you depending -- are you relying on the word “retail” or “service” establishment? Harold H. Levin: Service -- service -- retail service establishment, I think you have to read the -- read two together in a sense. Hugo L. Black: (Inaudible) Harold H. Levin: Well, they say retail -- Speaker: (Inaudible) Harold H. Levin: Yes, they say retail or service. I'll accept, Your Honor's correction, but I'm not sure that you wouldn't have to consider them also a retail in the -- in the sense that we've been talking about it. Now, the Senate -- Senator Taft said, in those power of Lucas said, that the amendment was to have the effect of confirming the exemption for the various local neighborhood businesses, to call it was the original purpose of the existing law to exempt. And on the subject of definition, as Senator Holland said, and this has to do with the question of categories. Senator Holland said, “It is our desire to clarify entirely the status of retail and service establishments by defining them, defining establishments and letting them know, beyond per venture, of doubt whether and when they are in fact, exempt from the provisions of the law. It is of you, the sponsors of the amendment, that is, the duty of the Congress at this time while the Act is being amended,” and they weren't just talking about consumer test. “To clarify the meaning of the terms ‘retail establishment' and ‘service establishment.” I think your father is -- is right above that, and service establishment so that every person affected thereby, both employers and employees, including, of course, the administrator and the staff, will know who is intended to be covered and who is not. And then, as my friend said, the -- the Administrator objected to the Act, precisely because it would supply a definition. And this is what he wrote to the -- to one of the Senators and it was read in the Senate. He said, “The bill would substitute a completely new set of definition.” And I'd like Mr. Justice Frankfurter to hear this because he talked about categories, you'll excuse me for suggesting it. “The bill would substitute a completely a new set of definition”, said the Administrator, “Of a retail or service establishment in place of the clear definition now recognized by the courts. Years of litigations,” he said. “He would be required to determine how the exemption should be applied. The amendment would give rise to exceedingly difficult problems in administration since it is by no means clear what different industries regard as retail sale.” So, that I think there was an intention to provide a binding and controlling definition and if there's any -- if you aren't convinced of that, I have one more, says that here. Hugo L. Black: Do you think he was talking when he said retail sale, about retail services? Harold H. Levin: He -- he was including both. There isn't any question about that. I don't know whether I cut it off before the end of it, but -- but I think -- I think that there isn't any doubt that he was talking about retail sales or services. Felix Frankfurter: I can give a consult to -- but you called my attention, quite properly, by saying he's naturally worried of having exemption defend on what witnesses will testify is regarded by the investor and not regarded by the industry. That opens up not a difficult question, doesn't it? Harold H. Levin: Yes, sir. Felix Frankfurter: Do you have to put witnesses on the stand? Harold H. Levin: Yes, it does. Felix Frankfurter: That is, the administrator puts conduit witnesses. Harold H. Levin: That's right, Your Honor, but -- but that objection is not new. Felix Frankfurter: No. Harold H. Levin: It was raised in the Senate. It was raised -- Felix Frankfurter: What I'm -- what I'm saying is that he addressed himself to that difficulty. Harold H. Levin: He addressed him -- Felix Frankfurter: But does not thereby imply that you open up a whole new door as to what is a retail business. I don't even (Inaudible) I -- I don't think I'll be called about it daily, so I have to be given an end. Harold H. Levin: All right. Now, let's take -- take the next one. Senator Holland said that under the third test any sale or service, absolute resale will have to be treated by the Administrator and the courts as a retail sale or service, so long as such sale or service is recognized in the particular industry as a retail sale or service. And he went on further and said, “The Administrator and the courts, as well as the people who are in business, are warned that the rules prevailing in the business, the understanding of the terms in the business, would apply with the complete knowledge that the same would not apply in every industry.” Earl Warren: Well, I don't see on that how then you can make a distinction between a small local building and loan and the small loan company? Now, it just seems to me that there isn't any difference between the two. Harold H. Levin: Well, perhaps -- perhaps I ought to be prepared on that, Your Honor, but well, I am not here representing a building and loan association or a small or -- nor do I know how they operate. I know some of them operate in very fancy buildings and like banks and lend very substantial sums. Earl Warren: There are some very big credit companies too -- Harold H. Levin: There are big credit -- Earl Warren: -- and small -- small loan companies nationwide -- Harold H. Levin: There are, there are but the -- Earl Warren: -- they could be. Harold H. Levin: That's correct, but you're talking in terms of what the employer is or does. I agree with Your Honor 100%, but if you're talking about -- and this doesn't happen to be one of those. But if you're talking about what happens and what the employees do, and we certainly have been warned sufficiently by this Court. That is what the employees do that counts and not what the employer does, then I think the question is, are these employees engaged in a local activity or aren't they? Are they engaged in an activity where they are dealing at the end of the stream of commerce to “the Administrator” or are they not? And I -- I assert that the Congress, in adapting this amendment, definitely indicated that it was going to leave it to the industries, that is not leave it to the industries, but permit the industries to say what is their custom and practice and then have the courts or the Administrator, and the Administrator determine what is correct. Now, the fear that this would open the -- the door to a tremendous number of -- of cases is not -- has not been realized. This is the first case on the subject, in this Court, and the only -- there are only two or three cases besides the small loan cases that -- that I have come across in all of the Circuits. I want to call, Your Honors' attention, if my time is not up. I think I have five minutes. I want to call attention to -- to this aspect, the one referred to by the Chief Justice. One of the objections to the amendment in Congress was that it would leave it to the industry, and that therefore, it wasn't a good idea. This industry recognition test was therefore called a joker. But the answer given by the sponsors was and I quote, “Under the amendment, the courts would decide the question of what sales or services are recognized as retail in a particular industry.” Now, that decision has been made by three -- every court that's heard it. Each of the three lower courts have agreed that this business is recognized as retail in the financial industry. They have the qualifications where we lost, based on the claim that you cannot apply the retail exemption to personal loan company. Now, Senator Holland said, “How better could the matter be left than by recognizing the dividing line between retail sales and wholesale sales in a particular industry of the thousands of industries which will be affected by the law.” And Senator Taft said, hardly, and this is the answer given in the House of Congress, “Hardly, an industry can be found in which the question of what is retail and what is wholesale had not been settled for years. It is a question of fact, just as much as any other question of fact. It is a question of fact which we are perfectly able to determine.” Now, with those pronouncements, I don't see how it can be said that an establishment, which is recognized as retail, as a retail service establishment in an industry, can't qualify unless it meets some preconceived idea of what is a retail service establishment, whether that preconceived idea comes from the Administrator or anybody else. And I might say this to, Your Honors'. I know that you have held and we are reminded that the -- great weight must be given to the Administrator, but the Administrator in -- for a long time has served as an advocate to expand this very good Act and to limit exemptions under it. And when he's defeated in Congress, he turns to the Court. In fact Judge Magruder had occasion to -- to comment on that in connection with the (Inaudible) amendment where he said that the administrator would have us decide this -- this case as though the amendment had not been adapted, and that's what the Administrator is trying to do in this case. Thank you, Your Honors. Felix Frankfurter: How do you justify the pawnshop, Ms. Margolin? Bessie Margolin: We do not say that a pawnshop, as such, is within this exemption. We say that to the extent that if it make sales, it might be, but its lending activities are not. As a matter of fact this is a -- Felix Frankfurter: (Voice overlap) pawnshop, is that right? Bessie Margolin: It's a bailment more than a sale. We say to the extent that they make sales. They are engaged in retail sale, but we do not say that it is such, but its credit transactions are -- are retail. Now, these people are engaged in nothing but the extension of credit. They are dealing with money, not -- not goods or services. A loan is a loan. It's a service only in the broad generic sense that Mr. Henderson and the other economic experts testified and they admittedly testified -- some testified on the theory that every economic endeavor is either a service or sale of goods. Every economic -- couldn't think of anything they wouldn't be and that's the whole theory of the claim here. If you look at the language of this exemption and because I haven't argued it, doesn't mean that we are conceding that the court below was correct in saying this language as clear as a bail. We think the language on its phase is in apposite to the making, to the lending of money. As a matter of fact, the stipulation provides they are engaged in purchasing these accounts receivable. There is no sale of -- of anything there of goods or services. Felix Frankfurter: If they purchased, somebody must have sold it. Bessie Margolin: Yes, but they are not selling and this applies only to an establishment that's engaged in selling something. William J. Brennan, Jr.: What's the classification of banks? Bessie Margolin: I beg your pardon? William J. Brennan, Jr.: What's the classification of banks? Bessie Margolin: A bank is classified as non-exempt in the non-exempt financial category. William J. Brennan, Jr.: Why? What's the basis for that? Bessie Margolin: Well, the -- the original basis the Administrator originally adapted, he was following the stand -- primarily the standard -- industrial classification that the Government had established for other purposes. And as I say, that was approved by the Court. In fact, the record in this case, one of the exhibits of -- of the respondents carried over from the Household Finance case specifically state merchandising and -- and financing are two distinct industries. Hugo L. Black: How does the local -- Bessie Margolin: I mean this was -- this was generally recognized. The -- the government's standard industrial classifications treats finance and manufacturing and real estate quite -- in wholly different categories from the service trades. Hugo L. Black: What about a bank in a small town? What about that? Bessie Margolin: A bank in a small town would not be exempt. Hugo L. Black: What's the line of distinction there? For you it's not -- Bessie Margolin: That it's just not -- it's just not in the category of a retail establishment. Now, it may be that some of their -- that if they don't engage in interstate activities, many of their employees would not be exempt. This exemption was -- was originally, as this Court stated, put in to take care of -- to kind of --to kind of supplement the local retailing capacity exemption, in the Jacksonville paper that was stated. And it was early interpreted, to have nothing to do in the -- in the other distinct types of industries. Now, I did want them to make -- take some time to make a response to this picture of this little local basement office that counsel has painted. The stipulation -- in this case, the interstate activities of the small loan business was not developed or were not developed because of the stipulation that they were sufficiently engaged in interstate activity. Hugo L. Black: Where that stipulation? Bessie Margolin: The stipulation is -- is in the record and I don't think there's any question about it. If I don't need to take the term, it is definitely stipulated, but they weren't sufficiently engaged to be within the general coverage terms if they were not within this exemption. Now, I take it that the Court isn't concerned with this question related specifically to this particular small loan company. That what we're concerned with here is whether the -- this exemption applies to the small loan business generally in this country, and that is one of the -- the exhibits in this case. It says that a small loan business is not a small business. That's big business. It's a billion and a dollar a year annual business and its -- the bulk of it is in the hands of 20 huge chains, nationwide chains, closely integrated. And I see my time's expired, but I will refer the Court to the decision in the Aetna Finance case, the First Circuit's decision to see the interstate character of this business is -- but it's certainly not purely local.

William H. Rehnquist: We'll hear argument next in No. 03-5165, Marcus Thornton v. the United States. Mr. Dunham. Frank W. Dunham, Jr.: Mr. Chief Justice, and may it please the Court: The central issue in this case is whether the Government, having failed to prove that the police initiated contact with Petitioner Thornton while he was an occupant of his automobile and having failed to prove that when Mr. Thornton was arrested, that he was even within reaching distance of his automobile, may rely on New York v. Belton to justify a warrantless, suspicionless search of Mr. Thornton's automobile incident to arrest. Now, it's the Government's burden-- Sandra Day O'Connor: Well, now, Belton did involve a car search after the suspects had left the car and were under arrest. They weren't in a position to reach into the car. Frank W. Dunham, Jr.: --They were within reaching distance of the vehicle, Justice O'Connor. Sandra Day O'Connor: And arrested. Frank W. Dunham, Jr.: They... they were standing by the side of the car at the... at the moment of arrest. Sandra Day O'Connor: Right, but then they were disabled by the arrest. They couldn't reach into the car, and after that, the search occurred, and we... we said, okay, that you could search if... for a recent occupant of the vehicle. I just... I think the reasons articulated in Belton weren't all that clear, but it may cover this case. Frank W. Dunham, Jr.: Well, Your Honor, I... I believe that when you focus on the word recent, it's not a very bright line test unless you flesh it out and give it some definition. I believe I was a recent occupant of my automobile this morning. Somebody could say I was recently in that, but that wouldn't mean that they could go search it. Well, the facts show-- Sandra Day O'Connor: Do we know from the facts here? Frank W. Dunham, Jr.: --a lot less... the facts here show a lot less time, but recent doesn't give the kind of clear bright line that Belton said it was trying to draw because it... it's open to a lot of interpretation. Our-- Ruth Bader Ginsburg: How about moments? William H. Rehnquist: You conceded... the Fourth Circuit said that it was conceded in the... that he was in close proximity to his vehicle when Officer Nichols approached him, and the record does conclusively show that Officer Nichols observed Thornton park and exit his automobile and then approached Thornton within moments. You don't dispute any of that I take it. Frank W. Dunham, Jr.: --No. Those... those are the facts of the case, Your Honor. But moments again... is he... is he 5 yards, 10 yards, 15 yards away from the vehicle? We... I think we need to go back to what Belton was all about. Belton said that it concerns the proper... quoting at page 459 of the Belton opinion, it says the proper scope of a search of the interior of an automobile, incident to a lawful custodian... custodial arrest of its occupants. And the Belton rule itself says, quote, at page 460, when a policeman has made a lawful arrest of the occupants of an automobile, he may, as a contemporaneous incident of that arrest, search the passenger compartment of that automobile. Belton was focusing on that highly dangerous situation when a police officer initiates contact with and approaches a... an occupied vehicle. As this Court recognized in Pennsylvania v. Mimms, that may be the most highly dangerous situation an officer faces. Ruth Bader Ginsburg: But there was no search until the... Belton was... wasn't he in... in the patrol car by the time they started the search? Frank W. Dunham, Jr.: So was Mr. Thornton, Your Honor, and I-- Ruth Bader Ginsburg: But... so I... that's what I don't... it's quite different from search into... incident to arrest. The... the area around the defendant, the defendant may still grab a gun. But the one thing we know is that when the defendant... when the suspect is sitting in the patrol car with handcuffs on, there isn't any danger that the police faces when they're doing the search. When they arrested him, yes, but not when they search... do the search. Frank W. Dunham, Jr.: --I would agree with that 100 percent, Your Honor, but the converse of that position is that in order to do the search, the... that he's allowed to do under the Fourth Amendment, that... that right to search fixes at the moment he effects the custodial arrest. You don't want to... or it's not reasonable to require the officer to conduct that search with the suspect at his elbow. So while I would agree with Your Honor as a... as a very practical matter, there is no danger to the officer in the situation where the man is arrested, stuffed in the back of the squad car, and then we go search, that's kind of a fiction. But on the other hand, it may be a kind of a reasonable fiction because otherwise, the converse is, if the officer is going to search the car, he's got to do it with Mr. Thornton or Mr. Belton standing right beside him. And that's why-- Ruth Bader Ginsburg: So you don't object to the search taking place when there's no danger to the officer, but you say in order to do that non-dangerous search, the officer has to put himself in danger when he makes the arrest. Frank W. Dunham, Jr.: --That's... that's right. I... and I... and I believe, Your Honor, that's why... this case is really presenting a situation where we're dealing with the harm to the Fourth Amendment instead of really dealing with potential danger to the officer. Modern police practices are going to have a Mr. Belton or a Mr. Thornton in the back of the squad car at the time these searches incident to the arrest under Belton or whether you're operating-- Sandra Day O'Connor: Was there... were there reasonable grounds here, do you concede that, for the Terry pat-down of petitioner? Frank W. Dunham, Jr.: --Your Honor, there may or may not-- Sandra Day O'Connor: Is that contested? Frank W. Dunham, Jr.: --The... that ground, that exception to the warrant requirement was not advanced by the Government below. Sandra Day O'Connor: All right. I mean, there was a Terry stop. There was a pat-down. Narcotics were found. He was arrested. Right? Subsequently the search. Frank W. Dunham, Jr.: That's correct. We-- Sandra Day O'Connor: Of the vehicle. Frank W. Dunham, Jr.: --We have not-- Sandra Day O'Connor: Now, had... had the officer not made an immediate search of the vehicle, presumably the police would have to have taken precautions to safeguard the car and make an inventory search of it. So they're going to find the stuff anyway, aren't they? Frank W. Dunham, Jr.: --Well, Your Honor, the... the Fourth Circuit did not address-- Sandra Day O'Connor: Isn't that right? Frank W. Dunham, Jr.: --Well, not necessarily, Your Honor. We're not conceding that particularly in this case. We're not saying that there... this case involves a car that was parked in a... in a shopping mall parking lot. And the only motor vehicle violation didn't authorize a towing of the vehicle. So that the... the... there is an inadequate record below with regard to whether or not there would have been an inevitable towing and inventory of this car. Anthony M. Kennedy: Well, it seems to me that Justice O'Connor's questions are... are getting to your comment that Belton is a... is a fiction. And maybe it's not a fiction. Maybe the officer, at the time he conducts the search, is not in immediate danger, but if he left the vehicle without conducting the search, a confederate can come by. There could be somebody with another key. A passer-by can come and get the gun if the car isn't locked, and there's going to be an inventory search anywhere... anyway. So Belton, rather than being a fiction, makes a good deal of sense in terms of safety, maybe not safety at the time the officer is making the very search. Maybe that's somewhat fictional. Frank W. Dunham, Jr.: You could make the same argument with regard to the house in Chimel, that we limit the search to the area within reaching distance in the room that the man is in. We don't let him go into the kitchen or the bedroom. But there could be accomplices there. There could be guns there. Anthony M. Kennedy: Houses are... houses are stationary and cars are not. So we have to draw the line there. Frank W. Dunham, Jr.: Well, it... the... if the... the justification in Belton for allowing the vehicle search says it's not a departure from Chimel, and it limits the search to an area within the reaching distance. It's based on a generalization, Your Honor, that everything within the narrow passenger compartment of the vehicle is within reach of an occupant. Now, when a man is no longer an occupant and has become a pedestrian and is walking on the street, that generalization that he can reach everything in the narrow passenger compartment of an automobile no longer makes any sense. William H. Rehnquist: Well, then... then Belton should have been... if you're right, Belton should have... not have been decided the way it was. Frank W. Dunham, Jr.: Your Honor, Belton was decided absolutely correctly I believe. The... the... Roger Belton was approached by the officer while he was an occupant of the vehicle. The officer asked him to step out of the car. I do not believe that we want to have our search incident to arrest doctrine turn on whether the officer decides to have him step out before he places him under arrest or arrest him, sit him in the... sitting in the vehicle. Five other-- Ruth Bader Ginsburg: Well, suppose this... this officer lets Mr. Thornton go to the shopping mall but is standing guard next to the car and Mr. Thornton then comes back, enters the car and just as he enters, the police officer says, you're arrested. Then he could do-- Frank W. Dunham, Jr.: --In my view he would not be able to do a Belton search. He would be able to a Chimel search. He'd be able to arrest the individual under Chimel, which is still the... the law in this Court, and he would be able to conduct a search of anything within Mr. Thornton's reaching distance at the time. David H. Souter: --So if-- --So if the car were... the car door were unlocked and his reach would have been long enough to get inside the... the car if the door were open, he could search into the car? Frank W. Dunham, Jr.: If... if the... if the car was... if he could... he could search for anything within reaching distance of the person he's arresting. David H. Souter: What about the answer to my question? Frank W. Dunham, Jr.: If he could reach into the car, he could... he could get anything within the man's reach. Antonin Scalia: Why is that reasonable? Why doesn't he tell him, look it, move off, get... get 10 yards away from the car, get 20 yards away, however? I... I mean, you... you don't really suggest that there is a necessity to conduct a Belton search in order to protect the officer. All he has to do is say, get away from the car. Frank W. Dunham, Jr.: Well, I... I agree with Your Honor that if he hasn't arrested the man and he has an opportunity to let the man move away from the car before he conducts the arrest, he's certainly acting as a prudent officer in protecting his own safety. I would agree with that. Speaker: It seems to me-- Stephen G. Breyer: --Belton must then rest on some kind of bright line administrative consideration because you're attacking Belton in various ways which are logical. But our problem I think in this case is to decide whether the particular limit that you propose makes sense, and that's where I'm having a problem because what you say is that the... the line to be drawn around Belton is not just a line of... in time and space, which I could understand. But you want to say it depends on whether the policeman initiated conduct with the individual before he exited the car. And that seems to me that you're trying to distinguish between the case where the policeman notices a wanted suspect driving, pulls over to the side. The police... the... the suspect takes off and runs over to a fence. Now, that would be okay. That's Belton. But the car stops before the policeman recognizes him. The driver gets out and then the policeman recognizes him, and then he takes off for the fence and it's exactly the same. That you would say is not Belton. Now... now, that line that you're drawing there to me... I... I don't understand it at all in terms of the Belton rationale or administrative. It would make it more complicated and it wouldn't achieve that much. It seems... in other words, I want you to explain why that line is a rational way of limiting Belton. Frank W. Dunham, Jr.: I would suggest, Your Honor, that the man who exits the vehicle and runs to the fence, 15, 20, 30 yards from the vehicle, whether he did it because the police pulled up behind him and turned the flashers on or whether the policeman surprised him as he was coming out of the car, neither one of those searches are good under Belton because the man... it's... it's no longer appropriate in my judgment to rely-- Stephen G. Breyer: That's not what the question presented says. It says, when the arrestee was not in the car when the police initiated contact with him. Frank W. Dunham, Jr.: --I understand. Stephen G. Breyer: So what I thought you were advocating is if the policeman was not in the car when the police initiated contact with him, unless he's within reaching distance, which he isn't... if he's not in the car when the police initiated contact with him, then don't apply Belton. Frank W. Dunham, Jr.: That's... that's correct, Your Honor. Stephen G. Breyer: And that was the line that I was having trouble figuring out a justification for. Frank W. Dunham, Jr.: That... that's correct, Your Honor, and if I might respond. The... our... our test under Belton has two prongs to it. One is that he's in the car when the police initiate contact with him. The second is that he's arrested within reaching distance of the car. So your hypothetical that the man runs to the fence-- Stephen G. Breyer: You're saying that Belton never applies as within reaching... if he's outside reaching distance of the car. Frank W. Dunham, Jr.: --If he's... if he's outside reaching distance, it doesn't make any sense-- Stephen G. Breyer: Okay. That's... that's one possible rule. That would... that would invalidate what is ordinary police practice in almost every place, which is that they remove him, he's outside the police... I take it it would. Frank W. Dunham, Jr.: --Well, it's the moment-- Antonin Scalia: Can the policeman make him stay within reaching distance? Wait. Don't... don't get any further than that. I want you to stay right there. Frank W. Dunham, Jr.: --The policeman can arrest him and take control of him. So I would argue yes, he can make him stay within reaching distance. The... the justification for the Belton search is to protect the officer. It's not reasonable to think that he's going to effect his arrest at a point that increases the danger to himself just so that he can make a search. Stephen G. Breyer: Okay. I mean, I understand the argument, and it's been made many times and there's a lot of logic to it. But it's been pretty consistently rejected. So... but I got it. At least I understand it and... and maybe it will be accepted or not. But let's put that one aside, the reaching distance point. Do you want to defend the other distinction your making, which I take it is even if you lose on reaching distance, still Belton does not apply if the initial contact was made between the police and the... and the suspect outside the car? Frank W. Dunham, Jr.: We... that is-- Stephen G. Breyer: You want to give up on that one. Frank W. Dunham, Jr.: --No. Stephen G. Breyer: Or you want to defend it? Frank W. Dunham, Jr.: No, no. Stephen G. Breyer: Then defend it. Frank W. Dunham, Jr.: Our... the initiation of contact we believe is a... is a very reasonable test, and we believe it's called for by the Belton case itself. When you read... when you read Belton, it says it is a narrow... narrow... class of problematic recurring cases, and then it gives seven cases as examples of cases that fall within its class. And in every single one of those cases, with the possible... a marginal exception of one, the police are initiating contact with the man while he is an occupant of a vehicle. We-- Stephen G. Breyer: And that escalates the danger of the situation. I mean, why... what sensible regime would say, police officer, don't take the precaution of waiting to make the arrest till the person stops and gets out of the car? That way, police officer, you won't be in danger of the man grasping for a gun. Or suppose it's a case where the police want to follow that car and not signal because they want to find out where the crack house is that he's going to. So if they signal, they make initial contact, they give away the whole... the whole thing. They will not find the destination they're looking for. To... to say that Belton is okay but... in those situations the... the police would not have the possibility of within moments after the suspect exits the car arresting him and then doing a car search. It just doesn't seem to make any sense. Frank W. Dunham, Jr.: --Well, Your Honor, if you... if you think about it, that most... the most dangerous situation for the police officer is when he initiates contact with the person while he's an... an occupant in an... of an automobile, but has not yet gotten up to the point where he can get him out and make an arrest. It's during that interval between the time that the officer initiates contact with the vehicle and the time when he actually makes a custodial arrest that the danger to the officer is at its greatest point. Ruth Bader Ginsburg: Well, that's what... why I asked doesn't it make sense to say we're not going to initiate contact while he's in the vehicle, but the minute he gets out, we will arrest him. Frank W. Dunham, Jr.: Because in most cases, Your Honor, the officer doesn't have a choice. You look at the case in New York v. Belton, I mean, he... the officer was a... was a State trooper pulling the man over on the highway. The... when... when you... and that's going to be the case most of the time. You're going to have a... a State trooper or somebody with lights on top of their car that are pulling somebody over, and they don't really have a choice. Or you've got undercover agents watching for the drug transaction to occur and then before the dealers drive off, they want to rush the car and make the arrest of the occupants. It... the... the officer frequently has no choice. And I like to think of it as when you turn on the light to pull the man over, you turn on Belton. Belton comes on when you turn on the red light to signal the man over. And what does it do for the officer? It immediately defines, for purposes of a bright line rule, who is an occupant. It not only defines who is an occupant, it defines who can become a recent occupant. Anthony M. Kennedy: Why... why don't we save ourselves a lot of trouble and say that in almost all of these cases, the police have an interest in what happens to the vehicle, they're going to take it away anyway, so they might as well do the inventory search right away? Frank W. Dunham, Jr.: Well, the... the Court has come close to entirely extinguishing any Fourth Amendment protection in a vehicle, and that kind of a decision would give it the final death knell. There would be no privacy left. Anthony M. Kennedy: But, I mean, does it make a lot of sense if in most cases, which I... which I assume to be so... I may be wrong. In most cases, especially when the car is on a... on a street or in... in a... in a parking lot... it's not at the residence... they're going to have to tow that car and... and check it. They probably should make sure it's locked before they leave so that nothing will be taken from the car, et cetera. Frank W. Dunham, Jr.: What you end up with, Your Honor, is when you combine that view with the Court's decisions in Atwater and Wren, you end up with the police stopping somebody in... in a parking lot, maybe a short distance away in a store because they've got a dead inspection sticker. But it's a pretext because the officer wants to search the car. Anthony M. Kennedy: Well, no, my case... my case says there's been an arrest. Frank W. Dunham, Jr.: Well, but the... the Court's decisions allow the arrest to be made on a minor traffic violation that doesn't carry anything more than a $200 fine on a pretext because the officer wants to search the car. He then... he makes the arrest on the... on that under... under Wren and Atwater. He then has the right to go search the entire vehicle. John Paul Stevens: Well, my point... my point is I assume it happens anyway. Now, empirically I may be wrong. Then that's a different case. Well, it is clear, is it not... I... if I remember Belton, it is clear that the Belton rule applies to any arrest. It does not necessarily have to be an arrest in which they will impound the car. You could be caught for speeding. That's what they stopped him for in Belton. They were speeding. And so I think Justice Kennedy's hypothetical is not the facts of Belton. Frank W. Dunham, Jr.: The... the fact is that... that Belton is an arrest. It doesn't require a towing or inventorying of the car. It is a... a classic search incident to arrest. John Paul Stevens: And it not only allows search of the vehicle but of every container in the vehicle. So everybody who's caught speeding has his vehicle... everything in that vehicle is subject to search. Frank W. Dunham, Jr.: If they're... if they are arrested, Justice Stevens. Many times-- John Paul Stevens: Correct. Frank W. Dunham, Jr.: --people are just issued a citation. But if they're... if they're stopped, even for a bad traffic signal or not wearing a seat belt, they can be subjected to a custodial arrest and have their entire vehicle searched. And I think that's why it's... in drawing the lines here with respect to Belton, recognizing that the... that the arrestee is usually in the back of the squad car, and we're not here talking about officer safety issues... that we try to remain... retain some semblance of the Fourth Amendment with regard to automobiles. William H. Rehnquist: The arrestee here, though, wasn't... wasn't in the back of the car, the back of the police car. Frank W. Dunham, Jr.: Mr. Thornton was placed in the back of the police car before the search occurred, Your Honor. He was arrested-- William H. Rehnquist: Oh, after... after he was arrested you mean. Frank W. Dunham, Jr.: --Arrested, but before the search, Your Honor. And that's Justice Ginsburg's point. Where is the danger to the officer when the arrestee is in the back of the squad car? And that is a fiction and it is a fiction that courts accept, that if the squad car drives off with the man and takes him back to the station house, then the right to search is gone, but as long as it's a contemporaneous part of an unfolding scene-- Sandra Day O'Connor: Who... who-- --Unless the police have a practice of trying to safeguard the vehicle since it... it could be claimed later by the person arrested, I had the Hope diamond in the back seat and you people hauled me off to jail, now you pay me for the Hope diamond. So, obviously, they want to inventory it. And I suppose virtually every police department has regular provisions to safeguard vehicles in those circumstances and do inventory searches. Don't they? Frank W. Dunham, Jr.: --I... I assume most good police departments do, but in this-- Sandra Day O'Connor: So I don't see how we're furthered in our concerns by your approach. Frank W. Dunham, Jr.: --Well, in this particular case, Your Honor, those inventory concerns were... were not addressed in... in the factual record. We believe we would win on the issue of inevitable discovery. The Fourth Circuit didn't address it. And moreover, you... frequently you're going to have an occupant arrested but that doesn't mean the vehicle is going to get towed. Stephen G. Breyer: Why... why instead of complicating it... take Belton as a given. Sorry. Were you finished? Frank W. Dunham, Jr.: I... I was just going to finish, Your Honor, by saying that the... that... that you might just arrest one occupant and you might let the other occupants go on. So you can't necessarily say that the vehicle is always going to be towed and is always going to be inventoried. Stephen G. Breyer: I mean, would it... do you think it would work... or why wouldn't work... to try to control Belton by imposing limits on what's reasonable time and reasonable space so that you keep it really to a... an arrest that took place really when he was just within the car and not too far away unless it's his fault because he took off? All right. Now, you'd do that through a common law approach. The lower courts would make their decisions and occasionally we could review one to say it went too far one way or the other. That, it seems, is a... is a procedure for imposing limits on Belton that... that might work. Why wouldn't it? Frank W. Dunham, Jr.: Well, Your Honor, as long as they're... they're more definite than words like recent or close proximity-- Stephen G. Breyer: No, no. You'd have to... you can't get... unfortunately, language is what it is, and... and sometimes efforts to make it clearer make matters worse. So one way to control, in the presence of vague language, is through example. Frank W. Dunham, Jr.: --And I... that's what I thought the Court did in Belton was give examples. And if you follow the examples that were given in Belton, you don't approve the search that occurred with regard to Mr. Thornton, because if you're trying to draw a bright line, which is what you were trying to do in Belton, you have... some things fall on one side of that line and some things fall on the other. And we would... we would submit that once a person, on his own without any prompting from the police, becomes a pedestrian, he's no longer an occupant of a vehicle. Stephen G. Breyer: How long after he got out of the car did the arrest take place? Frank W. Dunham, Jr.: Moments. Stephen G. Breyer: What are moments? Frank W. Dunham, Jr.: Well, the... it seems like the entire time I've been standing here is moments because my life is going in front of my eyes. [Laughter] Stephen G. Breyer: All right, and how far-- Frank W. Dunham, Jr.: But in... in any event, we would argue that the... that the search here was outside of Belton and we would also argue that you have a perfectly good 35-year-old precedent in Chimel. If Belton doesn't apply and you're on the other side of the Belton line, then you go to Chimel, and Chimel tells you what to do. Chimel wasn't limited to houses. It is the rule that the police use every single day when they effect a custodial arrest. No new rules. No new guidance. Just if Belton doesn't apply, go to Chimel. I'd like to save the rest of my time for rebuttal please. William H. Rehnquist: --Very well, Mr. Dunham. Mr. Garre, we'll hear from you. Gregory G. Garre: Thank you, Mr. Chief Justice, and may it please the Court: The sole contention advanced by petitioner on appeal was that the search of his car was not lawful under the rule of New York v. Belton because Officer Nichols did not succeed in initiating contact with him while he was still inside his car. The court of appeals correctly rejected that contention. To begin with, petitioner's initiation of contact rule has no foundation in the rationale of Belton. It is the fact of the arrest and not the reason that the person exited the car that gives rise to the justification for the Belton search. The custodial arrest is an extremely dangerous and volatile encounter for the officer in the field, and that's particularly true in the case of the arrest of a recent occupant of a vehicle. In Belton, this Court drew the generalization that when the recent occupant of a vehicle is arrested, that the inside of the vehicle is always within the area in which that occupant might try to... try to lunge in order to get a weapon to effect his escape or to grab evidence to conceal it or destroy it in the car. Now, the application of that generalization-- John Paul Stevens: May I just point out that the question presented in Belton defined it as an occupant of the vehicle? Gregory G. Garre: --That's correct, Justice Stevens, but the Court did use the term recent occupant at page 460 of its decision. John Paul Stevens: It also used occupant several times in the opinion. Gregory G. Garre: That's true, and... and in describing the category of-- John Paul Stevens: And... and the examples that it gave, as your opponent indicated, all were... except one possible exception, all were occupants, weren't they, in... in the cases that Justice Stewart-- Gregory G. Garre: --No, Justice Stevens. I... I actually don't think that that's correct. I think the Frick case, which is discussed, listed with the cases discussed at page 459 of the decision, involved the situation where the police came upon the person in a parking lot, and in that situation... which was one of the cases that the Court identified as the disarray in the case law that existed before Belton. And that's a critical point for the Court to understand in weighing the... the petitioner's reaching distance argument here. This Court knows what the world is like in a reaching distance regime under Chimel and the important context in which the recent occupant of a car is arrested. As the Court mentioned in... in Belton, it's a world in which there's disarray and confusion in the case law, more litigation and more confusion for the officer in the field. The Court noted on page 460 of its decision in Belton that that kind of confusion was not helpful to the police who need clear rules for the scope of their authority in this context. John Paul Stevens: --Yes, but if you emphasize the clarity... and that's what Justice Stewart did. He drafted what he thought was a very clear rule. If you limit it to occupants, isn't that equally clear as the rule you propose? Gregory G. Garre: It's... it's artificial, Justice Stevens, and it's-- John Paul Stevens: Well, I agree it's artificial, but is it not equally clear? Gregory G. Garre: --That is a clear-- John Paul Stevens: In fact, is it not more clear? Because I don't know when you stop being a recent occupant. Gregory G. Garre: --Well, with respect, we think it's an artificial rule, and... and if I could-- John Paul Stevens: It is an artificial rule. We all agree with that, but what we're... what we're looking for is a clear artificial rule. That's the purpose of Belton. Gregory G. Garre: --No. I... I think a rule which... which takes into account the justifications-- John Paul Stevens: Because the reason it's artificial is it explains that normally Chimel would control, and he said we want a special rule for... for arrests of occupants of cars. And that's what they did. And we... and they made it so you can search the entire vehicle. That's the other important part of Belton. Gregory G. Garre: --But... but it-- John Paul Stevens: And the entire... all... all containers in the vehicle I mean. Gregory G. Garre: --If I could respond in this way. First, the vast majority of arrests that take place in the Belton context, including in this case, including in Belton itself, take place after the person is already outside of the car. John Paul Stevens: Yes, but the contact with the police is when they're occupants. Gregory G. Garre: Well, that's true. And... and let me talk, if I could, about the artificiality of that rule and why we think it's not a rule that the Court should adopt. John Paul Stevens: Well, I'm trying to get an answer to this question. I agree it's artificial. It's described in Belton as artificial. But the search in Belton was for the clearest rule available, and my suggestion to you is the rule of Belton, as... as described in Belton itself applying to occupants of the cars at the time of contact, is clearer than a rule defined by recent occupant because what is a recent occupant. Gregory G. Garre: Well, let me answer both questions. I... I don't think that that is going to be a clearer rule than the rule that we're asking for in this case. And... and to respond to your second question as to what is a recent occupant, in our view it's someone who's just occupied the car. It's... it's the person in the vast majority of cases in which this question has arisen. In this case it was clear that Officer Nichols met petitioner moments after he exited the car, and that's going to be the situation in which this question has arisen and it can arise in a number of ways. In Michigan v. Long, the police-- John Paul Stevens: But would your rule apply to someone who was out of the car for 5 minutes? Gregory G. Garre: --Well, the... the recency test that the Court... that we think the adopted or described in Belton is one that's tethered to the proximity of the automobile. And there are going to be line-drawing problems at the outer-- John Paul Stevens: Well, I'm trying to understand what your definition of recent is. Gregory G. Garre: --It's... it's someone... it's the person who has gotten out of the car and who's in the same proximity to the car that he would have occupied if he had been ordered out. John Paul Stevens: But is... in other words, geography is part of the time dimension of recency. Gregory G. Garre: Well, and it is in a typical Belton case. If I could give the Court an example. The Federal Law Enforcement Training Center trains its officers that they should stop their police car within two to four lengths of the vehicle that they're stopping and to pull the person out of the car prior to the arrest. And this is... this is the way officers are trained to bring them back because of the inordinate risks that officers face in that situation. In this case, Officer Nichols intended to pull petitioner over. That's at page 16 of the J.A., but he didn't succeed in doing so because the petitioner pulled into a parking lot. And that's not an uncommon practice that... that suspects do if they... if they feel or sense that they're under surveillance by the police. And he got out of his car, and the record shows at page 11 of the J.A. that Officer Nichols got out at the same time and met him within moments. This is... this case we think has the hallmarks of the classic Belton encounter. Officer Nichols patted him down, found drugs on his person, and at that moment, placed him under arrest. The... the pat-down was a consensual search. That's... that's indicated at page 19 of the joint appendix, and at the moment that he placed petitioner under arrest who, after all, was a convicted felon who just had drugs on his person and who had a loaded semi-automatic gun-- David H. Souter: Why... why does that matter? We don't know that. The police don't know that. That doesn't figure into any calculus. Most people who get out of cars are not convicted felons bearing drugs. Gregory G. Garre: --That's absolutely correct, Justice Souter, and that's an important aspect of the generalization that the Court drew in Belton and... and that underlies the search incident to arrest cases which is-- David H. Souter: No, but the... the point of Justice Stevens' question is why should we go beyond... strictly why should we go beyond the generalization in Belton? And the reason certainly cannot be that this particular guy had a record and had drugs. Gregory G. Garre: --My... my point, Justice Souter, was that the officer safety justification for Belton is going to be squarely implicated regardless of the reason that the person got... got out of the car. David H. Souter: No, but it seems to me that you get into... into deeper water if you say that because the... to me the incoherence of Belton is that it... it purports to be an application of Chimel with a bright line, but at the point at which the actual search is made, any danger to the officer is over. And so if... if you're going to try to justify a... a more flexible approach to Belton on grounds of the safety justification in Belton, I... I think you're... you're out over your head. And... and the force of Justice Stevens' question to me is this. Belton is not coherent with Chimel. Belton does not stand up as an analysis of anything other than we're going to have a simple bright line rule for cars and stop all of this litigation. But if Belton gave a bright line rule for cars, why is there a justification for making it less bright by going beyond the specific kinds of facts in Belton itself? That's the force of the question. Gregory G. Garre: Sure. And... and we don't think it's going to be any less bright in the most common situation in which this question has arisen where police come upon the person right as he's... as he's exiting his car. Michigan v. Long is another example. That case was decided two terms after Belton. And in that case this Court indicated in dictum that Belton would apply in the situation where the police come upon the person after he's outside of the car. David H. Souter: But is... is your criterion then going to be a time criterion, the recency of his exit from the car? Gregory G. Garre: It's... it's going to have both... and the court of appeals emphasized it in this case at page-- David H. Souter: Well, is it time or is it space? Gregory G. Garre: --It's both space and time and it's going to encompass a situation where the person has just gotten out of the car-- David H. Souter: So if... if I get out of my car and I run as fast as I can run for 15 seconds, and I get across the parking lot, that is very recent in time. Can... can you search my car then? Gregory G. Garre: --Well, under the position that petitioner advances-- David H. Souter: No. I want your position. We want a bright line rule. If... if I... if I'm a sprinter and I get across the parking lot and it's 15 seconds, can they search the car? Gregory G. Garre: --Justice Souter, as in the case of any Fourth Amendment case, there... there are going to be situations at the margin. I think if... if the person is racing away from the-- David H. Souter: No, but bright line rules are... are there to... to avoid marginal problems. What... what's the answer to my... my question? Gregory G. Garre: --If the hypothetical is the person sees the police officer and races away from the car, the police officer arrests the person in the vicinity of the car, then no, I don't think it matters if he got 15 feet or 20 feet or 30 feet. If he gets a block away, then sure, it might matter. These are cases at the outer extreme or margin and aren't implicated by the commonly recurring fact pattern in which this case arises where the police meet the person in the same spot that he would have been if he had been ordered out of the car. And... and let me talk about the problems with line-drawing that the Court is going-- David H. Souter: What if he... what if he didn't see the police officer? He drives into the parking lot, gets out of his car, locks the car. He's 5 feet away and... and the police say, that's the guy I saw speeding on Main Street 10 minutes ago. What's... what's the answer there? Gregory G. Garre: --Well-- David H. Souter: He's... he is in the spot he would have been if the police had arrested him or had apprehended him in the car and told him to get out. Can they search? Gregory G. Garre: --Of course, there's something absent there which is the positive linkage. The police don't know that that person has just gotten out of the car. That... that case is a lot like the Frick case that the Court noted in Belton as one of the cases that it was trying to deal with when it came up. David H. Souter: But if they see him... if-- Gregory G. Garre: I think the police-- David H. Souter: --if they see him get out of the car, can they then search in my hypo? Gregory G. Garre: --I... I think in that situation where the person was arrested right by the car, we think that Belton probably would apply. But that's not the fact pattern initiated here. If... if I could just talk about the line-drawing problems that the Court is going to invite if it adopts petitioner's initiation of contact rule. The... the petitioner said today that... that the rule the Court ought to adopt if the light is on, then Belton is... is on. Well... well, that's going to create line-drawing problems. To take an example close to home, the... the police officers in the District of Columbia often drive around with white flashing lights on. Now, I'm not sure how the existence of those white flashing lights would come into play under petitioner's initiation of contact rule. Take the case that the Court had before it this fall, Arizona v. Gant, which was a case that presented the same issue, but the Court vacated and remanded it in light of the Arizona Supreme Court's decision which rejected the initiation of contact rule. In that case, the officer came upon the suspect and he shined a flight... shined a flashlight into the car which the suspect was still inside the car. The suspect got out of the car. The officer met him moments later, and yet the court of appeals in that case said that the police officer hadn't sufficiently initiated contact with the suspect while he was still in the car. William H. Rehnquist: The Arizona Court of Appeal. Gregory G. Garre: The Arizona Court of Appeals held in that case. That's correct, Mr. Chief Justice. And... and in describing that, the Court listed the number of different factors that would have to go into the calculus both from the standpoint of the officer on the scene and from a court later reviewing that determination as to whether the officer initiated contact. He'd have to take into account the lighting in the situation, how far the officer was the car when he... away from the car when he shined the flashlight into it, whether the person saw the flashlight, whether the person thought it was a police officer shining the flashlight or someone else, whether the person was aware that there was a police-- John Paul Stevens: Well, you said a little while ago there are cases on the fringe. Of course, you can always find one or two cases that present these difficult problems. But are... are you really contending that the rule of initiating contact is less bright than the rule you're proposing? Gregory G. Garre: --Yes, we are. If... if the Court focuses-- John Paul Stevens: What if, for example, the... the officer saw a person speeding, he pulls into a gas station, he gets out, goes to the men's room and comes back out. Can he be... can you search his car? Gregory G. Garre: --If... of course, that's... that's not the fact pattern here. John Paul Stevens: No. I'm just not... I'm just wondering-- Gregory G. Garre: Yes, I think he probably would be able-- John Paul Stevens: --I'm wondering about the integrity of your statement that there's a real bright line rule there. And what do you do with my case? Gregory G. Garre: --In... in that case where the person-- John Paul Stevens: He's... this... the officer saw him speeding but he didn't turn the light on. He followed him. The guy goes into a gas station, goes to the men's room, comes out 2 minutes later. Can you search his car? Gregory G. Garre: --If the person comes out and is right next to the car in the place he would have been when he had been ordered out, yes, we think that... that Belton would apply in that situation. But... but the rule that we're asking the Court to adopt here is that on this fact pattern, which as the court of appeals we think correctly recognized has temporal and spatial limits, where the police see the person exit the car, confront him moments later, the application of the bright line rule in Belton shouldn't depend on the fortuity of whether the police initiate contact with that person beforehand. And that's particularly true in a case like this where Officer Nichols intended to pull the car over and... and yet didn't do so because the suspect did what suspects sometimes do, which is to pull over and get out in order to try to blend in. The... now, going back to the officer safety rationale, we think that is a justification for Belton and that it is implicated in this situation and that the initiation of contact rule would implicate officer safety in a number of ways. One is the surveillance situation that was mentioned during petitioner's argument and that the court of appeals mentioned in this case. In... in some cases, officers are engaged in surveillance activities and maybe determine that it's undesirable and unsafe to make contact with a suspect while he's still inside the car and so take the prudent step of waiting for the suspect to step out of the car before confronting him. The... the case out of Virginia, the Glasco case that's discussed in the brief, is an example of that. There's... there's also the... the possibility, which is recognized in the case law, that an initiation of the contact rule would have the effect of increasing the volatility of Belton encounters by creating a dynamic in which suspects had an incentive to race out of the car before police could... could initiate contact. Anthony M. Kennedy: If the... if the suspect is handcuffed and is in the police cruiser, is there any danger to the officer at that point that can't be equally avoided by simply having an inventory search later? Gregory G. Garre: There is danger, Justice Kennedy. I mean, first of all, on... on the handcuff-- Anthony M. Kennedy: Assume a single occupant. Gregory G. Garre: --Right. There is danger. And we... we... and it's true in... in a stop and arrest like this case where there's a lone officer and a person who he arrests. And the... the deeply ingrained practice in this country is for the officer to put the... the suspect, arrestee, in the squad car and then go back and search the car. And... and we cite cases on page 38 of our brief where... where suspects have escaped from handcuffs and gotten out. And... and that danger is remote, but we think that it's still real as long as the suspect is at the scene of the arrest. All of the courts of appeals that we're aware that... that have considered this question and Professor LaFave who's... who's recognized that have concluded that Belton applies when the person is handcuffed in the back seat of the squad car. And of course, Justice Brennan in his dissent in Belton recognized-- Anthony M. Kennedy: I know it applies, but it's just not clear to me why an inventory search can never be, which... I have only one factual question here. Was this car locked before the police officer searched it? Did he need the key or do... do we know? Gregory G. Garre: --The... I believe the answer to that is... is no because the record doesn't... what the record shows... and this is on page 50 of the J.A. I think... is that the officer arrested petitioner, put him in the car and then went back and searched the car. There's nothing in the record that suggests that the officer needed keys. But... but on the inventory search question, although it may be true in some cases that the inventory search inevitably would have led to the discovery of the contraband, in that sense the privacy interests of the person from a Belton search at the time are... are further diminished. The inventory search I don't think is an answer to the officer's safety concerns and justification for Belton, which are real as long as the person is still at the scene of the arrest. There is the remote risk that the person can escape and try to get back into the car. There's also the risk, as... as you mentioned I think, that there could be confederates in the area who might try to get into the car, either for a weapon or to get drugs out of the car or other contraband out of the car. Officers in... in the Belton stop, it's not uncommon for them to... to have the person out of the car, to secure him, and then it's only at that point that they... that they feel safe to go back to make sure that there's no one else in the car who could be hidden in the car or other things in the car. So I... so we don't think that the inventory search is an answer to the very real concerns that the officers face in conducting the Belton search and that provide the rationale for the Belton search. I wanted to just go back briefly to the Court's decision in Michigan v. Long. And although it is dictum in that case on the application of... of Belton, we do think that it's... it's persuasive dictum. In that case the police officers saw a car swerve off the road, and they... they came around back to investigate. The petitioner... or... or the suspect in that case, the individual who was driving the car, was already outside of the car when the police came back. And... and the Court in that case made quite clear in dictum that if the... if the suspect in that case had been arrested, that the search of his car would have been perfectly lawful under Belton. And we think that that was... that is a persuasive and a correct understanding of Belton. If I could... I wanted to make clear too that we think that this case does bear the... the hallmarks of a classic Belton encounter. The only difference is... is that Officer Nichols did not succeed in initiating contact before the suspect got... got out the car, but Officer-- Ruth Bader Ginsburg: Would he have to at least see the suspect in the car or would it be all right under the rule you're proposing where the police that come upon the scene just after the suspect exits from the car? Gregory G. Garre: --Well, we think that the... the most important thing for the Court to hold in this case... that we would ask the Court to hold in this case is in the commonly recurring situation where police see the person exit the car and confront him moments later in the same vicinity that he might have occupied if he had been ordered out of the car, that it doesn't make a difference for the purposes of applying Belton as to whether or not the police succeeded in initiating contact or succeeded in initiating contact in a sufficient way. There may be... there are going to be other cases that arise, and... and we don't think that this is an area in which the Court should try to establish a rule which is tethered to a particular distance or... or a particular amount of time. These are... this is an extremely dangerous encounter for police. This is an area in which police need to make judgments. This Court recognized in the Lagovista case-- John Paul Stevens: It seems to me your argument is that we don't want a bright line rule. We want a... a facts and circumstances rule and take everything into account, which is sort of... Justice Scalia often speaks of those rules with some disparaging terms. [Laughter] Gregory G. Garre: --No. That... that's not what we're asking for, and I'm sorry if I... if I misled the Court. We're asking the Court to apply the generalization that it adopted in Belton. The... the reaching distance rule that petitioner has alternatively asked for would just eviscerate Belton and put courts and police officers back in the situation that they occupied before Belton in trying to apply Chimel in... in the recurring and dangerous context of an automobile stop. The Court recognized in Belton on page 59 of its decision that that... the Chimel analysis had... had provided to be... shown to be unworkable in this context and... and had created litigation for the courts and uncertainty for the police officers. So we're asking the Court to... to stick to that bright line. William H. Rehnquist: Justice Stewart wrote both Chimel and Belton, did he not? Gregory G. Garre: That's absolutely correct, Mr. Chief Justice. On the handcuffing in the squad car, I... I did want to make clear on that point that that argument was not raised by petitioner below, and... and the court of appeals noted that at page 74, note 2 of the joint appendix. It's not pressed by petitioner in this Court. I think petitioner's reply brief makes that clear on page 16. Stephen G. Breyer: What do the police departments normally tell the policemen? What do they say? They say, when you arrest a person who just got out of a car, you can search the car? Gregory G. Garre: In terms of... of... I... I can tell you what the practice is at the Federal Law Enforcement Training Center. And... and that practice is you... is... is to take the... the person outside of the car, ordinarily away from the car back towards the police-- Stephen G. Breyer: No. I'm not... I'm not asking the practice. I'm asking... the virtue of Belton is supposed to be it's simple. Explain it to a policeman. So I want to know how do they explain it. I thought perhaps they explain it by saying, policeman, if you arrest a person who's just got out of a car, you can search the car. Gregory G. Garre: --That's... that's correct, Justice Breyer. Stephen G. Breyer: All right. Then if that's... then there has to be some kind of limit on just got out of. Gregory G. Garre: And... and if it's-- Stephen G. Breyer: So... so inevitably we're in the business of trying to say what's just got out of. Is it a minute? Is it 2 minutes? Is it 5 minutes? There's no way to avoid that, is there? Gregory G. Garre: --No. There's not at the outer margins, but... but the Court-- Stephen G. Breyer: All right. So what in your opinion is the outer margin? Gregory G. Garre: --Well, let me... let me say affirmatively that this case we think places a proper temporal-- Stephen G. Breyer: This is well within it. Gregory G. Garre: --and spatial limits on it where it's clear that the person-- Stephen G. Breyer: And you'd say certainly a day is too long I imagine. Gregory G. Garre: --Of course. Stephen G. Breyer: Yes. Gregory G. Garre: That's correct. I think if the Court were to hold in this case that Belton applies in this situation where the police confront the person just after he gets out of the car, that is going to provide a guidance to the police officers. And that's going to tell them they don't need to undertake this additional fact-specific analysis as to whether the person got out of the car of their own volition or an initiation of contact. Stephen G. Breyer: Then perhaps we could use words like just got out of. Gregory G. Garre: Or within moments. And... and I think-- Stephen G. Breyer: Seconds? Gregory G. Garre: --Seconds would be fine. But... but no. Anthony M. Kennedy: And what about in this-- Gregory G. Garre: I don't-- Anthony M. Kennedy: --what about in this... this is a serious question. What about if he's just about to get into it? Gregory G. Garre: --Well, and... and that's... that's a different fact pattern that has arisen. We think Belton would apply in that situation, and police we think have reasonably concluded that and courts have reasonably concluded that. But... but that's not the question here. And the most important question for the Court to answer, which is the situation where the police do see the person get out of the car and do confront him moments later. The... the States... a number of States have filed an amicus brief in this case supporting the Government's position and... and urging against adoption of an initiation of contact rule. And... and we do think it's significant that each of the States and jurisdictions that have adopted the initiation of contact rule, States like Florida and... and Illinois and Michigan, have signed that brief and urged the Court to reject the initiation of contact rule. We think that that rule is unworkable. It's shown to be unworkable in cases like Gant v. Arizona. There are other cases in which added wrinkles have been applied to the rule. There's a Florida case, which is not discussed in the briefs, but it is publicly reported. It's Kavallierakis v. State, 790 S. 2d 1201. In that case, the courts in Florida, applying the initiation of contact rule, concluded that in order to trigger Belton, the contact had to be of a confrontational nature and not of a friendly nature, so that in that case, the courts reversed a conviction for possession of drugs found in a car because the police officer met the person with a greeting while he was getting out of the car as opposed to a confrontational signal such as a... as a siren or a light. Now, that... that seems like an extreme application of that rule, but it's nevertheless indicative of... of the variations in the line-drawing that can arise and that have arisen. In this case we think that the court of appeals properly held that Belton apply. The record conclusively shows that petitioner was a recent occupant of the car and the search was contemporaneous with the... the arrest, and we would ask the Court to affirm the judgment of the court of appeals. William H. Rehnquist: Thank you, Mr. Garre. Mr. Dunham, you have 4 minutes remaining. Frank W. Dunham, Jr.: I have four brief points, Your Honor, that I'd like to make, if I could. The first is that the State court opinion in Michigan v. Long, People v.... People v. Long, shows that the car there was being chased by the police. They just weren't observing him drive by at a high rate of speed and crash into a ditch. They were in a high-speed chase, and it's reasonable to infer that they had their lights on and therefore had initiated contact. Furthermore, the State court opinion in People v. Long shows that Long was in the vehicle when the officers got out of their car, after he had crashed into the ditch, and began to approach the vehicle. Then Long exited his vehicle and walked towards the officers. So I don't think it's... it's fair to say that there was no initiation of contact by the officers with Long in the Long case and that the footnote in the Long opinion referencing to Belton is no expansion or further brightening of the Belton rule. Second, I want to point out that the Frick case, which is the one possible exception that I think Justice Stevens referred to when he was talking about the cases that Belton points to as defining its class... the man is either getting into or getting out of his vehicle. He has not... he has not achieved the status of pedestrian. Most people... I think you could still consider someone who was in the act of either getting in or getting out... you could call that person an occupant. Third, if you... the Fourth Circuit did not adopt Mr. Garre's place where he would have occupied if he had been arrested test. We call... that's the Government's might have test. But Mr. Garre would add that to what the Fourth Circuit rule and would have him... and... and would add a limit that, oh, as long as he's arrested where he might have been if he might have been arrested, if we'd stopped him when he was getting out of his car. It seems to me that that is an unworkable rule and it just adds further confusion to the situation. Yet, it's necessary, necessary because it's the only way you avoid reversing Chimel. Now, the... the other point I want to make is Justice O'Connor I think made a good point about the inventory search. Why can't we draw Belton narrowly because in 90 percent of the cases, we're going to have an inventory search anyway? And why can't we maintain some semblance of Fourth Amendment protection in automobiles? And finally, with regard to the handcuffs point, Mr. Garre's point that people sometimes get out of their handcuffs, I'd simply like to say if we indulge in the presumption that suspects are going to get out of their handcuffs, there's simply no search incident to arrest rule that we can fashion that doesn't just have us searching everyplace on God's green earth. John Paul Stevens: May I ask you a question-- Frank W. Dunham, Jr.: Yes. John Paul Stevens: --if your time is up? In your experience, does an inventory search include the right to search containers in the... in the car? Belton, of course, gives the... the Government the big advantage. You can search every container in the car. Frank W. Dunham, Jr.: I believe an inventory search does not allow you to search opaque containers within the car. William H. Rehnquist: Thank you, Mr. Dunham. The case is submitted. Speaker: The honorable court is now adjourned until Monday next at ten o'clock.

Earl Warren: Number 91, John Wiley & Sons, Incorporated, Petitioner, versus David Livingston. Mr. Lieb. Charles H. Lieb: Mr. Chief Justice -- Earl Warren: Is it Lieb or Libe? Charles H. Lieb: Lieb, sir. Earl Warren: Mr. Lieb, yes. Charles H. Lieb: Thank you. If the Court please, this is a Section 301 action to compel Wiley to submit to arbitration under the Union's contract with Interscience Publishers. Interscience and Wiley were technical and scientific publishers. Interscience, for bona fide reasons, had some -- had merged into Wiley four months before the expiration of Interscience's contract with the Union. As a result of the merger, the business of Interscience was combined with Wiley, and the Interscience stockholders, under the merger and consolidation agreement, received a 20% stock interest in the Wiley Company. Interscience was a small company, and its clerical workers were unionized. Wiley was a large much over company, had never been and was not and is not unionized. The Interscience contract, which is sued under, contained no successor cause, and the contract, specifically, was not assumed by Wiley at the time in the merger. The merger took place on October 2nd, 1961. The Interscience contract by its terms expired on January 31, 1962. The process of combining the two businesses was commenced immediately, and all of this is contested, apparently, by the Union in its brief to this Court and by amicus. It was completed before the contract expired. And the record so indicates if you look hard enough for it. Neither at the time of the merger nor thereafter, was any Interscience employee discharged, disciplined nor did any Interscience employee ever asserted nor has an Interscience employee ever asserted a grievance against Wiley. To this day, some two years after the event, since this suit was commenced, we have no notion. We have no idea whether, in fact, the Union in prosecuting this suit, does, in fact, represent any of the former Interscience employees who are now members of the Wiley Enterprise. This action was commenced on January 23rd, 1962, a week before the contract expired, about four months after the merger. The action was commenced under our Section 90 of the New York Stock Corporation Law. The allegation being that under the provisions of Section 90, Wiley, as a constituent company to a merger, was responsible for the obligations of the merged company. The complaint, and I'll read from page 5, alleges, I'm reading from the first full paragraph on page 5, alleges that notwithstanding the merger on the provisions of Section 90 of the Stock Corporation Law, the Company, since the consolidation, has failed and refused to recognize the validity of the collective bargaining agreement, currently, that is January 23rd, a week before the contract expired, a moot question because no controversies have arisen during the term of the contract. And beyond January 30, that's an error in printing, and beyond January 31, 1962, which is the date of the expiration of the Interscience contract, and it's further alleged that Wiley has failed and refused to recognize the property rights of the former Interscience employees thereunder, that is under the contract expiring January 31, a week hence, and otherwise, beyond January 31, 1962. And the relief that is demanded, and I read from page 10 in the record, is that the Union asks that Wiley, with whom it has no contract, submit to arbitration with the Union to arbitrate the following five questions, whether the seniority rights build up by the Interscience employees must be accorded to the employees now, that's January 23rd, a week before the contract expired and after January 31, 1962, that's after the contract expired. I should add that in the briefs to this Court, the position has taken that not only do seniority rights build up as of January 31, 1962, not only are they claimed to carryover into the separate Wiley Enterprise, but it's claimed that the employees continue to have the rights to build up additional seniority rights after the expiration of the contract. The second demand is whether, as part of the wage structure of the employees, the Company, that is Wiley, is under an obligation to continue to make contributions to the District 65 Security and Welfare Plan now, January 23rd, and after January 31, the expiration of the contract. William J. Brennan, Jr.: (Inaudible) January 31. It says, January (Voice Overlap) -- Charles H. Lieb: It should be January 31. That's -- that's our respondents' error in printing, no issue on that. I should say that although the demand is that the Company continued to make contributions, Wiley never made contributions. And because the contributions were closed at the time of the merger, no further contributions made following October 2nd, 1961. Third, whether the job security and the grievance provisions of the contract between the parties shall continue in full force in effect and the briefs make very clear that they're talking not only of up to January 31, which of course is moot, but thereafter, indefinitely and forever presumably. And finally, DNE whether the Company must obligate itself to continue liable now and after January 31, 1962, to severance pay and to vacation pay. And I think it's clear from the briefs that the claim is made that they are talking of an accrual of additional severance pay and certainly additional vacation pay because all vacation pay that had been earned under the contract has always been paid. With the exception of the claim for the welfare plan contributions for the four-month period between the date of the merger, October 2nd, 1961 and January 31, all of the now issues, now and hereafter, are moot. No controversies have ever risen. What the Union really wants to arbitrate is whether the Interscience employees carryover to the Wiley Enterprise and retain permanently Wiley work in the Wiley Enterprise the working conditions which the Interscience Company granted, under the terms of the expired Interscience contract and which contract, of course, governed the Interscience Enterprise. The case got into court and gets here not after trial but on a sort of mixed proceeding on the Union moving off under the Arbitration Act and under Section 301. We've assumed because the Court of Appeals has said that this is a Section 301 action and therefore, I think the Arbitration Act questions are --are not in the case. But the point is that no answer was filed. The time to extend an answer has been extended -- time to file an answer has been extended until after a final order in this action. There was no trial, case was heard on the complaint in order to show cause in the petition and opposing affidavits. William O. Douglas: Does anything occur in the arbitration, in their proposed arbitration? Was there an arbiter? Charles H. Lieb: No, sir. William O. Douglas: He didn't rule on this question? Charles H. Lieb: There was never a demand made for arbitration. There was never an issue claiming for arbitration. This complaint was filed on January 23rd without a prior filing -- without the prior service or making of a demand for arbitration. William O. Douglas: I suppose that there had been arbitration that the issue that you now litigate could have been making to the Court as result of the outcome -- depending on the outcome of the arbitration, is it not? Charles H. Lieb: Well, I think it's -- I think it's fair to say that even had a -- a demand for arbitration have been made, we undoubtedly would've urged that the claims asserted were not within the scope of -- William O. Douglas: But -- Charles H. Lieb: -- the contract and not within the scope of the arbitration clause. William O. Douglas: And was that -- is that -- whatever the arbiter would decide would be reviewable, I suppose, by courts or -- Charles H. Lieb: We would have urged that this is the decision that most preliminary have been made by the Court because we would have urged that this involves a question of the construction of the contract but none of that happens. William J. Brennan, Jr.: (Inaudible) Charles H. Lieb: What page are you reading from, sir? William J. Brennan, Jr.: (Inaudible) Charles H. Lieb: The record -- William J. Brennan, Jr.: (Inaudible) Charles H. Lieb: Oh, yes. William J. Brennan, Jr.: Does that refer to these five or six issues at the bottom of page 10 when the Court of Appeals says that they construe the agreement as requiring of those questions by the arbiters? Charles H. Lieb: Yes, yes, sir. William J. Brennan, Jr.: So at least -- what I'm -- what we -- I ask you a question is, how -- how did the Court of Appeals reach the question whether these are arbitrable questions, if that you say that was not an issue made in the -- in the case? Charles H. Lieb: Let me -- I'm not sure that I explained myself clearly, sir. The complaint was filed on January 23rd with no prior demand for arbitration having been made. The first demand was contained in the complaint. William J. Brennan, Jr.: Yes, complaint asked an order to -- of arbitration, didn't it? Charles H. Lieb: Correct, yes, sir. The District Court dismissed the motion. It dismissed the application on two grounds. It assumed for the purpose of its decision that the Wiley -- that the Interscience obligation to arbitrate carried over under Section 90, didn't decide that question. But it said, “We deny arbitration, first, because in our opinion, the claims that are sought to be arbitrated are not arbitrable within the scope of the contract. And secondly, it said, “We find that none of the,” -- “I find”, the judge said, “None of the conditions precedent to arbitration have been complied with. They have been totally ignored. There has been an abandonment of the procedure.” And for that reason, the implication was dismissed. The case went up to the Court of Appeals. The Court of Appeals reversed. The Court of Appeals directed arbitration, and it directed arbitration in this manner. It said, "We note your questions, and we'll pass them all off to the arbitrator. Let the arbitrator determine whether or not Wiley is required to arbitrate the substantive terms of the contract. Let the arbitrator determine whether or not there are conditions precedent to arbitration and if so, whether those conditions have been complied with, and if not, whether they have been waived, and let the arbitrator determine whether they are all in fact vested rights,” so-called living rights that the Union claims here, “And let the arbitrator determine the merits of that.” Consequently, we are here now where in and of -- William J. Brennan, Jr.: (Voice Overlap) -- Charles H. Lieb: I beg -- William J. Brennan, Jr.: Well -- Charles H. Lieb: -- your pardon. William J. Brennan, Jr.: -- I'm still puzzled. If that's all they did, what did the Court of Appeals mean when it construes the agreement and saying that these issues tendered by the Union are indeed arbitrable under the agreement? Charles H. Lieb: I think the -- the agreement -- the -- the Court of Appeals' opinion, at least the majority opinion by Judge Medina, is, in my opinion and with due respect, a very turgid and -- and difficult opinion to read. On page 90 in the record, he says, Judge Medina says for the majority that the terms of the agreement contemplated the arbitration of just such a dispute or controversy as the one before us. I must assume, Your Honors, that what he was saying was, and I interpolate the form, I don't find it on this page, I think that he's saying is -- what he is saying is, had there not been a merger and had this claim been made against Interscience, where Interscience still an active company doing business, we would find that these claims fall within the scope. I must come to that conclusion because I turn over to pages 94 and 95 of the majority opinion, where the Court disposes of this aspect of the case. And the Court says, in the paragraph in -- starting at the middle of the page, down toward the end of the fourth line, “We think and hold in the exercise of our duty to fashion a rule that it is not too much to expect and require this employer proceed to arbitration, with the Union, to determine whether the obligation to arbitrate, regarding the substantive terms of the contract, survived the consolidation. And if so, just what rights survived?” and so on. If you'll turn over to Judge Kaufman's concurring opinion on pages 110 and 111, he states it much more subsequently. He says, and I'm reading from 110, “We hold that the collective bargaining agreement is not clearly removed from the scope of the arbitration the following questions, one, whether the collective bargaining agreement as a whole, survived the consolidation of Interscience and Wiley. Two, if the agreement did survive, thereby imposing upon Wiley an obligation to arbitrate etcetera, then whether the Union had to comport with the conditions precedent. And three, whether, in fact, there are rights to carryover.” And to make more certain, what is certain in the next paragraph of his short opinion, he says, and I'm reading from that first full paragraph at probably on 131, "Our decision today, although there's no successor cause, permits the arbitrator to imply their successor cause, if under the circumstances, he thinks the implication is proper." And he continues, "It is this power to read the successor cause into the collective agreement which makes Wiley a proper party defendant.” And he goes on and says in which makes the Union a proper party plaintiff. And he says that if the arbitrator finds that the contract did not, in fact, carryover, then of course, Wiley shouldn't have been sued and the Union shouldn't have sued. Byron R. White: Do you -- I'm not sure and do you think that Judge Kaufman had the right -- did Judge Kaufman had the correct deal of the major -- of the (Voice Overlap) -- Charles H. Lieb: I have no doubt of it, sir. I think that -- I think my own feeling is that the earlier pages in Judge Medina's opinion were unclear because I think that he was talking of an obligation that he was finding in the Interscience contract. But then at pages 94 and 95 which I read from, I think he then tries to take the Interscience contract and decide whether or not Wiley, a stranger, not a party to the contract, can be made a respondent in and of -- Byron R. White: What do you think -- what do you think the rule has been, as laid down in this Court, that when -- that when the contract does not clearly put outside the scope of arbitration and that is in dispute, you order arbitration or not? Charles H. Lieb: We think, and this goes to the heart of our argument, we think that where what is not clear is whether a respondent is -- is committed to a contract obligation, we think that where the question is, has the respondent, the party sought to be charged, made an agreement to arbitrate? We think that under the rules that this Court has -- Byron R. White: But when -- Charles H. Lieb: -- laid down and elaborated -- Byron R. White: -- when you read -- when you read an arbitration clause and you have some real doubt about which way would its arbitrable or not and that's about an even question, what do you do about it? Charles H. Lieb: Well, we say in our reply brief, Mr. Justice White, that we think that you laid down two rules in the Steelworkers cases, we think that you laid down a clear demonstration rule to decide whether or not a court is to be relieved of its duty to determine whether the party sought to be charged, has, in fact, made an agreement, and then you establish the second rule for the one who is to make the decision, whether it's the court of the arbitrator, as to whether the claim that is made is within the scope of the arbitration clause. Byron R. White: Yes, but when without much doubt about an arbitration clause is to be this way or another, the Court has to resolve with this, does it order of arbitration? Charles H. Lieb: We aren't talking, sir, of an arbitration clause, we're talking here of an obligation to arbitrate. I haven't gotten to the arbitration clause. How do you get Wiley before this Court? Wiley is a 107-year old company. Wiley -- Wiley does a $15,000,000 volume of business. Wiley has 400 employees. Interscience was a company having 40 unionized people and according to the record doing $1,000,000 worth of business. That was an error, it should've been $3,000,000. But -- but Interscience has been absorbed by Wiley. Interscience isn't findable in Wiley. Interscience business, the industrial enterprise, what my friend, Mr. Feller terms in what we call the continuing employing enterprise and the -- and the separate collective bargaining unit disappeared as a result of the absorption of the Interscience business into Wiley. And we say this is really no different than if Wiley had, in fact, purchased the Interscience business as it could have with the -- exactly the same results incidentally, under the Internal Revenue Code because in either of that, it would have been a deferred recognition of (Inaudible) case. Had they purchased it and given for the assets, given to the stockholders 20% of the Wiley stock even under amicus' brief, they concede.And in that case, they would have no claim against Wiley. Now, you've found me into the heart of my case, and I -- I welcome it because my first point is that the Court -- that the Court obviously, erroneously gave away it's jurisdiction to determine whether Wiley made a contract. And obviously and clearly, it should not have referred back to the arbitrator to determine. How do the Union in amicus treat that? Well, the Union where the kind of shutting its eyes hard in fervent belief says that the Court did decide. Well, of course, that's flying into the face of the language, it didn't. Amicus looks the other way. Amicus doesn't like the question so it, in substance, says to this Court, “You decide.” And we join with amicus. And we asked you to decide it because we think the record is sufficient for you to decide it, which then brings me to the four questions, which I think, this case presents, four open questions we -- we present them at page 3 of our reply brief. The first question is whether the Interscience obligation to arbitrate is binding on Wiley, whereas a proximate result of the merger of Interscience into Wiley, the business and workforce of Interscience, was absorbed by Wiley's business, and the Interscience Industrial Community was dissolved. My view of the question is not the broad question that amicus says, does the contract as a whole carryover it. It's a much narrower one, where the business has been absorbed, where the Interscience Industrial Enterprise has been terminated as a proximate result of the merger, does the contract obligation to arbitrate carry on? Byron R. White: When does (Inaudible) that the dissolution of the bargaining unit took place, at the time of the merger or when it actually did? Charles H. Lieb: We -- Byron R. White: Let's assume for the moment that you said that the -- that the holding was the collective bargaining contract in this case survived the merger. I mean if that all or was to it -- let's assume that the holding was that the -- that it survived the merger. Charles H. Lieb: Mr. Justice -- Byron R. White: When -- when -- then was there a (Inaudible) between them and the -- and the dissolution of the bargaining unit? Charles H. Lieb: Mr. Justice White, I -- I'd like to answer that question obliquely if I may. That was not a question that was ever before this Court. We asserted in our answering papers that the Interscience Enterprise was dissolved at the time of the merger. We -- Byron R. White: Well, it was but we're talking about the bargaining unit. Charles H. Lieb: Yes, but we stated as a fact to the Court in our papers and our position and it was never denied that the Interscience workforce was merged into and was integrated into the Wiley workforce on October 2nd, the date of the merger. Byron R. White: Well is that (Inaudible) -- is that -- that (Voice Overlap) on the date of the merger I think, did you -- did you keep the -- the (Inaudible) clause in this contract and Wiley had taken over Interscience's plant to keep the plant separate and the bargaining unit intact, this probably would've been dealing with this Union (Voice Overlap) -- Charles H. Lieb: I'll answer that question. If and I -- we say it in our briefs, we don't -- we don't try to deduct that. If Wiley had acquired Interscience and had kept Interscience as a separate division, separate division, I have no doubt. And we volunteer the rule, although there's much authority in the lower courts and the Board against it, we volunteer the rule and suggest the rule then in that case, what amicus, and we call the rule of the continuing employing enterprise or industrial community, would have required Wiley to recognize the Union. But we say that that is not the case here for a number of reasons. First, because we put an issue that fact. We took the position before the trial court. Before this complaint was served, before this action was dreamt of, we wrote to the Union before the merger and at the date of the merger that the workforces had been integrated. I refer you to -- to the letters appearing on pages 78 to 80. Byron R. White: I understand that. Of course, I wonder either the Union or amicus says that the integration of the unit took place at a date after the merger. I'm not -- let's just assume for the moment that it did take place after the merger but did it -- would it had taken place as much after the merger -- as after the terminate -- expiration date have come to that. Charles H. Lieb: I think that's -- that's an iffy question and I would like to answer differently. I say to you, sir, what is the fact, that the integration was commenced according to plan, pre-planning and plan was commenced on October 2nd at 9 o'clock the date of the merger and was carried through over a period of four months until the first week in January when the Interscience offices were actually closed and the employees who were still remaining in Interscience, some of them are already having been moved over to Wiley, those remaining were finally moved over to Wiley. But, were we given the chance to offer proof, and none of this is in the record because this was never an issue, were we given the chance to offer proof on this in addition to the correspondents that we have in this record, the allegations of the complaint would say in substance that there is a new enterprise. And the complaint was filed before the contract was finished. But in addition to that, we would show the plan of integration, which actually was put into effect and was accomplished as per plan, commencing with the date of the merger. Amicus argues that unless all of this happens on the precise date of the merger, then the contract goes over. Byron R. White: I didn't (Inaudible) about that, I'm just interested in the fact. Charles H. Lieb: The fact -- the fact is as I've told you, the integration was commenced on the date of the merger and was concluded as per plan in the first week of January. Byron R. White: That's before the contract was scheduled to expire. Charles H. Lieb: The contract expired -- correct, the contract expired on January 31. The move, the physical move was made, this does not appear on the record but we can find it for you in footnote, the date, the move was made in the first week of January, three weeks before the contract terminated. Now, we say that there are four questions that this case presents. The first one is the one that we've been talking about which is whether where, as a proximate result of the merger, not on the date of the merger but as a proximate result of the merger, the Interscience Enterprise is discontinued, can there be an obligation on the part of the successor Wiley to arbitrate under the Interscience contract? The second question we add, is whether in any event, even assuming that there might be some carryover of employees' rights, can the Union, who at the time it filed it suit, was no longer the employees' collective bargaining representative because these 40 people had been merged into a workforce of 400 or doing similar work, can the Union arbitrate claims in their behalf when those claims relate as they do here, not to liquidated claims but to working conditions in the Wiley Enterprise? Different question, there maybe carryover rights, possibly, none is yet been decided, in hearing an employees following the termination of a contract and before a new contract is negotiated, but if the Union in the meantime is no longer the collective bargaining representative of the employees, can it commence an action in their behalf? And we think, as we argue at length in our brief and reply brief under the cases Montgomery Ward, Keenan, Modal, Glendale, we think that it obviously cannot. The third question is, and here, we come to your Steelworkers cases, whether these claims to permanent working conditions in the Interscience Enterprise spelled out by faith from an Interscience contract although without pointing to any specific provisions in the contract, whether it's conceivable that it can be said that the claim to a carryover of these permanent working conditions to a different employee enterprise can be a claim made under the Interscience contract. And if it's not, it's obviously not made within the scope of the contract and obviously, therefore, it's not arbitrable. And the fourth question that we present to Your Honors, is a question that you have now as yet decided on what the Union calls “procedural arbitrability” and who is to decide it. But we suggest that perhaps you don't have to get to that question because we think apart from arguments pro and contrary and they're argued in full in our briefs and in the Union's and amicus', we don't think this is really a procedural arbit -- arbritrability case. We think this is a case clearly where arbitration was abandoned as a remedy and where clearly the Union elected to bargain with the Company. The Company performance talking to the Union on a -- without prejudice basis, without prejudice to explain that the contract was then at an end, and it recognized no rights under the contract. And that whereas here, after four months of such without prejudice bargaining, the Union got what it wanted. We think that now, a week before the contract when it files it suit to compel arbitration, never having demanding it, we think this is not a case of procedural arbitrability. We think this is just clear as I said before, abandoned. This is a wide territory that -- that we cover in this case. And each one of these points really makes a case by itself. But if it's agreeable to the Court, I'll choose to argue at -- at length from the question that, this was the subject of a colloquy between Mr. Justice White and me because I think this is a -- the four new questions, this is probably the newest and that is, how do you reach Wiley? William J. Brennan, Jr.: That is your question number one? Charles H. Lieb: That's -- that's -- that's right, sir. How do you reach Wiley? The Union says, and I distinguish District 65, Mr. Livingston from amicus, the Union says, very simple, “We sue under Section 90.” The Court of Appeals said, “Well, that doesn't make sense in a labor case.” And amicus says, “It doesn't make sense in a labor case.” Now, I think that this Court must agree that the -- this difficult question involving all of these facets of relationships between company, successor company, successor company and employees and successor company and collective bargaining agent can't be decided by a -- of the merger and consolidation statute. One of the several states obviously have to look to more than that. So I think the fact is -- is clearly wrong. I think clearly, the question that we have here is not one of corporate or commercial law but it's a question of labor law. That does not depend on tactical niceties of a consolidation statute nor we suggest upon the manner, upon the manner by which one company acquires another. And here, although I argue for the Company, here perhaps, we break ground and argue what many other companies might know or assert what many other companies, counsel for companies might not be willing to grant. I want to say first, there are four possibilities as I've seen them of how you can reach Wiley. First is merger and consolidation statute, I think that's clearly wrong. Second, you can do what the Court of Appeals did which is to say, “Well, Court won't pass on the question that the arbitrator decide everything.” I think that also is clearly wrong, and I think so does amicus say it's clearly wrong. The Court must decide it. The arbitrator can't decide whether a party is to be bound to a contract. And the fact that Wiley is charged here, not as the signing party but as a successor of the signing party, doesn't author the question. If Interscience were doing business, the Court would have to decide did Interscience make the contract. Interscience is no more, Wiley is being sued, the Court must therefore have to decide, is Wiley bound by express assumption of contract, by the terms of the contract or by operation of law? This is the threshold finding which obviously is a judicial one and not an arbitral one. The third possibility of holding Wiley is, if you adapt the rule presently in effect, in the lower courts and the Board, and that is that absent a case of alter ego, and this clearly is a good faith merger, except in the case of an alter ego, a purchaser of assets is never to be held to the contract of the predecessor. Now, it's true that those are contract bar cases. Those cases were decided in the framework of whether or not the purchaser company, reinstating the operations of the old company, could claim the benefit of the contract that the seller had made with the Union or whether -- Byron R. White: (Inaudible) as in the case? Charles H. Lieb: Yes, sir, yes, sir, and we suggest that you can fairly equate a merger such as here, of a company where the stockholders of the merging company acquire a 20% stock interest in the surviving company, we think that you can fairly equate that to an asset's purchase, but we don't argue it. We don't argue that. We choose instead to place our opposition on the broader rule which we would suggest that you adopt. And I think in this, we and amicus are in basic agreement -- Hugo L. Black: (Inaudible) Charles H. Lieb: which is that, Wiley could be held to the Interscience -- Hugo L. Black: (Inaudible) Let me ask you a question because -- Charles H. Lieb: Yes, sir. Hugo L. Black: -- I don't quite understand. Am I right in making the two questions, the number one is this, (Inaudible) claims he has no contract to arbitrate. Charles H. Lieb: That's right. Hugo L. Black: The other people claim, he does. Charles H. Lieb: That's right. Hugo L. Black: And the question is whether that to be decided by an arbitrator or decided by a court? Charles H. Lieb: Well, our -- yes, sir, that's the first question, but the second -- Hugo L. Black: But I'm talking about the first question. Charles H. Lieb: That's the first part of the first question. The second part of the first question -- Hugo L. Black: Well, suppose it's decided that the Court is the one that has the right to decide that, why does that in there? Charles H. Lieb: Well, because amicus and we are suggesting that this Court on the record can decide the question. We sugge -- Hugo L. Black: Decide what question? Charles H. Lieb: Whether Wiley is bound and that you can find on this record that Wiley cannot be bound. We're asking -- we're asking you not only to reverse the Court of Appeals, we're suggesting that it may not be necessary for you to remand at the trial. Hugo L. Black: Well, is that the bottom of this? The first thing, it has to be decided under number one. Charles H. Lieb: That's correct, sir. Hugo L. Black: Whether when there's a dispute between whether there's a contract to arbitrate, the Court has the right must pass on that first or that you let the arbitrator first. Charles H. Lieb: That's correct, sir. Hugo L. Black: And you and amicus, you say agree? Charles H. Lieb: Well, I -- I -- Hugo L. Black: (Voice Overlap) -- Charles H. Lieb: -- perhaps I'd better not speak too freely for amicus. Hugo L. Black: (Voice Overlap) -- Charles H. Lieb: It's my understanding that we are in agreement. Hugo L. Black: What about the -- those who are not amicus? Charles H. Lieb: Well, the Union says that Section 90 of the consolidation statute imposes as a matter of law the obligation on Wiley. Hugo L. Black: But they -- who do they say decide it? Charles H. Lieb: Well, they said -- Hugo L. Black: Did they say that the arbitrator has the right to decide whether the arbitrator can -- can arbitrate? Charles H. Lieb: No, sir, they read the Court of Appeals' opinion differently than we do and they construe it differently, then -- then Judge Kaufman in his concurring opinion construed it. They say that the Court did decide it. And I think that they -- Hugo L. Black: They say that the Court decided that there was an obligation to arbitrate -- Charles H. Lieb: Yes, sir. Hugo L. Black: -- by contract -- by what, by substance? (Voice Overlap) -- or what? Charles H. Lieb: Are you -- you have to let them speak for themselves because they are the ones who -- who -- Hugo L. Black: I don't know who satisfy (Inaudible) Charles H. Lieb: Well, sir, they -- they say that -- that Judge Medina in his opinion held that, we, the respondent, are required by contract assumption to arbitrate the questions. Hugo L. Black: Did Judge Medina -- Charles H. Lieb: But he did not. Hugo L. Black: -- said that you had assumed it by contract? Did he have any evidence on that? Was any evidence taken with the Court or what (Voice Overlap) -- Charles H. Lieb: No, sir, no, sir. Well, he just didn't say it. This is what the Union says he said. Hugo L. Black: Well, suppose you did say it, what's it based on? Charles H. Lieb: It -- it could only have been based on Section 90. Hugo L. Black: Of what? Charles H. Lieb: Of the New York Stock Corporation Law, the merger and consolidation statute. William J. Brennan, Jr.: (Inaudible) is a matter of -- of one of the effects of the merger under that statute. Charles H. Lieb: Yes, but -- William J. Brennan, Jr.: That's what it would be, wouldn't it? Charles H. Lieb: Yes, but -- William J. Brennan, Jr.: It's not an assumption then that's an imposition Charles H. Lieb: Yes. William J. Brennan, Jr.: -- by the statute. Charles H. Lieb: Yes but Judge Medina didn't say that. William J. Brennan, Jr.: Well, whether he did or not, you're suggesting that the Union's position is -- Charles H. Lieb: Yes, that is -- William J. Brennan, Jr.: -- that section of the statute imposed the obligation. Not that they volun -- that Wiley voluntarily assumed it. Charles H. Lieb: That is exactly the Union's position. Hugo L. Black: (Inaudible) be held to be a matter of judicial determination can be shifted over to the arbiter I suppose. Charles H. Lieb: I don't think that anybody disputes that in this case. William O. Douglas: Yes, but that would -- that short circuits another question whether or not it should not be preliminary question for the arbiter to come if -- if probably as agreed to a court for review after the arbitration. In other words, whether or not in our Steelworkers formula -- formula of our Steelworkers case will -- what is left for judicial review whether that would be one of those questions. Charles H. Lieb: Mr. Justice Douglas, I don't just don't see how you can reach that point because in your Steelworkers cases, and just last -- this week, in Humphrey-Moore -- William O. Douglas: Yes. Charles H. Lieb: -- you said you have to find the obligation to arbitrate in contract, I'll add to that, in contract all by operation of law. But the Court has defined it. You can't leave it to the arbitrator. William O. Douglas: But the question is when does the Court do it? Does the Court do it now or does the Court do it -- Charles H. Lieb: Well, I -- William O. Douglas: (Voice Overlap) part of -- for arbitration, that's another alternative. Charles H. Lieb: I don't think that -- I don't think that that was ever intimated in your opinion. William O. Douglas: That's right. We have never decided it yet. Charles H. Lieb: No, no. I would think that you must -- that the Court must decide it first because otherwise, you're throwing -- then you have the classic case of bootstrap jurisdiction, then you are throwing everything to the arbitrator and saying “comeback and appeal it to the courts”. They're much more salutary rule, the one that I think most members at the bar read the Steelworkers cases to provide and that is the Court must decide whether the party is required to arbitrate. Speaker: (Inaudible) Charles H. Lieb: Well, you came pretty close to it in Humphrey-Moore, I thought. Maybe I won't. In any event, the rule that we're talking of, the rule that we're suggesting is that, if following the merger, the separate enterprise, they're separately continued and the collective bargaining unit is continued as a separate unit, it would be appropriate to hold the successor whether he's a successor by merger or purchase or reorganizational whatever, bound to that contract. But we're suggesting that where, as a proximate result of the merger or the purchase, the acquired enterprise is dissolved and -- and absorbed completely. And the collective bargaining unit looses its identity, then we're saying there can be no carryover. And the issue, it seems to me, between my friend, Mr. Feller and me, is not as to that rule but as to its application. He says that if at 9 o'clock on October 2nd, when you file, and I'm exaggerating a little, he says that if on the date of the merger, October 2nd, you terminated the Interscience Enterprise by moving the 40 people over to the Wiley offices right then, 9 o'clock that day, and the Court has to dismiss it. But he says, “If you didn't move them over that day, then Wiley has become bound by the contract and when Wiley moves them over the next day, it has to arbitrate all the questions, which would not have had to arbitrate, had it moved in at the day of the merger. We say this can't be the rule. The rule has to be that if this rule of the continuing employing enterprise or an industrial community is to be adapted and we think it a logical rule, you must give -- you must examine all of the facts and circumstances, as Mr. Feller suggest, and you must examine them over a reasonable period of time and not just at the precise moment of the filing of the merger papers. And you, is the Court, the trial court and obviously and not the arbitrator because it's a juridical question involving whether or not party is legally bound to arbitrate. Byron R. White: (Inaudible) Wiley is bound (Inaudible) don't make the arbitration clause reaches -- Charles H. Lieb: Oh, no we don't. Byron R. White: -- these kinds of issues -- Charles H. Lieb: No, we don't. Byron R. White: -- to survival, the questions of surviving -- Charles H. Lieb: I -- I would like to touch on that but let me add just two minutes to what I've just said. This is an appeal from a motion for summary judgment. When we come to the application of the facts to this case, this is not here, as I said before after trial. Amicus is -- doesn't sustain the Court of Appeals' opinion if there's -- even if we're wrong in saying that the record shows that there was integration at the date of the merger, all we have to show is an issue because the Union, having gotten the benefit of a motion for summary judgment, has to support it and has to support it by showing that there is no evidence of integration. And this obviously, it can't do. And I would like to add the second comment that the burden to do this, obviously, must be on the Union, not only because of moves for summary judgment but more importantly because it must be its burden to establish the nexus between the Union contract and Wiley, a stranger to the contract. And if it can't rely on Section 90 to do -- do that, it must support the burden of showing a continuing enterprise or showing that Wiley has carried on separate or at least separate Interscience Enterprise as -- as it separate and apart thing from the Wiley business. Speaker: (Inaudible) Charles H. Lieb: Yes, sir, but we're -- but we're the people who were licked on a motion for summary judgment. Hugo L. Black: (Inaudible) suppose we sent it back to -- Charles H. Lieb: No. Hugo L. Black: -- try the case. Charles H. Lieb: No, no. Hugo L. Black: I don't quite understand why you're insisting that we get into this (Inaudible) for summary judgment. Charles H. Lieb: Well, because I would pref -- I -- because I would prefer for you take the record as you find it and if you do, I think that you would find that we are not only entitled to reversal but that we are entitled to an affirmance of the District Court's dismissal. Now, we come to the question of -- Hugo L. Black: (Inaudible) Charles H. Lieb: Well, the record indicates concededly, a physical consolidation prior to the time that this suit was commenced. Even on amicus' own rule, if at that time, there was a physical consolidation, and if the intervening time between the merger and the physical consolidation was a reasonable theory at that time to accomplish the absorption then as a matter of law, the Interscience Enterprise was discontinued, did not carryover, is not to be found in the Wiley Company and therefore, Wiley cannot be sued. We have two other questions. We have the question of arbitrability. We claim that -- that these so-called “Glidden type questions” are not arbitrable, that they're really not Glidden type questions. William J. Brennan, Jr.: Am I right in thinking that is (Inaudible) half hour ago -- Charles H. Lieb: Yes, sir. William J. Brennan, Jr.: -- whether at page 100, at least that much, the Court of Appeals decided whether rightly or wrongly, did not obtain that under the Court of Appeals decides that if you are suable, Wiley, then the issues hounded by the Union are arbitrable under the agreement. Charles H. Lieb: Mr. Justice Brennan, I think that the Court merely decided, at page 100, that the Interscience contract in an action against Interscience would have supported -- would have supported these claims. But if you turn back to pages 94 and 95 -- Byron R. White: Well, that's -- is to be answered to his question that is yes. Charles H. Lieb: If it were an action as against Interscience -- Byron R. White: Yes. Charles H. Lieb: -- yes. Judge Medina so held. Byron R. White: He held that the arbitration clause reached this -- this kind of an -- these kinds of issue. Charles H. Lieb: Yes. Byron R. White: Yes. Charles H. Lieb: Yes, he did it as against Interscience. Byron R. White: Well, I understand that. But he -- but Justice Brennan said assuming Wiley is the step of the arbitration clause too. Charles H. Lieb: Yes, but if you look at -- at what Judge Kaufman said. And he says at a little bit more concisely on page 110, he says “We hold that the bargaining agreement does not clearly remove from the scope of arbitration the following questions, whether the collective bargaining agreement, as a whole, survived the consolidation.” And if it did, thereby imposing on Wiley, the obligation to arbitrate at that behest of the Union, the disputes arising before its natural termination, did the Union have to comport with the three-step grievance procedures? I don't think it's -- I don't -- I don't think, Mr. Justice Brennan, that it is possible to answer these questions separately, and we tried to touch on this in our main brief. I think this has sort of a gasthof thing effect. I think the trouble here is that these are really not claims as claims are commonly known “vested claims”. I think this is a -- Byron R. White: (Inaudible) Charles H. Lieb: I don't think that there is -- the claim -- it is asserted that there are claims made to vested rights. William J. Brennan, Jr.: (Inaudible) Charles H. Lieb: No, but I'm even going further than that. I'm saying that if you analyze what they're saying that Wiley, after the contract expiration date, must pay the 9% of wages into the Union plan, that Wiley must install a seniority plan and must install grievance and arbitration procedures following the date of the contract because they were provided for in an expired contract. What they are trying to do -- this is what they're complaining -- asking for, exactly that. What they're really saying, I think is this, this does not appear in their briefs, they are saying there had -- Interscience never merged and had the Interscience contract expired. And had there been that hiatus between the expiration of the Interscience contract and the -- and the negotiation and signature to a new contract, that during that hiatus, because the Inter -- Interscience Enterprise had continued and because the employees continued to work as a separate bargaining unit and because the Union continued to represent the employees even though the contract had expired, they are asserting some sort of right of a carryover. But by the -- on the very face of that claim, these claims cannot carryover to a different enterprise. So that I'm saying on the face of the claim, on the very face of the claim, it is premised on a continuation of the Interscience Enterprise and when it appears as it does appear here, that the Interscience Enterprise is no more, it must then appear that the claim is not the within the scope of the Interscience contract. They could just as well be making a claim against the United States Steel Corporation, because if the Interscience Enterprise has not carried over to Wiley, then there is no nexus, there's no connection, you'll never reach Wiley. And because they are claiming to arbitrate under the Interscience contract, then they're asserting the claim against United States Steel or Wiley, the claim obviously is not within the scope of the contract. I -- I would like to reserve whatever time remains unless the Court has any additional questions. Earl Warren: You may (Inaudible) Charles H. Lieb: Thank you. Irving Rozen: Mr. Chief Justice -- Earl Warren: Mr. Rozen. Irving Rozen: -- may it please the Court. I would like to emphasize first of all, this is an action under Section 301 of the Landrum-Griffin Act, an action to compel arbitration by the defendant. Speaker: Taft-Hartley Act. Irving Rozen: Under the Taft-Hartley Act. All we are asking here, Your Honors, is for an opportunity to go before the arbitrator and have the arbitrator tell us what rights passed over and what rights continue and that is all we are asking for. In the verdict part of his argument, Mr. Lieb was talking about rights and other matters as if we were here now before an arbitrator. As if we are here now trying to pass upon what these rights are. We aren't asking Your Honors to tell us what these rights are. As a matter of fact under the Trilogy cases, Steelworkers cases, that is not part of this Court's job. If that -- that is for the arbitrator to determine. Hugo L. Black: (Inaudible) determine, although there is a contract that first binds them to arbitrate? Irving Rozen: Of course, not, Your Honor. And we -- and we have argued in that brief that that was the question which was passed upon by Judge Medina in the Court of Appeals. And we cite numerous and copious quotations from his opinion, where he specifically held that the matter of substantive arbitrability, whether there is a contract, where there is a promise to arbitrate, is for the Court. And he held that this Court finds and holds that there is such a promise and that -- and that arbitration should proceed therefore on the question of what the rights are. The only question that he left open, this is one of the question you have to decide here by Your Honors, is the question of procedural arbitrability, whether or not, the Union complied with conditions of the contract respect the grievance procedure, with respect to grievance steps Byron R. White: (Inaudible) Court of Appeals decided that Wiley have to arbitrate? Irving Rozen: Yes, Your Honor, I think so. I think he said that in many places -- Byron R. White: I don't think it -- that they -- you don't think it left to the -- one of the arbitrator's questions whether -- whether Wiley is bound to this arbitration clause. Irving Rozen: I do not think so, sir. And I think it's clearly set forth in his opinion to that affect in many places. He -- Judge Medina recognized the -- the substantive arbitrability and procedure arbitrability. Our -- our action was against Wiley and Wiley alone because of course that was the legal entity that we could sue. And the action was direct to proceed against Wiley, the arbitrate is to proceed against Wiley. The only thing that's left open is the question of what the rights are and how shall those rights be implemented. I think that's pretty clear from the opinion, sir. I can read you many places from it whereas -- whereas so held. Potter Stewart: Judge Kaufman didn't read the opinion (Inaudible) Irving Rozen: Well, it's a little bit difficult to understand Judge Kaufman's opinion in that respect. But I must be frank, Your Honor, Mr. Justice Stewart. But I think that when you read it together with the majority opinion and where you read the fact that he enthusiastically agrees with it, I think you have to come to conclusion that the majority opinion on the finding that there is an obligation by Wiley to arbitrate, that -- that was passed upon and it was not reserved or send over to the arbitrator. We all agree upon that question, I believe that -- that it is the Court's duty to determine where there's a promise to arbitrate. We feel very strongly that the judge in the lower court held that the -- Wiley does have that obligation and we should be given the opportunity -- Speaker: (Inaudible) Irving Rozen: What's that, sir? Speaker: (Inaudible) Irving Rozen: We urged upon him Your Honor that to large extent, he should rely upon Section 90 of the Stock Corporation Law of the State of New York, because the Stock Corporation Law in the State of New York in cases of merging and consolidations, specifically states that the new corporation has imposed upon it all the obligations of the old corporation. And we thought that was a very persuasive argument but Mr. Justice -- Judge Medina disagree. He said, "No, Section 90 does not control us. Under Lincoln Mills case, we have the right and the duty to fashion our own federal common law on -- in arbitration. And we will, as a matter of brand new burgeoning federal law on arbitration, we will decide ourselves as a matter of common law what the obligation is.” And he went through -- they took into consideration Section 90 and -- and replied -- Hugo L. Black: Are you supporting his decision on that ground? Irving Rozen: Well, I -- I would -- Hugo L. Black: Did he had a right to fashion that rule? Irving Rozen: Well, I think he did, sir. I think New York cases and Lincoln Mills and the Trilogy cases specifically give the -- the courts the duty to do that, sir. Hugo L. Black: Fashion a rule to what effect? Irving Rozen: A fashion of rule of -- of labor law, of common law in arbitrations as to what the limit should be of arbritatibility and arbitration processes. This is I think that Constitution and the charter and the by-laws which were laid down by this Court in Lincoln Mills case and the Trilogy cases as to what the federal courts must do. They must -- Hugo L. Black: Suppose the statute, New York statute does not authorize, what do you say? Do you still say that the court has the right over a company, has not signed the contract to bargain, to arbitrate that the courts have a right to fashion a rule and say that they must arbitrate? Irving Rozen: I think as a matter of law, sir, that that is the fact. You -- you must bear in mind, Your Honor -- Hugo L. Black: (Voice Overlap) you know they haven't agreed to arbitrate. Irving Rozen: Even though, they haven't specifically agreed to arbitrate in writing in a -- in a specifically written document, yes, Your Honor. William J. Brennan, Jr.: (Inaudible) believe you suggest that you had to rely on Section 90. Irving Rozen: Yes, sir. William J. Brennan, Jr.: But what you'd now said, do I correctly understand your position is this, you still think that maybe Section 90 saddles Wallace -- Irving Rozen: Yes -- William J. Brennan, Jr.: -- Wiley? Irving Rozen: Yes, Your Honor. William J. Brennan, Jr.: But you don't have to rely on Section 90. Irving Rozen: Exactly so. William J. Brennan, Jr.: Because the Court of Appeals had said that the old fashion made a rule, a federal law which will govern this. Irving Rozen: Exactly, so. William J. Brennan, Jr.: And under that newly fashioned rule, Wiley is saddled with the obligation. Irving Rozen: That -- William J. Brennan, Jr.: (Voice Overlap) -- Irving Rozen: -- states it exactly correct, yes, Your Honor. William J. Brennan, Jr.: Oh, you tell me this. Would you mind looking at page 94 of the record? Irving Rozen: Yes, sir. William J. Brennan, Jr.: This is in the opinion of the Court of Appeals. Irving Rozen: Yes, sir. William J. Brennan, Jr.: This is Judge Medina's opinion. Irving Rozen: Yes, sir. William J. Brennan, Jr.: Now, he says, “We merely hold that as we interpret the collective bargaining agreement (Inaudible) we cannot say that it was intended that this consolidation should preclude this Union from proceeding to arbitration. Now, for proceeding to arbitration to what? To determine the effect of the consolidation on the contract, as well as on the rights of the employees. Now, why isn't that what Judge Kaufman said it was at page 110, his first question, “We hold that the collective bargaining agreement does not clearly a rule from the scope of arbitration to question one, whether the collective bargaining agreement as a whole provide the consolidation of Interscience and Wiley?” Why aren't they the same thing? Irving Rozen: Well, if you read the whole opinion and just not that one portion -- William J. Brennan, Jr.: Now, the whole opinion -- Irving Rozen: -- of judgment -- William J. Brennan, Jr.: -- the whole opinion just utterly confuses me, I just said but I -- I don't -- I -- I wonder if that -- after all that's in the language of holding that -- that says to me frankly, Mr. Rozen, that the arbitrator is to decide whether the collective bargaining agreement as whole survived the consolidation. Irving Rozen: Well, I -- I submit sir that you -- you just -- Speaker: (Inaudible) Irving Rozen: -- can't -- Speaker: (Inaudible) as the Court has held he brought on page 93 (Inaudible) Irving Rozen: Well, that's what I've been trying to say. Thank you for saying it. But I -- in my brief, I -- I quote from several places of Judge Medina's opinion where he clearly shows that he understands what the substantive arbitrability is. He clearly understands that he is, in fact, holding that -- Wiley's obligation to arbitrate. He is being passed upon and he does, in fact, direct that. And I think that the whole opinion does convey that distinct and definite finding and holding, sir. I would like, if I may, to refer to the statements made Mr. Lieb about when the physical change overtook place. But this does not appear in the printed transcript of record but it does appear in the typewritten record. And there was referred to in the Court of Appeals' brief by Mr. Lieb, I'm reading from page 5 of his Court of Appeals brief. I'm reading from a letter that Wiley sent on September 21, 1961 to the employees. And our letter clearly shows that was impossible for there to be any integration, any accretion, any disappearance of the Interscience units, until long, long after October 2nd, 1961 which is the date of the actual technical merger in the Secretary of State's office up in Albany. They tell the employees that the -- it needs to be for long when suitable quarters have been arranged, you will change your place of work. Until the move, work will continue as now at these offices, meaning the Interscience offices at the old stand. Then they go on to last paragraph and say, “Plans for the move should be completed within a few months, plans for the move should be completed with a few months.” Speaker: (Inaudible) the move takes place? Irving Rozen: We don't actually know and there's nothing in the record on that fact. I've searched the record carefully. I've looked at the references to the record made by Mr. Lieb and I can't find -- Byron R. White: Well, assuming Interscience will have two plants, there was no merger and one was organized and one wasn't and it discontinued to organize the plant, took the employees together in one plant and -- and there was no -- and the Union no longer had a majority, what is the consequence upon a labor contract if it has still had a year to run? Irving Rozen: Well, I would say it may depend upon where the labor contract is being tested. I would say that if it was being tested as we've tried to test it, that the -- the contract would continue. Judge Medina in his opinion says the essence of this case -- Byron R. White: But your position is even though the Union has no majority of the -- of the employees in that plant which is now -- all the employees are in one plant and the Union has no majority, does the contract goes on and the Company continues to be bound by the arbitration clause in the Company. Irving Rozen: Yes sir, it does because the contract is a contract. I say it's a sacred document that has to be observed and followed and -- and until it reaches its end either by operation of law or otherwise. Byron R. White: (Inaudible) Interscience had only one plant and it didn't merge, does the contract has to be expired in accordance with its term -- Irving Rozen: Yes sir. Byron R. White: -- was -- is Interscience bound the next day after the expiration of the contract to arbitrate? Irving Rozen: It is bound, sir, to arbitrate rights which created during the life of the contract. Byron R. White: But not -- not of the -- not down to arbitrate the events that took place the day after the contract is terminated. Irving Rozen: If -- if those events which took place the day after the termination of the contract have no relationship, have no root of foundation in the -- those matters which grew -- grew up or accrued or became vested during the life of the contract, then of course, arbitration -- William J. Brennan, Jr.: Well (Voice Overlap) -- Irving Rozen: -- could not be held. William J. Brennan, Jr.: -- Mr. Rozen -- Irving Rozen: Yes, sir. William J. Brennan, Jr.: -- what about the undertaking the pay into the pension plan? Suppose Interscience or whatever the -- this company is, had not been merged, the contract ran out, weren't able to negotiate a new agreement, three months after the expiration date and not a payment is demanded on the part of the Union, would Interscience had to pay or go to arbitration (Voice Overlap) -- Irving Rozen: This is really a question which should not be asked in this proceeding, Your Honor. We are -- that is one of the questions we are asking the arbitrator to pass upon. This is what Judge Medina says, tempting as it is for me to do something and say something about this. I must resist that temptation because this is an action to compel arbitration, an action to go the arbitrator to give the arbitrator a chance to tell us what those answers are. William J. Brennan, Jr.: (Inaudible) Irving Rozen: But I have an answer for you if you want it. William J. Brennan, Jr.: Your answer to me would be whether or not the Company's obligation survive the termination of the contract, would be an arbitrative -- arbitrable question on the contract itself. Irving Rozen: That's right, Your Honor, but we would -- Byron R. White: But you wouldn't have to say that -- that you might have the -- the Company might have the obligation to pay the pension plan but might not have the obligation to arbitrate. And then it might be -- the Company might be able to recover the money from (Voice Overlap) -- Irving Rozen: Well, there might -- possibly, there might be a distinction. Byron R. White: Except the arbitration clause has expired. Irving Rozen: There might a distinction but I don't think so, Your Honor. I would say, no. I would say, even though the arbitration clause has expired because that's the end of the contract, I would say that the obligation to make contributions to the pension plan were -- were vested, were created -- were -- a right that during the life of -- of the contract. Let us a take a case for example, where a union's been in collective bargaining agreement with the company for let's say, 25 years. And during that period of time, there's been pension plans and pension contributions enforced. Byron R. White: Will you pay for that? Irving Rozen: And each year they've had two years, each two years have had negotia -- did you ask question, sir? Byron R. White: Would any item -- would any -- would any matter survive the contract then arbitration -- the arbitration clause automatically survive, would it? Irving Rozen: I would think so. Yes, Your Honor because the -- the grievance arises during the life of the contract. Their vested right to -- created were a right during the life of the contract. Each two years have, in the example I was about to propose to Your Honor, there's been negotiations for wages and other things and the -- the most important attributes of a collective bargaining relationship is a pension plan, is the fact that when I get to be 65 or more, I'll have something to -- to protect me in my old age. So we give up rights for -- for increased wages. We give up rights for vacation pay. We give up rights for a number of other things so as to get that pension plan, to get those pension plan contributions. And -- and we -- and we get those rights in that way. After 25 years of service, the company, lets say, says “No, I'm not going -- I'm not going to bargain with you anymore. We're all through, we're not going to make the more contributions to your pension plan”, as -- as emphasized in this case. Exactly -- that's what exactly happened. And as -- as the employee to left high and dry, are all the -- the rights which has been created, all the promises that were made from all the years of -- of bargaining, all to go for north, we say there was a consideration on actual legal consideration, a quid pro quo, every two years for that pension plan contribution. And now, there's a mere fact that the plan -- that the Company's contract has terminated according to a termination clause in the contract, does that mean that were -- were employees go through? We -- Byron R. White: You're saying the contract didn't terminate in that respect. Irving Rozen: We say did not terminate in that respect. We say that this arbitration right to the Union to find out what it -- what -- what should go on there? What should happen there? And this is what we're asking. This is all what we're asking. We really shouldn't be engaged in this discussion at all because this is the ultimate -- this is -- this is the kind of discussion I expect to be arguing and talking to when I get before the arbiter, if I had to get to there with Your Honors permission of course. So I -- I say that -- in addition to our letter, I'd like to read you or Mr. Lieb's affidavit at page 58 of the record, this is again in connection with the physical transfer. And he here is, on September 19, 1961 talking to me and to my associates and here's -- here's what he said, “I said that although the physical transfer for me to sign to Wiley premises, would not be made until later of the year. It was Wiley's position that on October 2nd, automatically, without anything more, on October 2nd when the merger became effective, the collective bargaining unit would disappear at Interscience and be merged and be absorbed by the larger Wiley. So here, I've read Your Honors two statements by the Company itself telling us that there is not going to be disintegration, desecration as of the date of the merger. And that is why Judge Medina in his opinion states that the position, on page 89, he states that the position of the Company was that the agreement automatically, this is an exact quotation, "Automatically terminate for all purposes, the agreement by the consolidation." So I say to you -- Your Honors that that has been the legal question of law that Judge Medina passed upon. There's no factual issues before him because the Company's, as he finds and as their letter shows, took that position and on October 2nd, there was an automatic termination, Union was through, the employees are through, no more rights, nothing. And the fact is that nobody knows. The record does not show when it did take place. Now, I'd like Your Honors to bear with me while I explain Mr. Lieb's statement that there's no prior demand for arbitration. I concede that there was no formal document asking for arbitration. That is true and that possibly what he refers to, although I don't think so. The fact is from June 27th of 1961, when I addressed my first letter to Mr. Lieb advising him that there were knowledge of the impending merger and our insistence upon the continuation of the contract, upon our insistence upon the continuation of the rights of the employees until down to the very commence of the action, we were engaged in almost one long continuous process of -- of talking, of negotiations, of trying to work this problem out, of -- of advancing into each other's arguments and issues as to what the rights of employees were informed to do something about it. And this was not held at the level of the shop steward or the Union employee in the shop. Of course, it would be slightly ridiculous to think that such a problem could be handled in that way. This was handled at top level. Mr. Lieb, myself, Mr. Livingston, the President of our Union, Mr. Robinson, the Secretary-Treasurer of the Union and Mr. Lobdell, who was Vice President and Treasurer, I believe, of Wiley. Speaker: (Inaudible) Irving Rozen: Exactly, so. Speaker: (Inaudible) Irving Rozen: Yes. Speaker: (Inaudible) Irving Rozen: Yes, Your Honor, but I thought I -- I'm -- Speaker: Therefore, you don't reach the merits (Inaudible) Irving Rozen: You don't reach the merits, Your Honors, no. But I wanted -- I wanted to talk about that because I wanted to go into the question which I think impelled Your Honors to grant certiorari in this case and that is the question of procedural arbitrability. Speaker: There conflicts (Voice Overlap) -- Irving Rozen: There's the conflict in issue in the various circuits. And that's the question you have to decide. But I wanted to lay that question in its proper background because otherwise, wrong impression might be gotten his -- this all of a sudden, out of the blue, we start an action without any prior talks. Here we had talk after talk after talk, meeting after meeting, conference and conference, response and telephone conversations, all discussing these issues and these problems and trying to work something out. And we told them time and again, is -- is set forth in our affidavits in the record, we told them time and again that if we couldn't resolve them, we would have to go arbitration, we'd had to go to litigation and they -- could -- we couldn't get together so we had to start this suit as -- as -- which is now here pending. Speaker: (Inaudible) Irving Rozen: I think so, yes, Your Honor. On the merits of that issue, I do think so because I think that, as this Court itself held in the -- in the -- Speaker: (Inaudible) Irving Rozen: Well, the only question is -- I think you do have to reach it, Your Honors, because it's a question of procedural arbitrability and not -- William J. Brennan, Jr.: Well, not only that -- what -- the things you just said to us were not in the (Inaudible) Irving Rozen: Well, yes they are. William J. Brennan, Jr.: You mean about all these conversations with -- Irving Rozen: Oh, yes. William J. Brennan, Jr.: -- Mr. Lieb's are all in the record? Irving Rozen: Oh, yes, all in the record, yes, Your Honor. This is what we -- we were advanced in -- in our motion papers in the District Court in our affidavits, it's all in the record. But I think if -- I think you have to decide the question of procedural arbitrability because you may not want to get into this question of whether or not this constitutes compliance with the conditions of grievance machinery. I mean, I want to get into whether -- whether there was a waiver by the defendant by them. You mean I want to get into the question whether when they came into our office or we came to their office and we said to them -- and they said to us, “Look, there's no contract, there's no Union, we're just sitting down here without prejudice,” and this is what they said each time, “We won't never, never in a million years,” they kept saying to us, "Consent to your theory that you represent these employees, that these employees have rights as we can do something for you." That was their position all the way through and we tried to argue them out of it, we try to work something out with them, we couldn't do it. I -- we think that the arbitrator when -- if Your Honors agree with my position that procedural arbitrability is for him, we think the arbitrator will ultimately decide that issue that this was substantial compliance, that there was a waiver that the -- that the arbitration clause does not call for this -- for step by step adherence. It's at page -- I think you should read the arbitration clause at page 27 of the record, Your Honor. And this leaves me to my -- my question that I'm trying to discuss now as to whether procedural arbitrability is for the arbitrator for the Court. As Mr. Justice Harlan indicated that there is a conflict and I think that was the big issue in this case as to why this Court was kind of guess as to why this Court grant a certiorari. But I -- I don't think that -- Hugo L. Black: (Inaudible) we do have to pass on whether the federal rule, Judge Medina formulate (Inaudible) his right. We have to pass on that, do we not? We either have to approve it or disapprove it, do we not? Irving Rozen: Well, on the -- on the question of substantive arbitrability as to whether or not he was right in holding that Wiley -- Hugo L. Black: Well, I want to see if I can get this clears my mind. Irving Rozen: Yes, Your Honor. Hugo L. Black: As I understand it, what you held was that where a company has collective bargaining agreement with a union, that company is bought out or absorbed by a company that has no such collective bargaining agreement, that the federal rule from now on is that the company that bought it out and absorbed it, becomes liable under the collective bargaining agreement -- Irving Rozen: Yes, Your Honor. Hugo L. Black: -- that that's the federal rule that we find. Irving Rozen: That's right. And I'd like to add onto that, Your Honor, that traditionally -- Earl Warren: Finish your sentence (Voice Overlap) Irving Rozen: Thank you very much. Traditionally, there's been a distinction between an "assets deal" so-called and a "stock deal" so-called. The courts have held that where you buy the stock of a corporation, of course, the corporate entity continues and the -- and the corporate -- corporation continues liable on the collective bargaining agreement. But where you have an assets deal, where you buy merely the physical assets, then possibly, the contract does not continue to the -- to the new purchaser. But we say this was a stock deal. That was one of our arguments to Judge Medina. This was a stock deal. A merger is nothing more than a purchase of the stock of one corporation and -- and giving a stock the other corporation exchange. Thank you very much, Your Honors. Earl Warren: (Inaudible)

Earl Warren: Mario DiBella versus United States. Mr. Terris, you may continue your argument. Bruce J. Terris: Mr. Chief Justice, may it please the Court. Overnight, I have rethought the colloquy I had at the close of yesterday's session with the Chief Justice and Mr. Justice Frankfurter. The Chief Justice asked what the Government's position would be if the petitioner asked both for the suppression of the narcotics and for the return of the money instead of for just the suppression of the narcotics, and I answered that both would be appealable since the issues as to both would be the same and that proper judicial administration counseled against splitting the two portions of the motion. On reconsideration, it seems to me that my answer was wrong. While in this case, the issues as to the narcotics and the money probably would be identical and therefore, could be decided together. This would not be true probably in most cases, and in many cases, whether the issues were the same, within -- within in itself be a difficult question which only the Court of Appeals could finally determine. And therefore, the Government agrees as was suggested yesterday that each part of the motion under Rule 41 should be treated independently and tested to determine whether it is a part of the criminal case or as an independent proceeding, and this means returning to the Chief Justice's hypothetical case, that the part of the motion denying the return of the money would be appealable by the portion of the motion denying the suppression of narcotics would not be appealable. I would now -- Earl Warren: That is -- that is assuming, of course, that the money is not necessary to be used as evidence. That's -- Bruce J. Terris: Well, no. I'm assuming there that -- that it was, but the issue of appealability, it would still have to be returned if it were -- if it were illegally seized -- Earl Warren: Yeah. Bruce J. Terris: -- prior to trial. So that issue could be taken to the Court of Appeals for determination prior to trial, to determine whether it was illegally seized. Byron R. White: (Inaudible) Bruce J. Terris: Well, cash could be legitimately seized if it's the fruits of the crime, but it -- but if it were illegally seized, then, of course, he's -- Byron R. White: (Inaudible) Bruce J. Terris: -- entitled to return. Byron R. White: (Inaudible) Bruce J. Terris: That's right, narcotics. Even if he asked for the return of narcotics, we don't think it would have made any difference because obviously, he's not entitled to the return. That's -- Byron R. White: (Inaudible) Bruce J. Terris: -- well, even if -- even if the property involved is of the kind that -- that the movement is entitled to the return if he ask only for suppression and doesn't ask for return, then we think it's not appealable. If it -- if it is of the kind which he is entitled to return if it's illegally seized, then -- then it would be appealed when he asked for return and he's not entitled to it clearly on the face of it, then it's not appealable. Byron R. White: (Inaudible) Bruce J. Terris: That's right. It's as -- we -- we think of the equivalent of just asking for suppression. Felix Frankfurter: But I don't -- pardon me. You said if it's illegally seized, I thought as to -- that the Government's position that whether or not it was illegally seized could be appealed from if the Court decides it wasn't illegally seized? Bruce J. Terris: Well, that -- that would of course would be the issue that would be appealed to the Court of Appeals to determine whether it was illegally seized. Felix Frankfurter: Before the trial, although -- you -- you got me all confused. Bruce J. Terris: Well, our position -- Felix Frankfurter: I thought the whole point of not bringing up the question of illegal seizure of evidence that will be offered in evidence ought not to be taken out and isolated from the general prosecution, but should be left for out -- eventual determination in case there is a -- a (Inaudible) of guilt. Bruce J. Terris: Oh! The Government is not contending for a rule that there is never any appealability prior to trial. That we admit that there is appealability of the -- an order, either granting or denying a motion asking for the return of valuable property, for example, assume a case -- Felix Frankfurter: Is it because it's valuable that the -- that the ground for appeal is laid? Bruce J. Terris: We think -- Felix Frankfurter: I thought that -- I thought the great issue insofar as -- as not having piecemeal review is, that if this is part of the criminal trial, that you must await the outcome of the criminal trial before you raise the question of illegality. Bruce J. Terris: That -- that is -- Felix Frankfurter: Now, you say that if it's money and it's illegally seized, that can be appealed. If it's illegally seized, so that the Government can seize if illegally seized, of course, it has no business to offer it, so that the illegality is an issue in contest. I don't follow you at all. Bruce J. Terris: But you -- we agree with the -- our basic proposition is that if it's part of the criminal trial, then it is not appealable. However, when you ask both for the return of valuable property and for its suppression, the suppression part is part of the criminal trial. But when you're asking for the return, it is in essence like a lawsuit between the -- between the private individual and the Government over the right to property. Felix Frankfurter: I mean, why do you contest the -- the return as if it's -- if you should return it without having it -- Bruce J. Terris: No. I'm assuming that -- that issue is in -- is in contest; the issue of illegality. Felix Frankfurter: But then you're partly taking out of the criminal trial before its conclusion, a part of the criminal process. Bruce J. Terris: Well, you -- it -- it is true that the issue of illegality relates not only to the suppression, that it relates not only to the return, but to the suppression. That we think that when there -- when there's an issue between the -- the private person and the Government as to valuable property that this is in essence independent of the criminal case, even though the criminal case may have a light issue in it. Felix Frankfurter: I mean what in the issue is, whether it belongs to him? Is that the issue? Bruce J. Terris: That's -- that's -- it belongs to him and he's entitled to its immediate return, and to his -- his immediate possession. For example, assume that there wasn't an indictment. That all -- all there was is an arrest and a seizure of -- of large sums of money as in -- as in this case. Felix Frankfurter: Unrelated to the prosecution or related to it? Which? Bruce J. Terris: It's -- It's related to the prosecution. Felix Frankfurter: Related and the -- Bruce J. Terris: And the Government -- and the Government intends to -- to introduce it when and if it brings an indictment. It doesn't bring an indictment for a considerable period of time. The private person wants -- Felix Frankfurter: That's -- that's a problem, but it may not bring it. That's applicable to all sorts of seizures, money or not money. Bruce J. Terris: But -- but here, a man is being deprived of a -- of an extremely valuable property right and we think he shouldn't have to wait until the Government finally tries if it -- Felix Frankfurter: Do you think this will be -- but you may not have that -- that opportunity to introduce that in evidence because he may dissipate that valuable property. Bruce J. Terris: Well, it will not be given back to him assuming that we went in the District Court that -- and the -- and the motion to return is denied, then it will be appealed to the Court of Appeals. If he decides that the evidence has been illegally seized, then it will be returned. If it -- if the -- Felix Frankfurter: Then I don't want to take your time then, but you're leaving us completely confused. Potter Stewart: The point is as I gather that if the motion is basically a replevin action. Felix Frankfurter: Precisely. Potter Stewart: That appealable. Bruce J. Terris: That's right, in the essence, an independent action between the -- the Government and the private -- Potter Stewart: (voice overlap) -- Bruce J. Terris: -- person. That's right. Potter Stewart: That's -- that's basically to suppress the evidence which would include the -- an action to return non-returnable property. It's -- it's only defined with the -- with the criminal trial itself whether or not the indictment has just -- Bruce J. Terris: That's right. Potter Stewart: -- been brought. Bruce J. Terris: And if it's both he can -- and if -- and if it's both there's a -- very well be, then -- then he's entitled to appeal (voice overlap) -- Potter Stewart: -- the replevin action or reply. Bruce J. Terris: That's right. Felix Frankfurter: But by calling it replevin, you don't change the issue because -- Potter Stewart: Thank you. Felix Frankfurter: -- a -- a piece of paper, my piece of paper illegally seized, is to me just as valuable or maybe just invaluable as a $500 in gold. Bruce J. Terris: Your Honor -- Felix Frankfurter: If I want to call it replevin, if that -- if that clarifies the issue for you, it doesn't for me. A motion to return illegally seized property is a motion to seize illegally, properties, illegally seize property. Now you can call it replevin, and that clarifies, if that analyzed the issue for you, then God bless you, it doesn't for me. Bruce J. Terris: Well -- Felix Frankfurter: I'm asking you, the Government to return property which I claim is illegally seized and I see no difference between a book of mine that you seized or a letter of mine or a carbon copy of the letter than money. Bruce J. Terris: Well, Your Honor, as to -- without confining it to money. If it's other valuable property, we agreed that it's appealable. Felix Frankfurter: But everything that the Government has no right to take from me, is valuable to me and it isn't for you say it is invaluable. Bruce J. Terris: Well, first of all, Your Honor, is, narcotics is not valuable to you. Felix Frankfurter: I'm not talking about narcotics. That is a totally different issue that it doesn't belong to anybody and you can't get it back. I'm talking about illegally seized evidence which I claim the Government had no business to take and it isn't for you to say whether it's worth five cents to me or $500. Bruce J. Terris: Well, we -- Felix Frankfurter: Again, it may be worth nothing to you and everything to me. Earl Warren: Mr. Terris, according to your thesis, is it necessary to use the word valuable in connection with property? Bruce J. Terris: Well -- Earl Warren: It just isn't -- isn't the word “property” sufficient to sustain or -- Bruce J. Terris: In this -- in this case, Your Honor, it is, in the Coney case the -- the issue between what is -- Earl Warren: But what is that -- in any -- in any case, if it was disassociated from the criminal trial and it was property of the person -- Bruce J. Terris: Right. Earl Warren: -- person that would -- we don't have to bother about the -- Bruce J. Terris: Well -- Earl Warren: -- the valuable part. Bruce J. Terris: -- we -- we think of it -- it's -- it's something completely minor. Let's say -- let's say a copy of a document. We think even though he's asking for the return of that, that isn't important enough to make -- to make it independent of the criminal case, because we think what he's really interested in there, a court can determine whether he's really interested in the suppression. Earl Warren: Well, take the property that is not de minimis he said, then I think maybe we can get -- all of -- now, may I ask you just one more question, please. Do make any distinction between the post-indictment and -- and pre-indictment insofar as this particular issue is concerned? Bruce J. Terris: Well, no. But we think -- we think that the Caroll case and Cogen together -- Earl Warren: Yes. Bruce J. Terris: -- decide that as far as post indictment motions are concerned, that orders deciding them are not appealable either by the Government or by the defendant. Now, Caroll has some suggestion may be in Di Re case that they would be separate enough and it cites the (Inaudible) case, Court of Appeals decision, but -- Earl Warren: Yes. Bruce J. Terris: -- but except for an -- in rare instances and I'm not quite sure how they would be defined, we don't think that they could ever be appealable. Felix Frankfurter: I might question some more, if you got some time in the next case. The Chief Justice's question considered the word “disassociated” from the prosecution. If it's disassociated, then there's no problem, if it's disassociated. Bruce J. Terris: Well, we think -- Felix Frankfurter: The problem arises if the Government has in its possession the property. I don't care what it is. A worthless heirloom, a worthless occasion that would -- that might be inscribed inside which is an heirloom of mine in which incommensurable value, means nothing to you, and it was seized and it's claimed to be useable in the trial. If it's not claimed to be usable in the trial, there is no issue. Therefore, I get down to every kind of every species of problem and I do not see the difference you make between dollars or compared to dollars which I tried to discourage a document Bruce J. Terris: Well, Your Honor, your heirloom will -- will be returned, of course, after the trial. The only issue is time and we think that -- that something which is de minimis as the Chief Justice has explained it -- Felix Frankfurter: Come on, forget about -- forget about de minimis. It might be to you de minimis to you, to the Government, and not to me. Bruce J. Terris: Well, then, Your Honor, then if you -- if you could convince the District Court that you had -- that you had a real interest in not preventing the delay of the return of your property, that's all we're talking about. Felix Frankfurter: That applies then to every species of problem. Bruce J. Terris: That's right. Felix Frankfurter: Document for the fee. Bruce J. Terris: That's right Your Honor. Felix Frankfurter: And therefore, -- therefore, you are allowing an appeal if the defendant claims that he needs the property which you seized. Bruce J. Terris: Well, if he claims and -- and shows that he does, that I mean -- I suppose he can -- Felix Frankfurter: That is -- that is the truth of a rule that there should be -- there should not be an appeal that might be true about some -- some judgment although within a motion to dismiss. You might say, “I don't want to be hooked up now for six months. I've just drafted this interest not to stay until the trial comes on.” Would you allow him to appeal in that case? Bruce J. Terris: No -- no we wouldn't, Your Honor, but that -- Felix Frankfurter: Oh, but then you do allow then you do with the same effect, that in every case whether the claim of illegally seized property, a claim which may be made that you should have it returned at least once before the trial. That's what your argument, notwithstanding it. Bruce J. Terris: Well, in -- in many cases, they -- that claim can't be made. It can't be made in the case in which the difference between the Government and the movement is about contraband. It can't be -- Felix Frankfurter: I'm not talking about contraband. Bruce J. Terris: But that's a very frequent case, though. Felix Frankfurter: I know, that's -- that doesn't -- that raised a different problem, but you can get it returning though because this is yours. Bruce J. Terris: There -- then there's another kind of case in which the issue whether who's property is, is going to have to wait to the -- to await their trial. That's the Coney. That's -- Felix Frankfurter: I'm not talking about that issue. I'm talking about what is crucial in these two case whether when the property is claimed to be illegally seized and the prosecution is pending whether you can take that out of the -- the criminal process and get a review in the appellate court. Bruce J. Terris: Well, Your Honor, the discussion -- Felix Frankfurter: And now you left me all in the dark and you practically take back the whole argument that you may get -- Bruce J. Terris: Your Honor, the discussion that we're having isn't crucial to DiBella. In DiBella, we all were concerned with here is the motion for the suppression of narcotics. Felix Frankfurter: I'm not talking about the -- we didn't stand on the problem. I'm not -- we went beyond that. We didn't refuse to take your argument to the narcotic case and that's -- that's not a difficult problem. The difficulty would rise from the situation that you entered into discussion with Chief Justice that namely, money. Then you should thought to differentiate money from other property. For my self, I see no difference. Bruce J. Terris: Well, I -- I don't just -- I -- I did never intend to distinguish money from other property. Felix Frankfurter: (Voice Overlap) a claim of -- a claim -- the property claimed to be illegally seized and the question is whether that is appealable before determination of the criminal prosecution. And you now say, if the defendant says, “He needs it badly,” then he can appeal. Bruce J. Terris: And he -- he shows that and he shows reasonable ground for that -- for that. Felix Frankfurter: Well, they can show that in every case. Bruce J. Terris: Well, Your Honor so in many cases, we don't think he can show it. For example, the moment there will be copies of documents, Felix Frankfurter: (Voice Overlap) Bruce J. Terris: -- we don't think that he can show them. Felix Frankfurter: I don't think you can tell them. Instead I'm taking this position, that of taking the position you said, probably, yesterday, probably because you turned on such distinctions. Bruce J. Terris: No -- no, Your Honor. (Inaudible) only is -- only is relevant insofar as it establishes the -- the framework for how this issue should be considered. Felix Frankfurter: I'm not even suggesting what position the Government should take. If the Government says, “I would disagree.” The government says that -- that you can review, you can take on -- on the criminal posit and every included step before termination. I could understand that and completely disagree with it. If you think that's issue as I understand it from my standpoint, I'm going to be against it, but I can't understand the suppression. Bruce J. Terris: Well, You Honor, the -- of course, the Government was in a very difficult position. There isn't -- there isn't -- that there's been no decision as far as we know, that -- that goes as far as denying appeals as Your Honor suggested. Felix Frankfurter: But the government is -- ought not to be in a difficulty of position to have coherent position. Bruce J. Terris: But we think this -- Felix Frankfurter: And the difficulties are not something from which the Government ought to speak and state. Bruce J. Terris: Well, we think we have a logical and coherent position. Felix Frankfurter: (Inaudible) Earl Warren: Mr. Lewis. Jerome Lewis: Mr. Chief Justice and may it please the Court. As I listened to my line of adversary, I believe his theory would amount to fragmentary appeals. That one part, that in you're going to ask for a suppression of contrabands and you also ask for the return, let's assume that there are papers that implicate the -- the defendant in the sale of narcotics. Now, after those papers in which you ask for a return, you can then have a divisiveness and go to the Court of Appeals upon the illegal seizure of those papers. And I think the whole question here is, is either the contraband or these papers' part or a step in the criminal procedure or proceeding or is it not? That is the issue. Now, back in 1930, Judge Learned Hand of our circuit, in an appellate case said, “We hold therefore that at the beginning of the proceeding which determines the appealability of order and that since this was before indictment, we have jurisdiction of the courts. That's been the law in our circuit for 31 years. And as I point out in my appendix, seven other circuits agreed with Judge Learned Hand. There are seven cases in this Court which more or less adhere to the same philosophy, an addition to the three cases that Judge Whittaker -- Mr. Justice Whittaker mentioned yesterday, we have the Go-Bart case, the Steel case, the Lockwood's case, and, of course, the more recent vintage, the Carroll case. Now, in the Carroll case, the Court very distinctly stated, earlier cases illustrated sometimes was off discussion that under certain conditions, orders for the suppression or return of illegally seized property are appealable at once as where the motion is made prior to indictment. Now, we made our motion prior to indictment. And as to this divisiveness, the severance, this theory of fragmentary appeal, this Court in a footnote, I think, thoroughly elucidated the concept of law when it said, “We do not suggest that a motion made under Rule 41 (e) gains or loses appealability simply upon whether it has return or suppression or both. I don't think this Court in the Carroll case, has set a line of demarcation between a return or a suppression. Felix Frankfurter: Why should there be a difference? Why should the difference turn on whether before or after indictment, if in fact, the criminal process has started? Jerome Lewis: Well -- Felix Frankfurter: Why should that be a difference? Jerome Lewis: Well, I -- I would say this to Your Honors, that the difference seemed to be that when there isn't a criminal proceeding pending, is in the nature of a special proceeding. Now take this case -- Felix Frankfurter: I'm assuming when I say the criminal process had started, but the criminal proceeding is (inaudible) Jerome Lewis: You mean an indictment has been filed, Your Honor? Felix Frankfurter: I mean a -- a proceeding before a commission in the Southern District of New York and the commissioner has held the man, but was pleading before the grand jury. And the grand jury actively is engaged in considering the case. Jerome Lewis: Well, I -- Felix Frankfurter: And the seizure is made -- was made before the -- before the grand jury reports the indictment. Do I understand you to say that the law is that if the seizure -- if the -- if your motion for suppression on the return came the day after the indictment, is appealable, if it came the day before it isn't appealable? Jerome Lewis: No. If the motion is made prior to the filing of the indictment, it is appealable. Felix Frankfurter: But suppose the motion is made the day after the filing of the indictment, but after the process that I've indicated, namely, long hearing and have them to my knowledge, proceedings before the United States Commissioner the same day. And at the end, he holds the man from the grand jury and they have the man who's out on bail in the proceedings and now before the grand jury. Before the grand jury returns the indictment, you -- you move with the suppression of documents. According to your move, that's appealable. Jerome Lewis: Yes, Your Honor. Felix Frankfurter: You move it and you make the same motion the day after indictment is not appealable. My question is, why is that different? Jerome Lewis: Well, the distinction -- the distinction seems to be drawn in -- in the Go-Bart case, because once a commissioner has exhausted his jurisdiction, there is nothing pending. The -- Felix Frankfurter: He is pending in my -- in my supposition, a proceeding before the grand jury on the basis of the commitment by the -- by the commissioner. Jerome Lewis: Except, Your Honor that the indictment may never come down. And now, let me give you a practical example of what took place in our case. When I made my motion to suppress -- Felix Frankfurter: But suppose the indictment has come down by the time the motion is -- is heard, to make -- to make it turn that you make it turn on whether an indictment is done. My question is, whether the sensible, rational line of inquiries -- whether a motion just for a return of documents in connection with the criminal process that's underway to be appealable, whether the indictment has been initiated or not. I can understand -- I can well understand if it's not appealable, but after a decent period is as -- or the grand jury adjourns without returning an indictment that the -- that the prosecution is blown up. But as this time, I don't see the (inaudible) Jerome Lewis: All I could -- Felix Frankfurter: On the theory, this is a mechanical rule, at least not for me. Jerome Lewis: Yes, Your Honor. Felix Frankfurter: This -- this non-appealability is a mechanical rule. It's one of the few things about which you can say there's a big historic principle in federal jurisdiction. Jerome Lewis: May I please Your Honor, as I said that the theory of law seems to be that once a commissioner has filed them in over for the grand jury and prior to the filing of the indictment, there is nothing pending in a criminal proceeding. Now, in our particular case, Your Honor, when I made my motion to suppress, I didn't receive a criminal number. I received a miscellaneous number and I had to pay a filing fee. Now, in the event there had been an indictment, I would have received a criminal number and not pay the filing fee because it would considered as part of the criminal proceeding and therefore -- Felix Frankfurter: If you say that there is no -- it is deemed or whatever your phrase was.It is deemed that there's nothing pending? That's a false meaning. That's not -- that doesn't accord with the fact. Jerome Lewis: But Your Honor, I cannot disagree with your reasoning, but that's what the courts have held in the past. Felix Frankfurter: I'm assuming that this is a new question for us, an undecided question, that certainly there's no decision, whatever the talk may be and I'm old-fashioned enough to assume there's a difference between inadequately considered talk in a case because it isn't a matter before the court and a decision and that old-fashioned. Earl Warren: Mr. Lewis may I ask you a question similar to the one I asked Mr. Terris? In this case where they -- where they searched the premises and they found both narcotics and money and took -- took both under -- under their search. Suppose you made your motion to -- for a return of -- of both the -- or suppression of the narcotics and a return of the money. The court denied both of them. Do you appeal from that?And suppose we're not with you on the -- on the question of the suppression of the evidence. We believe that was properly suppressed. But the fact is that the Government made no effort at all to show that the money was anyway connected with the -- with trial or it's total absence of proof on that -- on that subject. Would you think that -- that was appealable? That portion was appealable? Jerome Lewis: Your Honor, I think that -- Earl Warren: Or would you insist that that be not appealable and the Government keep your money all the time you're undergoing trial? Jerome Lewis: I said either both are appealable or none.Either is part of a criminal proceeding or it isn't. You can't have fragmentary appeals and go to the Court of Appeals and say, “We're only going to take one portion of what took place at this particular time and we're going to exclude the other.” And I think the same philosophical reasoning must be, either they're part of a criminal proceeding as a step or they are not. It is my contention that when there is no indictment pending, it is in the nature of a special proceeding and I don't care what received or whether I asked for the return and I think that's what the Court meant in the Carroll case. Now, that is my entire concept of a law as it is and I think it has been for many, many years. I haven't got much time left. We haven't had too much of a discussion from the Government on the merits, and I think, Your Honors, that in the court the Congress never contemplated that the awesome powers that the agents arrogated to themselves in this particular case would ever be used by them in the manner in which they did because a particularly -- particular significance to note that none of -- not one agent ever submitted an affidavit as to what took place prior to the arrest or at the time of the arrest to justify what they did. And I'd like -- and I respectfully submit that the judgment of the lower law of court should be reversed and I'd like to conclude with a very pertinent observation made by Judge Waterman in the dissenting opinion when he said, “To approve the office's acts here, is to take another long step away from the original concepts of oath and liberty expressed in the Fourth Amendment. Thank you very much. Charles E. Whittaker: Gentlemen, may I ask you please. Jerome Lewis: Yes. Charles E. Whittaker: I understand from the record that there was a very sharp controversy between the officers and petitioner as to what happened in his apartment. The officers contending that petitioner consented to and took this search and took them to his bedroom and to this bag that contained the contraband. He denies that. Has that issue of fact ever been resolved in any place? Jerome Lewis: It never was resolved. May I say this; there we have a very unusual situation. I can understand the use of hearsay evidence in order to indicate probable cause. But we haven't got an affidavit from any of the arresting agents in this case. All we have is an affidavit of an -- the United States Attorney who says, based upon information and belief. Now, after an arrest that which takes place is evidentiary in nature. The Assistant United States Attorney, if we had a formal hearing, couldn't take the stand and testify as to what he was told and that is the entire falsity of the Government's argument here. We haven't got an affidavit from any of the agents. And so, the only thing that was before the court was the affidavit of the petitioner that he didn't give his consent. Now, the Assistant United States Attorney, I think it's a -- a very unkind of procedure for an Assistant United States Attorney to submit his affidavit as to what he was told by an agent after an arrest took place and immediately filed thereto without an affidavit from an agent. Charles E. Whittaker: Even if you're right that this order was appealable, would not that factual controversy still have to be determined? Jerome Lewis: No, Your Honor, because I say that issue of fact never has arisen because the Government did not submit any affidavit by any of the agents as to what transpired. And even -- even assuming arguendo that there might be, of course, and they have consent. When it comes to the question of consent, then the Government has the burden of proof to show clearly and unequivocally that a man waived his constitutional right. And I said that looking at the record here, it is apparent that this man did not unequivocally waive his constitutional rights. And I say the Government submitted no evidence in support of it. You can't submit an affidavit of an Assistant United States Attorney as to what he was told about evidentiary facts. You can under the (Inaudible) case, do it to establish probable cause but you can't do it to establish that arrest was legal and the circumstances surrounding the arrest. And I say there was no factual issue presented to the trial court with determination. Are there any other questions? I know it sounded too light. Earl Warren: No, I think not, Mr. Lewis. Jerome Lewis: Thank you Your Honor. Earl Warren: Thank you.

Earl Warren: Number 48, System Federation Number 91, Railway Employees' Department, AFL-CIO, et al., Petitioner, versus O.V. Wright et al. Mr. Lyman. Richard R. Lyman: Mr. Chief Justice, if the Court please. I represent the petitioners in this case who are a group of railroad labor organizations, commonly referred to as shop craft unions as well as some of their subsidiary component local unions who were enjoined along with the respondent Louisville & Nashville Railroad Company some 15 years ago from discriminating against a group of non-union plaintiffs with respect to affording those plaintiffs' full and equal enjoyment of all of the rights given to them and other employees in their respective crafts, under collective bargaining agreements that were negotiated between this petitioner organizations in the railroad company. We are now here seeking for reversal of decisions of the courts below which refuse to modify that old injunction to the extent of permitting us to ask the railroad to execute a union shop, union security agreement with this petitioner labor organizations as bargaining representatives. The type of agreement we sought to negotiate of course is the type that was authorized by the 1951 amendments to Railway Labor Act which came along some six years after this old injunction was issued and which subject to enumerated safeguards, did authorize union security agreements in the railroad industry which had previous had been an open shop industry. And this Court is very familiar with that in view of the decision in the Hanson case which was the first time that those 1951 amendments had been held to be constitutional. We petition for modification of this injunction in accordance with Rule 60 (b) subparagraph 5 under Federal Rules of Civil Procedure, which authorizes modification of an injunction in its prospective application when circumstances have so changed as to make it inequitable for the injunction to be continued in an effect -- in effect in its original form. What we -- Hugo L. Black: Is that rule printed in your brief? Richard R. Lyman: It appears at page 14 of our brief Your Honor, our original brief. Hugo L. Black: Thank you. Richard R. Lyman: What we asked the Courts to do was not to vacate the injunction, not to open the door to any unlawful discrimination against these original plaintiffs and members of their class, but simply to give us a pro tanto modification. So that the injunction which at time of its issuance had declared and protected plaintiffs' rights under the Railway Labor Act as it existed at that time would now be modified so that it would protect the rights of these plaintiffs and their class under the Railway Labor Act in its present form. And we sought and obtained a review by this Court on three questions that we urged that were involved, three points in which we stated that the courts below aired in the decision that they reached. First of all, the Courts concluded, both the District Court and the per curiam opinion of the Court of Appeals which was primarily a paraphrasing of the decision and reasoning of the District Court, the Courts concluded first that the amendment of the Railway Labor Act is so as to permit union shop agreements, which had previously been unlawful, was not a sufficient change in circumstances as to justify removing this injunctive prohibition against our negotiating such agreements. Then they also ruled that in view of the fact that the original decree of an injunction had been a consent decree rather than a decree written by the Court following a complete trial and litigation of the old suit. Therefore, we must be deemed to have agreed with this original plaintiff's and their class that never at anytime in the future would we ever negotiate a union shop agreement. So the courts below both fell into the error that this Court come in to (Inaudible) Swift case of treating the consent decree as a contract rather than as a judicial act. And third, both courts -- Charles E. Whittaker: (Inaudible) decree, there's a contract did you say? Richard R. Lyman: Yes Your Honor, and of course in the Swift case, this Court discussed that concept in considerable length. And third, both of the courts below give such comments in their opinions to evidence submitted over the objections of the moving parties, the petitioners here that -- that we must consider that they give weight to it and -- and give it effect in refusing to modify injunction. That evidence was to the effect that as a result of an economic strike on the Louisville & Nashville Railroad in 1955, they remain a great deal of bitterness and hostility among the employees of the railroad and the evidence showed that these petitioner organizations had find and expelled members who worked during the strike. The L & M claim that 2500 of these employees stayed at work during the strike. And now, they came in this proceeding to modify the old injunction to permit us and negotiate a union shop and urged that because there was this antipathy among the employee groups, which had nothing whatsoever to do with the original injunction against discrimination in the enjoinment of contract rights, had nothing whatever to do with this union shop agreement but was simply bitterness in strike out of -- between strikers and strike breakers that this should be construed as holding us without clean hands and hence not entitled to negotiate the union shop agreement. John M. Harlan II: Is the District Court opinion printed in the record on page -- Richard R. Lyman: Yes Your Honor that -- Judge Sherburne's opinion appears at page 69 of the record. It's -- it goes from page 69 to page 80. John M. Harlan II: Oh, yes. Richard R. Lyman: Now, I think it's important to have in mind the nature of the discrimination that was charged in the original complaint, it illustrates that I have nothing to do with this so-called bitterness or hostility. What these plaintiffs originally complaining about was the fact that the non-union employees they alleged had been -- had been denied equal opportunities for promotions from one category of employment to another, had been denied their fair share of overtime assignments, and had been denied certain attributes of their seniority status, all claim to be governed by the contracts between the company and the organization in certain matters such as picking man to be temporarily upgraded from helper to a temporary mechanics job or in assigning men to be called for overtime in particular jobs. There is discretion that's exercised by a local foreman and a local union committee in deciding who they think to be the best man to be upgraded. And that was the gist of this original action. There was no question of a union shop agreement back in 1945. But this Court just prior of entry of this consent decree, had decided the landmark Steele and Tunstall cases which contained a complete and new to all of us exposition of the statutory fiduciary duty of bargaining agents and the carriers under the Railway Labor Act not to join in discriminating against members of the class representative. Now up until the Steele and Tunstall cases were decided of course the -- as this Court knows from having reversed both the Supreme Court of Alabama and the Court of Appeals for the Fourth Circuit, there was a quite a body of authority relied upon by many course to the affect that you couldn't maintain a lawsuit based on discrimination which was joined in by the company and the union. But, when these cases were decided, there was no longer any point in litigating this lawsuit on the original complaint for the purpose of trying to create any precedent. The precedent was there for us, this Courts opinion in the Steele and Tunstall cases practically wrote the form of our consent decree force. But then when we came along after the Railroad Labor Act was amended as to permit a union shop agreement, the railroad suddenly said, "Do as, well, we won't sign that agreement with you because somebody is going to hold us some contempt of this old decree that says we can't discriminate based on non-membership in the union." So, that's was this case is about and that's what precipitated this motion to modify the injunction. Now, probably one of the most basic concepts on modification of injunctions is it in -- in injunction does not create a right but simply furnishes the protection, a remedy for the protection of a right which must find its source some place else. In this case, the source of the right asserted in the original complaint was the Railway Labor Act. It was the statutory fiduciary duty defined by this Court in the Steele and Tunstall cases. Now, our position to support of the modification and the injunction is quite simple, these rights stems from the statute. The statute has now been amended so as to change the nature of the right. And if we don't have the injunction modified to conform to this change, we're confronted with the situation of these petitioners continuing under threat of this injunction, under panic contempt proceedings for violating it, continuing to be prohibited from negotiating agreements which Congress has said in these words, "They shall be permitted to negotiate." And the original plaintiffs and the people that have been intervened in these more recent proceedings would be continued to be protected, would continue to have this injunctive remedy for the protection of a right which is no longer in existence. And of course aside from the inequity of being prohibited from engaging in con -- conduct which is lawful and which Congress said it is desirable now for national public policy in the railroad industry to prevent free riders to require employees to bear their fair share or the cost of burden -- the cost in the burden of collective bargaining. In addition to -- to just the inequity of being prohibited from doing something that you have a legal right to do, there is of course the additional very substantial financial consideration that's involved in which these petitioners are seeking the right to enjoy. We have by railroads argument in this brief, I believe this claim that 2500 employees work during the strike and that everybody that work doing the strike was expelled from the union or was not a member of the union to begin with. But we took a very small figure for the amount of dues income that would be lost by these organizations as a result of being kept under this injunction. I suspect a very conservative estimate what the dues lost would be if you would assume 1% of an employer's monthly earnings for -- for his monthly dues. I suppose you have between $100,000 to $200,000 to this lawsuit dues to these group of petitioners so, this is not a situation where the petitioners are not suffering any particular inequity or in any particular wrong or not hurting from the continuously injunction. Charles E. Whittaker: Mr. Lyman, may ask you please? Are the types of employees dealt with the Steele and Tunstall eligible for membership now in (Inaudible) Richard R. Lyman: I don't know what Your Honor means, but -- but types --- Charles E. Whittaker: Steele -- Steele and Tunstall (Voice Overlap) -- Richard R. Lyman: That was a racial discrimination case. Charles E. Whittaker: I beg your pardon? Richard R. Lyman: That was a racial discrimination case. Charles E. Whittaker: Steele and Tuns -- Steele and Tunstall dealt with -- Richard R. Lyman: Yes. Charles E. Whittaker: -- with racial -- Richard R. Lyman: And assuming in that they were a members of different crafts, they were operating crafts and the shop crafts. Charles E. Whittaker: They couldn't be members of the union but nevertheless what members of the bargaining union. Richard R. Lyman: Well they -- they are -- sorry, the answer to your question Your Honor is yes. Charles E. Whittaker: They can be. Richard R. Lyman: They can be. And we would very much like to be able to require them to join and to make their contributions to the overall cost to collective bargaining. Now, there is one point that and one only that runs through all of the briefs of the respondents, both the respondent, Railroad Company and the individual employee response. That is this idea of an agreement, an agreement to the agreement. They don't speak of the decree. They speak of the decree and the agreement. And they give the impression they try to give the impression in their briefs as they seem to have succeeded in doing with the District Court that this was not an ordinary kind of a consent decree of injunction but it was something a little unusual. The say that we agreed in some kind of a tripartite agreement between the plaintiffs, the company and the unions that there would be never be a union security agreement negotiated on this property. The fact is there is no such agreement and we challenge counsel in the District Court and the Court of Appeals and we've done it here to point to any place in the record where there is such agreement. We have further demonstrated that by reference to their own briefs, that when press, what they say is that the decree was the agreement. And they say that by the act of settling the case by a consent decree therefore, we must by some magical method be assumed to have entered into some implied agreement. We would not ever negotiate the union shop agreement. Charles E. Whittaker: Did the District Court take the position that he did not have the power? Richard R. Lyman: No, the District Court said he had power to modify the injunction but then he cons -- construed this consent decree as I've said as being a contract, an agreement, strictly contradiction to what this Court has so plainly and clearly stated in the Swift case. Hugo L. Black: You mean as being an agreement that you would never seek a modification on the decree? Richard R. Lyman: Yes -- yes Your Honor. Hugo L. Black: Where is it -- why did he say this? Richard R. Lyman: Not that we would never seek a modification. He said that we must be held to have agreed that we would never attempt to negotiate a union shop. Hugo L. Black: Well that would be the same thing, isn't it? Richard R. Lyman: And we didn't agree to that. What we did, we agreed to an injunction to the entry of a consent decree of an injunction enjoining us from this broad range of discrimination. There is no side agreement. There is no covenant undesirable. Hugo L. Black: The language of the injunction permanent or did the court retain jurisdiction? Richard R. Lyman: The Court retain jurisdiction expressly in the injunction. Hugo L. Black: Well, what purpose? What page is that? Richard R. Lyman: Page 36 of the record Your Honor. Page 38, the bottom of the page, the Court says, "The Court retains control of this act to the purpose of entering such further orders has may be became necessary or proper." And of course as we have pointed out, under Rule 60 of the Federal Rules, the Court expressly possesses that far with or without reservation, it's also part of the general principles of equity to jurisprudence even before the Rule was spelled out and that clearly, the Court does posses its power. Hugo L. Black: Unless suppose that you had -- I don't -- I don't know, but I suppose if you had made a contract based on the valuable consideration which was valid that you would never seek a modification, it might be that the rule was not popular. Richard R. Lyman: Well, Mr. Justice Black if -- if such a contract rather than the Railway Labor Act were the basis for the Court's order of injunction, the Court would have no jurisdiction under the Norris-LaGuardia Act. He -- he couldn't base his -- his decree on a contract. He had to be enforcing the obligation of the statute because under this Court's decision in the Graham case, this was made very clear that this discrimination case didn't wipe out Norris-LaGuardia and that unless the plaintiff were speaking to enforce some positive mandate of the Railway Labor Act in one of these injunction suits. The Norris-LaGuardia Act would prevent the issuance for an injunction. Hugo L. Black: Was there any effort made -- or was any evidence open to show that there was a contract? Richard R. Lyman: No, Your Honor. Hugo L. Black: Despite of the fact that it's simply been sent decree here? Richard R. Lyman: That is all the evidence through this. The parties entered into a release or by the plaintiffs released their claims for back damages upon the payment by defendants of $5000 and second, the defendants agreed to the entry of a consent decree which decree appears at page 36 and that is all or there is. There is no other agreement. There's been no effort made. The point to any other agreement -- Hugo L. Black: (Voice Overlap) -- Richard R. Lyman: -- except to say that this must be construed as cascading one. When they argued for it, they don't say here's the agreement at page such and such of the record. They simply argue in this very well. This decree of injunction didn't come from the air. It had to come from some place so therefore there must have been an agreement and yet, they and the Court of Appeals below said that the decree wasn't -- the decree became the agreement. So, what they're doing, they're electing the -- to the decree as the source for some implied agreement. Hugo L. Black: What is the exact language where the Court said that? Richard R. Lyman: At page 152 on the -- Hugo L. Black: 152 -- Richard R. Lyman: -- sentence of sentence of the -- the next to the last paragraph. Charles E. Whittaker: (Voice Overlap) -- Richard R. Lyman: The Court says, "When the injunction was issued? The parties herein by their consent thereto provided that no such requirement of union membership should there have to be in effect in any bargaining agreement." They're looking to the consent decree as to the description and definition and source of this theoretical outside -- side separate covenant or agreement. And the fact of course is that the procedure that was followed in settling this lawsuit by the answer that consent decree was precisely the same as you will find in any case where there's a consent decree of an injunction. And if we hold that under those circumstances, the consent natures the decree bars us on some agreement theory then it would be equally -- it would equally bar modification of an injunction in any case where the injunction was by consent. Hugo L. Black: In perpetuity -- in perpetuity? How long? Did the Court say? Richard R. Lyman: The Court of Appeals as they have a counsel for response and as I recollect, he said he did claim it was in perpetuity. Charles E. Whittaker: Where is that record -- the record with reference to the $4000 -- $5000 payment that you referred too? I notice the -- decree does not resided? Richard R. Lyman: No, it was the separate release but I don't recall whether that release was ever entered into the record in this case. It's referred -- Charles E. Whittaker: (Voice Overlap) -- Richard R. Lyman: -- to in the brief for respondents so that other than L & N, however and I have no -- no particular quarrel with their statement of facts as to the nature and scope of -- of what the settlement consisted of it. It starts at page 5 and goes around page 6 of the brief of counsel for respondents other than the L & N. Hugo L. Black: Well, did the Court, which decided the case have agree before it? Richard R. Lyman: There was no agreement but they could have referral. Hugo L. Black: But, I'm talking about the one that's now in the brief. And the Court decided on the basis of that agreement, this is now put into briefs. Richard R. Lyman: What is in the brief is not an agreement Mr. Justice Black. Hugo L. Black: Oh, whatever it is. Richard R. Lyman: It is -- it is a release. Hugo L. Black: Well, is the -- was the release (Voice Overlap) -- Richard R. Lyman: The Court -- the Court did have that before -- Hugo L. Black: -- or it did have so it's -- it's really part of the record (Voice Overlap) -- Richard R. Lyman: Not and -- I don't believe he did in 1945. He did in our 1958 motion of my advisory (Voice Overlap) -- Hugo L. Black: So it is to be considered as a part of the record then you say. Richard R. Lyman: If it's reproduced here, I -- I don't find it in here so I -- I guess we can't consider it part of the record except that I have no quarrel with the statement of counsel that that is what took place. Charles E. Whittaker: Now, what is what took place? That's why I'm not sure off. Richard R. Lyman: It's recited at page 5 and 6 on the brief for counsel other than the respondent now and then. The parties agreed to one, the entering of the consent decree going on to describe what the decree would be. Earl Warren: What page is that? Richard R. Lyman: Page 5 of the brief -- the green brief for respondents -- Earl Warren: Oh green brief? Richard R. Lyman: -- other than -- other than Louisville & Nashville Railroad Company. The parties agreed to one, the entering of the consent decree two, the waiver and release by the plaintiffs, the law claims against the defendants for damages and three, the payment of the sum of $5000 by the defendants to the plaintiffs. That is your settlement of the lawsuit and then the Court entered the decree -- the consent decree which the parties had written up, that -- that is the agreement. So that there -- there is no agreement separate in the parts from the decree. We just get together and said, "We'll settle this lawsuit by getting with -- agreeing and stipulating if the Court may sign this decree, let me paying you some money and you get him your release." That -- that is the agreement -- and that is the only agreement that there is and it's -- it's about the most minimal kind of a -- an agreement you could ever have in any consent decree of injunction. So that if the Court post that such a settlement of a case bars subsequent modification when the facts clearly demand the modification, the equities demanded, then I don't see how we can ever modify any consent -- John M. Harlan II: What is your -- I suppose what the technical issue is, is to whether this is an abusive discretion when the Court begun. Richard R. Lyman: We have -- John M. Harlan II: -- that it isn't a (Voice Overlap)-- Richard R. Lyman: We have mentioned that on our brief Your Honor. There is no right of the Court to exercise discretion in the ordinary sense, one of the questions before purely a matter of law. We file this motion solely on the basis of the change in the statute. There's no issue of burden of proof there or anything. We say that the statute was change -- was completely eliminated, pro tanto, the right that the injunction previously protected and the Court has no discretion to misapply the law, if it were request of weighing evidence or having at some appraisal as to what the effect of this modification might be for factual point of views and to review the discretion. Thank you Your Honors. Earl Warren: Mr. Eldred. Marshall P. Eldred: Mr. Chief Justice may it please the Court. At the outset, let me call the Court's attention to the fact that the release which counsel mentioned as being not sure whether it was in the record is in the record. It begins at page 138 and continues through -- through page 144. As you were allude to that release in a few moments from now, if I may proceed with what I deemed to be -- should be said first to this Court and an orderly presentation of the reasons the respondents have for affirmance of the decisions below. In the first place, I think we should determine what requirements for modification of an injunction are, necessarily saw in order to determine whether the facts in this case bring us within permissive modification. Well, of course the leading case on that subject is the case decided by this Court, the Swift case, and this Court has clearly said in the Swift decision that the requirement for modification is that there must be a clear showing of grievous wrong that must be shown by the movement evoked by new and unforeseen conditions. Secondly, we wished to point out that the courts have held at modification must effectuate and not what the purpose of the original decree. In the next place, we desire to call the Court's attention to the fact that, as already mentioned, that modification under Rule 60 (b) is addressed to the sound legal discretion of the Court and is not to be disturbed except for an abuse of that discretion. It is our position that in this case, the petitioners have failed to show any abuse of the discretion of the District Court. In order to point that out, I think we should briefly analyze what the District Court held when he denied the motion to modify the injunction in this case. The District Court recognized his continuing authority to modify the injunctions not withstanding the consent nature of the decree. He recognized that authority -- his authority continuing to modify under the formulae setup by this Court in the Swift case. The District Court concluded that the 1951 amendment, which is the sole reliance of petitioners in this case for modification for 1951 amendment to the Railway Labor Act which is Section 211 of that Act was permissive only and the District Court concluded that on the basis of this Court's decision in the Hanson case. Secondly, the District Court concluded that the Railway Labor Act leaves the railroad and the unions at liberty to agree that a union shop shall not prevail. He concluded that there was such an agreement in this case namely that a union shop should not prevail and that that agreement underlie the decree issued originally in this case. John M. Harlan II: Where -- where is that agreement now? What was the -- oh, I'm meant you say an agreement? Marshall P. Eldred: Yes. John M. Harlan II: You're talking about something underlying the decree that -- Marshall P. Eldred: That is the agreement, that's the parties reach -- the understanding that the parties reached when this case will settle. John M. Harlan II: Before the decree. Marshall P. Eldred: Yes sir. John M. Harlan II: Now, where is the -- what -- what is there to show that underlying agreement? Marshall P. Eldred: That is shown in the release which the 28th named plaintiffs executed on December the 1st, 1945. John M. Harlan II: Where -- what could you -- Marshall P. Eldred: That appears on page 138 of the record. John M. Harlan II: What could provision of that release? Marshall P. Eldred: This provision if Your Honor please, the premises refer to the filing of the suit. Then it refers to the fact that it is the mutual desire of all the parties to the action to settle and dispose of all the issues in dispute. Felix Frankfurter: Where you reading at? Marshall P. Eldred: In the -- of page 138 of the record. Felix Frankfurter: Yes. Marshall P. Eldred: They agreed to settle and dispose of all the issues and dispute in the following manner, one, the entering of a consent decree and the forth said actions, the purpose of which will be to protect the undersigned against any future acts of practices of or by the defendants which will deny to the undersigned any of their rights and benefits under the collective bargaining agreements now in effect are which may hereafter be entered into, in accordance with the Railway Labor Act find between the L&N and System Federation 91 a copy of which consent decree is a test here too. Hugo L. Black: May I ask you that? Marshall P. Eldred: Yes, sir. Hugo L. Black: You said which was denied of the undersigning of their rights and benefits, at that time, they had a right not to be asked by reason of a union shop agreement, doesn't it? Marshall P. Eldred: Yes, sir. Hugo L. Black: And the 1951 Act changed it, doesn't it? Marshall P. Eldred: The 1951 Act merely made it permissive. Hugo L. Black: Yes, but it made it permissive for them to negotiate further. Marshall P. Eldred: Yes, yes, sir. Hugo L. Black: As I gather, you're real disputed whether this denies to them the right to negotiate which was granted absence agreement under the Act of 1951. Marshall P. Eldred: We say that since the amendment is permissive only that an agreement now not to have a union shop is legal under the amendment. Hugo L. Black: It's legal but -- Marshall P. Eldred: It was legal Hugo L. Black: -- it would not be illegal if they have one, would it? Marshall P. Eldred: If they have an agreement not to have a union shop? Hugo L. Black: If it would not be illegal if they would have an agreement now to have that kind of a union shop? Marshall P. Eldred: Oh no, no it would not be illegal. Hugo L. Black: So it wouldn't deprived anybody of any right -- Marshall P. Eldred: Well, then -- Hugo L. Black: -- the employee of any right unless they have it under a contract. Marshall P. Eldred: Exactly. Precisely. Felix Frankfurter: And at the -- at the time of the contract, could an agreement had been entered into for -- for a union shop on the label? Marshall P. Eldred: No sir. Felix Frankfurter: Well then that which stay -- that's what you rely on as having been a consensual arrangement. Marshall P. Eldred: And contractor. Felix Frankfurter: But in that, I can set you a contractual arrangement, wasn't really a contractual arrangement because they weren't free to have the opposite arrangement. Marshall P. Eldred: It was in this sense of the word. The unions did not -- did not have to go to the extent of agreeing that there would be no union shop because the law for better union shop, the Railway Labor Act did that at that time. All that was necessary for the unions to have done in this consent decree since evidently, they did not want to take the issues to the Court in the trial, was simply to do what is done in -- for example Fair Labor Standard Act cases. Simply consent that they will not violate the law, consent that they will no longer discriminate against the non-union employees. William J. Brennan, Jr.: But, that you go further here Mr. Eldred, in effect, aren't you saying what this agreement says, this agreement, the -- without preferring the release, you can't, by law, have a union shop agreement, if ever the day comes when you may negotiate for one, we now say we'll not exercise our right to negotiate (Voice Overlap) -- Marshall P. Eldred: Precisely. William J. Brennan, Jr.: That's what you're saying? Marshall P. Eldred: Exactly. William J. Brennan, Jr.: And you read all of that into this? Marshall P. Eldred: Yes, because the unions went farther than they were -- were required to go. They had a choice in this matter. They had -- they could've said, "We will no longer discriminate against non-union employees in connection with seeing that they get their employment benefits." But they went farther than that and they said that now are in the future. Now, if you will look at the injunction -- Earl Warren: Well, before you get to that, I wonder if they did go that far in this -- this paragraph that you have just written -- or just read. They said that the entering of a consent decree in the force of action the purpose of which will be protect the undersigned against any future acts or practices, however, by the defendants which will deny to the undersigned any -- any of their rights benefits under the collective bargaining agreements. Now, in effect, all which may hereafter be entered into -- in accordance with the Railway Labor Act. Now, we're talking -- you're talking there are you not about consenting to an injunction which would prevent them from denying to the undersigned any of their rights? Marshall P. Eldred: By reason of their failure to join or maintain membership in the union, at that time of course, the Railway Labor Act forbad the union shop. Now, they're saying here that in view of giving up certain rights than we have in this lawsuit and in order to settle all our issues, we agree that the non-union employees on the L&N Railroad in the six shop crest shall not be required to join or maintain membership in the union under any bargaining agreement now in effect, of course you didn't need it because the Act forbad it then are hereafter in effect in accordance with the Railway Labor Act. Now, that could only mean one thing -- Hugo L. Black: (Voice Overlap) do you think -- Marshall P. Eldred: -- no matter how much the amended here. Hugo L. Black: Either one of the parties contemplated at that time the Act of 1951, sir? Marshall P. Eldred: Yes. Hugo L. Black: But that's -- Marshall P. Eldred: And I'll (Voice Overlap) -- Earl Warren: Well, why wouldn't they've -- couldn't they have said that very well and very easily if that's what they intended? Marshall P. Eldred: I think they said it very well indeed if you will look at the language of the decree and you remember that a copy of this degree -- decree was attached to the release, a week before the decree was ever entered. Felix Frankfurter: Would you agree Mr. Eldred (Inaudible) questions come to my head namely, would you agree that you have to show that at the time of this release, it's the time of the injunction, the import is going to have -- or the amendment of the Railway Labor Act goes to allow union shop, was an active issue in the railway -- in the railroad world or in the part of the railroad and in part of the Brotherhood. Would you -- Marshall P. Eldred: I'm not -- Felix Frankfurter: Would you agree that you have to find out that it had that kind of reality or -- or immediacy rather that to say that by just general language, they foreclose themselves against calling and unanticipated legislation. Marshall P. Eldred: I'm not that all sure that was necessary to show in the action. What we do know as a matter of fact that it was -- Felix Frankfurter: I don't mean in the action but in the -- in the word -- in the world that which they were moved. Marshall P. Eldred: It was well. It was because two years before this suit was filed in 1945 and in 1943, the unions had made a demand upon the L&N and other railroads for a certain wage increases and a union shop not withstanding the fact that it's Railway Labor Act at that time for better union shop. The dispute was so serious that it was referred to a presidential emergency board. The Mulholland Firm of Toledo, Ohio which is the firm representing the unions today, participated in that hearing before the emergency board. And Mr. Willard H. McEwen was before that board. He was also one of counsel for the unions when we filed this case in 1945 and took discovered deposition before this decree was agreed upon. Before the emergency board, Mr. McEwen and other counsel representing the unions advanced the contention that even then, under the Railway Labor Act as it existed, the unions were entitled to a union shop but they made the argument that it more expedient that the emergency board should recommend to the Congress that the Railway Labor Act be amended so that they could have a union shop. And that the fact the notice given to the carriers was to grab a union shop, and that was two years before this suit, and two years before this agreement was entered into by the very counsel who was representing the -- these unions before the presidential emergency board. Felix Frankfurter: That wasn't the only -- that wasn't the only thing. The Act of 1951 wasn't an overnight measure. Marshall P. Eldred: No, sir. It has been contemplated by the unions for heaven knows how long. And it was only after building pressure up constantly against Congress that Congress finally made up its mind, "We will permit. We will never require. We will permit to carry within the unions to enter into a union shop brief." William O. Douglas: I thought you're arguing it was that that this -- that this conflict that there wasn't any today, 1960 under these facts that existed at the time of his conflict in this record. The Court today has been authorized to issuance kind of an injunction. Marshall P. Eldred: I'm not sure if I understand Your Honor's question. William O. Douglas: I -- it's been assumed that there's -- that the injunction was issued under the -- on the facts existing prior to the 1951 amendment under a law that was different form the 1951 amendment, is that right? Marshall P. Eldred: It was issued, Mr. Justice, because -- William O. Douglas: Yes. Marshall P. Eldred: -- there was discrimination which the Railway Labor Act forbade under this Court's -- William O. Douglas: I -- I thought that your argument was that if there was a -- the conflict, an intense conflict disturbing the railroad management for rolling of the -- of the -- by this -- by the stop, the movement of train because of a union disputed this character that today, a District Court could enter precisely this kind of a decree in spite of the 1951. Marshall P. Eldred: It could do so. Suppose now, this Act -- the -- I mean this suit, the original litigation had arisen after 1951, which was the date of the amendments. Pick out a railroad, said the XYZ railroad where no union shop prevail. Suppose as in this case, the union in that case was not permitting non-union employees to get fair share of employment, rights and benefits. Suppose the suit had been filed asking for declaration of rights and for an injunction against that discrimination and for damages for the loss of wages that the non-union employees had suffered. Suppose the parties had gotten together and said, "We will settle all the issues in this litigation." And among other things, we're going to agree that there will be no union shop now, under the -- under the provision for the Railway Labor Act as it exist or in the future under the Railway Labor Act as it may then exist. That agreement could be executed. John M. Harlan II: (Voice Overlap) said that this doesn't say that though, this -- this agreement, does it? Marshall P. Eldred: Yes. I was -- I'm going to get to that a moment ago -- John M. Harlan II: Perhaps, there are extra words in there why -- [Laughter] alright. Marshall P. Eldred: That maybe zeal of advocacy -- John M. Harlan II: Well, -- Marshall P. Eldred: -- but Mr. Justice -- John M. Harlan II: Undoubtedly, that goes with the heart of the case, wasn't it? If you will look at page 37 of the record, this is the consent decree, and mind you, this is the consent decree that was made part of the release a week before the decree was entered. Marshall P. Eldred: First, on the middle paragraph of page 7, we have the declaration of rights that the non-union employees be entitled irrespective and without regard to whether said employees or any of them were members or join or retain membership in any of the defendant labor organizations or in any labor organization. Earl Warren: What page is this? Marshall P. Eldred: 37 Mr. Chief Justice. Earl Warren: 37. Speaker: That “They would be entitled to these employment benefits as provided for in such agreements now in effect or that may hereafter be in effect in accordance with the Railway Labor Act. And then even more strongly, it seems to me, in the injunctive phase which begins in the next paragraph. At the union defendants and the union railroad, be enjoined from requiring that the plaintiffs and the classes represented by them, and this action join or retained membership in any of said dependent labor organizations as a condition to receiving these benefits. And any other rights or benefits which may arise out of or be in accordance with, regularly adopted bargaining agreements in effect between the defendant railroad and the defendant unions or that may hereafter be in effect between the defendant railroad and the defendant unions in accordance with the Railway Labor Act. Hugo L. Black: May I ask you a question there (Voice Overlap) -- Marshall P. Eldred: Yes, Mr. Justice Black. Hugo L. Black: -- by Justice Harlan. You referred first to that and you said in such agreement now in effect or that may hereafter be in effect. Marshall P. Eldred: Yes, sir. Hugo L. Black: To be deprived if any rights. But short after is to bar -- is to bar them by keeping this injunction from entering into a new agreement as a -- as a part of the Act. Marshall P. Eldred: That's right. Hugo L. Black: Well, how do you get benefits then from this statement that the reference referred such agreements now in effect or that may hereafter be in effect? Marshall P. Eldred: Bargaining agreements. Hugo L. Black: But does it say anything about they're not entering into one hereafter in accordance with the Act? Marshall P. Eldred: Yes, because they are not -- they will -- the unions and the railroad are not to require union membership as a tradition preceding to employment benefits under a bargaining agreement which was then in effect are which may hereafter be in effect in accordance with the Railway Labor Act. Even though, and it's implied in there until notice bailed out, even though the Railway Labor Act be subsequently amended to permit a union shop. Felix Frankfurter: Are you saying the Railway -- the Act of 1951 doesn't create an agreement that -- so that the agreement must come from the parties, the parties must make an agreement. In 1945 -- when was it? In 1945 -- Marshall P. Eldred: 1945. Felix Frankfurter: -- they were disabled from a having a union shop. In 1951, they are able to have a union. Marshall P. Eldred: They're able to have it. Felix Frankfurter: And you're saying is, they can now enter into an agreement which they could enter as this injunction were limited to -- lifted from your point of view. Marshall P. Eldred: Right. Felix Frankfurter: If this injunction were lifted, that would authorize them to enter into an agreement which you say would have a clause in it which is prohibited by the decree. Marshall P. Eldred: Correct. Now, there must be a grievous wrong which results -- now, simply, a change in the law which permits a union shop agreement is not sufficient, because the unions have not shown under your Swift formula that this decree results in a grievous wrong to them, nor have they shown that that grievous wrong was evoked by new and unforeseen circumstances. I think I've already pointed out to the Court that the -- it was not a new and unforeseen circumstance, the amendment to the Railway Labor Act because the unions knew two years before and were trying their best to get a union shop on a railroad and had sought to have a recommendation come from a presidential emergency board that Congress amend the Act and forbid a union shop agreement. John M. Harlan II: Did the -- did the District Court in its memorandum interpret the settlement as you're interpreting it? Is there a language in the District Court's opinion that -- Marshall P. Eldred: Yes. John M. Harlan II: -- says that's the effect to it. Where -- where is that? Marshall P. Eldred: On page 77 of the record. The Court concluded that the Railway Labor Act leaves the railroad and the unions at liberty to agree that a union shop shall not prevail, and then immediately after that that there was such an agreement which underlay the decree of December the 7th, 1945. And the Court further, on page 78 of the record, concluded that, "Under the Railway Labor Act as it then existed forbidding a union shop, it was not necessary for the unions to agree to that but that they went farther than they were required to do in order to agree that no union shop would prevail." Then the Court -- District Court goes on to find that the change of law alone is not sufficient, because it does not result in any grievous wrong to the unions, resulting for new and unforeseen circumstances. The unions have not met the burden of proof which this Court, in the Ford case, said, "is upon the movement in an effort to modify an injunction." Now, the only thing the -- the union has shown is simply on a member of the Railway Labor Act which permits the parties but doesn't require it." The unions in effect, argue that the amendment to the Railway Labor Act compels a union shop agreement. Hugo L. Black: Were there any hearings on that amendment? Marshall P. Eldred: Any hearings? Hugo L. Black: Any hearing when they passed that amendment to the Act. Marshall P. Eldred: Oh, yes. Extensive hearings in the -- Hugo L. Black: Did the railroads appear did the unions appear? Marshall P. Eldred: I know the -- I -- I'm sure the unions appeared and I -- I'm not sure about the railroads. Hugo L. Black: You know whether any -- anything came up about the reason for passing it, was -- was this particular matter referred to them? Marshall P. Eldred: No. Of course, this was -- well, of course it was after. This particular -- you mean this particular case? Hugo L. Black: No, I'm not talking about the case, I'm talking about the L&N strike and the trouble they had about it. Marshall P. Eldred: Well, the strike occurred in 1955, Mr. Justice, after the amendment occurred in 1951, that occurred later. Hugo L. Black: So, when -- when was the contract entered in to? Marshall P. Eldred: 1945. Hugo L. Black: 1945. Marshall P. Eldred: 1945, the amendment was in 1951, the strike occurred in 1955. Hugo L. Black: And when was it -- when was it they had the controversy where the -- you said to the board that -- that the railroads in 1951 -- Marshall P. Eldred: 1943. Hugo L. Black: -- that is amended? When? Marshall P. Eldred: 1943. Hugo L. Black: 1943. Marshall P. Eldred: Presidential Emergency Board was in 1943. This suit was filed in 1945. In the summer of 1945, it was settled in December 1945. The amendment was pushed through Congress in January of 1951. Strike occurred in 1955. In 1957, the unions filed their motion to modify. That brings us down today. Felix Frankfurter: Mr. Eldred, I think you said a few minutes ago that you thought that you attribute it to the admission as the argument that the 1951 Act is a compulsory act, were they? Marshall P. Eldred: Well -- Felix Frankfurter: I didn't follow you there. Marshall P. Eldred: Well, we can't come to any of the conclusions. Felix Frankfurter: (Inaudible) I think they would argue tat because -- Marshall P. Eldred: We can't come to any of the conclusion because that is the only reason at best by them -- Felix Frankfurter: No, they were -- Marshall P. Eldred: -- to show that the decree is a grievous wrong. Felix Frankfurter: Well, it may simply say that a decree in 1945 in the context of law which prohibits an arrangement which is now permissible. Thereafter, by law, is allowed to be submitted or to lift that injunction against entering into a voluntary arrangement to avail themselves of the right under the 1951 Act. Marshall P. Eldred: Well, you say voluntary arrangements. The parties who benefits, this agreement was made, gave up substantial rights. There were 28 plaintiffs for example who alleged damages in the sum of $5000 each, for a total of $145,000 which they gave up for a forfeit settlement of $5000 -- Felix Frankfurter: (Voice Overlap) Marshall P. Eldred: -- as part of this overall settlement. Felix Frankfurter: Under the 1951 -- of the 1951 Act certainly didn't speak inquiry, Steele and Tunstall, did it? Marshall P. Eldred: No, sir. It did not. Felix Frankfurter: And therefore, they could not make an arrangement, disadvantages nor -- and whatever the difference were, which did not give fair protection to your (Inaudible). Marshall P. Eldred: They could know -- they couldn't continue to discriminate, that's true. They could not discriminate. Felix Frankfurter: It couldn't harbor -- it couldn't harbor and switch them into union responsibilities under the 1951 Act. Marshall P. Eldred: Well, they have union responsibility whether they have a union shop or not. Felix Frankfurter: Well, but a -- but they -- it would be a union shop that if with all the consequences, I believe it was. Marshall P. Eldred: Yes, yes. Felix Frankfurter: That's what I'm -- William J. Brennan, Jr.: But only if they have the employers agree -- Felix Frankfurter: Yes. William J. Brennan, Jr.: -- to such an arrangement. Marshall P. Eldred: That's of course the position we take it, we have this right. William J. Brennan, Jr.: And as I get it, what they -- what they insisted that this ought to be reluctant at least to the extent of submitting them to negotiate with the railroads -- Marshall P. Eldred: Correct. William J. Brennan, Jr.: -- to such an arrangement. Marshall P. Eldred: That is right. William J. Brennan, Jr.: Whether they succeeded getting it to something else. Marshall P. Eldred: Right. But we can -- William J. Brennan, Jr.: The fact the matter, they'll get it. Marshall P. Eldred: Of course. No railroad today can withstand the economic sanctions of the strike. Railroads are having difficult time enough as it is. It certainly could not withstand that. The point that I want to make is that this agreement and I do emphasize because there was an understanding. And the consent decree which had been worked up referring to bargaining agreements in effect now or which maybe in effect under the Railway Labor Act hereafter. That agreement was lawful then it's lawful today. Now, the only reason that the unions advanced to modify the injunction is that they're now permitted to do it but they can't by their own agreement. We do not say that the injunction in this case can never be modified. We say that the question whether it can ever be modified is not before the Court on this record. Felix Frankfurter: Would you mind just in the interest of making the thing more concrete at least to one member of the Court, indicate what the practical reasons of resistance by the -- by your clients with having a union shop agreement. Is -- is that a fair question to you? Marshall P. Eldred: Yes. Yes, sir. In the first place, my clients, when this suit was originally filed and when we settled the issues, gave up rights to prove substantial damages. All of the members of the class represented by the named plaintiffs could have under procedure, appropriate procedure, have intervened and proven damages to a large extent. It became generally known among the classes represented by the 28 named plaintiffs in the original action that this agreement had been reached, that no union shop would be required -- Felix Frankfurter: Alright. Marshall P. Eldred: -- then or in the future. Five years statute of limitations applies to a contract not in hiding. So they have -- they lost all those. Now, this is an agreement fairly reached and until the railroad -- I mean, until the unions prove that it's an instrument of oppression to them and they haven't shown that in this case. They -- they refer to the pro rata arguments. Felix Frankfurter: Well, I don't mean to suggest that I -- Marshall P. Eldred: They referred to laws or revenue which had no equitable reason. Felix Frankfurter: I don't mean to suggest because I believe the contrary that fixing an agreement isn't in and out of itself and enforcing consideration (Inaudible). But I wonder what other things except that they made a bargain and which they now insist. What consequences disadvantageous to them would follow an anticipated union strike? Marshall P. Eldred: In addition to what I have said, they are opposed -- Felix Frankfurter: Yes. Marshall P. Eldred: -- to compulsory unionism. Felix Frankfurter: Well, why? Marshall P. Eldred: Because they feel that it's against their principles. They believe that a union should carry its own weight that if it properly represents the employees, its own persuasion will lead to union membership, that they should not -- the -- the employees should not be compelled against their will, particularly when they took pains to agree with these unions 15 years ago, that they would not be compelled against them. Felix Frankfurter: Well, isn't it more than enough that I don't expect, so called abstract principles but doesn't this -- doesn't this -- that it is translated into some practicality which beyond the opposition to -- to unions as such, I know a lot of people had that. Marshall P. Eldred: Well, they -- they could -- Felix Frankfurter: Haven't they got some special reasons or rather, I mean particular reasons? Or maybe I'm asking questions I shouldn't ask. Marshall P. Eldred: No. That's -- that's alright Your Honor. It's -- it's a matter of principle with them. It's a matter that they do not want to be members of the union. They do not want to have to pay tribute to a union -- Felix Frankfurter: That means -- Marshall P. Eldred: -- and have that money used for purposes to which they are opposed. Felix Frankfurter: That means they have to pay union dues and in return, they wouldn't get what they regard as -- as advantages for substantive matters. Marshall P. Eldred: Well, that maybe part of it or -- but it's not the whole picture. Felix Frankfurter: No, I mean -- Richard R. Lyman: Mr. Chief Justice, I wanted to state that particularly with respect to this agreement argument. I want to call the Court's attention to the fact that Mr. Eldred, when called upon to read the agreement, turned to page 36 to 37 of the record and what he read was the course decree which -- which simply serves to emphasize a -- a statement that what Mr. Eldred and the Court -- and the District Court and the Court of Appeals in the language which he read to you held that that decree was an underlying agreement. That would -- the decree itself that they said was the agreement. And of course, we argue here and it is our position that it was error where the Court too so hold and it was directly contrary to the Swift case. And one -- one further point I would like to finish was -- Charles E. Whittaker: I thought he was reading record on 138. Richard R. Lyman: -- he turned -- he read the -- from the release for a while and then we he got down to the declaration of rights, he was reading from page 37 of the record, the decree. He says that when -- when Your -- Your Honors pressed him for more language as to what the obligations and what the prohibitions were, where was the agreement that said, what they were prohibited from doing, what he read was the decree and that of course is what we're here seeking to modify. Felix Frankfurter: May I ask you this question and -- these 28 plaintiffs, the original plaintiffs for the class which they represent, do they -- was there any -- any differentiation between them and the other members of your -- the members of your unions except for these people have principles regarding union empathy? Richard R. Lyman: Well, I think that 28 people were just a -- a group that claimed they could show some wage loss or (Inaudible) missed out on some overtime assignments or promotions and -- William J. Brennan, Jr.: Were there -- were there any racial problems about this? Richard R. Lyman: No, this is not -- William J. Brennan, Jr.: Were they colored or white? Richard R. Lyman: This is not a racial case. William J. Brennan, Jr.: I mean what the -- what were these plaintiffs? Colored or white? Richard R. Lyman: I think there are probably some of both. I would guess that a majority would be white. I think Mr. Eldred could -- Marshall P. Eldred: There were both. Richard R. Lyman: -- correct me on that. I think there were some both. Felix Frankfurter: Those 28, about some of total of those who were (Voice Overlap) -- Richard R. Lyman: That's all that there were in the original action and I might say that -- I propose Your Honor's question to Mr. Eldred down the consideration concept and settlement of this thing for $5000. The -- the Swift case would seem to say that the fact that 28 people might have entered into such a contract if there were any contract, wouldn't justify preventing a union shop agreement to be negotiated for anybody else except for those 28 people. Felix Frankfurter: What they did -- the settlement or the claim which was settled in there and something for them, was a claim of discrimination, wasn't it? Is it claimed that the union didn't -- this bargaining agency didn't do well about it, is that right? Richard R. Lyman: Well, we learn as we go along. The claim was really a -- a claim of agreement violations. This case was decided before this Court decided the cases Local against Steele and W. which created the concept of exclusive jurisdiction in the National Railroad Adjustment Board and I think where we going back to retry this lawsuit, we might well have had quite a hassle as to whether these men wouldn't have had to file their claims for deprival of overtime under the overtime rule with the National Railroad Adjustment Board. Felix Frankfurter: All I'm suggesting -- Richard R. Lyman: But they -- they argued that they had gotten deprive over fair share because they were not members of the union. Felix Frankfurter: They have a grievance, didn't they? Richard R. Lyman: Yes, it was a grievance based under the language of the collective bargaining agreement. Felix Frankfurter: And -- and that is under the agreement itself they -- Richard R. Lyman: Yes. Felix Frankfurter: -- their claim was recognized -- Richard R. Lyman: The agreement -- Felix Frankfurter: -- and if maybe -- Richard R. Lyman: -- is called for equal distribution of overtime. Felix Frankfurter: -- (Inaudible), maybe that's -- maybe they -- they had from experience. I'm trying to find out what the human beings are instead of these abstract so-called principles. I should find it there. Hugo L. Black: One -- I've just had one other question, is the injunction against you are entering into open sub-agreement under the new Act with reference to everybody, the employees now or is it limited to these 28? Richard R. Lyman: It's not limited to the 28. Hugo L. Black: A general blanket. Richard R. Lyman: It's a blanket injunction against the railroad and the -- Hugo L. Black: Injunction that you have upon the obligation under -- Richard R. Lyman: Yes. Hugo L. Black: -- whether the person (Voice Overlap) -- Richard R. Lyman: And of course in the Swift case, the Court clearly pointed out that so far as the interveners were concerned, people other than the original parties to that case, they couldn't take advantage of the thing if it were contractual (Inaudible) because they weren't parties that running contractual undertake. Felix Frankfurter: Was there a -- was the -- was the (Inaudible) hearing before to Judge Sherburne joined in -- in entering the decree which is not on the record? Richard R. Lyman: I wasn't there Your Honor. There was -- Felix Frankfurter: Which is not in the record? Richard R. Lyman: But I don't believe there was -- Felix Frankfurter: (Voice Overlap) -- Richard R. Lyman: -- any hearing -- you're talking about the 1945 decree. Felix Frankfurter: That's what I'm talking about. Richard R. Lyman: The decree was drawn up by the parties in conferences between the parties to the lawsuit and exchanged drafts and proposals as to what the decree are to recite and then it was -- Felix Frankfurter: And before (Voice Overlap) -- Richard R. Lyman: -- stipulated that it would be submitted to the judge for a signature. Felix Frankfurter: Before it was submit -- when it was submitted to him? Richard R. Lyman: It was explained to him I'm sure. Felix Frankfurter: And before it was done, were there any arguments (Inaudible)? Richard R. Lyman: I don't believe there was argument -- Felix Frankfurter: From the lieu that I know of Judge (Inaudible) satisfied himself as (Inaudible). Richard R. Lyman: I'm sure you wanted to know what the case all about. Hugo L. Black: What percent of the total employees are members now? Richard R. Lyman: Well, that's a subject to disputed propaganda claims. The -- at the hearings on this motion to modify, it was argued that -- or suggested that maybe the -- might be about a 50% proposition of that whole in view of this alleged bitterness. Hugo L. Black: 50% what? Richard R. Lyman: 50% members and 50% non-members in the classes. There has been no attempt to precipitate a representation dispute before the National Mediation Board in this property. William J. Brennan, Jr.: I suppose, over 15 years, it's been turnover in person now or union officers and the like have -- Richard R. Lyman: Yes, there has been considerable turnover in the officers. I would say more than -- William J. Brennan, Jr.: All the 28 -- Richard R. Lyman: -- happy to the general chairman -- William J. Brennan, Jr.: -- plaintiffs, are they still employed? Richard R. Lyman: No. I think there were about 15 -- is that right Marshall? How many plaintiffs are still left? Marshall P. Eldred: Original plaintiffs left? Richard R. Lyman: (Inaudible) originally, yes. Marshall P. Eldred: About eight of the 28 but we had a great many interveners. Richard R. Lyman: There would be eight of the original plaintiffs initially imposed in which to modify and then a number of other employees came in and joined with them in imposing that. Earl Warren: But how many employees are there all total, you said 50% -- 50% of about what? Richard R. Lyman: It's between 4000 and 5000 in the shop crafts group. Earl Warren: 4000 to 5000. Hugo L. Black: Where were these employees? Richard R. Lyman: They are all over the system of the Louisville National Railroad Company in the (Inaudible). I mean the employers in the crafts, most of the employers that Mr. Eldred represents are in the Louisville area. I think he has some putative come in and join -- Hugo L. Black: I mean these 28, where were they from? Richard R. Lyman: They were all from around Louisville. Speaker: They were all over the system? Richard R. Lyman: Were they? I'm sorry. Speaker: The plaintiffs. Richard R. Lyman: I misunderstood you. Speaker: They were picked all over the system. Earl Warren: We'll recess now.

Oscar H. Davis: I came from the bench of the argument yesterday. Justice Harlan asked if the record revealed how long the jury was out. On page 405 of the original record on file with the clerk, it indicates the jury returned at 4:26 in the afternoon and returned with a verdict at 6:06. So they were out about an hour and 40 minutes. Some reference has been made to the fact that the trial judge before he submitted the substantive counts to the jury refer to the fact that it was a very slender case. He did say that. He said, “Off-hand, I think this is a very slender case.” After the verdict was returned, the motion for a new trial was made as to all 15 counts. He granted it as to five, but did not grant it as to the 10, which still remain in the case. The issue of the sufficiency of the evidence was brought up to the Court of Appeals and was thoroughly reviewed there as the opinion reveals. It has not been brought to the Court. I would also say on the point that the full record contains somewhat more evidence than the printed record here that is, there is testimony of both witnesses for the prosecution and witnesses for the defense whose testimony is not included in the printed transcript, but it is included in the original transcript on file with the clerk. Mr. Justice Frankfurter asked about the catch line with respect to the denial of the motion for production of notes on page 93 of the record. I have ascertained from the clerk that that catch line which is in the capitals on page 93 was inserted by the clerk of this Court in preparing the record for printing for the convenience of the Court. And it is done so that an index can be made up from the beginning for the convenience of the Court. The original record, as I said yesterday, contains just what we have here and has no indication of any deletions or elisions. Potter Stewart: The motion itself does not appear in the record. Oscar H. Davis: The motion itself does not appear at all. And I also referred yesterday to the case report which was delivered to defense counsel at -- at his request. Earl Warren: Mr. Davis -- Oscar H. Davis: And -- Earl Warren: -- and also, it does not appear in the full record. Oscar H. Davis: It does not appear anywhere. Earl Warren: Yes. I think it was not taken down by the -- Earl Warren: Yes. Oscar H. Davis: -- by the stenographer at the trial. With respect to the case report, a copy of which is in the original record here in file. I have the agent's own copy. This is a carbon copy of the one on file with the -- with the Court. And I would -- for the convenience of the Court, I would like to refer to and then tell the Court a little bit what it's about. It's 23 closely typed pages, single space. And it's called “Narcotic Case Report” and it goes on with a narrative statement of the -- by the -- by the agent of -- of the facts in the case including a very elaborate description of all the physical exhibits, the various prescriptions and records which he -- which he inspected and which he took. And then this elaborate description goes of -- of the physical records goes on to page 8. And beginning at page 8, and ending at page 23, there is a narrative description of the expected testimony of various government witnesses, not only the agent himself but of all the various government witnesses whom he thinks might appear at the trial. Beginning with the Director of -- of the Internal Revenue in that area to show that Dr. Needelman did have a narcotic stuff and so forth. Potter Stewart: Is that an excerpt only from that that appears at the -- Oscar H. Davis: Yes. Potter Stewart: -- printed record beginning on page 138? Oscar H. Davis: Yes, Mr. Justice. The excerpt is that -- that portion of the case report which deals with the expected testimony of Agent Rudd himself. And what I -- I now want to point out to the Court that the expected testimony of a lot of other people is also included in the original report which was handed to the defense counsel. The excerpt here which is printed in the record and goes, I think, for some eight pages in the record is the -- is the expected testimony of Agent Rudd himself. In the typed case report, it goes from page 17 to page 23, so it is a -- an extensive -- Speaker: (Inaudible) Oscar H. Davis: Certainly, Mr. Justice. Certainly, the portion of the case report which refers to the testimony of other witnesses would not be compellable with respect to the testimony of Agent Rudd. In fact, it contains report of testimony of people who were not called as witnesses by the Government in the trial. This is what the agent thought the Government's case could rest upon at its maximum. Some of these witnesses were not called at the trial. William J. Brennan, Jr.: Well, tell me, Mr. Davis, am I correct in understanding that what became crucial at the trial was Agent Rudd's testimony that Dr. Needelman had in effect told him that he knew these prescriptions were being given to narcotics addicts? Oscar H. Davis: That was an important factor in the trial. William J. Brennan, Jr.: Well, I thought -- Oscar H. Davis: I do not think it was crucial. William J. Brennan, Jr.: I see. Well, Dr. Needelman denied, didn't he? Oscar H. Davis: That's right. Dr. Needelman did deny that he had said that. But there was, of course, a lot of other testimony to the effect that these people were addicts and were not treated in a regular course of -- of practice. The facts have not been fully stated before the Court and I don't want to go into them because the sufficiency of the evidence is here. William J. Brennan, Jr.: Yes, so that on -- on the question -- as I'm looking at page 139, there's a statement in the report from the original report that at that point, Dr. Needelman voluntarily and spontaneously stated -- Oscar H. Davis: Yes. William J. Brennan, Jr.: -- that he had left those prescriptions with those addicts when he left for Europe. Oscar H. Davis: That's right. William J. Brennan, Jr.: Now, this Dr. Needelman denied, didn't he? Oscar H. Davis: That is right. William J. Brennan, Jr.: And that became really a crucial factor. Oscar H. Davis: That was an important factor. William J. Brennan, Jr.: Crucial (Voice Overlap) -- Oscar H. Davis: I -- I don't know if it was crucial -- William J. Brennan, Jr.: -- crucial at least in court. Oscar H. Davis: -- but it was important. Certainly, that's true. William J. Brennan, Jr.: Now, is there anything in the original report to indicate that this is a summary of the agent's notes? Oscar H. Davis: No, sir, no, sir. William J. Brennan, Jr.: We can't tell that at all. Oscar H. Davis: You can't tell that from the (Voice Overlap) -- William J. Brennan, Jr.: And we don't know then whether there was recorded by the agent at the time of this conversation with Dr. Needelman, the substance of the conversation, we don't know that? Oscar H. Davis: No, the Court doesn't know -- doesn't know that. But I would say this that what the defense did have was not only this very elaborate case report, but it also had the prior testimony of Agent Rudd at the prior trial. William J. Brennan, Jr.: Yes. Oscar H. Davis: It was a mistrial. And of course, it also had the testimony of the other Agent Waters. Now, everyone agreed that at -- at this interview with Dr. Needelman, the only persons who were present were Agent Rudd himself, Agent Walters, both of whom testified for the Government, a Florida state agent, Bellinger, who was not called but was available and Dr. Needelman himself. William J. Brennan, Jr.: Is there anything in the original report which indicates the lapse of time from the date of the interview with Dr. Needelman where he made the submission according to Agent Rudd -- Oscar H. Davis: Yes. William J. Brennan, Jr.: -- and the preparation of the report? Oscar H. Davis: Well, the report is dated October 31st because that is the day it was transmitted. I cannot say when it was prepared and there was, of course, no questioning of the -- by the defense of the -- of the agent at the time to bring this out. I would doubt that a report of this length was all prepared only one day. We also do know that the interview with Dr. Needelman occurred on September 22nd, so there was a lapse of time. We also do not know because there was not sufficient questioning as to when the agent made his notes because the only information that we have is that short colloquy on page 88 of the record, that in the course of this investigation, he made several notes. William J. Brennan, Jr.: Do we know how long this crucial interview, I used the word “crucial” -- Oscar H. Davis: Yes. Took place? William J. Brennan, Jr.: Took place? How long it lasted? Oscar H. Davis: Well, I think the case report indicates that they saw Dr. Needelman early in the afternoon and then they went back to the pharmacy. So I can't say the -- it indicates exactly how long, but it was apparently a period afternoon on the day and then before 4 o'clock or something or then. There has -- was time for traveling going to the pharmacy, which wasn't too far away. William J. Brennan, Jr.: Well, I would suppose that the notes of that interview had nothing like this statement of the agent in them that might have been very important to the defense. Oscar H. Davis: Perhaps, it would, but if I can get that basic part of my -- of my -- my argument, Mr. Justice, on -- on the Jencks Act, which I would really like to get to now, if I may. I -- Felix Frankfurter: Before you -- I -- finish your answer. Oscar H. Davis: I -- I was about to go on with my argument. Felix Frankfurter: Yes. Did this question of the production of the notes take place? Did that occur at the first trial? Oscar H. Davis: Was -- the first trial was on a conspiracy indictment only, Mr. Justice, and I do not know. I do not -- it was not on the substantive -- Felix Frankfurter: I understand but couldn't it be relevant to that, too? Oscar H. Davis: Yes, it -- it might be. But you see, it was a conspiracy between Dr. Needelman and the drugs. Felix Frankfurter: I understand. Oscar H. Davis: I do not know what occurred at the first trial. Felix Frankfurter: Your answer is you don't. Oscar H. Davis: I don't know. William J. Brennan, Jr.: Oh, well, in that same connection, may I ask, Mr. Davis, was the conspiracy trial before the same judge, Judge Choate? Oscar H. Davis: No. I think it was before a different judge. This conspiracy indictment charged in this trial was of course. You see, the conspiracy trial was tried -- the conspiracy charge was tried again together with the substantive counts. William J. Brennan, Jr.: Well, I'm -- I'm referring to the trial that Mr. Justice Frankfurter gave. Oscar H. Davis: No, that was before another judge. William J. Brennan, Jr.: Because it -- it might -- might be significant as to this -- what seems to me a rather a little discussion on this motion comes, the -- Oscar H. Davis: Well -- William J. Brennan, Jr.: -- the party -- the counsel or the prosecutor and defense counsel and judge might from the prior trial have known what each was talking about and that had been a lot more cryptic in another way in this question. Oscar H. Davis: That might be true. And of course, if I may so, Mr. Justice Brennan, that's the core of my argument about the notes that the man himself knows what the notes are about and other people don't. And that's why they are not properly usable in the impeachment process, which I will try to develop. My understanding is, I maybe wrong, counsel may be able to correct me, that -- but that the prior trial was before a different judge. Now, on the -- on the problem of the Jencks Act, our position is that it is quite clear that under the Jencks Act, that private uncommunicated notes made by a private witness, that is a Government witness who is not employed by the -- by the Government. The office assistants of Dr. Needelman in this case, who were Government witnesses but not employed by the Government, that if they made private notes of their conversations with Dr. Needelman, which they did not hand over to the Government, that would not be producible under the Jencks Act, that's clearly so. This would be personal uncommunicated private notes of those private government witnesses. Our position is that when the witness involved is a Government agent and he has notes which he has made in the course of his investigation or -- or -- what the facts he has encountered, and he does the same thing that that private witness does, he does not communicate the notes to the Government but keeps them in himself, that he is in the same position and that his notes are not compellable under the Jencks Act as a matter of right. We think this follows both from the terms of the statute and from the purpose of -- of the Jencks Act and from the basic character of notes, which I would want to go into. The terms of the statute has been discussed with the Court. And I would just like to say that the only -- the -- it's quite clear that subsection (a) and subsection (e) (2) refer to statements made to a government agent. The whole basis of the -- of my opponent's position really is subsection (e) (1), which is on page 3 of our -- our brief and which says that a statement includes a written statement made by said witness and signed or otherwise adopted or approved by him. Now, I would suggest that if merely because the agent's notes were in his own handwriting, if that were enough to make them producible, Congress would not have said a written statement made by the witness and sign or otherwise adopted or approved by him. It would have stop with the statement of written statement made by the witness because everything in the witness' own handwriting would be included in the phrase, a written statement made by said witness, but Congress didn't stop there and went on to say, “And sign or otherwise adopted or approved by him.” And we think that this means really that it's -- that the witness has to acknowledge responsibility to someone else for these notes. He has to communicate them to someone else. It's not enough that he was writing a momento or a -- a mnemonic device to himself and that -- and this fits in really with the entire structure of the Jencks Act because what -- as the Court well knows, what the Congress was dealing with and what this Court was dealing within the Jencks case were reports or statements made by a witness to the Government, which the Government could use in the preparation of the case, which they could use in -- in the -- in knowing what the witness would testify to and so forth. And the Court felt and the Congress agreed that it was -- it was consistent with the fair trial that that kind of statement should be made available to the defense counsel. But neither the Court in the Jencks case nor Congress in the Jencks Act were dealing with private uncommunicated notes which had been not been used by the Government in the preparation of the case or even were known to the Government. And -- and there is a good reason -- before I go on to the reason, I -- I would say that we have support in the legislative history, we believe, for this possession, because not only was there a very explicit discussion at various points in the legislative history that what Congress was dealing with was reports made to an agent of the Government but in the house manager statement at the conference report, which is the Court recognized in the Palermo case last year, it's very significant with respect to the legislative history of this Act. The house manager said that among the changes agreed upon with the Senate Conferees was to limit the types of statements and reports, which come under the provisions of the bill, the statements of Government witnesses or perspective witnesses other than a defendant made to an agent of the Government, and they italicized, they italicized in their report the phrase “made to an agent of the Government.” So we think that -- that they indicated very clearly that they were talking about communicated information and not something which was kept within the agent's or the witnesses' own bosom. And Congressman Cellar, who is particularly interested in this and Senator Ommaney were explicit on this point that its reports made to an agent of the Government. One of the reasons they were interested in this, if I may say by the way, is that they wanted to make sure that the old rules, I think this is one of the reasons, the old rules such as the rule of refreshing recollection of the Goldman case, there were a witness understand uses materials to refresh his recollection. They wanted to make sure that that rule was not cut off by the Jencks statute. And Mr. Justice Brennan, if I -- I think that this is the explanation of the change -- of the omission of the original exclusive language at subsection (a) and the change in the conference. I think this is the true explanation of that change because under the language, as it was originally worded, that is no reports would be producible except as provided in subsection (b). And if you had some material or summary, for instance, which was not producible under subsection (b) because it was not a verbatim or substantially verbatim statement, but it was used by the witness om the stand to refresh his recollection at that time under the literal terms of this -- of the bill as it was worded before the conference, that would not have been producible to the defense counsel because it would have been excluded. And I think that the true -- the true reason for the change in the language to which both you and the majority of the Court adverted in the Palermo case was to continue the rule of the Goldman case from materials which were used to refresh recollection because the rule, as I hope to be able to say for few minutes later on, the rule of the Goldman case is that where material is used on the stand, it's almost automatically producible not always, where it is used off the stand then it is producible within the discretion of -- of the trial judge. And I think that this is what people like Congressman Cellar and Senator Ommaney were worried about that the Jencks Act might cut off an accepted rule which no one was challenging. William J. Brennan, Jr.: I would seem -- as I recall -- am I right? Neither of them mentioned it explicitly in (Voice Overlap) -- Oscar H. Davis: No, I -- I would cast a little warning on this that in our brief, we inaccurately say that Congressman Cellar opposed an amendment relating to refreshing recollection, that is not so. There -- the -- an original bill which was just read on the floor in order to have something else substituted contained this information. They didn't -- any of them referred to that. But they did refer generally to preexisting rules of law that everyone accepted that preexisted Jencks, I meant, or the Jencks case. And that no one wanted to do away with it. And they were afraid that the Jencks bill, as it was originally formulated, would do a way with these old rules of law. Now, why do I say that -- that there is a great difference between personal uncommunicated notes and the kind of statements which the -- the Congress was interested in -- in producing for the defendant, and which the Court in the Jencks case was interested in producing. We all know that personal notes that people make that -- that I make, that members of the Court make, that other people make vary with the personality and habits and everything else of the individual note taker. Some of them can be made on scratch pads and pieces of paper and written upside down. Some can be -- some people use just keywords that -- that reveal to themselves because, of course, they notice for their own benefit. A keyword may reveal a whole massive material to the individual because he doesn't have to worry about anybody else, it's for his own benefit only. The one word, saw Joe Smith, as I'll try to describe later may -- may recall the history of the entire conversation with Joe Smith even if he doesn't set out all of the things that Joe Smith said to him. The Court may think that when government agents either the Narcotics Bureau or the Federal Bureau of Investigation go out that they have a kind of form for reports for their notes, I mean, and they followed. That is not so. They -- they follow their individual event and some of them -- some of the notes are, I should imagine, very detailed because that is the way the agent does it. Some other agents have -- have sketching notes, fragmentary ones using keywords just to jot their own memory. And there are all kinds of gradations and permutations and -- and combinations. It can -- it can depend upon the situation. If an agent is standing up at a place talking to somebody, he can't write something very adequately in his -- in the palm of his hand on a small card or a piece of paper. He may then go back to the office and write it up more fully. Or, on the other hand, if he is interviewing a man in the office and the man gives him a desk to sit down at, he may take fuller notes. It may all depend upon the situation, the needs of the moment, the time at his disposal and so forth. Now, the general practice, as I understand it, both of the Narcotics Bureau which is involved in this particular case and of the Federal Bureau of Investigation is that these notes are -- are sources from which the agent then uses to continue his investigation and to write a more formal kind of report such a case report, which was written in this case, and which was transmitted to the Government for use in the prosecution and -- and to the defense counsel. There is a whole world of difference between the things that one writes for oneself because you only have to worry about yourself and you know your -- you know your own memory, and you know how one word may reveal something to you. There's a whole world of difference between that. And when you want to communicate it to somebody else and have the other person know what you are talking about. Let me try to give an example to the Court. Suppose the note said, “I saw Joe Smith, I saw Joe Smith.” And the agent got on the stand and he testified that he saw Joe Smith at a certain time, certain place. And he -- Joe Smith told him this and he answered that and so forth. And suppose this note was used in -- for impeachment purposes and the -- the defense counsel would say, “Well, you only wrote you saw Joe Smith.” And the witness would say, “But that's my practice. The words saw Joe Smith will recall to my mind the entire conversation I had with Joe Smith. That's always been my practice.” And the defense counsel says, “Well, how do you know it's your practice? It just says you saw Joe Smith here. It doesn't say that -- what he said to you and what you said to him or anything else. How do you know it's your practice?” And the -- and the witness says, “That's always been my practice. I have that kind of a memory.” And defense counsel says, “Can you prove it? Can you bring in your other notes?” Well, you will then get into exactly the kind of trial confusion and collateral issues which we think that Congress was trying to avoid in the Jencks Act. There is a probable situation with respect to the -- to summaries and other recordations which were not substantially verbatim. Congress was afraid in the end that material of this kind which contained the recorder's selection, perhaps the recorder's bias, perhaps the recorder's impressions or -- or suggestions that that was not proper material for impeachment purposes that the only proper -- because it would take too long to -- to, what shall I say, strain out that portion of this recorded summary, which was really properly attributable to the witness, and that which was not, which was the -- the recorder's infusion. Now, of course, if men were angels, that we were all perfect, juries and judges and -- and defense counsel and prosecution, and we will -- no one was confused by -- by the things you could spend days, try to figure out precisely what was attributable to the witness and what was not. The Congress decided and -- and the common lawyers has decided that men are not angels and there is too great -- a chance of confusion and too greater chance of collateral issues delaying and -- and confusing both the jury and the -- and the parties to the trial to allow long drawn out investigations of collateral issues. And we think the same principle is applicable to -- to personal notes which can -- as I say, vary from fragmentary jottings to the kind of narrative notes that -- as I understand Judge Learned Hand made when he was a -- a trial judge and which we're very full and very revealing to anybody else. And because you can't tell, you can't tell what the notes are like because a fragment -- you don't really know whether the note is only fragmentary or not until you really investigated and find out what the agent's practice is and what his habits are and so forth. That, on the whole, there is too little to begin -- William J. Brennan, Jr.: Mr. Davis, I think you said to us yesterday, however, that at least at the agent's notes has been transmitted to his superior, I don't think he went by this far, if he merely (Voice Overlap) -- Oscar H. Davis: (Voice Overlap) -- William J. Brennan, Jr.: -- in his file. But nevertheless, with all the imperfections which you suggested appear in such notes, yet they would qualify to that. Oscar H. Davis: Well, I think there are two things I would say about that, Mr. Justice, one is that I think then they would fall within the terms of the statute and whether a statute is written in broad terms, then it covers things that -- that don't really fulfill the original purpose, but you have to interpret the terms of the statute in -- in square so that it -- whatever the terms the statute cover, you will apply. But the second and the more important thing is that when a man communicates his notes, he indicates that he thinks they're going to be understood by somebody else. He's sending it to another agent or his superior with the notion that they'll understand what this is about. If he gets -- William J. Brennan, Jr.: Yes, but suppose -- I notice you have them on that envelope (Voice Overlap) -- Oscar H. Davis: Because we asked the agent for them. He -- he prepared -- suppose he just prepared this report, do you think that this is an infinitive report compared to those notes? Oscar H. Davis: And other things, probably. William J. Brennan, Jr.: And forwarded them and merely said, “My notes are in this envelop.” Oscar H. Davis: That would indicate that he thought that the other people who are going to pass upon this for the Government in deciding whether to prosecute and to prosecute would be able to get out of these notes a full statement of what was going on. William J. Brennan, Jr.: Well, that very package of notes, I gather, this record shows, had been transmitted as I have suggested in the final report. It would have been producible, would it not? Oscar H. Davis: Yes, yes. But I -- what I'm saying is that the fact -- that the fact that the agent does transmit them brings in to the case the hallmark of his belief that they have an objective quality and so can be understood by other people. William J. Brennan, Jr.: We don't know whether the fact is or not that that package was transmitted to his superior, do we? Oscar H. Davis: Well, you don't know that but we have investigated and I can assure the Court to the best of our understanding. William J. Brennan, Jr.: It was not. Oscar H. Davis: The agent has said it was not transmitted. He has written us to (Voice Overlap) -- William J. Brennan, Jr.: Yes, you told us that. Yes. Oscar H. Davis: Yes, that -- that he -- he has not. I would not make the argument that -- that if -- if we didn't know this and -- William J. Brennan, Jr.: Yes. Oscar H. Davis: -- and -- Felix Frankfurter: No inquiry was made of the witness -- Oscar H. Davis: No. Felix Frankfurter: -- during -- on -- on the stand. Oscar H. Davis: That's right. No inquiry was made of the witness on the stand. That could have been. And that basically is -- is our argument as to why the Jencks Act doesn't apply. And then, you come to the second question which we think is in the case and that is, suppose the Jencks Act does not apply and these documents, these notes were not compellable as of right under the act, are they compellable or can the judge compel them? Because they were used as the agent said on the stand to refresh his own recollection. Now, the -- the Goldman case in 1942 adopted for the federal court the majority rule of -- or the majority rule of the -- of the states and federal courts up to that time which was that materials which were used by a witness not on the stand but prior to taking the stand to refresh his recollection were producible in the discretion of the trial judge. Now, we do not think that that part of the Goldman rule was abrogated by the Jencks Act as to materials which are used to refresh recollection. I try -- I try to make my self clear, the -- the Jencks Act, as this Court held in the Palermo case last year, provides for the automatic production of, what shall I say, of -- of statements or reports, which are properly attributable to the witness. And it provided that there was no discretion in a trial judge to require the production of reports or summaries which were not properly attributable to the witness. Now, suppose you have one of the latter con, a summary, which is not compellable under the Jencks Act, as interpreted in the Palermo case and suppose the witness says on the stand, “Yes.” Suppose the witness on the stand uses it to refresh his recollection even though it's a summary, we do not think that the Jencks Act says that cannot be given to the defense counsel. We think that that portion of the Goldman rule survives and similarly within the discretion of the Court and as I've indicated, the -- the rule has been that unless there are very serious reasons against giving it, the rule is where the man uses it on the stand, you give it to him. Now, you have a similar summary, if you may say, which the witness says, “Yes, I used it before I took the stand to refresh my recollection,” that's not, as the Palermo case, held compellable as of right under the Jencks Act. But we think that it is still in the discretion of the trial judge to decide whether it should be produced. William J. Brennan, Jr.: Well, now, what did we mean, do you think, then, Mr. Davis, what we said in Jencks, the Court held in Goldman that the trial judge had discretion to deny inspection when the witness “does not use his notes or memoranda relating to his testimony in court”? We now hold that petitioner was entitled to an order directly. Oscar H. Davis: Well, that's right. William J. Brennan, Jr.: What do you mean by that? Oscar H. Davis: I think that the Court held in Jencks that Goldman was overruled to the extent that it gave discretion to the trial judge to require the production of certain types of documents, but then along came the Jencks Act and substituted for the -- William J. Brennan, Jr.: But we're -- we're -- I thought this argument was on the premise that this is something not discoverable under terms of the Jencks Act. Oscar H. Davis: Well, that's right. William J. Brennan, Jr.: That they are notes which were used admittedly by the witness -- Oscar H. Davis: To refresh his recollection. William J. Brennan, Jr.: -- to refresh his recollection before he took the stand. And I thought you said that those might still be producible to the defense -- Oscar H. Davis: That -- William J. Brennan, Jr.: -- under the Goldman rule within the discretion of the trial judge -- Oscar H. Davis: Because we do not -- William J. Brennan, Jr.: -- except as the Goldman rule may have been affected by what I just read to you. Oscar H. Davis: No. My view -- our view is that the Goldman rule was not completely abrogated or overruled in the Jencks case. And that that portion of the Goldman rule which survived the Jencks Act was the part which said that where something which is -- which is not producible under the Act, but which is used to refresh recollection is still producible in the discretion of the trial judge. In other words, we would not say that the Jencks Act and I think the legislative history, though it doesn't bear this out affirmatively in its basic premises, bares out, as I said before, the notion that Congress did not intend to abrogate the rule as to refreshing recollection either on a stand or prior to a stand. And so that what -- what you -- if I can summarize and perhaps made myself a little clearer, if you have materials that are producible as of right under the Jencks Act, they're producible whether or not they've been used to refresh recollection. If you have materials which are not producible under the Jencks Act because summary as held in the Palermo case, they are not producible even in the trial court's discretion unless they are used to refresh recollection. If they are used to refresh recollection, then the trial judge has discretion. William J. Brennan, Jr.: That is unless you said contrary here at Jencks. Oscar H. Davis: Well, I -- I would think that you -- that you didn't overrule Goldman completely, and -- and if you did I would think that you should reinstate it in -- in the Needelman case because it's a good rule and -- and that where materials have been used to refresh recollection, the trial judge should have discretion. So I come to the question as to whether there was an abuse of discretion in -- in this case.And as the Court of Appeals passed on that issue and said there was not. And as I've already indicated, what the defense counsel did get was this voluminous case report. He had the testimony of Agent Rudd at the prior trial. He had also the testimony of Agent Waters at this trial, who was also present. He had the possibility of calling Agent Bellinger of Florida State Narcotics Squad, who was the only other person aside from Dr. Needelman present. We also know that he did not make any effort to find out what kind of notes these were, what they bore on, how extensive they were. And whether or not that further inquiry by him was relevant to the question of what -- whether the Jencks Act required production as of right, we certainly think it's relevant to the issue of discretion, that is that we, the Government, are right. The Jencks Act did not compel production. Then, you have the question of the discretion. We certainly think that it's -- it's highly relevant to the issue of discretion that the defense counsel did not seek to go further as he could have gone to find out what these notes were about under what conditions they were made, what the relation to the case report was, how fragmentary they were, how full they were. All these things which he could have -- have gone into but he did. William J. Brennan, Jr.: Whether in -- when Goldman tried, had there been any development of requirements of this nature before the trial judge call upon exercise of discretion? Oscar H. Davis: Well, I think some of the -- the cases don't say it explicitly but they go into the question of -- of the reasons why the production should be allowed or not. And I would say that most of the cases did not allow production, that is in most of the cases, the -- the Court exercise discretion against production where the material was not used on the stand. William J. Brennan, Jr.: Because again, we're faced here with the fact that the trial judge, so far as the record appears, had no knowledge or whatever of the contents of these notes. He never looked at it. Oscar H. Davis: He could have been asked to look at, as it has been done in other cases. And this, perhaps, is an appropriate point to deal, as I think I tried to yesterday, I will deal with it more fully with -- with the other cases which have said that because the materials is not in the record, we will not consider. There were cases, the -- the Holmes case in the Fourth Circuit and the Ninth Circuit case of Bradford were cases where the defense counsel made an effort. The judge said, “I want to look at them. I'll hand them back.” Well, of course, if the defense counsel makes the effort and the judge won't comply, then he's done all of that he could. Now, on the other hand, you have the Miller case in the Second Circuit. That is 248 F. 2d 163, where the party stipulated that the challenged document should not be included in the record on appeal. On the Second Circuit, applying the Jencks case, this -- not the Jencks statute, he said, “It's the burden of the defense.” If they think that -- that something was prejudicial -- refusal to give them something that's prejudicial, they should have stipulated. It should be admitted from the record. Now, I draw from that, the -- the general proposition that the defense counsel should go as far as he could in protecting his record, and this, of course, is a -- is a general principle of Anglo-American law, Rule -- William J. Brennan, Jr.: I suppose you could carry that. It may -- could be, I suppose, in that hiatus and the jury was sent out and then his motion was acted for production. Some of the things that you say should have been done -- may have been done but they're not in the record because apparently, whatever that colloquy was, it was not transcribed. Oscar H. Davis: Well, the defense counsel could then ask. William J. Brennan, Jr.: Well, I gather, you're carrying this to the extent of saying that was up to the defense counsel (Voice Overlap) -- Oscar H. Davis: They took -- they took to the appeal -- the appeal to the Fifth Circuit and they took appeal on this issue. If they thought that the record did not contain everything which had transpired of the trial, they could have asked for further record if one was available. Felix Frankfurter: Well -- Oscar H. Davis: Now -- Felix Frankfurter: -- is it a common place thing when counsel go into private talk with the Court, and then make motions which are desired not to be made in the presence of the jury or have discussions not desired to be heard by the jury with any ruling by the Court adverse to a party, it is then formally stated, a motion of this sort was made and denied, the -- the most commonplace thing in trial. Oscar H. Davis: Well, that's right. And there was -- there would be no objections of their saying -- William J. Brennan, Jr.: Well, the -- the thing that puzzles me about this, Mr. Davis, is that the action on the motion was taken down stenographically transcribed because it's in the record. Oscar H. Davis: Well -- William J. Brennan, Jr.: Nothing that preceded the Court's action appears. Oscar H. Davis: It -- it has puzzled me, Mr. Justice Brennan, but from my resolution of this, I rely on the old established principle that the person who was seeking the admission of evidence or production of documents has the burden. Then the person who's appealing has the burden with relation to the Fifth Circuit. The person who's petitioning this Court has the burden when he comes here. And my opponent is in that -- each one of those positions. And we think that the Court has applied this in Hoffman against Palmer in 318 U.S., as -- as I said yesterday. We think the Court applied it last year in the Pittsburgh Plate Glass case with respect -- Felix Frankfurter: But you used the word “burden” as though this is a heavy load -- Oscar H. Davis: No. Felix Frankfurter: -- that somebody has to carry. Oscar H. Davis: I -- I can -- Felix Frankfurter: All that required counsel to say, counsel moved the Court, asked the Court to look at the record and look at the notes we questioned, and the Court declined. That's all that's required. Oscar H. Davis: That is right. Felix Frankfurter: Burdensome as though you put a ton on it. Oscar H. Davis: Well, I didn't mean that because it is very difficult. And Rule 51 of the Federal Rules of Criminal Procedure provide that it's the -- or the -- the duty of the -- of the lawyer to make clear to the judge what his -- what the lawyer's position is so the judge can rule on it. All these things together -- Felix Frankfurter: For the appellate court knows what has been done and whether what was done was right or wrong or was allowed the discretion or not allowed the discretion. Oscar H. Davis: That -- that is right. So, in our view, the whole duty and obligation of showing an abusive discretion was not availed itself out by the -- by the defense in this -- in this case. There's one further fact that I -- I want to mention on the question of discretion, and that is, that we know from just reading the record that the -- the defense had the case report available to it which he had only asked for it at the very end of the examination of the agent. And that it had his -- his trial -- his testimony at the prior trial. It didn't apparently make any use of this as far as we can say. And this also bears on the question of whether the request of the notes here was really a serious one. I have come to the conclusion, I may be wrong, reading this entire record that at the trial, it had a very small role. And that when the appeal stage came, it loomed much larger and that's the right of the defense counsel. But I don't think that the defense counsel can take such a position and -- and rely on their own luck of -- of making a record as -- as was done here. Now, we've also made the argument that even if these materials were producible either as of right under the Jencks Act or where there was an abusive discretion by the trial judge under the -- the portion of the Goldman rule will survives that -- it was harmless in this case because of the materials which the -- the defense counsel had his ability to -- to cross-examine the agent on the basis of the case report on the agent's prior testimony, the testimony of the other agent, Agent Waters, his ability to call prior to state narcotics agent Bellinger. And the fact, as I have just said, that he made -- as far as we can say, no use of -- of these materials which were available to him. Again, it's indicating that the -- the failure to receive these notes did not play a significant role at the actual trial as far as this record reveals. In closing, if I may, I -- I would like to make -- summarize really two or three points. And one is that we think that it's very important that if defense counsel are to claim failure to receive certain materials that they have the burden of making a proper record so that the appellate court, the Court of Appeals or this Court can make a proper disposition of that claim, that they are the ones who are asking for the materials or the evidence and under the traditional rules, as I've said, it is their duty, their obligation to make the proper record, and that they cannot rely on a failure to make the record on the mercy of -- of the Court of Appeals or of this Court really to infer that a lot of things happened which don't appear on the record. And the -- the second final statement I would like to make is about the nature of these notes and that as I said, government agents are no different from other people but they make fragmentary notes, some of them. Some of them may make full notes. Some make fragmentary notes, jottings, things to remind them -- them of -- of events wholly unimportant for other people because the only person they are interested in at that time was themselves. They just want to remind themselves. And for a man as reminded by one word, that's enough for himself. Earl Warren: Mr. Warren. Herbert A. Warren, Jr.: Mr. Chief Justice, may it please the Court. First, with further reference to questions asked by Justice Harlan, there is also a comment by the trial court, Judge Choate on page 18 of the record at the time of sentencing, embracing the petitioner upon probation, he makes a statement, “I do that for the reason that I still believe that perhaps you were just careless.” That's my understanding -- Felix Frankfurter: But the case -- the -- the sufficiency of the evidence to go to the jury, was that a claim made here and asking for review? Herbert A. Warren, Jr.: Not in this Court. No, sir. Felix Frankfurter: I mean it wasn't even presented. It wasn't merely -- the Court restricted it. But I -- let's look at it. The petition was granted without restriction. Herbert A. Warren, Jr.: That's right, but there were no questions posed as to the sufficiency of the evidence. Now, it's my -- William J. Brennan, Jr.: Mr. Warren, now, was the first trial before another judge? Herbert A. Warren, Jr.: It's my understanding that it was before the same judge, Judge Choate. William J. Brennan, Jr.: It was the same judge. Herbert A. Warren, Jr.: Yes, sir. And I'd like to point out to the Court the fact that the motion which was made subsequent to the conspiracy trial and before the consolidated trial refers specifically to the fact that the agent, Rudd had testified at the first trial, and that the contemporaneous notes were testified to at that trial and states -- which said contemporary notes have already been referred to by the said agent Rudd in the previous trial of the said cause and by which testimony, it was shown that said contemporaneous notes prepared by the said run were of the events, activities related to the said testimony. Speaker: Where does that appear? Herbert A. Warren, Jr.: That appears on page 8 of the record, sir. Potter Stewart: That -- now, that -- that motion which appears on page 8 is not the one that was later already denied by -- page 193, whatever it was. Herbert A. Warren, Jr.: No, sir. It -- it was, I believe, a renewal of that motion and the Court of Appeals in its opinion said, “We assume in response to a renewal of this motion.” The judge then made his ruling, “I will deny the request for the notes because they may involve many things.” Potter Stewart: Well, I -- I don't understood yesterday and perhaps I misunderstood it that this motion, this written formal motion appearing on page 8 in the top of page 9 of the -- of the record was denied and -- Herbert A. Warren, Jr.: Yes. Potter Stewart: -- and that it's -- there's no claim of error in the denial of this particular motion. Am I mistaken about this? Herbert A. Warren, Jr.: In framing our questions and our petition, we did set forth that the motion was made prior to trial and then renewed after the witness had testified and we claimed that the trial judge in denying the motion did commit error in not following the procedures of the statute. Speaker: What this look -- Felix Frankfurter: (Voice Overlap) -- Speaker: Excuse me. What this looks like, maybe this is all wrong, particularly in view of your statement that this case was tried before the same judge. It looks like to me that the motion on page 93, is it? Herbert A. Warren, Jr.: They come in the 93 for -- Speaker: 93, following the discussion with a sort of giving counsel an opportunity to put an exception into the records that really stem back to the original denial of these earlier motions. Herbert A. Warren, Jr.: Yes, sir. Speaker: And with one of those off the record discussions that the -- I'd like to have the record show that this motion was renewed. Herbert A. Warren, Jr.: That tried after what (Voice Overlap) -- Speaker: That's about what it looks like, didn't it? Herbert A. Warren, Jr.: I believe that is a -- Speaker: Not much more than that. Herbert A. Warren, Jr.: I believe that is a fair statement. Yes, sir. Felix Frankfurter: Mr. Warren, I don't -- I don't think I quite understood or at least appreciate you answer to Justice Stewart's question. The motion that has been denied -- the motion that was denied as you quoted on page 9 and 10. Herbert A. Warren, Jr.: Yes, sir. Felix Frankfurter: Is that the motion to which reference is made on page 93 to deny the request for the notes? Herbert A. Warren, Jr.: It is my assumption that and I can say from speaking to trial counsel that the motion was renewed. It is not reflected in the -- Felix Frankfurter: Well, what -- I don't understand that. When you say the motion was renewed, you mean the motion that was formally -- that was denied the record -- the recording of denial of which on page 9 and 10 was renewed? Herbert A. Warren, Jr.: Renewed as far as production of the contemporaneous notes. Yes, sir. Felix Frankfurter: Well, but there is no reference in that. It seems to me a totally different transaction in 88. There was testimony about these notes and then there was this recess, and I will deny the request for the notes. Herbert A. Warren, Jr.: Yes, sir. Felix Frankfurter: Are you now saying that the motion, the pretrial motion on page 9 was -- were those notes? Herbert A. Warren, Jr.: Yes, sir. Speaker: Did they -- Herbert A. Warren, Jr.: They are the same notes, the notes that had been referred to in the first case and where again, the subject of the discussion in the second case. Felix Frankfurter: Well, how do we know that? Is that we -- have we got -- is the motion here identifying what was the -- the motion, the order on motion is for the production of documents. Herbert A. Warren, Jr.: Yes, sir. Felix Frankfurter: Now, what is then in this record that would enable me to see -- to say that the motion for production of documents was the motion for the production of these notes? Herbert A. Warren, Jr.: The statement in the motion for -- for production of documents. Potter Stewart: Is that on page 8 you're talking about the Court, on the top of page 8? Herbert A. Warren, Jr.: On page 8. Yes, sir. The motion specifically says particularly the -- the documents which are requested particularly, the contemporaneous notes made by the government witness Kenneth Rudd who has previously testified in said cause and who is a material witness for the Government in said cause made by the said Kenneth Rudd during his investigation in preparation for trial of said cause and which said contemporaneous notes have already been referred to by the said Rudd in the previous trial of said cause. Felix Frankfurter: Well, then, this mean that -- what I asked Mr. Davis, that this -- the production of these notes had emerged at the first trial. Herbert A. Warren, Jr.: There had been discussion over that first trial, as shown by this motion. Felix Frankfurter: So that, that makes all the most significant to me at least, that in examining Rudd about these notes, no questions were asked as to the nature of the notes as to the bearing of inconsistency, as to the potential conflict and above all, in asking the Court to look at them -- Herbert A. Warren, Jr.: Yes, sir. Felix Frankfurter: Is that right? Herbert A. Warren, Jr.: That is correct. But I will say this, that it's our position that it's not necessary for the defendant to -- Felix Frankfurter: I understand that, but I just wanted to make sure what it is that was put before the trial judge on which he ruled and on the basis of which the Court of Appeals decided what it decided. Herbert A. Warren, Jr.: Yes, sir. Felix Frankfurter: And the basis on which the case comes here. William J. Brennan, Jr.: I suppose, Mr. Warren, this might also have happened, prosecutor, defense counsel and Judge Choate, that he did try the first -- Herbert A. Warren, Jr.: Yes, indeed, sir. William J. Brennan, Jr.: -- case. Had been all through this on a go-around for all that appears, everything that now seems missing here may all have been developed in the first trial and Judge Choate had refused to turnover the notes and they just persisted in that. Herbert A. Warren, Jr.: That's correct, sir. Felix Frankfurter: And was there anything to prevent trial counsel from having it recorded that they asked Judge Choate to look at those? Herbert A. Warren, Jr.: No, sir. Felix Frankfurter: And nothing appears that such a request was made? Herbert A. Warren, Jr.: No, sir. Tom C. Clark: (Voice Overlap) -- Felix Frankfurter: You mean yes, they're not (Inaudible) Nothing appears -- Herbert A. Warren, Jr.: Nothing appears in the record. Felix Frankfurter: -- that such a request was maybe either at the first trial or in the second? Herbert A. Warren, Jr.: That's right, sir. Tom C. Clark: You just have said that your request on 93 referred back to the motion. Herbert A. Warren, Jr.: I tried. I assumed and I think -- Tom C. Clark: (Voice Overlap) -- Herbert A. Warren, Jr.: -- I fairly saw that when the judge says, “I will deny the request for the notes,” that there must have been a request for the notes. Speaker: Without asking to go off the record, is it fancible to suppose in the proportion where there's -- 93, that counsel said, “Your Honor, may the record show that the motion that I made before trial for the production of these notes which you deny was new to the trial and is likewise denies the trial”? Herbert A. Warren, Jr.: I don't think it's fancible in the least, Mr. Justice. Speaker: You don't think it's fancible at all. Herbert A. Warren, Jr.: No, sir. As to the case report, which was filed here by the Government, I think Mr. Davis made a statement which points out the significance of that report very clearly. He described it as what the Government could rest its case upon. Now, this report was made some six weeks after the interview with Dr. Needelman. It was made some two weeks after the indictment had already been returned in the first case. And I think it's obvious from reading it that the Government was preparing their case for trial and there can a world of difference between what the witnesses were testified to and the recording of the events made as those events actually happened. Felix Frankfurter: You said at the time you started the investigation of this case, is there anything in the record to indicate that he made notes that this doesn't refer to notes made weeks before he ever talked -- the day before he ever talked about the Needelman. And that he talked to other people who then led him for -- talk with whom, led in to Dr. Needelman. Is there anything in the record to -- he said lied on that? Herbert A. Warren, Jr.: No, sir. The Government seems to try to make their distinction on whether or not the notes were communicated, and I submit that the communication adds nothing to the value of the notes, the primary point considered by this Court in the Jencks case and I think the primary point of the statute is the fact that the witness himself has, at a time, when his memory was fresh, made a notation as to what occurred. And if he just puts that in his pocket and never looks at it again until he takes the witness stand, it still just as valuable to the defense and cross-examination and just as valuable in ascertaining the truth of what actually happened at the time that he made that recording. Now, this Court in Jencks, of course, over turn the idea that we -- that the defense counsel had to show any inconsistency between the prior statement of the witness as a prerequisite to having it produced. And I think the contention of the Government now to place upon the defense, the burden, if you wish to use that word, the burden of showing that the notes would be intelligible would fall within the same category. It's our position that the Jencks' case holds very clearly and very precisely that the only thing which is necessary to be shown is that the witness has made a prior statement relative to his testimony. And when that appears, everything which is necessary for production purposes has been shown. This Court in Jencks referred back to the decision in the Gordon case and said for production purposes, it need only appear that the evidence is relevant, competent and outside any exclusionary rule. When it appears that the witness who is testifying has made a prior statement concerning his present testimony, certainly his prior statement is relevant. He made himself so it's competent. He's already testified so there is no exclusionary rule or evidentiary privilege which (Voice Overlap) -- Felix Frankfurter: The Jencks -- the Jencks case was a confrontation of present testimony of a witness reported to a government agent -- Herbert A. Warren, Jr.: Right, sir. Felix Frankfurter: -- as against a report made by government agent of a prior statement by that witness, is that this case? Herbert A. Warren, Jr.: No, sir. But the same principle has appeared because it is the fact that the witness has made a prior statement. In the Jencks case, it was a witness who had made a statement to a government agent, but it was his statement, and the Court said it was his statement could probably be used to impeach him and therefore, should be produced. The same -- Felix Frankfurter: And you say it's irrelevant that the Government now offers a witness who says -- now offers as a government official who says, the witness made this and this statement to me, and that same government official previously made a report of the same statement by that witness. Do you think that (Inaudible)? Those are quite unimportant facts in the determination of the decision of the Jencks case fully apart from the fact of what the Jencks statute did to the Jencks case. Herbert A. Warren, Jr.: I think the primary consideration is that you can impeach the government witness but only by his own statement. Now, if it's a witness who is not a government agent, the report is in the hands of the Government. They can claim an exclusionary privilege there. Jencks says that that exclusionary privilege does not apply where the witness has testified and it's his report producing. So you can impeach him with it. Here, you have one step eliminated because the agent is the witness himself, for the witness is the agent. There is already the exclusionary privilege there but once he testifies, then his prior statement no longer has that exclusionary privilege, it is just as competent to impeach him as was the reports of the -- Felix Frankfurter: But you're -- Herbert A. Warren, Jr.: -- witnesses in the Jencks case. Felix Frankfurter: -- but you are saying that as a matter of law, as a matter of law, if I testified in something subject to cross-examination and it appears that I scribbled some notes which I looked at before I testified that as a matter of law, without law, just that fact, requires the trial court to make me produce my notes -- Herbert A. Warren, Jr.: Yes. Felix Frankfurter: -- is that what you're saying? Herbert A. Warren, Jr.: Absolutely. Yes, sir. And I think that is the basic calling of the Jencks case in my -- in my opinion. Felix Frankfurter: Well, but the Jencks case had taught me different situation. It's the responsibility of the Government in vouching for a witness who now makes one report of his talk with the -- with the person and previously had filed another report of his (Inaudible). And those things seem to you immaterial. Herbert A. Warren, Jr.: Perhaps, I misunderstood you question then, because in our situation where the government agent is the witness, the Government is certainly vouching for his testimony and if he has notes in the possession of the agent, they are just as much notes of the United States as if they have been put in some other file. Felix Frankfurter: In the first place, I don't think that's so. But in the second place, you didn't ask for them. Herbert A. Warren, Jr.: We asked -- Felix Frankfurter: You didn't ask for the judge to pass on whether or not, in the interest of general fairness, there is any reason for having the witness who is also a person, a private person producing private jotting, that I remember this day because it was my son's birthday. Herbert A. Warren, Jr.: And it's our position that all we need to show is that they -- the notes are relevant to his prior testimony and once that it -- Felix Frankfurter: But you didn't show that. You simply -- you didn't show that. You didn't ask the judge to determine that. You simply prove that at the beginning of his investigation, he made some notes. Herbert A. Warren, Jr.: Right, sir. Felix Frankfurter: And you're assuming everything when you say that they're relevant to this. You draw that relevance merely from the fact that he made jottings to -- not -- not just memory. Herbert A. Warren, Jr.: That's right. He made notes during his investigation then he testified as to his investigation. Now, if the Government wants to claim -- Felix Frankfurter: We don't have a date what -- made the notes about afford to had anything to do with what he testified. And you didn't -- Herbert A. Warren, Jr.: But we -- Felix Frankfurter: -- ask the Court to examine that and make his own judgment about it. Herbert A. Warren, Jr.: Right, sir. We think that after we had showed just what we had shown, there was then the burden of the Government to assert that it does contain a relevant matter and at that point, then the judge steps in under the statute and makes the determination as to what portions are relevant and should be turned over and what portions are not. Now, as to some of the cases, as to the procedure followed by defense counsel in requesting production of the notes, I've already mentioned the Jencks case. In that case, the defense attorney moved for an order directing an inspection of reports dealing with meetings about which he -- the witness had testified. The trial judge denied the motion. There was nothing further done by defense counsel in any request that the judge examined the notes in camera or that the notes be made a part of the record. In the Holmes versus United States case in our brief in the Fourth Circuit, the agent testified as to his investigation, the defense then demanded production of the memoranda and report prepared during his investigation and recording its result. The file was tendered to the trial judge. The trial judge declined to read the reports, place a responsibility upon the FBI agents and the prosecution to determine which reports should be delivered. The Fourth Circuit said that that was error to do that, that the statute places an affirmative duty upon the trial judge himself to make the determination once the Government asserts that the notes or the document does contain any irrelevant matter. In the Bradford case of the Ninth Circuit, it's cited in our brief, the examination by defense counsel of the government agent was very similar to the examination in this case. He asked him, “Did you make notes?” And in fact, he said he did. “You refresh your recollection with those notes?” “Yes.” Counsel then requested production of the notes. The trial judge denied the motion for production. The trial counsel again said that he wanted the notes produced. The Court then, on its own volition, examined the notes, determined that they should not be handed over, handed them back to the witness. They were not made apart of the record in the case. There was no request by the trial counsel that they be made a part of the record of the case and the Court of Appeals said that appellant's counsel in this case did nothing less in the trial counsel in the Jencks and reversed the trial court because of its action in that regard. Now, we say that we've done everything necessary in this case to get production of the notes. If the Government wanted it to assert that they did contain irrelevant matter, they should've done so, then the judge would step in and make the determination. Speaker: Could I ask you a question? Supposing the judge had said, “Hand me these notes,” to the United States Attorney and he take and look at them and said no motions denied. What would have been your position then? Herbert A. Warren, Jr.: The same as it is now. Speaker: He'd still be entitled to this? Herbert A. Warren, Jr.: Yes, sir. As far as Goldman is concerned, perhaps it still has some validity where the document is not fairly attributable to the witness himself. If it is, that the witness is using a summary of someone else to refresh his recollection, then perhaps the trial judge, in his discretion, can require the production. But where the document is the witnesses' own document, Goldman can have no further application because if it is his own document, then it is producible. I'd like to close with just an adoption, if I may, of the words of Mr. Davis which he used before this Court in argument on Lev versus United States and other connected cases. In arguing with reference to summaries made by agents of witnesses' testimony, it was suggesting that counsel could call the agent himself and cross-examine him. And in response to a question to Mr. Justice Black, that if the agent denied the purpose contained in the summary, then Mr. Davis made the statement then the memoranda could be produced since it was the agent's own document and would be producible. And I think that very well sums up the entire law and reason applied to this case and to this situation. The notes for Rudd's own document and since it was his own document, it would be producible. Thank you. Earl Warren: We may recess.

Earl Warren: American Federation of Musicians of the United States and Canada, et al., petitioners versus Joseph Carroll et al. and number 310, Joseph Carroll et al., petitioners versus American Federation of Musicians of the United States and Canada et al. Ronald Rosenberg: May it please the Court. This case is before Your Honors on cross petitions for certiorari to the Second Circuit. In case 309, the American Federation of Musicians and its logo late 02 seek reversal of the Court of Appeals holding to which Judge Friendly had decided that certain of the Unions regulations constitute price fixing and violation of the antitrust laws. In case number 310, the plaintiffs four professional musicians challenged the Circuit Court's unanimous decision that a host of other practices which they had challenged and which the District Court had dismissed, did not constitute -- did not constitute violations of the antitrust laws. The plaintiffs had raised an entire series of violations of the antitrust laws which both courts below categorized into set -- eight separate categories but it is to the allegation that the unions violated the antitrust laws, the predicate of the majority opinion of the Second Circuit and to the contention that the unions violate the antitrust laws by accepting so called orchestra leaders into membership that I will address to my remarks primarily. The second point that the unions violate the antitrust laws by seeking and even coercing orchestra leaders into membership, I will address myself to my opening remarks because in our view, it sheds light on the basic contention in case number 309, the price fixing charge and indeed in our opinion, the answer to the question is to whether or not the union may admit the so called orchestra leaders into membership is in fact conclusive analytically under this Court's decision of the question of whether or not the unions may legitimately set a minimum price for the total contribution that the orchestra leader makes to the so called purchase or the music. Following a five week trial on this entire case involving myriad of issues, Judge Levet who had had a certain special familiarity with the industry, with the practices of the American Federation of Musicians due to a length of this particular trial and to his participation in other earlier litigation between these two parties, dismissed the complaints in their entirety. His opinion which has contained of course in the record contains comprehensive findings of fact which are meticulously annotated to the lengthy record of this case. And he as I have indicated dismissed the complaints in their entirety. We rely very heavily Your Honors upon the careful findings of fact that the trial judge made in this case. Indeed, these findings of fact lay at the heart of this case and in the findings of job and wage competition as I shall attempt to show to you Your Honors in fact or conclusive of the legitimacy of the unions' contentions in this case. Although the plaintiff's here in case 310 attack the unions' regulations and so far as they pertain in all fields of musical endeavor, both courts below considered that the primary -- indeed the main attack concern the so called club-date field which was by stipulation said to be single engagements concerning social affairs such as Bar Mitzvahs or weddings and other comparable social events. The plaintiffs in fact in this case, the four remaining plaintiffs do perform and there is a finding to the effect that they perform primarily in the club-date field. The so called non-club-date field would include theatrical engagements, opera recordings, nightclub acts, and engagements of that type. The club-date field again is single engagements concerning social affairs. Now, in order to understand the nature of this particular field and the manner which these particular engagements come about, it might be helpful to describe the -- some of the testimony of the witnesses as regards the method by which a so called club-date comes about. Normally, the purchaser of the music, the sponsor of the social affair will approach a given musician. You might have met that musician before, seen them in the previous engagement or he might even be a relative. In some circumstances where the fact that a given engagement is to come about that there is to be a Bar Mitzvah that there is to be a wedding is known the musician will approach the sponsor of the activity himself seeking the engagement. Now, when the sponsor of the engagement in the pawns of the trade, the purchase of the music engages that particular musician and to obtain to play that engagement and to obtain the other musicians who will play, that leader by that act becomes the leader for the engagement and he then undertakes the responsibility of playing that engagement, obtaining the other musicians who will play who are called sidemen, straight instrumentalists. Now the particular musician who has assumed the responsibility of leader might be acting his particular time for a leader for the first time of his life, for the hundredth time in his life, he might -- the very afternoon on which he is to play as a leader that evening, perform as a sidemen. The fluidity and the interchangeability of functions in this field as outlined in the record and is in the findings of fact is considerable. Musicians perform in many fields. They perform in the club-date field, the non-club-date field. They are sometimes leader and sometimes sidemen. Speaker: (Inaudible) Ronald Rosenberg: Yes Your Honor. On each engagement, there will be someone performing the leaders function. Now at -- in response really to what Justice Harlan has just said, at each engagement, there will be a person who will perform the conducting function and that is the leader's function, the obligation to conduct. Now the leader will also and almost instances playing instrument as well as conduct. The sidemen of course as instrumentalist do playing – play an instrument. Now there are occasions in this field in which the particular leader in question might have two or more engagements on the same night. And under those circumstances, he will obtain what is called a sub-leader to perform the leading function, to do the conducting at that particular engagement. So that in essence, there are the sidemen who perform as instrumentalist, the sub-leader who both conduct and generally will play an instrument and the leader who will conduct if he is present to a particular engagement and will generally play an instrument as well. Abe Fortas: Are those functions always performed by the same men that it say as the man who obtains the engagement always the leader? Ronald Rosenberg: Yes. That is the -- the person who does the obtaining is a leader but the conducting function might be performed either by the leader or by a sub-leader. Abe Fortas: Yes, but it might be performed by somebody else too, might it not? Ronald Rosenberg: The conducting function? Abe Fortas: Yes. What you're telling me is that the man -- if the man who obtains engagement play at a particular club-date and he will always -- he will always be the leader I suppose. That means select some music and determine some tempo and so on, is that what you're telling me? Ronald Rosenberg: Well, there are -- there are conceivable occasions on which the person is obtaining will not in fact perform the conducting function but that is the rarity and I was attempting to describe the basic pattern. Now, although the unions contended that the original trial of the case that the leaders in this circumstances are not employers in the club-date field, we will for purposes of our case before Your Honors assume as Judge Levet, the trial judge assumed that leaders are employers because we believe as did the trial judge and as did Judge Friendly in his dissent that there is no antitrust violation here regardless of whether or no the leaders are called employers whether they're called independent contractors or whether they are called what we would call them working musicians who perform at the trade, who conduct, who play instruments and that is the critical aspect as far as we are concerned and not the fact that they might be called employers and not the fact that they might be called independent contractors. Hugo L. Black: (Inaudible) Ronald Rosenberg: That is our position for purposes of this case Your Honor that the -- Hugo L. Black: (Inaudible) Ronald Rosenberg: Well, we are -- we are prepared to concede for purposes of this case Your Honor that the leader is the employer because we believe that the question is -- the questions presented by this case can be answered regardless of the status of the leader as an employer or as an employee. The same fashion as Judge Levet. Abe Fortas: Why do you say is an employer? Who pays the sideman? Ronald Rosenberg: That varies Your Honor. They -- money might be funneled through the leader to the sideman and -- or in some circumstances admittedly rare the purchase or the music might even pay directly. Abe Fortas: I must assume that you are aware of that -- that point maybe the utmost importance in the decision of this case. Ronald Rosenberg: We are Your Honor. But we -- we do -- we believe basically that the leader is not in fact he employer but Your Honors, do not have before them a record sufficient for you to reach that particular question and to decide ultimately if it's critical to the decision, the question of whether or not the leader is or is not the employer because Judge Levet who heard the entire case assumed as we are now assuming that the leader is the employer. The Court of Appeals went on and despite the fact that there had been no express finding on this particular point, concluded that the leader was the employer in the club-date field. It's our position as it was Judge Levet's but that issue was not controlling here but if it were -- if in Your Honors opinion it were then not in this case would require a remand so that the trial judge who heard all of the evidence on this particular issue would be in the position to decide the initial -- Abe Fortas: I don't follow you there that is, I assume that you are making a concession of counsel that this case can be decided on the basis that the leader is the employer. Ronald Rosenberg: We are conceding, yes Your Honor that they are the employer because we believe -- Abe Fortas: So there's no issue of fact on that both sides I assume to take a position that the leader is the employer that as if it were a stipulated fact for us isn't it? Why would we have to remand it? Ronald Rosenberg: I don't believe so Your Honor. I believe we have reserved the question of whether or not the leader is the employer in our original petition and -- Abe Fortas: Well, you're not -- you either have to say that you are conceding the point or you're not conceding the point and which is it? Ronald Rosenberg: We are not conceding it if it -- if it affects the case and the result ultimately, we are not conceding the point. Hugo L. Black: In both cases? Ronald Rosenberg: It was not intended as a concession Your Honor. Our basic position is that the point is in material to the decision in this case. Hugo L. Black: (Inaudible) Ronald Rosenberg: In this case. Hugo L. Black: (Inaudible) Ronald Rosenberg: Certainly not our contention to concede the point Your Honor, I would like to make the point to describe our basic argument as to why we consider this point quite irrelevant that the status of the leader is insignificant in the facts of this case. Hugo L. Black: (Inaudible) Ronald Rosenberg: I certainly did not intend to concede the point Your Honor. We will not address ourself to that particular point. We have not in any of our papers to this Court ruin into that point at any great length because of our basic belief that a case can be answered without this Court deciding that issue, deciding as Judge Levet or did assume that the leader is the employer that the issues are the same and that the ultimate conclusion is that there is no violation of the antitrust law and any of the items in this particular complaint. The -- as I indicated previously, the major -- one of the major contentions of the plaintiffs throughout has been that the union violates the antitrust laws by admitting leaders into membership. And this contention was advanced despite the plaintiff's own stipulation that the leaders have traditionally for at least 65 years been members of the union. In both court's below found that in fact, that in the commercial or non-club-date engagements where there formal collective bargaining agreements which cover the leader as an employee that the leader is in fact the employee. Both courts below made that finding in the non-club-date field. As indicated, the trial court decided it unnecessary to his decision to reach a conclusion on their status in the club-date field. Thus when the plaintiffs asked the trial court to bar leaders, the unions from seeking leaders into membership, they seek to obliterate practices which this union follows its inception, no recent practice, no recent idea of the type occurred to the people involved in the Grease Peddlers case or the Hinton case but rather the membership of these people in the union was a long historical practice stemming from the fact that they are working musicians that when they conduct and when they play instruments at these engagements, they are working musicians. Now the trial court attempting to answer the questions presented by the complaint stated that the issue before him had to be resolved on the basis of this Court's decision in Meat Drivers versus United States. But the question before him was whether or not the leaders were in such job and wage competition or other economic relationship that the union had a legitimate right to seek and to take these people into membership. And he concluded on the basis of carefully detailed lengthy findings set forth in this appendix that the leaders when they conduct, displace a sub-leader from a job when they play an instrument as they almost always do, they displace a sideman from a job and predicated on those findings of job displacement by the leaders, he concluded that the leaders were in job and wage competition with the union's other employee members and for that reason, the union did not violate the antirust laws by admitting leaders into membership. And -- Potter Stewart: Not admitting, it's requiring them to belong, isn't it? Ronald Rosenberg: There is no real difference Your Honor if we can legitimately and lawfully within the meaning of the antitrust has admit them, we can also attempt to compel them to join. I think that's clear under the decisions in Apex and Hutchinson and so forth that the question is whether or not they can belong and not whether or not the method by which we seek to obtain them whether voluntarily or whether they join through some sort of union pressure. Potter Stewart: Aren't there at least some orchestra leaders who are never anything but leaders. Ronald Rosenberg: There are a few who never act as sideman. The – Byron R. White: Including these equal -- Ronald Rosenberg: Well, the – Byron R. White: -- to be included in the -- Ronald Rosenberg: -- before present –- Byron R. White: (Inaudible) Ronald Rosenberg: -- yes, the four present plaintiffs were found to be persons who perform as leaders all of the time. Potter Stewart: And is this -- you talked about club-dates in reading the briefs, I thought the dichotomy was between single engagements being engagements up to five days and steady engagements being engagements for longer than that. Ronald Rosenberg: No, I believe Your Honor that -- well, there are various -- Potter Stewart: There are sub -- subclassification under single engagements, is that right? Ronald Rosenberg: No, I think the Court of Appeals -- Potter Stewart: Is that wrong? Ronald Rosenberg: -- addressed itself to the club-date field and to the so called hotel steady engagement field, lumping those -- lumping those two together. Potter Stewart: Not lumping, distinguishing isn't it? Ronald Rosenberg: Well, the basic distinction is between those short performances of a strictly casual nature which occur in the social engagement of club-date field. Potter Stewart: I'd thought that the industry practice and the union practice was to categorize the distinguished things I say is single engagements which I understood it were up to five days up to a week or five days in steady engagements which engagements longer than that. Ronald Rosenberg: Well, that's the-- Potter Stewart: And then there are subcategories of traveling engagements -- Ronald Rosenberg: There are various union terminologies but Judge Levet in his decision divide the case into the club-date and steady -- and hotel steady engagement and all other fields. So the basic division that was reached in terms of the employer issue was on the club-date and hotel steady as being that group that Judge Levet assumed were employers and the other group which we have called the non-club-date field. I think that the Court of Appeals follow that particular line and although it based its decision on the employments, they just primarily on the existence of collective bargaining agreements and then made a statement along the findings of various collective bargaining agreements in certain areas, all of which would be in what we call the non-club-date field. But the terminology that I'm using is basically addressed to the terminology that Judge Levet had used in his original decision and his -- that area where he assumed employer status which is club-date and hotel steady field. Potter Stewart: And is that all that this case has to do with, club-date and hotel steady field? Ronald Rosenberg: Yes Your Honor. In our opinion, I think that the other issue is where the leader is the employee as the Court of Appeals found and as the trial court found and there are no basic antitrust issues involved. Potter Stewart: Well, there are other areas where the leader might be an employer. Areas other than the club-date and hotel -- steady hotel field aren't there? There's a traveling engagement and others. Ronald Rosenberg: There was no finding Your Honor. Potter Stewart: And single engagements of up to five days. Ronald Rosenberg: There's no finding that the leader was the employer in any of these fields. In fact, there was an express finding that in the television recording and the so called other commercial and non-club-date fields that the leader was not the employer. Potter Stewart: Well, let's go back to this small group which you concede that exist that consisting of people who are leaders and only leaders. I don't want to date myself but people like Wayne King or Benny Goodman. They are employers, are they not? Ronald Rosenberg: With all do respect Your Honor, the people that you've just named are just that. They are named bands and there was an expressed finding by the trial court, the plaintiffs in this case do not belong to the group which might be called named bands and these -- the people that we're talking about might lead all the time but they are certainly not named bands and there is an unchallenged finding by the District Court on that particular proposition. Potter Stewart: Well, maybe not national named bands but in a particular community, a person could -- there's that subcategory I suppose isn't there? Ronald Rosenberg: That's just not the finding Your Honor, the finding that this people are the people who lead all the time and that is all. There is no finding that they are named bands in that sense and all of the criteria, what constitutes a name band or set out in the trial judges opinion and he concludes from that that these people don't fit that category that they don't have those special characteristics which would make one a leader of a named band. But that's -- Potter Stewart: And the implication is that if they were, the result would have been different in the opinion of the District Court? Ronald Rosenberg: No, Your Honor. I don't think -- Potter Stewart: Why is it say so? Why does he talk about it? Ronald Rosenberg: Pardon me. In terms of -- Potter Stewart: Why does he talk about the fact that they're not -- Ronald Rosenberg: He talks about it primarily in terms of the class action aspects of the case which are at this point really out of the case. He was attempting to answer the question of whether or not there was in fact something of a class action. Our basic point is that the antitrust laws are not violated when these people work as musicians. What we're talking about here is quite irrelevant to whether they lead sometimes or whether they lead all the time or whether they lead just half of the time. The fact is that when they lead and conduct and play an instrument, they are job threats and here is the finding that the Court of Appeals -- there are job threats to our employee members and that gives us the right to take them into membership and it gives us the right to regulate their activities in an effective matter and it's when they play, it's what they do as musicians that we're talking about and not some abstract notion of their status as employers or independent contractors. They are job threats. They displace working musicians –- Hugo L. Black: (Inaudible) Ronald Rosenberg: Pardon me? Hugo L. Black: You said the odds are – now what do you propose? Ronald Rosenberg: They are job threats Your Honor. In the words of the Court of Appeals, they are job threats to the unions' employee members because they take jobs away from the instrumentalists, the sidemen. They take jobs away from the sub-leaders. And what we are tempted -- what we attempt to do and we have always attempted to do is to assure that if they are to play these jobs, they will play these jobs on a fair condition that they will not. Abe Fortas: But suppose -- suppose you have somebody though who doesn't know how to play an instrument at all but it is a -- but he gets engagements, he books engagements and he hires musicians to go out and play them. Now do you concede that the -- that wouldn't -- it would not be appropriate for the union to admit or require membership of that sort of a person? Ronald Rosenberg: Well -- Abe Fortas: There are such persons in existence. I don't recall what the finding say but take that and take that illustration. Ronald Rosenberg: Well Your Honor, in those circumstances, there are very, very few people like that but they you know -- really would not be in our opinion leaders in the sense that we use the term. They would be what we call booking agents and under those circumstances, the unions' interest would not be so great but what we're talking about is. Abe Fortas: What I'm trying to get to your theory which is what I'm interested in here. Are you saying only that where the same individual books the engagement and plays an instrument or leads the -- or as present and leads without playing the instrument that in that situation and that situation only, you contend that it's proper for the unlawful and not a violation with antitrust laws toward the union to admit him to membership and to impose its regulations on him? Are you confining yourself to that restricted class and then affect conceding that if the person who books the engagement and rounds up the musicians is not an instrumentalist and doesn't play or is not present and actually conducting the instrumentalist then he is not eligible for union membership? Ronald Rosenberg: No Your Honor. Our primary argument is based upon what is the overwhelming -- the overwhelming fact that these people do when they lead on an everyday basis that they are performing musicians and that the vast number of the situations to which we're -- with which the union is concerned are the what we would call the performing leader. Now, there are -- Abe Fortas: But you're making things very difficult for me because on one hand, you're asking as to confine ourselves to a specific situation. I don't dispute your suggestion that that specific situation as prevalent, dominant numerically but you're asking us to confine ourselves to a specific situation and nevertheless to blanket in every kind of a situation. Ronald Rosenberg: Well Your Honor, the ladder situation where the particular leader is not performing with the phrases, a non-performing leader. We believe that that particular regulation which is not the predominant situation. It's a miniscule part of the basic picture. In that particular situation, there's a quite different argument. Admittedly, that situation is far more difficult for our purposes in terms of its legitimacy than the situation of the -- with the performing leader where the man actually works at the trade where people can see him so to speak and wavings it's baton or playing its instrument. In the situation where he doesn't perform, we believe that the facts of the industry and as the trial court found, show that there is so direct relationship between the price of this so called non-performing leader charges and the amounts that the sideman will receive but under those circumstances, the unions regulation of a price is legitimate because it is Justice White's words, a matter of imminent and direct concern. But that is a quite different argument Your Honor than our fundamental argument about -- Abe Fortas: Isn't that true throughout our economic life. And in that sense, the union could if you accept that theory. Why couldn't the union regulate the price of automobiles? Ronald Rosenberg: Because Your Honor, our answer there is tied very directly to the special circumstances of this industry is found by the trial judge and that is the kind of fluidity, the interchangeability among functions in this particular used to be as such and the lack of any capital and requirement of any capital investment in the specific findings based upon the evidence that where the leader be he performing or not performing does not obtain as a price to the unions minimum the sideman won't be paid. Now that's a very unusual situation. That's quite unlike the situation which Your Honor attempted to said out about an automobile where the union can't show that kind of direct intimate relationship, a one on one relationship so to speak and I think that the -- basically, these notions are non-performing leaders is really de minimis in the sense that it's so small apart. What we're talking about primarily is our concern about the performing leader, about the leader when he conducts and when he plays on an instrument. That is the fundamental aspect of our case and when he does that as I have indicated, he is in job and wage competition with the unions' sidemen or sub-leader members. And it was on that basis that both courts concluded that the union had a right to seek the leader as a member and the trial court on the basis again of that particular finding, on the findings of displacement and of job and wage competition, concluded that the union had a right not only to take them into membership but to set a rate for them. Just a rate comparable to the rate for other musicians and to require in order that that rate maybe received that it will actually be received by that particular musician that they each have a minimum price through the purchase or the music. Now the reason for the charge of the price is that where the leader or any independent contractor or employer in this sense is to receive moneys and if you call an employer who receives prices, if you call him an employee, he receives wages but it's the same money for doing the same thing and what the union must do as it did in Oliver is to assure that he in fact receives in his pocket, the leader in our case or the owner operator in the Oliver case that Your Honors decided, receives in his pocket the amount that the union has set for the wage scale and as in Oliver, he is in fact charging an amount for a truck which is less than the true rate for that particular truck, he is not getting the wage scale because the difference between the true rental of the truck and the amount that he has received must be subtracted from his wage scale. And so if the leader here receives something less than his total contribution for the performance, he is not getting the wage scale for the function that he is performing, conducting and acting as an instrumentalist and that is essentially our argument. There is of course the argument quite different about the situation of when the leader does not perform and there, as I attempted to indicate to Justice Fortas, the special circumstances of this industry and the miniscule amounts involved in that particular case, show that the union has not violated the antitrust laws in that particular circumstance as well. Potter Stewart: That is because of a kind of a de minimis? Ronald Rosenberg: Basically a de minimis but also because of the very explicit findings of a direct relationship between price and wages here, that in this particular industry, the union has found and the evidence supported that the trial judge found that unless the leader be he performing or not, receives that amount. He won't pay the -- he won't pay the wages. We're dealing with a very special kind of industry. There is no capital requirement. People are at one moment leaders and the next moment sidemen. Potter Stewart: But I suppose a non-performing leader and that is a leader who performs only by waving a baton around is not in job competition with the sidemen, is he? Ronald Rosenberg: The phrase non-performing leader Your Honor does not concern the one who waves the baton conducting was stipulated to be a musical function. Potter Stewart: I see. Ronald Rosenberg: And that -- so that when a leader conducts, he is a performing leader in the -- Potter Stewart: I see. What is a non-performing leader? Ronald Rosenberg: Non-performing leader is the one in the situation I attempted to describe where a man gets two or three engagements on the same night and he – Potter Stewart: And he's somewhere else then? Ronald Rosenberg: -- he gets someone else to act as a sub-leader – Potter Stewart: Although he called the engagement, I see. Ronald Rosenberg: Well, that is precisely in that context. The union is looking generally to the man who sets it up to be there and do the conducting and then they are these chance situations in which you have a sub-leader used and which he is a non-performing leader. Potter Stewart: Now, what is this minimum price we're talking about? Is this a package price for the whole union or what is it? Ronald Rosenberg: That's a quite limited amount Your Honor. It's a minimum. The union sets a minimum price which is the scale for the leader himself, for the function he is performing as a conductor and as an instrumentalist plus the wage of the sideman, plus an amount -- Potter Stewart: Plus how much? Ronald Rosenberg: 8% which was stipulated -- which astounded the amount necessary for various income tax or social security withholding. Potter Stewart: Which the leader is responsible for as an employer. Ronald Rosenberg: That's correct Your Honor under the Social Security Regulations he is responsible for that particular withholding, so that we have three basic components in the minimum that the union has set. Each of this is an amount which he must put in the minimum price to the purchaser of the music. And the reason that these are included is to assure if he were obligated to make a -- make social security payments of a certain amount. And in fact, he charges a minimum price, less than the amount of his own scale plus that withholding amount. He would in fact be working at an amount less than the union scale for that particular job. Abe Fortas: Although we also have to or do we also have to consider in these two cases the territorial restrictions and all of the other things are in this complaint is originally filed as -- which was as I understand, dismissed by the District Court. Don't we have to consider territorial restrictions here too? Ronald Rosenberg: Well I believe Your Honor, that's in case 310. The plaintiffs have attempted to bring that point up. Abe Fortas: Well, what's your position about that? Ronald Rosenberg: The territorial restriction is strictly a term and condition of employment that involves a labor dispute within the meaning of Section 13. In that particular aspect as the trial judge pointed out, we're strictly dealing with the question of what a union may do in order to obtain benefits for its members. Abe Fortas: So what you're saying then is that a musicians union, they prohibit musicians from New York from playing in Washington except on certain conditions vice versa, that kind of thing? Ronald Rosenberg: Basically Your Honor. The regulations themselves are primarily an increase in scale. A New York musician when he comes down in Washington will receive -- it is required by union regulations to receive an additional amount as wages 10%. Abe Fortas: Well, he can't play here, can he, unless he gets permission from the local in Washington? Ronald Rosenberg: No, he can play. There are certain circumstances -- Abe Fortas: Are you sure of that? Ronald Rosenberg: Yes Your Honor. There are certain circumstances in which if in Washington on a long-term engagement, he might not be able to compete and these are on certain types of Local engagements and basically, he may go outside and they do all the time. Byron R. White: This is even on the assumption that we are making in this case that these leaders -- these plaintiff leaders here are independent businessman and not employees and that the union and these leaders as independent businessman have in effect agreed to that -- that the wages on the road or the price that the leaders will charge on the road will be higher? Ronald Rosenberg: The union regulations Your Honor, indicated union and the leaders have agreed that all of these regulations -- Byron R. White: Well you wouldn't suggest for a minute that there is -- that if you assume that these independent leaders are -- these leaders are independent businessmen and not employees, what you have here is an arrangement between the union and some employers. I don't know how else you can talk about it. You can say, well, they didn't agree, we just coerced them into it but you really don't -- do you really seriously contend that for purposes of section one that this isn't a combination? Ronald Rosenberg: Yes You Honor because of the finding -- Byron R. White: Well, how can you if you assume these gentlemen are quite willing to assume in this case that these leaders are independent businessmen. Ronald Rosenberg: Because this is not the kind of combination that -- Byron R. White: Well, wait a minute. That's another question. I understand that you're relying on the exemption. I'm not for a minute asking you to concede that this violates antitrust laws. I'm just asking a plain simple question if this is a combination for a purpose of analysis under Section 1. If it isn't, you don't even either get to your exemption. If it is, you do need to and as I understand that you're relying on your exemption. Ronald Rosenberg: We are relying -- I'm really on the exemption because there's no combination with any non-labor group. The reason that the leaders are in the union is because of the job and wage competition which make -- Byron R. White: I know, but that's the part of spelling out your exemption saying that, well there are independent businessmen that will treat them as a labor group rather than a non-labor group because the exemption requires this too. But you're suggesting though that the union may take these independent businessmen and agree with them to have this differential on the road and this territorial restriction. Ronald Rosenberg: Yes Your Honor. Byron R. White: As part of the exemption, opens the labor union. Ronald Rosenberg: Because it's part of the wages Your Honor and when they work on the road like any other musician, they are to receive additional wages because -- they're working musicians. When they go on the road, they -- Byron R. White: Well how do you justify the agreement broke (Inaudible)? Ronald Rosenberg: Well, the answer there Your Honor is that the so called booking agents are –- Byron R. White: (Inaudible) Ronald Rosenberg: Pardon me? Yes they are. Byron R. White: The union agrees with them to pay the (Inaudible)? Ronald Rosenberg: Yes Your Honor. That certainly does not violate the antitrust laws. What we're seeking in that circumstance -- Byron R. White: You mean that the (Inaudible). Ronald Rosenberg: Yes Your Honor. Byron R. White: And how about the agreement (Inaudible)? Ronald Rosenberg: Your Honor on that particular point, as you know the Court of Appeals found a total lack of standing and here -- and I don't believe that the issue was presented in the plaintiff's certiorari petition but here again, there is a relationship. All that the union has done here will say to its members, don't accept kick backs from a given group. There is no combination with caterers. There's no agreement with caterers, the union's own internal regulations. Byron R. White: Is there an agreement that the (Inaudible)? Ronald Rosenberg: Yes there is by the terms of the -- Byron R. White: (Inaudible) Ronald Rosenberg: Yes Your Honor. Hugo L. Black: (Inaudible) Ronald Rosenberg: As I understand Your Honor, we're charged with price fixing that the union by setting a minimum amount for each that the leader must charge on what we call the purchase of the music on each particular engagement hasn't engaged in price fixing. Hugo L. Black: (Inaudible) Ronald Rosenberg: That the union is engaged in price fixing by setting this forth in a union regulation which is adhered to by certain union members called leaders and that in that sense, the union has agreed on a price. Hugo L. Black: Minimum of national prize? Minimum charge whenever engaged in? Ronald Rosenberg: This is a minimum of course Your Honor. It's a minimum which reflects only the sidemen scale, the performing instrumentalist scale as in writing and the minimum for the leader himself who was a working musician. That's -- Hugo L. Black: (Inaudible) Ronald Rosenberg: That's when the union and the so called -- its own members. That's part of the difficulty in this case Your Honor that the -- Hugo L. Black: Its own members. Ronald Rosenberg: Its own members, yes. So called -- Hugo L. Black: (Inaudible) Ronald Rosenberg: Yes Your Honor. Hugo L. Black: (Inaudible) Ronald Rosenberg: Well -- Hugo L. Black: (Inaudible) Ronald Rosenberg: No. The union regulations can't reach anyone who is not a member. The -- this is all done by internal union regulation. Hugo L. Black: (Inaudible) Ronald Rosenberg: Pardon me? Hugo L. Black: (Inaudible) Ronald Rosenberg: Well, there are no such agreements Your Honor. We just don't reach -- Hugo L. Black: (Inaudible) Ronald Rosenberg: Basically Your Honor that the -- because they are members and they have become members legitimately. There's a charge that they are improperly members of the union and both courts rejected that because of the finding that they are properly members of the union based upon the fact that they compete with our -- with other members of the union, we say that we have a right to regulate them like any other members. They are properly members and -- Hugo L. Black: (Inaudible) Ronald Rosenberg: They raise various other issues Your Honor which were disposed of in our favor by both courts below. Hugo L. Black: (Inaudible) Ronald Rosenberg: Well, as I understand, that is basically their contention. As I understand it, there are a lots of other -- Hugo L. Black: (Inaudible) Ronald Rosenberg: Well, they also Your Honor as I understand their complaint -- complain that we reach agreements with other -- with other people like nightclubs and booking agents and hotel -- but in those -- with regards to the nightclubs and the recording company, there is an expressed finding that those come -- we do not said any price in that circumstance number one, the -- and the finding was that these other people are employers and not the leaders so that the leader has lost even the -- even the possibility of being the independent employer businessmen in those situations where we have agreements. He is not because of the nature of his job function or other things. He is not the employer under those circumstances. Hugo L. Black: (Inaudible) Ronald Rosenberg: Well, he say, they admit that he is a member of the union. They think that he is improperly a member of the union and they argue that no leader should be a member of the union. Byron R. White: But as I understand what you said earlier that even if he is a member of the union, we are approaching this case on the assumption whether it's true or false. We are pushing on the assumption that the leader, these plaintiff leaders are independent businessmen. They are not employees of anybody. Now -- Ronald Rosenberg: What club-date-field. Byron R. White: What? Ronald Rosenberg: In what we call the club-date field. And that field alone -- Byron R. White: I understand that. What would you say if the independent -- this so called independent leaders who lead all the time and never they play. What if these gentlemen have formed an association of the association of independent leaders and they have arranged to set their prices that they were going to charge to those who purchase music and they did have an agreement like this among themselves. What about that under the antitrust laws? Ronald Rosenberg: That would be outside in terms of labors exemption -- Byron R. White: Well I know, these same, now wait a minute, these same independent businessmen can exempt that can have this sort of an agreement exempted nearly by joining the union. Ronald Rosenberg: No, not nearly by joining the union but by belonging to a -- Byron R. White: But the union can exempt by having them join them, is that it? Ronald Rosenberg: No. It's not the joining of the union Your Honor. It's the existence of job and wage competition with the union's employee members. It's the threat that these people present to the union, to the sidemen who are admitted employee. Byron R. White: Well let's the association that I talked about. Association of Independent Leaders, they formed an arrangement among themselves to set prices that they would charge for purchases of music and on this side, they went to the union and said, “Look, this is our -- this are our prices. Is this alright with you?” And the union said, “Fine. As a matter of fact, we would like to regulate your prices very much.” So they have an independent agreement between the union and this association of independent businessmen to set prices. Ronald Rosenberg: That of course was not the situation before Your Honor. Byron R. White: I know but what would you say about that? Ronald Rosenberg: I would say that that's a violation but because you have the critical element the fact that the union's regulation is predicated upon the existence of job and wage competition. The competition with the employee members and that -- William J. Brennan, Jr.: Well suppose these leaders were not in fact members of the union, would you still be making the argument you are today? Ronald Rosenberg: Oh yes, certainly Your Honor. William J. Brennan, Jr.: Even if they were not members of the union. Ronald Rosenberg: We would have the right to seek and to have them do this, yes, but because they are in job and wage competition. Your Honors, this is really precisely what was involved in the Oliver case that particular line of analysis because in Oliver, there was no indication that the owner operators were members of the union and yet the union was setting a price that the owner operator was to charge back to the – of the truck. Byron R. White: But you were agreeing there with an employer, you didn't permit and attempt to -- attempt to tell the employer you're making a collective bargaining contract with what he's going to sell his merchandise for. Ronald Rosenberg: No but we did by an agreement with him to determine what another independent -- Byron R. White: You could've agreed with him what his labor cost was going to be or what some of his applied cost are going to be. Ronald Rosenberg: But we do not -- Byron R. White: What is element purchase sales price for public was going to be? Ronald Rosenberg: What we did in that particular instance, the union was setting the sales price of the owner operator because it was reaching the price of the truck. Byron R. White: Well it doesn't have to be what you're doing here. Ronald Rosenberg: I believe it's precisely what we're doing here Your Honor. We're setting an amount that as a minimum which is intended to assure that the leader receive the amount that he gets for working as a performing musician. Abe Fortas: Suppose you had a firm to render electrical service -- service electrical fixtures in home and businesses and let's suppose that the talked person in that firm, the head of that firm was a working electrician. He went out on jobs with his mandate and let's suppose that all of the members, all of the men who work for that electrical service company belonged to a union, now could the union fix a price that the firm would charge for coming out to or going out to your house and installing a floor plug. Let's take that simple illustration of that sort. What's your answer? Ronald Rosenberg: The answer is, where the man is coming himself working as an electrician, taking work away that the union if it's necessary can set a minimum price which will assure that the man will receive in his own pocket the minimum wage that the union set for that type of work. Abe Fortas: So your answer to my question is yes. Ronald Rosenberg: Yes Your Honor. Abe Fortas: You don't contend that there's any case that this Court's decided that supports that proposition? Ronald Rosenberg: Yes Your Honor. The Oliver case makes clear-- Abe Fortas: Do you think that -- do you think that case instead was a proposition? Ronald Rosenberg: Analytically Your Honor, it makes clear that where the union is attempting to set a price in order to assure that the wage scale is not subverted then that is not a constitute of violation of the antitrust law. Abe Fortas: Well, it's your issue though. Ronald Rosenberg: Pardon me? Abe Fortas: I say that's your issue. Ronald Rosenberg: Thank you. Hugo L. Black: Well that gives me most of the case to decide for New York -- Ronald Rosenberg: No Your Honor, the Allen Bradley case to which you're referring involved a conspiracy in which a union came to the aid of already existing conspiracy. Both courts below here rejected the notion that out of this case approached the Allen Bradley posture. They both rejected the notion that there was a conspiracy. Hugo L. Black: (Inaudible) Ronald Rosenberg: But only through a very indirect fashion and only through creating -- Hugo L. Black: (Inaudible) Ronald Rosenberg: No, I think that Justice Fortas made it in quite a direct situation where the electrician is in fact working on the job and on those circumstances in that limited -- Hugo L. Black: Suppose that the electrician has an organization about – some of these electricians settled together and they're the ones to use it? Can you say that -- Ronald Rosenberg: Certainly not Your Honor. The essential element here is the fact that these people are working at the trade and there -- Hugo L. Black: This electrician is of less importance to them. Ronald Rosenberg: Our regulations are limited to those situations when he is working at the trade and we do what is -- Hugo L. Black: You could bring it if you want to and you could come up with our condition of the comparison to fix your problem, would you have to say that? Ronald Rosenberg: If he is in job and wage competition, he may legitimately be sought as a member of the union. Yes Your Honor. Potter Stewart: Was in the case of Sand against The Tire Layers Union, Justice Brandies' opinion, that didn't involve any claim of antitrust violation. Ronald Rosenberg: No Your Honor. Potter Stewart: Just reading it and I can't find it. Ronald Rosenberg: No. That was involved under Wisconsin's little Norris-LaGuardia Act. Potter Stewart: Right. Well, I know what the basic issue was. There's no antitrust claim in that case. Ronald Rosenberg: No sir, Your Honor. Thank you Your Honors. Godfrey P. Schmidt: May it please the Court. First, I would like to emphasize Your Honors that I do not represent most of the people in the spectrum of employers in this field to which Judge Friendly refers in his descending opinion. I quite agree with Judge Friendly that there is a varying spectrum beginning with the kind of person who files as an orchestra leader, maybe once or twice a year because some friend or relative asked him to serve as an orchestra leader, and the kind of orchestra leader represented by Benny Goodman who is a named band leader. Now, the people that I represent are professional orchestra leaders. They never work as sideman with one rare exception and that is true even of named band leaders. Stan Compton is perhaps one of the famous named band leaders in the country and he admitted that he had someone substitute for him when he was ill -- right on this record. But -- Hugo L. Black: I don't want to interrupt you but -- Godfrey P. Schmidt: Surely. Hugo L. Black: But I'd be glad if you could state what I asked him earlier. Godfrey P. Schmidt: I would be happy to do it right now. Yes. Hugo L. Black: With no charge. Godfrey P. Schmidt: My charge. Hugo L. Black: (Inaudible) divide among themselves or take it with them? Godfrey P. Schmidt: No, it is not limited to that. That indeed is one of the points of my charge that union members have combined by means of the bylaws with which they comply and that is to say as thank you. I'm sorry if my voice breaks every now and then but I just got up from a cold. I am not -- I'm saying that indeed, the orchestra leaders in the class that that I represent, the professional orchestra leaders have agreed by these bylaws among themselves to fix prices and never to compete below those prices. And Your Honors, there's not one -- evidence in the record to contradict that but I go beyond the members. I go to for example, the booking agents. Obviously, the booking agents are important for named bands and for named bands that haven't had even national reputations but Local reputations. That's one of the outside groups that I'm talking about. Then I talk about hotels, nightclubs and restaurants. Take for example the situation that prevails in New York City. Local 802, every so and so often negotiates with representatives of the hotels, nightclubs and restaurant and presumably, the negotiation is confined to the employees, the hotels, nightclubs and restaurant. That's what it appears in the surface. But Your Honors, that isn't true and the facts in this record are contradicted on that point. Every one of my clients performs in one of the other -- of hotels nightclubs and restaurants in the City of New York but they must comply even in single engagements with the standards, the wage turn out -- wages, house and working conditions, fixed by the hotels, nightclub and restaurants and the union. Mind you, they were not ready to these negotiations in anyway. They didn't even have notice on them but the negotiations at that time were now applied to my clients, the same is true of when we say radio, television. The radio and television contract is negotiated with the big companies. All of the smaller companies then follow -- the union prints a contract and they all have to sign it and when my clients perform a single engagement and they don't do it often, I will admit. When my clients perform a single engagement on radio or television, they must comply with the negotiations -- negotiated standards between the big television or radio stations and the -- now, I want to say too Your Honors that my complaint from the beginning, urge the fundamental distinction between said steady and single engagements, no other. As a matter of fact, Your Honors can look in vain through the bylaws of the international or the Local to find any reference to club-dates. Club-dates are just one department, the largest department that I would admit has single engagements and when the court below ruled on price fixing for example, it did not use the words club-date. It said orchestral engagements so that it covered both single and steady engagements. Now, it would be easy, I think, on the basis of this record to be confused by the fact that there are -- there were testimony from a variety of different types of orchestra leaders. On the union side, the union did not produce one single witness who was a professional orchestra leader, not one. That is to say one who gave his full time to being an orchestra leader never played his assignment, and they are the only people that I represent. I don't have to go into the status of this other margin of the type of orchestra leader because I'm not concerned with them. My own disposition is to believe that even they are employers pro tonto but that's not essential to my case here and I think that when Mr. -- when Judge Friendly in his dissenting opinion below spoke in terms of interchangeability, he was talking about the kind of orchestra leader that I don't represent. I have no doubt that Max Sanso who testified that during the three years, he had eight or nine engagements. I have no doubt that he could improvise orchestra at any time and that he would be interchangeable in that with other employee musicians. That isn't the point. I'm talking about the kind of orchestra leader who is the professional and he is vastly different from the employee sideman because he is the risk taker in this situation. It isn't as the -- my adversary's briefs reported and that as Mr. Rosenberg just put it that the usual procedure is for purchaser of music to approach of musician. No Your Honors, the usual procedure is for my clients to run up telephone bills of $4,000.00 and $5,000.00 a year when they read in the newspaper about fourth coming social events. And they solicit and when they have -- didn't have that kind of solicitation, in the end accumulated the kudos that comes with reputation then people come to them and call them up. They never go to my client's sideman and ask them to get together in orchestra. And when my client stands before an orchestra, they do one or three things. Some of my clients like Charles Peterson had never play an instrument. He simply conducts and leads but most orchestra leaders who are in the class of professional orchestra leaders do in fact play an instrument but they play it differently Your Honors than the ordinary sideman. In the first place, the sideman plays continuously. The orchestra leader leads by playing. He bows his head. He makes gestures. He gives emphasis and in that way, he keeps the ensemble, he denotes the tempo and so on and he is in charge. He is perfectly obvious I think to anyone that knows anything about orchestra performances that if they were all to play at random, even the same piece, they couldn't even keep time. Someone has to be there to lead them and that is what my clients do. Byron R. White: Well, do your clients in this case play instruments? Godfrey P. Schmidt: Do they play an instrument? All but Peterson. Peterson does not play an instrument. Byron R. White: If Peterson leads all the time, he never plays an instrument. Godfrey P. Schmidt: Never plays an instrument. Byron R. White: So we have to at least get phase up to the professional leader who never plays. Godfrey P. Schmidt: Oh yes, there are quite a few of those. As a matter of fact, some of the most successful ones today, no longer play an instrument and all of my clients Your Honor, refused to play an instrument when the orchestra is eight men or more. If the orchestra that they assemble is eight men or more then they confine themselves only to leading either with a baton or with their hands. William J. Brennan, Jr.: Did you say Mr. Schmidt that none of your clients could get an engagement in a hotel, nightclub and so forth in New York City unless he is a member of the union, did I understand you to say that? Godfrey P. Schmidt: I didn't say that but it's practically true Your Honor because whenever an events of any kind, the required music are arranged with the banquet manager of the hotel and that's in the record undisputed. The banquet manager of the hotel tells them, you better have only AFM members otherwise you're going to have later trouble. And in that way -- William J. Brennan, Jr.: I know but what do they say? You have to make your piece Mr. -- speaking not only of your clients. Godfrey P. Schmidt: Yes. William J. Brennan, Jr.: Mr. Leader, you have to be satisfied to the union before we can employ. Godfrey P. Schmidt: Yes, there is a specific provision in Local 802 bylaws that says that the executive board of Local 802 must approve each orchestra leader and it reserves to itself the right to cancel the contract. William J. Brennan, Jr.: Yes, but what about the -- does this union here have an agreement with any hotel to the effect that the hotel will hire orchestras only if the leader and the members are -- members that are associate -- affiliated with the union. Godfrey P. Schmidt: They don't Your Honor have a written agreement containing that verbiage expressly. But that's the way it's enforced. In other words, they do have written agreements with the hotels, nightclubs and restaurants and the hotels, nightclubs, and restaurants cooperate with the union by telling all of their patrons, you must have AFM members. William J. Brennan, Jr.: Well then I gathered that your clients are the ones who have been expelled from the union could never get a job with a New York hotel. Godfrey P. Schmidt: They couldn't get a job as an employee or -- William J. Brennan, Jr.: No, as a leader. Godfrey P. Schmidt: As a leader -- Your Honor, I must say that there are some few cases where leaders are employees. I don't represent them and I thought you're referring -- William J. Brennan, Jr.: No, your clients, your clients. Godfrey P. Schmidt: My clients? They -- in all probability, they could not get a job but there might be some cases in some hotels that are not as careful about that and wouldn't object to it but I know that there's always trouble when they don't belong to the union and that's the reason why two of the plaintiffs here, Peterson and Carroll for -- Byron R. White: Do you at least know whether or not you're any of your -- your clients have been expelled from the union. Have they been playing in New York nightclubs and hotels since they've been expelled or not? Godfrey P. Schmidt: Some -- in some places, yes and in some places, no. Byron R. White: There must not be any, any flat rule that leaders who aren't members of the union may not get an engagement in a New York hotel. Godfrey P. Schmidt: No Your Honor. You must understand that by virtue of an agreement in front of Judge Friendly, my clients, Peterson and Carroll agreed that they're with the union, that their orchestras could perform in this hotels, nightclubs and restaurants, provided Carroll and Peterson did not actually direct them or play an instrument while directing them. So that was a provision of -- Byron R. White: You mean, they could never lead there. Godfrey P. Schmidt: That's exactly a point. Byron R. White: They could book the engagement -- Godfrey P. Schmidt: That's right. Byron R. White: -- but they have to hire a leader. Godfrey P. Schmidt: Yes Your Honor, yes Your Honor. William J. Brennan, Jr.: What was this negotiation that you said earlier Mr. Schmidt? It wasn't even that was going on -- you said, I thought was not even known to your clients. Godfrey P. Schmidt: Right. William J. Brennan, Jr.: And this was altered in an agreement. Now what is this agreement you're talking about? Godfrey P. Schmidt: That's called the hotel agreement. William J. Brennan, Jr.: Well, what is it? What terms of that agreement have any bearing in the issues we have here today? Godfrey P. Schmidt: Well Your Honor, the terms of that agreement provide for example for payment into a welfare fund. We have challenged the first welfare fund and had been successful and that having it dissolved. We are presently challenging the current welfare fund but that case hasn't been decided yet. It hasn't been brought to trial. But one of the terms of that contract would be that my clients must contribute to this welfare fund, negotiated between the hotels and my client -- and the union. William J. Brennan, Jr.: That is must make that contribution even though they are not member of the union? Godfrey P. Schmidt: That would be true even if they're not members of the union, yes Your Honor. And as a matter of fact, many of the purchasers of music who are admittedly not employers at all of the sidemen are making contributions today to the Local 802 steady engagement welfare fund. William J. Brennan, Jr.: Well what -- is there anything at all in the agreement? I gathered what you said to Justice White a few minutes ago that there is not just to be sure. Is there anything at all in the agreement by which the banquet manager of the hotel agrees that he will not employ as -- or purchase music through a leader who is not a member of the union? Godfrey P. Schmidt: Not at the present time Your Honor. There was originally such an agreement and I believe it was brought after the institution of our action that that was withdrawn. But despite the fact that the language is absent in today's contract, the banquet managers admitted when they took the stand, we had I believe five of them. William J. Brennan, Jr.: You said as a practice that's where it works. Godfrey P. Schmidt: That's right? William J. Brennan, Jr.: My next question is, is there anything at all in the agreement which -- by which the banquet manager agrees that he shall pay a certain minimum price? Godfrey P. Schmidt: Oh yes. That was -- William J. Brennan, Jr.: What's that? Godfrey P. Schmidt: Well that's the minimum price which is made at the so called price meeting of Local 802. William J. Brennan, Jr.: So even if one of your clients is willing to take the job for something less, this requires your client to take the price that's specified in the agreement of the union with the hotels? Godfrey P. Schmidt: Oh yes Your Honor. Abe Fortas: But it's not really a price is it Mr. Schmidt? Is there anything more than an agreement by the hotel or the club or the person giving the party to pay a certain minimum wage to the sideman and the certain and specified wage to the leader, that wage including a sideman's pay plus something on top of it. Is that the way it works? Godfrey P. Schmidt: I don't think that's quite a fair way to point Justice Fortas -- may I -- Abe Fortas: I want you to state it as precisely as you can. Godfrey P. Schmidt: I will. The price list booklet of Local 802 isolates 11 items which are the ingredients of price. First, wages which they unilaterally prescribe without collective bargaining. Second, minimums which are minimum employment quotas and they too are unilaterally prescribed by the Local 802 Executive Board. Abe Fortas: What does that mean? Godfrey P. Schmidt: Well, that means that for example the grand ballroom of the Waldorf Astoria Hotel -- Abe Fortas: You've got to employ a certain -- Godfrey P. Schmidt: -- must have 12 musicians including the leader, including the leader because the leader is counted I this minimum quotas. This is a little different from the average case where a union's bylaws, fixes regulations for minimum quotas. Abe Fortas: Alright, what's the next one? Godfrey P. Schmidt: The third one is the leader's money. That is to say for clients like mine will always have three or more musicians at least. That means they get double -- they must get double the money that the sideman gets for what is called the leaders fee and they have no right to waive that. They may not wave it but it will be brought up on charges if they waive it. The fourth is -- William J. Brennan, Jr.: Wait a minute, who will be brought up on charges? Godfrey P. Schmidt: The leaders will be brought up on charges. William J. Brennan, Jr.: Even though they're not members of the union? Godfrey P. Schmidt: Well, yes in one sense only. I have had cases where my clients were expelled from the union and I thought, well, exposure from the union meant that they were no longer members but they were brought up on charges nevertheless as expelled members. Abe Fortas: Now, what's the next one? Godfrey P. Schmidt: The fourth one, cartage fees. For example, a double base is a bulky instrument and therefore, a certain amount of extra charge for that. Abe Fortas: What's next? Godfrey P. Schmidt: The fifth is mileage fees. Now, here's something that's very distinctive. If my client Ben Cutler who is nationally known as an orchestra leader, books for engagements in Chicago, he must book that each one of those engagements have the price indicated by these ingredients I'm describing. But obviously, the mileage fee is only taken care of once because you try to go there only once and play four engagements and come back. But the union regulation requires that you multiply the mileage fee four times so that each one of the persons for whom he performs must play the mileage fee. The next is the 8% surcharge which the union explained as something does defray the bookkeeping cost and the social security and so on. Abe Fortas: That's paid through the leader. Godfrey P. Schmidt: That's paid to the leader. He must charge that to his purchaser of music. The seventh is lodge, I mean that uniforms where he does require them. The eighth is food and lodging according to certain standards fixed by the union. The ninth is transportation costs which are supposed to be according to the Form B contract and I might say here that the union prescribes the form of a contract that my client as a businessman and employer must use in dealing with his purchasing. Abe Fortas: Alright, any more? Godfrey P. Schmidt: The tenth is the 10% traveling surcharge up to a certain point in the beginning of 1964, and that was a 10% addendum to the price because of traveling. But now, it is called the 10% wage differential. And of that, the Court of Appeals said that it is a price differential in actuality. And the eleventh is the contribution to the welfare program. Now, these -- Abe Fortas: Is that all of them? Godfrey P. Schmidt: That's -- that's all of them, yes, Your Honor. Abe Fortas: Now, the union book does refer to those as price. Is it? Godfrey P. Schmidt: The union -- I don't know how to answer that, Your Honor because during the trial, the union attorney took the position that the words ‘price' and ‘wage' were interchangeable. Abe Fortas: Now, would you agree Mr. Schmidt that one of our questions is whether all of those are appropriately part of the wage agreement and the wage contract, or whether in fact they should be regarding it as a fixing of the price for a totality of a commodity or service in antitrust terms? Godfrey P. Schmidt: I think some of them pertain to price. Abe Fortas: That -- that's one of our issues, is it? Godfrey P. Schmidt: Right, yes, Your Honor. Abe Fortas: Alright. Godfrey P. Schmidt: Yes, Your Honor. William J. Brennan, Jr.: Now, let me get it clear, Mr. Schmidt. Godfrey P. Schmidt: Surely. William J. Brennan, Jr.: You're telling us that in New York City, one of your clients who's offered and engagement at any hotel or night club that is a party to this agreement with the union has to take from the hotel, whether he wants that much or not, a sum of money which is the total of all those items. Godfrey P. Schmidt: Yes Your Honor, when the -- when the hotel hires him. But if one of the customers of the hotel, that is to say, one of the -- some association who wants to run a dinner dance, then he -- then the association must be charged with this amount. And the witnesses -- William J. Brennan, Jr.: Well, I know, but the association must be charged this amount by the hotel, is that it? Godfrey P. Schmidt: No, no, by my client in that case. Abe Fortas: I suppose Mr. Schmidt, it's arguable. Although I didn't hear your brother make the argument, I suppose it's arguable that the Oliver doctrine has -- is not relevant here because here, you don't have anything that is not conventionally, provisionally, etcetera, an aspect of the wage contract. Godfrey P. Schmidt: Well, I -- I took about four pages I believe in my reply brief to try to distinguish the Oliver case and I take the position personally that it is not relevant here. Abe Fortas: Well, I'm suggesting the possibility. I don't know. Maybe it's not relevant because you don't have to go as far as Oliver does if you regard all of these items that you've talked about here as conventional and provisional part of the wages. Instead of paying the man $50.00 a day, you pay him $20.00 and then you add on all of these other items. Godfrey P. Schmidt: Oh, I don't think that you -- you can merely baptize these items as wages and then say, you see, it's nothing but a wage question. I think you have to be realistic. This is a matter of -- of -- William J. Brennan, Jr.: Well, what -- what label would you use, Mr. Schmidt? Godfrey P. Schmidt: I beg your pardon? William J. Brennan, Jr.: What label would you use? Godfrey P. Schmidt: Well, I would say that for example, some of those items are clearly part of pricing and some are wages. For instance, the unilaterally prescribed wages, I can't say that that's part of -- that's pricing as such, but I do object to the manner in which they do it. They unilaterally prescribe the wages but when you have leader's money, when you have the 8% surcharge, when you have the cartage, when you have the minimum quota of employer -- employees where the minimum quota includes the employer himself, then I say these are all ingredients of price and not of wage. That's what I mentioned, Your Honor. Now, I might say too that it seems to me that the significant question on the item of whether or not my em -- my clients are employers and every one of the people I called, every single one of them testified in effect that my clients were employers, but the significant question is not whether these employers do certain things which are similar to things done by the union. They're not exactly the same because by that token, a glassblower employer, an electrician employer, any kind of employer, including the president of General Motors, he certainly does certain things that some employees can do or does certain things that are similar to what employees do. The important question is, are they businessmen with independent businesses and are they employers? And I say there's nothing in the record to contradict the repeated testimony that my clients are employers and independent businessmen. Now, we come to the -- another question, and that is a strain that goes through all of my adversaries' briefs. They keep talking about job and wage competition, and this was true in -- during the trial constantly, but no one, including the courts below or my adversaries ever took the trouble to analyze precisely what is meant by competition in these circumstances. And as I see it, there are only seven possibilities. First of all, the competitors must necessarily be, if I understand them correctly, orchestra leaders like my clients who are entrepreneurs, and employee musicians who are union members. Those are the two competing bodies. Now, for what can it be realistically stated they compete? Well, it's conceivable that these two would compete for jobs as leaders, and I don't think that there's any union that should have any right to regulate whether a sideman should compete for a job as a leader, or any association of leaders to regulate whether a sideman should compete as leaders. And incidentally, Justice White, there is an association here, a National Association of Orchestra Leaders, and they do not fix prices. Byron R. White: But I would suppose the union would claim that if that national association wanted to bargain with the union or the union wanted to bargain with that national association, that they could bargain and execute a collective bargaining contract in which the wage is to be paid by the members of the association to the sideman, etcetera, would be -- could be fixed. And I would suppose they would have to claim since their claim in this case in effect that is part of that collective bargaining contract, the association and the union could agree as to what the ultimate crisis the members of the association would charge for single engagements or extended engagement. Godfrey P. Schmidt: Well Your Honor, if I can approximate -- Byron R. White: Then that claim wouldn't be any different than what it is here. Godfrey P. Schmidt: That's right because -- because we did have one session between the representatives of the National Association of Orchestra Leaders and this union, and one of the things that we told them we couldn't do with them is fixed prices, which they wanted to do. Byron R. White: Well, this -- it seems to me like membership in the union is by independent businessmen -- independent leaders is really in effect the collective bargaining contract between them and the union. Godfrey P. Schmidt: Well, if it -- if the -- I don't believe it is really a collective bargain -- Byron R. White: It serves the same purpose. Godfrey P. Schmidt: If -- it might serve the same purpose but you certainly not arrive at the same way. Byron R. White: I agree with you. Godfrey P. Schmidt: Because my clients have no word in it. Byron R. White: That's right. Godfrey P. Schmidt: You understand. Well, as I say, competition for jobs as leaders is really nothing except competition for entry into the ranks of employers, and I don't think any union or any employee association has the right to close the door on that. The second type of competition would be for jobs as sub-leaders. Now, I might say that a sub-leader is a kind of supervisory employee musician who takes over the direction and control of an orchestra when the employer himself can't attend. This institution of sub-leaders is very limited throughout the United States. I suppose it has its greatest scope in the city of New York. But in Boston, Philadelphia and Chicago, I think there are a few. But they are definitely supervisors within the meaning of the National Labor Relations Act in my opinion, and I have always taken the position that if Congress saw it fit to exclude from the bargaining unit or from the union that has organized the employees, the supervisor afore certiorari, then employers like my clients should not be in the union. Abe Fortas: What do they supervise? Godfrey P. Schmidt: They supervise the conduct of the particular engagement. They conduct the orchestra. They watch to it -- they see to it that all of the amenities of social intercourse are observed. If an orchestra leader -- orchestra member were to become drunk, they have the power of firing right on the spot or order him home. You know, they stand in the place of the leader during the performance. The third kind of competition would be for -- for jobs as sub-leaders. Now -- I mean, for jobs as sidemen. It should be obvious that professional orchestra leaders who command much more of income than either sub-leaders or sidemen are not competing for jobs as sub-leaders or as sidemen. My clients -- there was no evidence whatever in this record to show that my clients ever competed for jobs as sidemen or as sub-leaders. And that could be competition for musical engagement contracts. That would be more or less in the way of acting as a broker or a man says I'll -- I'll get you the band or give me the contract and I'll see that the performance is carried out alright. But he himself is neither a musician or if he is, he doesn't perform. That kind of competition wasn't mentioned in our record. The four -- the fifth is competition for the income of professional leaders. And again, that -- there was no mention of that in any part of the record. The sixth, well, competition for wages of sub-leaders, supervisors not mentioned at all in the record, and seventh, competition for wages to sidemen. My clients never competed for wages of sidemen, but there was no evidence of that up to that point at all. Now, I think that it's important to emphasize briefly that Judge Levet at the trial court, when he talked about named bands assumed that named bands had to be organizations of national reputation. I submit that the evidence in the record here is undisputed that a man can have a named band in the city of great New York or in the environs of New York and not being known in Washington. So that the whole question of name is a very relative thing, except that there are indeed a 20 or 30 named bands that command towering prices and great audiences, and they are known to practically everybody. A question was asked about whether -- if one of my clients were to come to Washington and play an engagement here with his orchestra, he would be subject to filing requirements here with the local here. The answer is of course yes. In other words, he would have to file his contract for a single engagement here in Washington and the local here in Washington reserves the right not to approve it. And if the union here does not approve it, he simply can't play here. This is done regularly. And the territorial restrictions are very numerous that are imposed unilaterally by this union and abided by all of these outsiders. For example, one of the provisions in the bylaws is that since our institution of the suit has been eliminated was a provision which actually told the leader that he had no right to borrow money to advance the business of his own orchestra unless he got the permission of the president of the international. Then of course, if one of my clients were to book an -- a steady engagement in Chicago, for example, he would not be allowed to book any single engagement during the period of that engagement and he would not be allowed to book it for a period of five days before or five days after. And he couldn't even book it if he booked it during that period to be performed six months later. And many of the locals with the approval of the international seek to protect the local musician, the local orchestra leader from competition by orchestra leaders who invade. And of course, the -- one of the most important territorial rules is that whenever one of my clients comes from New York and visits another jurisdiction where the prices and the wages are lower, my client is bound by the higher of the two. In other words, since the Local 802 rates are generally speaking throughout the United States the highest rates in the industry, my client, if he goes to Newark, New Jersey for example, must compete with local musicians there on the basis of the higher New York prices against the lower Newark prices. The -- Abe Fortas: Well your action is solely against the New York local, isn't it? Godfrey P. Schmidt: Oh no, Your Honor, because many of the price fixing lists appear right in the -- the bylaws of the AFM itself. If Your Honors were to examine the bylaws as they prevail at that time, you would see all sorts of prices, not wages, prices fixed for also -- for instance, at a carnival or a rodeo or something like that. Now, since that time, the latest bylaws that I've observed has kind of circumvented that difficulty by saying write to the office of the president for the prices on this, and they're not set forth. But the point is that they are nationally fixed in some industries, radio and television being a pair of them. The -- I want to make sure that I answered Justice Black's question continuously now, and that is we claim that the violations of the -- of the Sherman Act take place in the following ways. One, all of our locals here, all of the AFM locals and the AFM itself have regulations which impose obligations on all members, including orchestra leader employers, that they can never compete at prices below the prices fixed by the respective locals or by the international. They -- Article 25 of the AFM bylaws requires every booking agent to get a license before he can operate as a booking agent. And it also forbids any orchestra leader to make use of the services of a booking agent unless he is licensed by the AFM. Now, the AFM reserves the right to vacate the license of the booking agent for a good reason, a bad reason, or no reason at all, and without notice. And it requires the booking agent to sign a contract that he will -- all his negotiations observe the bylaws of the federation and of the local involved. And finally, the -- one of the most effective means used here for violating the Sherman Act is the use of the Form B contract. Now, I might say that since this trial, Local 802, because of the constant thunder of criticism that we leveled at the Form B contract, to which I'll come in a minute, has dropped that Form B contract and published another. The other one made explicit what was implicit in the Form B contract. So we immediately moved in the United States Court of Appeals for an injunction against it because it fixed prices and we obtain that. Thank you. May it please the   court. One of the indications of the matter in which professional leaders garner most of the important business was provided by one -- three exhibits introduced by the defendants themselves, defendants' exhibits L, M and N. And one of those three showed for example that 4.9% of the persons who filed contracts as leaders had gathered into their business 52.4% of all of the contracts for engagements signed. The status of my clients as employers, contrary to what the District Court found without the benefit of any evidence in the record, remained the same even when they play on radio and television, or when they do recordings. Certainly, it should be obvious that a named band leader for example doesn't change his status as employer simply because he makes a recording with his own musicians. It is true nevertheless that very few records are today made by orchestras as such. The day of the big band has somewhat receded. But whenever my clients, like for instance, Sye Zetna, one of them -- he made -- I've forgotten how many albums. Whenever he performed, he performed with his men so that his status didn't change. And Hank Thompson and another one who testified, he's one of the leaders in the field of country music, he was required at one time by the union rules and by -- by the recording company that was enforcing the union rules to stop the system under which he was getting a lump sum of money. And now, the recording company advanced out of his royalties moneys to pay the employees, so that the money went only because of union rules from the insure -- from the recording company to his employees to give the appearance that the recording company is the employer, but it was subtracted from his royalties. I am challenging those findings of the court below that deal with competition. I say there's no evidence to show that there's competition. And also, those findings of the court below that say that my clients suddenly lose their status as employer or businessmen when they do recordings or do TV appearances or television appearance because I say there's absolutely no evidence in the record to substantiate their loss of their status. Byron R. White: (Inaudible) Godfrey P. Schmidt: Your Honor, I specified them in more -- in my brief somewhere, but I don't remember the number offhand. Now, I referred before to the Form B contract. The Form B contract not only is the result of a mandate from the bylaws of the AFM but it is a mandate that is pure fiction and misrepresentation in significant parts. For example, the orchestra leader who makes use of a Form B contract is required to acknowledge by his signature that he is not the employer but rather the employee of the purchaser of the music. And yet, that's done as a matter of form without any relation to reality. Also, the Form B contract incorporates by reference all of the AFM bylaws and the local bylaws, and it contains the fiction for example that the purchaser of the music hires the sidemen in the orchestra through the agency of the leader. Then, one of the things that's incorporated by reference has a particular bearing upon traveling engagements. You can understand that if an orchestra travels from place to place, they -- if he visits Chicago for example and then goes to San Francisco, the Chicago local won't be able to have jurisdiction over him to file charges of any kind. Well, in those cases, the federation, the international takes care of all the charges and processes them and adjudicates them by means of the international executive board. And if there are any fines, as there sometimes are, the fines go into the treasury of the international, the very organization that is adjudicating the case under a pseudo-arbitration system. The purchaser of the music, even though he is not the purchaser in the ordinary sense, is sometimes subjected to union boycotts and threats in this way. If an orchestra leader is not a member of the union or if he charges less than the minimum price prescribed by the union and he does that in X dancehall in Oshkosh, then that X dancehall is now put on an unfair list and no other person belonging to the union, whether employer or employee, is permitted to perform there until he's taken off that list. And of course, I don't know whether I stressed before that no booking agent is allowed to book for any musician unless he belongs to the AFM or one of its locals. I'd conclude with this quotation from the Pennington Case and with a suggestion that what was left to speculation and hypothesis in the Pennington Case is the case that's actually presented to Your Honors today. If the UMW, in this case, in order to protect its weight scale by maintaining employer income had presented a set of prices at which the mine operators would be required to sell their coal, the union and the employers who happened to agree could not successfully defend this contract provision if it were challenged under the Anti-Trust Laws by the United States or by somebody injured by the arrangement. That's the quotation, and that is exactly the case we have here because price lists, as the president of the local -- of the international admitted, are universal. Every single local of the 683 locals of the federation have their own price lists. And the federation itself has its price lists on national problems. Thank you, Your Honors. Ronald Rosenberg: May it please the court. In my opponent's argument, there are many, many statements made about lots of things that the musician's union does lots of statements about the nature of various negotiations. None of these things are in the record and none of them are the facts as they exist. The facts are as found by the district judge and as confirmed by the Court of Appeals. And Your Honors, I have before you a distillation of a lengthy trial in the findings of the District Court, an apt description of what occurs in this particular industry. And the argument that you've heard today has very little to do in fact with that particular industry. Hugo L. Black: Do you challenge any of the findings? Ronald Rosenberg: Do we challenge any of the findings? No, Your Honor. There are -- there is one or two little matters of -- very small concern, but nothing of a fundamental nature. Their -- in my opponent's presentation today, he made the statement, and I think this really lies at the heart of our case, Your Honors, that the sub-leader stands in the place of the leader. Now, there was a stipulation that the sub-leader is an employee. There was also a stipulation that the sideman is an employee. Now, when this -- when the sub-leader stands in the place of the leader, when he performs precisely the same work function, then there is such danger to the wage standards of the sub-leaders and of the sidemen musicians when the leader is permitted to form -- perform in an unregulated fashion that the union has the right to reach that particular type of disruption of its wage standards, and that is the basis of our reliance upon Oliver and of our reliance upon Jewell T. and this Court's expressed recognition in Jewell T. that there are times when the -- that it's not the form of the -- of the agreement that is critical. It's the impact of the agreement. And here, the impact of the union's regulations upon the leader is to preserve the wage standards of the employees, the stipulated employees on this record, the sidemen and the sub-leaders, these -- this was stipulated that these people are employees and the critical aspect of the union's regulation is an attempt to preserve those wage standards against diminution by a leader who works at an amount less than that. Byron R. White: What's the interest of the union in specifying that the leader -- leader's compensation shall be twice that of the sub-leader? Ronald Rosenberg: Because the – just as the union has the right to say when a musician plays two instruments, he will receive a certain amount more. In those fields in which the leader -- Byron R. White: I don't think that's at least but relevant. Let's assume that here's a leader that doesn't play no instrument whatsoever and he's a professional leader. And then, the thing of it is that he has two engagements at one time. Now, he hires a leader, a sub-leader to take one off him and the other one is leading himself. Now, what interest does the union get in saying that the leader's compensation in the -- on the engagement where he's conducting himself should be twice that of what the sub-leader's compensation is? Ronald Rosenberg: Because typically in this field, and it was stipulated, Your Honor, that in those fields in which the leader is admittedly an employee under the findings of both courts below, the -- so the recording in television, the leader always receives a -- an amount two times. He always receive twice the -- Byron R. White: So what's the union's interest in saying that it must be twice? Why shouldn't the union be satisfied with saying that the leader when he conducts himself, should at least get at least what a sub-leader would get. Ronald Rosenberg: That's no different than the union is saying, is it does, Your Honor, that the -- a musician who performs on two instruments shall receive and additional amount. The leader in playing an instrument and conducting is performing on the job, essentially two types of job. Byron R. White: I'm just saying that -- I say this is a situation where the leader doesn't play at all. He plays no instrument whatsoever. Ronald Rosenberg: In that particular circumstance, Your Honor, he does not receive two times. He receives in the end for himself only 25% because the sub-leader gets the main -- gets half of that additional amount under those circumstances. The leader, when he does not perform, does not receive a full amount. He in fact turns to -- Byron R. White: But why is it the union attempt to regulate what this fellow -- what the leader charges for his efforts in managing the orchestra, getting the engagement and supervising the whole affair? Ronald Rosenberg: Because for a number of reasons, Your Honor. Number one, the reason that Judge Friendly has signed is because that is very much a part of the musical engagement, and this is essentially a musical function. The major argument, Your Honor, which is quite different in our -- than our argument about whether a leader performs, is that because of the special nature of this industry and as found by the trial court that in this particular industry, wages suffer when the price does not meet the minimum wage of the -- the minimum wage scales that the union has set forth. We're not attempting to get an increase in wages or anything like that. What we're talking about is in this particular industry, as the trial judge found, there's a direct relationship and that wages do suffer. Byron R. White: I suppose that in price competition -- price competition in an industry, sever price competition inevitably is going to put pressure below, isn't it? But any industry, stiff competition in the automobile industry, I suppose -- Ronald Rosenberg: Not really. Byron R. White: -- would be harder for the industry to raise wages or to keep wages. Ronald Rosenberg: If there were -- if there were findings for the type that were made here showing that there is -- that there is scrimping, where there's scrimping that the wages suffer, than in that particular circumstance a very narrow situation-- Byron R. White: Well you would say that the union would have an interest in setting the prices of automobiles? Ronald Rosenberg: If you had that kind of a record, Your Honor. Now, that's very unusual, and what happens is the very unusualness of this industry and the union's experiences as found by the trial judge are the justification which we point to on this -- on this narrow instance where the leader does not perform. And the other situation, the matter is much clearer. Byron R. White: I guess he's right. Ronald Rosenberg: Thank you.

John G. Roberts, Jr.: We'll hear argument this morning in case 05-1157, Credit Suisse Securities versus Billing, et al.-- Mr. Shapiro. Stephen M. Shapiro: Thank you, Mr. Chief Justice, and may it please the Court: The pivotal question in this case is whether this Court's decisions in Gordon and NASD require implied antitrust immunity as the district court believed. And we submit that the answer is yes. The '33 and '34 acts were of course passed for the very purpose of regulating IPOs and alleged market manipulation. And this Court has referred to these laws as the anchor of Federal economic policy in the securities field. And under these laws the SEC has laid down detailed regulations applicable to the very practices that are at issue in this case with active supervision by the SEC and the NASD. And it has done this with full understanding that syndicated underwriting is inherently concerted action. An underwriting requires joint action in accumulating information and setting the price of the offering along with allotting shares to customers. Now the Gordon and NASD cases apply directly here because of the danger of inconsistency and conflict which the SEC cited. As in cases of this Court in the past, like NASD and Gordon and later Trinko, Congress required this expert administrative agency to take competition into account when issuing its standards. And review in antitrust courts across the country would once again raise the danger of false positives and conflicts and wasteful redundancy. Antonin Scalia: Did it, did it specifically state that, or is it that or just the principle that all Federal agencies have an obligation to-- Stephen M. Shapiro: Oh, no, Your Honor, it is very express in 75 and then again in the 96. Capital formation, investor protection and competition have to be weighed against each other by the SEC, and in Gordon this Court attached great importance to that standard, which differs from the competition first standard of, the antitrust laws impose. John Paul Stevens: Mr. Shapiro, to what extent has the SEC regulated the specific vertical restraints that are alleged here? Stephen M. Shapiro: The SEC regulates the... the alleged tie-ins and it regulates the alleged excessive compensation claims. John Paul Stevens: And laddering, for example? Stephen M. Shapiro: Laddering, tying, and excessive compensation. And it's had a number of enforcement actions. Its regulation M is focused exactly on those practices. It's issued very detailed guidance in a document that we attach to our petition appendix on what constitutes-- John Paul Stevens: And are we to assume that if the allegations are true, which they of course may not be, that this is a violation of the... of the securities laws? Stephen M. Shapiro: --Well the SEC has said it depends on the circumstances. And they draw very fine lines in this area, Your Honor. And if, in fact, the SEC concludes it is a tie-in under its finely calibrated standards, then yes. But that's the critical issue here. It is very easy to term these things excessive compensation or tie-ins, but when the NASD looked at a real complaint of this sort in the Invemed case it found that there was no excessive compensation and no commercial bribery. And-- Ruth Bader Ginsburg: How about in this case Did the SEC examine that question at all in this case? And did it take any position? Stephen M. Shapiro: --In this case it took no position on the merit of the underlying claims, but it said that there would be serious problems if antitrust law were applied to these allegations. It would interfere with the agency's ability to define what is manipulation and to amend its definitions. It has ongoing rulemaking proceedings right now addressed to this issue; and it said further that it would discourage underwriters from going up to the line of prohibition, which is very important in this area. Because if they don't step over the line and they engage in book building conversations, that's critical to setting the right price for the IPO. And so-- Ruth Bader Ginsburg: How should we, we weigh... Congress is asking with respect to securities, private securities litigation, Congress looked at that and thought some restraint had to be placed on private actions, but it didn't do anything with respect to antitrust private action. Stephen M. Shapiro: --We think part of the repugnance analysis here should focus on the fact that these securities claims have simply been repleaded as antitrust claims. Congress wasn't aware of any problem of this sort; nobody had attempted to replead securities violations like tie-ins and excessive compensation as antitrust claims. And Congress of course relied-- David H. Souter: Doesn't, doesn't the statute specifically provide for... for exactly this possibility? Doesn't both the '33 and the '34 act have a saving other remedies clause? Stephen M. Shapiro: --It doesn't refer to antitrust cases. Those were references to state law remedies that Congress later contracted with the-- David H. Souter: Was it... were those two clauses expressly limited to state law remedies? Stephen M. Shapiro: --No. They referred to other claims, Your Honor, but they don't refer to antitrust. So we don't believe-- David H. Souter: But do they have to? Stephen M. Shapiro: --We don't believe-- David H. Souter: None of the claims includes an antitrust claim on its face. Stephen M. Shapiro: Well, we think... we think they don't apply to antitrust, and in Gordon and NASD those same provisions were in place but that didn't deter the Court from finding them-- Antonin Scalia: --I don't even think we mentioned them. Did we mention them? Stephen M. Shapiro: --Pardon me? Antonin Scalia: Did we mention them in those cases? Stephen M. Shapiro: I don't believe the Court did. Antonin Scalia: Well, maybe we just forgot. [Laughter] Stephen M. Shapiro: They... well, they... they don't pertain to antitrust. If you look at the history of those provisions they are talking about state causes of action and there's no reference to antitrust as such in them. That's quite different from Trinko where there was an antitrust savings clause that went on in detail about saving the antitrust cause of action. The danger of conflict that the SEC is talking about here is an acute danger to its ability to-- Stephen G. Breyer: What happened in respect to the SEC? What about primary jurisdiction? That's what I wondered as I read this. Nobody mentions it. But there's certainly a lot of precedent in the area in this kind of thing. You ask the agency, have to go to the agency, see what they say. Stephen M. Shapiro: --Well, Your Honor, the reason it doesn't get mentioned is in that Gordon the Court held primary jurisdiction was not a fix for this kind of conflict. And here the SEC has expressed its opinion in its amicus briefs already. The Court is aware of those positions laid out in our cert petition-- John Paul Stevens: The allegations in this are quite different from Gordon. There you have got a horizontal... allegedly horizontal agreement. Here you have got a vertical agreement which it seems to me depends on non-disclosure for it work at all. If there been full disclosure of all these laddering and flippings I don't see how in the world you would ever get a... an antitrust violation. Stephen M. Shapiro: --Well, Your Honor, the conflict is different, but it's really quite a more serious conflict than it was in Gordon. In Gordon the only concern was the SEC might reinstitute fixed rates in the future, and it never did that in 30 years. Here the SEC says the conflict goes to our ability to define manipulation and to amend our rules which we're in the process of doing and we can't have conduct deterred. John G. Roberts, Jr.: Well, Mr. Shapiro, you're doing a good job of defending the SEC's interests but your position goes considerably beyond their position today. Stephen M. Shapiro: Well, the SEC in the lower courts advocated dismissal of the complaints; and in the Supreme Court, of course, they've... they've urged for a vacator of the lower court decision. And the brief of the SG echoes many of the concerns that the SEC expressed in the lower courts. Stephen G. Breyer: That's why I wonder about primary jurisdiction. You put a burden on the, on the plaintiffs to go to the agency and the agency could take a range of positions. It might say this is absolutely unlawful, BUT it's close enough we think an antitrust court has no business mucking around in this. Or it's unlawful and we don't care. Or, it's not... in which case they could bring their suit. Or it's... it's not unlawful but we don't care, or it's not unlawful and we do care. I mean, there is a range of positions they could take which was the purpose of the primary jurisdiction doctrine, to see in the context of the particular conduct, not general but in the context of the particular conduct, what the agency thought about this in terms of its regulatory mission. Stephen M. Shapiro: Well, I think Gordon is very informative on that point. It rejected primary jurisdiction because the agency's views were already known to the Court. Here the SEC has filed a 40-page submission in the district court explaining that the suit has to be dismissed because of conflict with the administrative scheme. Stephen G. Breyer: That's in respect to the particular conduct at issue here. Stephen M. Shapiro: Absolutely. The particular conduct at issue-- Stephen G. Breyer: Of course the Petitioners have not had an opportunity, I would think... they filed a complaint. But they've not had an opportunity to argue this out in front of the SEC with particular evidence, with particular witnesses, et cetera. Stephen M. Shapiro: --Well, what this Court said in Gordon was that it's a legal question whether there is potential interference with the administrative scheme for us to decide the SEC's views are entitled to considerable deference, the Court said. But if they've been submitted in the form of amicus briefs, that is sufficient to demonstrate the repugnance. Antonin Scalia: I suppose if primary jurisdiction were a cure-all, there would never be any cases in which the regulatory scheme did not displace the antitrust laws. Stephen M. Shapiro: That's absolutely right. In that case, where the Court did refer an antitrust issue, the agency declined to take the reference. And here there there was a factual issue the agency was supposed to opine on. Here we have a pure legal question, the Court has held, of potential repugnance with the SEC scheme. That's for the Court to decide. John Paul Stevens: The difference between this case and Gordon is that this case, the heart of their allegations are failure to disclose which is quintessentially the SEC's business, making sure disclosures are right. I don't think if there were disclosure, they would have a problem in this case. Am I missing something on that? Stephen M. Shapiro: Well, what the SEC says is that if the conduct is ordinary book building, communications about future transactions, at future prices, there's no misconduct to be disclosed. It is perfectly permissible. John Paul Stevens: The allegation in the complaint is there was no disclosure. Stephen M. Shapiro: The complaint alleges an antitrust violation. Just that there was agreement to engage in tie-ins, and an agreement not to-- John Paul Stevens: The allegation is the agreement... the agreement not to disclose. Stephen M. Shapiro: --That certainly highlights why this is an SEC case and not an antitrust case, it seems to me, because that... disclosure is for this administrative agency to wrestle with, and it has made clear that investor welfare will be harmed and issuer welfare will be harmed if these sensitive questions are taken from it and are frozen by antitrust judgments. That was the problem the Court faced in NASD and it was the problem the Court faced in Gordon. John Paul Stevens: Let me just ask one more question, Mr. Shapiro. Supposing there had been full disclosure here. Do you think there would be an antitrust violation? Stephen M. Shapiro: Well, in part, I would say yes, there was an agreement in restraint of trade-- John Paul Stevens: Agreeing on what the-- Stephen M. Shapiro: --Yeah, that's their theory. John Paul Stevens: --The preliminary before the IPO. But what they did after the IPO, would that violate the antitrust laws? Stephen M. Shapiro: Really what they are alleging is a conspiracy to violate the securities laws here, that had some... what they claim, a market effect. And it is the agreement that they contend is an unreasonable restraint of trade or they refer to the compensation payments as excessive commercial bribes. They say that violates the Robinson-Patman Act. The trouble is no matter how you phrase this, no matter how they could amend their pleading, inherent in the case are challenges to tie-ins and alleged excessive compensation payments that under the securities laws have to be regulated by the SEC. The Government has to speak with one voice on this issue under one set of standards, or administrative law gets frozen. And there's a huge deterrent effect on underwriters. Ruth Bader Ginsburg: Are there many situations in which a particular industry is subject to regulators and they sometimes conflict? Like EPA and OSHA? Stephen M. Shapiro: Oh, yes. Under these two decisions of the Court, NASD and Gordon, there has to be active supervision or pervasive regulation by the agency, and then a direct conflict with what the SEC is trying to accomplish. There are a number of things that can be regulated even under the antitrust laws under those standards. NASD and Gordon didn't stop all antitrust litigation in its tracks. Only things that were within the agency's supervisory jurisdiction to present-- Antonin Scalia: The EPA is not a hands-on regulatory agency the way the SEC is. It has not been given an entire industry to regulate. Stephen M. Shapiro: --I think that's right, Your Honor. The '33 Act, if you look at the Act, every provision in it is focused on IPOs. It is state of the art comprehensive legislation. The '34 Act in three separate provisions gives the SEC power to define manipulation. Then it has rulemaking power and then it has exemption power. This is comprehensive. It is far more pervasive than the kind of regulation that was before the Court in NASD. In that case, there was just unexercised rulemaking power. Here we have got voluminous regulations, we have interpretations, we have many enforcement actions aimed at this very same conduct. Antonin Scalia: Well, the Government says that's fine where the regulations have been issued, and where they... where they render the action here lawful. There's no... no problemo. What's wrong with that? Stephen M. Shapiro: Well, the Government says-- Antonin Scalia: The Government's willing, in other words, to give the SEC carte blanche. Whatever you say is lawful is lawful that won't violate the antitrust laws. Stephen M. Shapiro: --We think immunity extends beyond what is expressly permitted by the SEC. The way the Court phrased it in NASD was things that are connected to the agency's regulatory responsibility have to be immunized to allow the agency to do its task. And that extends a little bit further than the permission standard that the Government has given. And there-- Antonin Scalia: Extends a lot further, I would think. Stephen M. Shapiro: --I would think it does. I would think the NASD case would come out the other way under the standard the SG is using today. But we think we win under the inextricably intertwined standard, because all of this conduct is closely connected to what is permissible. There's a very fine line between what is forbidden and what is permitted. They can ask about future market prices. They can give the IPOs to their best customers, but they can't solicit a transaction in the immediate aftermarket while the IPO is still-- Antonin Scalia: So we could decide that way. We could say, we don't have to decide what the standard is, even if it is inextricably intertwined as the Government does, you would win, you would be happy-- Stephen M. Shapiro: --We would win under either of these standards. But what we advocate is dismissal with prejudice, which is the relief the Court gave in the NASD case, and not a shapeless remand of the case for further pleading. And the reason for that is that the interference would overhang the market. The interference would affect the SEC's ability to lay down the standards and encourage conduct going up to the line of prohibition. And the remedy that the Court approved in NASD is exactly appropriate here, dismissal with prejudice. These plaintiffs did not even seek to amend their complaints in the lower courts. Under Second Circuit law, they've waived their right to seek an amendment. So we, in sum, urge the Court to stick with its own standards in NASD and Gordon. The standards are not broken. They don't need to be fixed. Nobody has pointed to any changed circumstances that would warrant a change in this Court's decisions, and those decisions require dismissal with prejudice. If there are no further questions, we'd reserve the balance of our time. John G. Roberts, Jr.: Thank you, Mr. Shapiro. General Clement. Paul D. Clement: Mr. Chief Justice, and may it please the Court: The United States has responsibility for enforcing both the securities laws through the SEC and the antitrust laws through the Justice Department and the FTC. It thus has a critical interest in ensuring that these laws can be reconciled in a manner that gives effect to both, and completely ousts neither. Any effort to try to reconcile those laws in the specific context of the underwriting of IPOs has to begin with an understanding of the particular regulatory context and scheme. The SEC obviously carefully regulates both the registration and the underwriting process for individual IPOs. There are two aspects of that regulatory regime that are particularly important: First, the approval for all sorts of collaborative conduct that is the hallmark of the underwriting syndicate. And second, the very fine nature of the distinctions that the SEC draws between permissible book building activity and impermissible market manipulation. And in that regulatory context, the kind of collaborative conduct that would in many other contexts raise yellow or red flags of an antitrust violation is innocuous, because it's a hallmark of the underwriting process. Equally important, the SEC does make certain conduct like tie-ins and laddering unlawful, but very closely related conduct is not only permissible, but is considered beneficial to the capital formation process. John Paul Stevens: May I ask this question about the laddering and so forth? If it were fully disclosed, would it be unlawful under either statute. Paul D. Clement: I think it might, Justice Stevens. The prohibitions on laddering and tie-ins are not just disclosure provisions. And I think as a practical matter, if these kind of things were disclosed, they probably wouldn't happen. So it's a little hard to-- John Paul Stevens: I can see how they would affect the market if they were disclosed. Paul D. Clement: --That may be true, but the way the regulation approaches that conduct is a little bit more of a prophylactic approach. It's not just a disclosure approach, and it does say that there's conduct that is forbidden. But I think it is important to recognize just how fine the lines that are drawn here become, because, to give you a real world example, the guidance document that's at page 216A of the petition appendix makes clear that it is permissible for the lead underwriter, when talking to customers, to gauge their interest at various price points in the initial offering. Samuel A. Alito, Jr.: In light of the very fine line, how is the Court to distinguish between... determine whether what's alleged is inextricably intertwined with authorized conduct? Paul D. Clement: Well, I think if you were looking at a challenge that took place solely within the context of a single IPO, it would probably be so difficult that I think we would concede that you can't practically separate the two. What I think is important from the standpoint of the Justice Department and its antitrust responsibilities is you don't want to sweep an immunity so broad that it would, say, give cover to a conspiracy that cut across IPOs, and was an effort to fix commission rates, or to make territorial agreements, or exclude a rival investment bank from the underwriting process. Antonin Scalia: But the problem you address has been a problem of strike suits. And it is the problem that Congress addressed in its legislation. Shake downs. It just is less expensive to pay off the suitor than it is to litigate it to a final conclusion, where that conclusion is highly uncertain. And I don't see how your... your solution of inextricably intertwined, where there's a penalty of treble damages if you guess wrong about that line, I don't see how that's going to stop the strike suits any more than the current situation does. Paul D. Clement: Well, Justice Scalia-- Antonin Scalia: I wouldn't want to roll the dice on whether something is inextricably intertwined, with treble damages at the end. Paul D. Clement: --Well, Justice Scalia, I think that you could certainly perform this test and make the test protect conduct sufficient to protect against that threat. We are certainly sensitive to the threat that a regulatory agency is trying to draw a fine line between two closely related areas of conduct. They're not going to be able to enforce that line as a practical matter if the regulated community knows that the consequence of having a foot fault in crossing that line will be treble damages in a class action suit. On the other hand, we would caution against adopting some sort of broad immunity that would preclude, say, the Justice Department from investigating and prosecuting an antitrust conspiracy that cut across-- IPOs. And of course, the Congress has addressed the problem of treble damages directly in a number of areas. And I suppose, if they were to address the area in the antitrust context, they might draw a distinction between private treble damages suits and Government enforcement efforts. Now, that's a little hard to do-- John G. Roberts, Jr.: They might, but they haven't yet. A couple of times you've used this phrase cutting across IPOs. Are you saying there should be an absolute immunity from antitrust prosecution within a single IPO? Paul D. Clement: --Mr. Chief Justice, I mean, I would warn you off of sort of saying absolutely no. I think as a practical matter, though, it is going to be... I mean, I can't conceive of a ready example of where an allegation that is specific to an internal single IPO would really be practically inseparable. So I think the role of the antitrust laws will largely be in allegations that cut across IPOs. Stephen G. Breyer: And even then, why do you take the other position? It is pretty easy to imagine the SEC, under some circumstances, deciding that's a proper way to market securities, to have some kinds of agreements between IPOs or something like that. I don't see why not. Paul D. Clement: Well, I suppose it's possible, Justice Breyer. Stephen G. Breyer: It is possible. I'm back to Justice Alito's question. I mean, if you're worried about taking authority from the Department to prosecute territorial restrictions as some kind of blatant price fix, that's not in front of us. So this doesn't have to be precedent for that. You're talking about this case. And there, I think the Respondent... the Petitioners here say that my goodness, we don't see any way that a district court is going to be able to start talking about whether this evidence is protected. What does that mean, protected? Maybe protected here, because they have thought about it, but there will be a lot of cases where the SEC hasn't thought about the particular conduct. We don't know what they're going to prove. I'm back to Justice Alito. How is anybody going to administer the standard that you are asking the Court to enunciate? Paul D. Clement: Well, I think if you draw a distinction between intraIPO allegations and interIPO allegations, you go a long way towards doing it. And I should note, that's basically the line this Court drew in NASD. If you look particularly at the part of the decision that deals with count 1 of the Government's complaint, that was a horizontal allegation. And it was all in the context of vertical agreements that were specific to a particular mutual fund. And in that context, this Court said that with respect to the horizontal agreement, there's nothing in the SEC regulations that specifically addresses that, but the SEC specifically blesses the vertical agreements, so we're going to give additional immunity to that horizontal agreement. That same page, page 733 of the opinion, they say, what we don't have before us is an allegation by the government that there is a scheme here to reduce competition between mutual funds. There is no allegation that they were trying to cut down, there was an agreement that would cut down competition between Fidelity and Wellington, for example. It was all in the context of individual funds and retarding the secondary market for individual funds. The language the Court used on page 733 of that opinion seems to us a perfectly reasonable test. The Court said, quote: SEC had prohibited in the vertical context and what was sought to be gone after in the context of the horizontal restraints, those are too closely related. I don't think that test has caused the undue confusion. And I think what it does it makes a reasonable balance between a ruling that on the one hand preserves a great deal of immunity, but on the other hand doesn't give a kind of blanket immunity that would basically completely oust the antitrust laws. And I think that's the balance we hope to-- Ruth Bader Ginsburg: What happens on remand in this very case based on your theory? You are not adopting the district judge's position that this case should be dismissed outright. Paul D. Clement: --That's right, Justice Ginsburg, and-- Ruth Bader Ginsburg: What happens when it goes back? Paul D. Clement: --Well, I think this Court could do one of two things. I mean, the Petitioners for their part have pointed to in footnote 6 of the blue briefs, to a variety of Second Circuit precedents about the standards for repleading. Perhaps the easiest course for this Court would be to just vacate and let the Second Circuit apply its own law of repleading. That would be one option. The other option would be-- Ruth Bader Ginsburg: But why, if this is a sprawling complaint and if the problem is that it says too much or too vaguely? A district court doesn't have to leave the pleader to its own devices. It can have a pretrial conference and say, now let's get this whole thing in order, and it's not that the pleader is left alone to do what he or she will. But in complex cases like this, the district judge will often assert control from the beginning and not leave the parties to do what they want. Paul D. Clement: --We would have no objection to that, Justice Ginsburg. And I would say, you know, you might say that, particularly based on the guidance this Court gives in this case and the guidance this Court gives perhaps in the Twombley case, that it might be fair to let the plaintiffs have a crack at making a new complaint in this area. Oh the other hand, as I say, we would have no objection to just allowing the Second Circuit to sort it out based on Second Circuit pleading law. I think the important thing from our perspective-- Ruth Bader Ginsburg: What would, what would a satisfactory complaint for this party look like? Paul D. Clement: --Well, Justice Ginsburg, it's a little hard for me to frame that complaint. I think if it focused on inter-IPO allegations and, contrary to this complaint, paragraph 42 of this complaint, actually alleges that there were a variety of different mechanisms that were used, that doesn't sound like what you would expect from a disagreement that cut across IPOs. You'd expect uniform conduct to be alleged. And if there was that sort of conduct and it was alleged to violate both regulatory regimes in a clear way, then maybe it could go forward. Thank you. John G. Roberts, Jr.: Thank you, General Clement. Mr. Lovell. Christopher Lovell: Thank you, Mr. Chief Justice, and may it please the Court: This Court's decisions in NASD and National Gerimedical determined that implied immunity is not favored, is justified only by a, quote, "convincing showing of clear repugnancy", and then, quote, "only to the minimum extent necessary. " close quote. It is not necessary to make the securities laws work to permit a conspiracy to engage in conduct that the securities laws have been trying to stop since their inception. Stephen G. Breyer: Well, it might well be, because the reasoning would be, which I find very strong, is that as soon as you make an, bring an antitrust court in, you're talking about juries and treble damages. And as soon as that happens, the people who are subject to it stay miles away from the conduct that, in fact, would subject them to liability. And yet staying miles away, they will not engage in conduct that, A, the SEC might believe is permissible, or, B, actually favor. Where you get a complex complaint like yours, that begins to ring true, that argument. And that's what's concerning me. Christopher Lovell: I totally disagree, with great respect. Our complaint is that the conspiracy was to require laddering in order to develop pools of orders right after the stock began trading. Stephen G. Breyer: What they say in respect to that is the other side says it's common to try to what's called make a book or something. I don't know these terms. Christopher Lovell: Right. Stephen G. Breyer: And when they do, what happens is that the marketer goes out and he asks people: What's your plan? What are you thinking of doing next month? What's your plan for this stock? Hold it? Not? It doesn't require much imagination to see how certain answers to that kind of question could be brought by a plaintiff in perfectly good faith as evidence that there's an agreement that next month they will pay more for the stock and next month they'll pay a lot more. Christopher Lovell: That's not this case, Your Honor. That's not this case. We say that the underwriters made a horizontal conspiracy to inflate the prices and to inflate their charges as a result by requiring these laddering orders and jointly negotiating together the amounts of the laddering. Antonin Scalia: He's not saying that that's this case. He's just saying that it's so easy to make allegations that action which was perfectly legitimate amounted to action that was illegitimate. And that question ultimately gets thrown into the laps of the jury; and if the jury comes out the wrong way, you get hit with treble damages. Christopher Lovell: Your Honor, sorry for interrupting. Antonin Scalia: I'm done. Christopher Lovell: Okay. It's like a lawyer knows what to say and knows what not to say. This has been established for years. You cannot say in the securities business, Your Honor... and we don't know this; we know what to do as lawyers. You cannot say it's a quid pro quo, I'm going to negotiate with you how much you have to purchase. That type of conduct created pools during the 1920s and the early 30s which manipulated prices to unsustainable levels that led to the great stock market crash and maybe the depression. The legislative history said: We want to stop pools. In section 982 of the Securities and Exchange Act it says, quote, "One person or more cannot work together to raise prices. " We allege that the first part of this horizontal conspiracy, across underwriters and across IPOs, was to require the laddering in order to raise prices. Stephen G. Breyer: The problem... I'd be repeating it. we're not talking about, say, your case. I don't know what your evidence is. But let's imagine a case where the evidence of just what you said consists of some rather ambiguous discussions which might be characterized in a variety of ways, including the way the way the plaintiff wants to characterize it, who would repeat the very words you just said. Now, the issue, it seems to me here, is in light of that possibility, do we want an antitrust judge to say whether that's so? I know you do. Or do you want the SEC to say whether that's so in the particular case? Or that's why I thought of primary jurisdiction: Maybe first send it to the SEC. What's your view? Christopher Lovell: Well, I'll do primary jurisdiction last, Your Honor. My view is that to bring in the other case is, in effect, to exculpate antitrust violations. On this narrow case that we've alleged, under Connelly versus Gibson there is no other case. Anybody who's charged with murder or any serious conduct could say: Well, you can't really apply that because this is the other case. John Paul Stevens: May I ask you if your conspiracy allegation would be the same if there were only one underwriter? Christopher Lovell: No. No, Your Honor. John Paul Stevens: It is critical to your case that there are multiple underwriters? Christopher Lovell: Yes, yes. John Paul Stevens: What if we thought that the activities of the multiple underwriters were Comparable to a single joint venture? In many respects they're like a joint venture. Would that mean your whole case could collapse? In other words, I'm really wondering to what extent you're depending on your horizontal agreement as opposed to the vertical arrangements like laddering and flipping and that sort of thing. Christopher Lovell: We totally depend on the horizontal agreement, Your Honor. The case rises or falls on the horizontal agreement among underwriters to require that which the securities law-- John Paul Stevens: If there had just been the vertical agreements and if they had been fully disclosed, there would no antitrust violation, would there? If there had just been publicly disclosed agreement by one underwriter with the purchasers to engage in these activities, there would be no violation, would there? Christopher Lovell: --If there's no market power, we're not alleging that, and we wouldn't try to bring that case, Your Honor. Where the antitrust laws, as General Clement says, have their reach is that they get the whole elephant. If we prove that the underwriters conspired as we alleged, and there's five administrative complaints here... it's not something where it's is a strike suit. There's five administrative complaints finding this parallel unlawful conduct, which would work best through a conspiracy. And we have our allegations in the complaint that they worked jointly together to do in this case what's always been prohibited under the securities laws. John G. Roberts, Jr.: What about the Solicitor General's suggestion about extending antitrust immunity to a single IPO? In other words, what's wrong with that? That's where the SEC's regulation seems to be most pervasive, and what you can do in the context of an IPO if your allegations cut across IPOs that might be different. Christopher Lovell: It's a hypothetical. We're not trying to do an individual case. I don't have a strong position on it. There is a case called Roth berg in the Eastern District of New York... the Eastern District of Pennsylvania, a district court case, that recognized an antitrust violation in a single stock manipulation. There are other cases called Shumway and... and I forget the other case... that said, no, you can't have it. They've gone both ways. It wouldn't matter to our case at all. We're trying to get at... the securities laws are transactional. They can't get at a big wrong like this. They only get their own part of the elephant. The antitrust laws, this is business as usual, step into my office. As General Clement says, the antitrust laws come if we prove that there was a horizontal agreement. Then all of these individual efforts-- John G. Roberts, Jr.: What are you talking about when you say a horizontal agreement? Are you talking about a group of underwriters in the context of a single IPO? Christopher Lovell: --No. John G. Roberts, Jr.: No. Christopher Lovell: No, Your Honor. It's across IPOs and across underwriters. They changed their business. They all changed the business at about the same time: This is the way we're going to operate. We're going to require the laddering orders. That moves the price up. And we're going to require another type of tie-in agreement that allows the underwriters to participate in the customer's profits from the difference between the IPO price and the inflated prices at which transaction sales were made right after the IPO. Stephen G. Breyer: What about an agreement among underwriters, among underwriters, which says the following: We agree that we go... when we go on our tour, we will be certain to ask the potential purchasers whether they plan to hold this stock for at least a month. Christopher Lovell: No problem. Stephen G. Breyer: No problem. Christopher Lovell: Never. Stephen G. Breyer: How do you know that isn't a disguise when they say-- Christopher Lovell: We wouldn't bring the case, Your Honor. Stephen G. Breyer: --Ah, ah. What they've said was... you see, they have the same allegations. I don't know how to... you see what I'm driving at? Christopher Lovell: Yes. Yes, but-- Stephen G. Breyer: What's the answer? Christopher Lovell: --I don't think it fits into the way of this narrow case and the facts that are presented for immunity here, which the Congress has been trying to stop forever, and the conduct's spread between 1997 and 2001 and was a massive violation that the securities laws really aren't cut out to address. I know I'm getting off your question a little bit, but in the NASDAQ antitrust litigation these defendants and their predecessors agreed to keep the spreads wide in the over-the-counter market. There were rules about maximum spreads. There were many rules, many regulations. However, it was never permitted in the securities markets for all the underwriters across 5,000 stocks... we only proved it out to 1600... to widen their spreads, to keep their bids and offers wide. Billions of dollars... the Justice Department after we brought the case, the Justice Department brought a case. The entire industry was changed. You can now trade a million dollars worth of stock for less than it costs to change your tire or something. And it's all due to the antitrust... I'm sorry, Your Honor. John G. Roberts, Jr.: I'm trying to grasp the difference between the single IPO and multiple. So in response to Justice Breyer's hypothetical, they all agree in the context of a single IPO, let's make sure everyone's going to hold the stock for a month, and you say no problem. Christopher Lovell: No problem. John G. Roberts, Jr.: Well, if the same underwriters get together the next month, they've got a different IPO and they say, you know, let's do the same thing we did last time because seemed to work well in terms of the issuance and the capital formation. All of a sudden that's an antitrust problem? Christopher Lovell: No. The basis for my answer is two levels of no problem. There's not a problem as to the single deal and there's not a problem as to saying you have to hold the stock. That's not at issue. We have no problem with that. What's always been prohibited is to create pools of orders to drive up the price of the stock. If you work to raise the price of the stock, which this was all geared to do, after it came public, it drives prices to unsustainable levels. It creates a lot of action in the stock. People come in and buy. Our clients buy directly from the defendants who are driving the stock up. And yes, there was no disclosure. As with any antitrust conspiracy, if there was disclosure there could have been-- Stephen G. Breyer: Can you get damages for that from the SEC? I mean, it sounds like bad conduct. Christopher Lovell: --The SEC refers the customers to the private lawyers if you complain. The securities laws are totally different from the ICC, from the common carrier case. Stephen G. Breyer: Suppose you lose, your client... suppose all these bad things happen and you don't have an antitrust claim. Is there somewhere in the law that you can get damages? Christopher Lovell: Yes. Where? The specific intent of Congress in creating the securities laws was to create private remedies which are available, and to preserve all other remedies, including-- Stephen G. Breyer: So what's at issue here is not whether you get a remedy. It's whether you get treble damages. Christopher Lovell: --No. Theoretically, there are other remedies as to each individual client for what each individual client did. No one can address in a securities case the wrong that happens here. The agreement. That can only be addressed as General Clement says at page 22 of the brief, through an antitrust case. Antonin Scalia: Why is that? I don't understand why the SEC could not... they can make rules for a single IPO; it seems to me they can make rules for coordination of IPO. Why can't they do that? Christopher Lovell: Well, the SEC could make a rule to prohibit... to further supplement the protections. Antonin Scalia: Right, right. Christopher Lovell: Yes, Your Honor. They could supplement the prohibitions-- Antonin Scalia: They have chosen not to. Christopher Lovell: --Well, it... it... I think it's more institutional that the focus has always been transactional, Your Honor. And the Congress clearly in 982 of the Securities and Exchange Act of 1934 clearly prohibits individual or joint efforts to raise prices, empowers private investors to sue, empowers the SEC to sue-- Antonin Scalia: No, but-- Christopher Lovell: --There could have been a suit by now but it has never happened. Antonin Scalia: --But you... you could regard the activity of laddering and of making a book on a stock when the... in the case of a single offering. You could... you could look upon that as, as an attempt to raise the price. That's what it is, isn't it? An attempt to make sure there's going to be a high enough price for the stock so that it won't flop once it's out there? Christopher Lovell: In the... there's huge qualitative differences between certain types of conduct which has always been accepted and was not prohibited in the securities laws and laddering or pools of orders to raise prices and tie-in agreements. The only metaphor I can throw out, Your Honor, is that we know how far we can say and what we can't say, the brokers always know this, until 1997 to 2001 when they... they changed their underwriting businesses to go... and we, we allege that they required, induced, solicited... not that they did things on the way... close to the line or... in the, what had always been the accepted area, the world changed. And that change moved into the territory that had... sorry for hurrying... that had always been prohibited. Antonin Scalia: Yeah. And you're saying they did this just... not in the context of just single IPOs, but that they agreed across IPOs that they would all do this. Christopher Lovell: Yes, Your Honor, across IPOs and across underwriters, so that-- Antonin Scalia: Why? Christopher Lovell: --So that a customer couldn't go to another underwriter for a different deal. Antonin Scalia: Uh-huh. The customer being the issuer? Christopher Lovell: No, no. The public customers who have accounts with the underwriters; they're also brokerage firms. If they wanted to get an IPO in what we call class security, the technologies securities, they had to pay-- Antonin Scalia: They'd have to pay the premium. Christopher Lovell: --Yeah. They had to pay these unlawful charges under securities laws, no matter where they went. And in terms of the inextricably intertwined, it is the qualitative difference that stops that. I think behind the Solicitor General and the SEC's proposal is a fear that the syndicates, the underwriters are vulnerable to an antitrust case because they operate together. That's not true. There's never been a case precisely like this; and the underwriters as brokers, as market makers, they operate together and cooperatively all the time. Five years goes by. Seven years goes by. There's no antitrust case-- Stephen G. Breyer: All right. So what are the words you use in the opinion, that would separate your case, where it is like price fixing and so forth, to charge them, from the case that they're worried about, which is where the evidence is, to prove the allegation is, really involves activity that could be quite legitimate? Now, now... what words would I write in the opinion that in your opinion would separate the sheep from the goats? Christopher Lovell: --They agreed to inflate prices in precisely the way the securities laws have always prohibited. They agreed to inflate prices and they agreed to make tie-in agreements that have always been prohibited under the securities laws, to participate in the profits from the inflated prices, which they were not permitted to participate in. John G. Roberts, Jr.: So your test is it has to be prohibited by the securities laws? Christopher Lovell: No. But in this narrow case, it happens to be that the method that they went to, which was always a guaranteed method to drive up prices and to participate, was... had always been prohibited by the securities laws. It is not the test. The test for the antitrust claim is merely this: they wanted to make an agreement to inflate prices and they wanted to make an agreement to inflate their charges. And if a customer came to this underwriting trust at the time to deal with them, they had to do this type of transaction to inflate the price, and they had to pay the underwriting extra-- John G. Roberts, Jr.: What do you say to the... sort of stepping back from the trees to the forest, to the general suggestion that Congress has been tightening up the requirements for private securities litigation over the past few years; and you're bringing this now as antitrust claims as a way to circumvent Congress's regulation. Christopher Lovell: --That the actual facts show that Congress wanted this claim to be brought. Certain... Congress is well aware of the NASDAQ antitrust litigation and of the Salomon Brothers antitrust litigation, both antitrust claims in the securities markets. Both situations where the diligent professionals at the SEC were criticized by the congressional oversight people for not finding out what was going on, perhaps, and that the antitrust bar did and brought the case, and then the DOJ brought it and then there was questions. Stephen G. Breyer: What about... what about... listen to what I'm about to say. I'm thinking of the standard. The standard would be where the allegations are such, where the case is such that... to go further... that, one, it is an allegation of a claim of illegality; is price fixing, in price fixing; and it is of longstandingly prohibited under the securities law; and there is evidence to support that, of... strong evidence to support it, or the evidence in support thereof is not primarily evidence simply of asking the jury to draw inferences from conduct that is protected. Under those circumstances there is no immunity. Christopher Lovell: Bingo. That... we live with all that, Your Honor. To quote... sorry, sorry. [Laughter] Stephen G. Breyer: I don't know if it's... I mean, you know-- [Laughter] Christopher Lovell: No, no... but we agree on every one. But to go back-- Samuel A. Alito, Jr.: How could the Court... how could a court enforce that at the 12(b)(6) stage? Determining whether there's strong evidence of one type or another. Christopher Lovell: --Well, in this particular case, Your Honor, there's five administrative proceedings that have, that have come forth since we... we filed first, and there was nothing. And... but since then there have been a lot of administrative proceedings. I would say that the fact that parallel unusual... unlawful conduct is occurring in a way that the horizontal people who are doing it inflate their prices at the expense of the public, would satisfy any test. Antonin Scalia: Look, the question isn't whether it satisfies it. The question is whether you can get rid of this suit at the outset or do you have to go through enormously expensive discovery, which... which isn't worth the candle. Christopher Lovell: Your Honor, I think you have... for the good of the country, I think you have to follow the facts and find out if these people conspired as alleged. Antonin Scalia: --discovery? Right? Christopher Lovell: Yes. Sure. John G. Roberts, Jr.: But the problem... the problem is that, of course, these people are to some extent under the securities laws in the business of fixing prices. They get together as a syndicate, a syndicate, and say well, you have to figure out what price we're going to charge for this initial public offering. It looks, if you didn't understand the context, it would look an awful lot like an antitrust violation. And the problem is, I guess, that... that when you take that type of evidence, the type of evidence you're going to be relying on to show that there's price fixing, it is exactly what the SEC wants the people to do. They want them to get together. They want them to agree on an appropriate IPO price that's going to contribute to capital formation and everything else. And how do you at, as Justice Alito pointed out, at the 12(b)(6) stage, how is a district court supposed to say well, this is the bad price fixing, this isn't the good price fixing? Christopher Lovell: Again it is the qualitative difference. Everybody knows... and the SEC does want IPO prices to be fixed, just like in the NASD case, they only wanted one price for the mutual fund shares because people could be disadvantaged. However, everybody also knows under Section 982 and Section 17 of the Securities Act, that you don't go over and rig the after market, not even in one stock, let alone what we allege, across stocks. And with regard to the question earlier, Your Honor, about how Congress-- Antonin Scalia: I don't think you've answered his question. Christopher Lovell: --Oh, I'm sorry. Antonin Scalia: I think that you've said that the two were different. His question was how can you tell at the outset, at the 12(b)(6) stage, the difference between those two things that you've mentioned? Sure they're different but... but the evidence that is only evidence of the one also looks like evidence of the other. Christopher Lovell: Well-- David H. Souter: What is the particular difference between supporting the price and rigging the aftermarket? I mean, how do we tell that at the 12(b)(6)? Christopher Lovell: --You look, you compare the cases to the language in the complaint. In paragraphs 4 and 5 of the complaint we say that they agreed to require laddering, they agreed to require this. We don't say that they made any... any hints or legitimate activity. We're held to that burden of proof. You look at the cases, required has always been unlawful. To require a pool of orders to drive up the prices... always unlawful. And Congress during the 1990s did narrow the securities laws; and they took away treble damages as to RICO, and they stopped resorting to state court, where the standards weren't as stringent as under the PS law... for class action. However, they knew about these antitrust cases that had saved billions of dollars for consumers. They applauded them. And they reenacted the savings clause that says all rights and remedies are-- preserved. John G. Roberts, Jr.: How did they applaud them? Christopher Lovell: Well, they just said that they... Congress... that's too strong a statement. The specific Congress people involved were glad that the... the wrongdoing was uncovered and said as much and wrote to the Attorney General, and the SEC, and said why... why wasn't it found sooner? But they did not touch these antitrust actions. Number one, they come very infrequently. Number two, they've done great benefit for the securities markets and for the participants in the securities markets, and even for the defendants themselves. They forced the defendants to operate by talent and bring out their best, and not resort to what the problems for the public always is-- John G. Roberts, Jr.: The SEC which is the agency charged with supervising those markets, thinks otherwise. Christopher Lovell: --No... no. John G. Roberts, Jr.: They don't think these, the antitrust actions are good for the securities markets. Christopher Lovell: The SEC... and this is the first immunity case before the court where the SEC and the DOJ both are in favor of not having substantive immunity. They both oppose immunity. Antonin Scalia: But that wasn't the SEC's position below, was it? Christopher Lovell: No. No, it was not, Your Honor. Antonin Scalia: And the Justice Department was on one side, the SEC was on the other. Right? Christopher Lovell: Yes, Your Honor. And-- Antonin Scalia: It looks to me like they split the baby up here. [Laughter] Christopher Lovell: --I... I... that's the only way I can see it. But if Your Honor looks at the questions that the SEC answered to Second Circuit, the SEC said they couldn't say how the current laws couldn't work on the facts of this case, but future cases might present a closer case, Your Honor. Stephen G. Breyer: I would always... I think the standard I was more or less talking about is pretty close to what the SG says. And I think he says that... that... that Justice Alito's point, which is certainly a good point, is that you would have to allege facts such that it was clear from the face of the complaint that you weren't resting your case on the conduct that was... that's what he means by protected... and there's an ongoing obligation, it says, on the part of the district judge to be sure that the case isn't really growing out of this conduct that is arguably okay. Christopher Lovell: Protected conduct. And we could live with-- Stephen G. Breyer: You, you could live with the SG-- Christopher Lovell: --We could live with that. On the other hand, applied immunity is an affirmative defense. It was held in Cantor versus Detroit Edison, 428 US 579, which didn't make it into our brief, that applied antitrust immunity is an affirmative defense. As we brief, there's a long line of cases from Your Honors that say that you don't have to plead in the complaint to negate an affirmative defense. I don't think that unlawful conduct under the securities laws is entitled to more protection than free speech or some of the conduct in these other cases; and I... and we've opposed the inextricably intertwined standard as particularly inappropriate where an affirmative defense is involved. Nonetheless, we could live with that, if it came down. And we think the complaint already lives with it. The complaint has, from paragraph 53 through paragraph 63, a number of allegations of joint conduct to do things which are clearly unlawful under the securities laws. It does have one allegation about holding road shows. On its own, that's permissible. We don't have a footnote that says this is permissible on its own. That may have caused somewhat of the problem for... for people. But reading the complaint as a whole, paragraph 5 says that these later paragraphs I just referred to show how the time in the syndicates was abused. And I'm going back to this vulnerability point. The defendants are vulnerable to an antitrust class action plaintiffs saying, you conspired. Yes. But it only happens... it only happens once in a while. And think about it. If they abuse their time in the syndicates to create a conspiracy of this nature, to do something that's always been prohibited under the securities laws, and it's clearly prohibited under the antitrust laws, why should we bend over backwards to protect that every five years or seven years? The normal-- Ruth Bader Ginsburg: You didn't have a chance to answer Justice Breyer's question about primary jurisdiction. Let's get the SEC's views first of whether there is any interference with securities law enforcement. Christopher Lovell: --The public carrier cases, the Interstate Commerce Commission, the sea carriers and the air carriers have had primary jurisdiction as an approach. In order to keep it uniform, they kept the rate and then there would be questions on the rate. So both for administrative discretion and factfinding, the Court said that's their baby, we're going to stay out. The securities laws have always been totally different. The antitrust laws... it was a little bit patterned after the antitrust laws. Section 9(e) is like the antitrust laws, 15 U.S.C. 15. the antitrust laws said we want private attorney generals to go out and sue. The securities laws said we want to give the remedies under this act, new remedies. We want to preserve... preserve all other remedies, any and all other remedies. The single damages point raised by the defendants in the same section is only a limit on recovery. It's not a limit on the rights and remedies. So the answer to primary jurisdiction is that it's always worked this way, that the private plaintiff is supposed to sue in court. He's expressly empowered under securities laws to sue in court, As he's expressly empowered under the antitrust laws, and the courts have always resolved the issue. David H. Souter: No, but we haven't had this problem focus before, and isn't primary jurisdiction the most efficient answer to the problem that we've got? In other words, isn't it time to do something different? Christopher Lovell: No, I don't believe so, Your Honor. The times that it's come up before in the NASDAQ case, United States versus Morgan, the courts have said business as usual. They used the usual implied immunity standard and they resolve it, as usually happens. In Richey, the Richey case and a few other cases we've either said... not implied immunity, but we've either said we're not going to get involved, it's the agency's, it's the ICC's responsibility, or it was referred one time in the Richey case to the old Commodity Exchange Commission, which then declined to take the referral because... that was an appropriate referral because it had to do with the exchange rules. Antonin Scalia: I don't understand what happens with this primary jurisdiction in the context of an antitrust suit. You're entitled to a jury trial in the antitrust suit, right? Christopher Lovell: Yes, Your Honor. Antonin Scalia: And in primary jurisdiction, would we refer it to the SEC and accept the SEC's fact determinations and then instruct the jury that-- Christopher Lovell: Never happened before, and it's contrary to the... what Congress wants. In a different statutory context, it was what Congress wanted for uniformity. Antonin Scalia: --And it is really the factual determination that is the hang-up, that you don't want things that are innocent and that the SEC would know are innocent to be taken as evidence of guilty by the jury. So you really haven't accomplished a whole lot if you just send it over to the SEC for rulings on the law as opposed to rulings on whether this particular conduct violated the law. Christopher Lovell: I agree, Your Honor. I think that the presence here of the SEC complaints, the SEC's fact-finding, saying that things got out of hand during this time and the law was broken on a widespread basis, indicate that we are not coming forth with weak facts. And I also agree that in the securities context, primary jurisdiction has not had the basis it's had in other legislative contexts where uniformity was desired. Thank you. John G. Roberts, Jr.: Thank you, Mr. Lovell. Mr. Shapiro, you have four minutes remaining. STATEMENT OF STEPHEN M. SHAPIRO-- ON BEHALF OF THE PETITIONERS-- Stephen M. Shapiro: Thank you, Mr. Chief Justice. The key question in this litigation is who's going to design what a tie-in is and who's going to decide what constitutes unreasonable compensation. The plaintiffs say quite overtly in their briefs these issues can't be left in the hands of the SEC. Well, Congress put these issues in the hands of the SEC. There are three separate provisions that give the SEC power to define what is forbidden manipulation, what is a forbidden tie-in, and what is excessive compensation. The SEC this Court has said is an agency that Congress had considerable confidence in in the Gordon case and that confidence is well justified here. Antonin Scalia: What's your test, Mr. Shapiro? Stephen M. Shapiro: Our test is the one the Court laid down in those two cases: Is there active supervision or is there pervasive regulation? If the answer is yes to either of those, you ask, is there a potential conflict, and if so immunity applies and the complaint has to be dismissed. And this is true whether you're talking about one IPO or an agreement that cuts across several IPOs, because even in the multiple IPO situation the jury would still have to decide, was that a tie-in or was it something innocent; was it unreasonable compensation or was it something that was proper? Stephen G. Breyer: --We all agree, say a group of underwriters, that for the next we will insist that every customer, whatever price we charge, will pay 30 percent more for 50 percent more shares next month. Absolutely illegal, isn't it? Stephen M. Shapiro: Well-- Stephen G. Breyer: They write it down, just what I said. Stephen M. Shapiro: --The same circumstances were presented very similar to the NASD in the Invemed case. They had a Three-week trial, 17 experts, and they concluded that those charges were quite permissible considering the whole range of services that were given. Now, if this occurred with concerted action the SEC has power to deal with concerted action. Congress said that they could deal with multiple party manipulations. They have many cases where they proceeded against multiple parties. In the NASD case the claim was that there was a horizontal conspiracy involving many brokers and many underwriters, it was industrywide, it went on for years and years. And the Government argued there it was improper, it was contrary to the SEC's policies this. This Court held squarely that that is within the SEC's power to regulate and if something of that sort is occurring the SEC can deal with it. The test there wasn't whether it was connected to something that was permissible. The test was whether it was connected to the SEC's regulatory responsibilities and the SEC could deal with that sort of concerted action on an industrywide basis. Now, Mr. Lovell has argued that the conduct has always been forbidden. He labels it that way. There are many case from this Court that we cite in our reply brief holding that that labeling does not defeat immunity because it's always possible to characterize conduct in that fashion. But the agency has to apply its expertise to decide what is forbidden and to change its rules over time, which the SEC is now doing. And it has to be able to prevent, deterring conduct that comes up to the line of prohibition. Here that conduct is essential to protect investors and to protect issuers. The markets couldn't function efficiently if underwriters could not engage freely in the kinds of conversations that get twisted in this litigation into something characterized as tie-ins. Now, there are 310 private suits now pending under the securities laws brought by many of these same lawyers, making the same claims of concerted action to manipulate the stock market. Those suits are subject to a panoply of safeguards that Congress has prescribed, including single damages, restrictions on class action abuse, serious loss causation requirements. The only purpose for stretching the antitrust laws here is to evade all of the safeguards that Congress has passed, each and every one of them. We think NASD and Gordon are very important in preventing that kind of a pleading tactic. And of course, when counsel talks about concerted action and manipulating the stock market, what did Congress pass the '34 Act for if it wasn't that? There were extensive hearings about concerted manipulation involving pools and groups that were manipulating the market. That's why there are several anti-manipulation provisions in the '34 Act that give Power to define the misconduct and to deal with it effectively. And this is the toughest cop in Washington, the SEC. They're perfectly capable of dealing with this. John G. Roberts, Jr.: --Thank you, Mr. Shapiro. Stephen M. Shapiro: We thank the Court. John G. Roberts, Jr.: The case is now submitted.

William H. Rehnquist: We'll hear argument first this morning in Number 98-9828, Maria Suzuki Ohler v. the United States. Mr. Coleman. Benjamin L. Coleman: Mr. Chief Justice, and may it please the Court: The Ninth Circuit has adopted a pro se waiver rule. Under all circumstances, a defendant waives her right to seek any appellate review of her objection to a district court's ruling admitting her prior conviction for impeachment purposes if she attempts to mitigate the sting of that evidence. The Ninth Circuit-- William H. Rehnquist: You mean, when you say mitigate the sting, when she gets on the stand and testifies herself about it. Benjamin L. Coleman: --Correct. The Ninth Circuit has articulated this rule, although it has relied on no specific language in the Federal Rules of Evidence or the Federal Rules of Criminal Procedure. Indeed, the Solicitor General appears to concede that there is no such specific language supporting such a rule. William H. Rehnquist: Well, what specific language do you rely on to support your position? Benjamin L. Coleman: We rely on the 1990 amendment to Rule 609, which specifically removed the cross examination limitation with respect to when evidence could be admitted under Rule 609. William H. Rehnquist: But that simply allowed the testimony to come in on direct as... as well as cross. How does that support your position? Benjamin L. Coleman: We believe it supports our position because we do not think that Congress would have intended to lay a trap for the unwary to on the one hand specifically authorize attempts to mitigate the sting, but on the other hand silently provide for the fact that such attempts, which are authorized, constitute waivers of the right to appeal without making any such indication in the rules of evidence. In addition, we also rely on Rule 103. Antonin Scalia: I don't know, I mean, you really... are most rules of waiver reflected in the Federal rules? I mean, what you have here is a criminal defendant who introduces this matter in the trial herself. How can she complain of its introduction? Benjamin L. Coleman: With respect to the first part of the question, I believe that usually the waiver rules are incorporated in the Federal rules. For example, Federal Rule of Criminal Procedure 12 has a specific provision which indicates when a party specifically waives any objections. With respect to, how can a defendant actually introduce the evidence and yet seek to appeal it, she is only introducing the evidence after she has articulated an objection, that objection has been overruled, and the only possible reason why she would be admitting that evidence is because the objection is overruled. No criminal defendant in their right mind would seek to put in evidence of a prior conviction. That's extremely damaging evidence, and nobody would ever seek to do that. In addition-- William H. Rehnquist: Well, we've held, haven't we, that most rights generally are waivable? In other words, it doesn't take a specific provision allowing waiver in the granting of the right for it to be waivable. There's a presumption in favor of waiver. Benjamin L. Coleman: --I believe there's a presumption in favor of the availability of waiver. That does not mean that there's a presumption in favor of waiver. In fact, I think the presumption-- William H. Rehnquist: Well, what's the difference between a presumption in favor of waiver and a presumption as to the availability of waiver? Benjamin L. Coleman: --The difference is that with respect to a presumption of the availability of waiver, that means that unless there is a specific provision saying that you cannot waive this, no ifs, ands, or buts, waiver is available. However, if the presumption against waiver in general means that if the rules are silent, for example, you should presume that there will be no-- William H. Rehnquist: But there isn't any presumption against waiver in general. There's a presumption in favor of waiver, our cases say. Benjamin L. Coleman: --I believe Barker v. Wingo says that the presumption is against waiver. William H. Rehnquist: Well, Barker v. Wingo was decided a long time before the more recent cases. Benjamin L. Coleman: That is true. Barker v. Wingo was a 1972 case. However, I'm not aware of any cases overruling that proposition. Admittedly, Mezzanatto says that waiver is presumptively available, but I don't believe that Mezzanatto took the additional step to overrule Barker v. Wingo and to indicate that not only is waiver presumptively available, but we also are going to presume waiver. Antonin Scalia: Oh, I don't... I don't think it's a matter of presuming waiver when it's your client herself that put the evidence in. How can she possibly complain about the Government's introducing the evidence when she herself took the initiative in introducing it? I... that's not a hard question as far as the issue of waiver is concerned. Benjamin L. Coleman: Again, if she had not objected beforehand to the introduction of this evidence and received a ruling beforehand, then I agree, she would have waived, but in this instance the only reason why she is putting in the evidence is because she has articulated an objection, that objection has been overruled. Antonin Scalia: The Government might have decided that its case was strong enough that it wouldn't take a chance on the ruling and wouldn't introduce the evidence. She took that option away from the Government by leaping ahead. Benjamin L. Coleman: I believe on the record that we have here there was absolutely no question that the Government was going to use this conviction. The Government affirmatively moved to admit the conviction, as opposed to a motion to exclude the conviction. Antonin Scalia: Before it knew how the trial had gone. It might have concluded, after seeing how strong its case looked and how well its witnesses did, not to take a chance on this, that we didn't need it anyway. Why should it be precluded from deciding not to introduce it by her jumping the gun? Benjamin L. Coleman: I think that Your Honor is articulating a policy concern that was articulated in Luce v. United States. I believe that Luce indicates that when a defendant does not testify, an appellate court cannot determine for sure whether a prosecutor would have used the prior conviction. However, when the defendant does testify, an appellate court can review the full and complete record, which includes the defendant's testimony, and make a determination as to whether the Government's case was so strong that it never would have used the conviction. Ruth Bader Ginsburg: Mr. Coleman, could not the defense have, to be sure about this, said to the judge, out of the hearing of the jury, just before the defendant testified, judge, I don't want to bring out this conviction if I can avoid it, but if your ruling is going to stick, let me know now? Couldn't he have confirmed the in limine ruling by asking just before the testimony, Government, are you going to bring this up, and then there would have been no doubt about the definitiveness of the ruling, or the Government's expectation of bringing it out on cross? Benjamin L. Coleman: He could have done that. However, I don't think that such a sidebar or such a colloquy is required, especially given the circumstances of this case, given the Government's motion to admit the evidence, and their claim that such evidence was critical and... it was important and critical evidence and, in addition, the district court was clear that it was going to rule that the prior conviction was admissible. In fact, on the day that the defendant testified, the district court specifically warned defense counsel that obviously the prior conviction was admissible, so in these particular circumstances, I do not think that such a scenario was required. However-- Anthony M. Kennedy: Well, of course, even if that's true, it wouldn't quite answer the problem that Justice Scalia raised. I want to go back to that for just a moment. In your colloquy you said, well, there's no question but that the Government would have used this in its case. Is the rule you're proposing one in which there... if there is some question whether the Government would introduce the evidence, there should be some sort of different result? Benjamin L. Coleman: --I believe if the Government articulates a question as to whether they are going to admit the evidence beforehand, then that would be a different result, yes. David H. Souter: Isn't that what the Government will do all the time, if you win this case? Benjamin L. Coleman: I don't believe so, for essentially three reasons. Number 1, of course the Government has to be honest with the court. They can't just say something that's dishonest. David H. Souter: Well, it's not that they have to be dishonest about it. They simply can take the position that, given the nonwaiver rule, it's simply in their interest to have the decision made, in effect, at the last possible moment when, in fact, the judge knows as much as the judge can possibly know in weighing the relative probity versus prejudice, and it's in the Government's interest in effect to avoid appeal risks. So I don't think the Government necessarily would have to act in bad faith simply to say, we're not going to make the final decision and we're not going to make a representation. I can see that as being something the Government might choose to do in good faith. Benjamin L. Coleman: Well, I think there are two reasons why the Government won't always do that. Number 1, if the Government expresses any hesitation as to whether it's going to use the conviction, certainly it couldn't take an interlocutory appeal under section 3731 of the district court's ruling excluding the evidence. They would have had to make it-- David H. Souter: Yes, but that's... is that a realworld scenario? I mean, that's conceivable, but that's really not going to happen very often, is it? John Paul Stevens: It seems to me the real world scenario is, if the Government has such a strong case it doesn't need to use it, at the end of its case it simply advises the judge, I've decided not to use this impeaching evidence. Benjamin L. Coleman: --Exactly. John Paul Stevens: And then they would avoid this risk. Benjamin L. Coleman: Exactly, and we do believe it's the Government's burden. Antonin Scalia: Mr. Coleman, you sort of assume throughout all of this that the defendant doesn't have to pay a price for removing the sting. You assume some absolute right to remove the sting, and you should not lose anything by removing the sting. I don't know why there's that principle in our law. Let's assume the defendant knows that the Government's going to introduce, you know, a bloody shirt, so in order to remove the sting, the defendant himself introduces the bloody shirt. Now, you really think that we would entertain an argument, well, after all, the defendant only introduced it because he knew the Government was going to introduce it, and therefore you shouldn't be deemed to have waived any objection to it. That doesn't seem to me like a sensible principle. If you want to remove the sting, remove it, but don't come to the court and then say, we have an objection to what we ourselves have put in. Benjamin L. Coleman: Well, for... specifically with respect to Rule 609 evidence, again, I think it does come back to the 1990 amendment to Rule 609. If Congress intended that a defendant should have to give something up in order to remove the sting, one would think that Congress would have said so, rather than just specifically authorizing such attempts to mitigate the sting. Antonin Scalia: Why? That's the normal rule. You have no basis for objecting to stuff that you've put in yourself. I mean, I don't know why you would have to spell that out in order for that rule to be applied. Benjamin L. Coleman: We don't believe that that was the normal rule, that in fact the Second Circuit and the D.C. Circuits before the Federal Rules of Evidence were enacted had specifically indicated that there was no waiver under the circumstances. Stephen G. Breyer: Is it relevant here or not... I've been thinking, not about Rule 609 but 103. My thought was simply that there's a definitive ruling by the judge. The judge says, I rule, Government, you can admit this evidence, and you wish under 103 to appeal that ruling. You can appeal the ruling if, and only if, it affects a substantial right of the defendant, that it substantially hurt the defendant, the ruling. If the Government didn't introduce it, it didn't hurt the defendant. Ah, but wait a minute. The defendant, because of the threat, introduced it herself, so of course that ruling affected a substantial right. If we're uncertain about what the Government would or wouldn't do, I guess maybe it didn't affect a substantial right, but where we're certain, it did. I think the exact word is, a substantial right of the party affected. Now, that's how I've been thinking about it, but don't let me think that way if I'm wrong on the basic concept. Benjamin L. Coleman: I agree with the basic concept that if there's a case where the evidence is so overwhelming that an appellate court would take a look at this and say, well, maybe the prosecutor would not have used the conviction, in any event that error is going to be harmless anyhow. It's not going to affect a substantial right. I do agree that the Rule 103 substantially affecting language overlaps. Stephen G. Breyer: Well, I was thinking that that's what the case is about. Ordinarily, you would get your appeal, because there's a ruling that affected a substantial right of the defendant, and the reason it did is because the defendant was put to bringing out the evidence herself. Benjamin L. Coleman: I certainly agree with-- Stephen G. Breyer: Is that right? Benjamin L. Coleman: --Yes. Stephen G. Breyer: Don't let me think this way if I'm making some error in the basic-- Benjamin L. Coleman: No, I agree with that. David H. Souter: --When you assume that the defendant is put to, into the position of bringing it out herself, you're assuming something which I guess most of us assume, and that is that she's really going to reap a significant advantage by doing so. There was at least one study cited, I guess, in the Government's brief that calls that into question. I didn't read the study. I take it you probably have. What's your response to that? Benjamin L. Coleman: In response in our reply brief we cited a study that conducted empirical studies which contradicted the one article cited by the Solicitor General. In addition, I believe that Your Honor's opinion in Old Chief talks about the devastating effect that a litigant can have if the jury perceives that litigant as hiding something from them, so I think that the Court has embodied the mitigating the sting principle in its jurisprudence. David H. Souter: Well, my thought was maybe we shouldn't have. But you think we got it right. Benjamin L. Coleman: I do think you got it right, and I think that Congress has indicated that you got it right, because they specifically authorized such attempts to mitigate the sting, and-- David H. Souter: Well-- Ruth Bader Ginsburg: --And defense attorneys respond that way. Defense attorneys, if they know that a prior conviction is in the wind, will try to diffuse it. I think that's standard operating procedure. Benjamin L. Coleman: --That's correct, and it's standard operating procedure for Government trial attorneys when they use an informant or a cooperating witness. They often attempt to mitigate the sting, and we cited some cases in our briefs, and that's standard operating procedure for both parties, and it's something that you learn as a trial lawyer, or one of the first things. William H. Rehnquist: Would the Government have a similar right to appeal if the trial court made an adverse ruling on its informant's testimony? Benjamin L. Coleman: No. William H. Rehnquist: Why not? Benjamin L. Coleman: Once jeopardy has attached, they couldn't appeal under-- William H. Rehnquist: Well, how about an interlocutory appeal of the type you described that might be taken under section 3731? Benjamin L. Coleman: --The problem is that under 3731 it says that the Government can appeal a ruling that either excludes or suppresses evidence. If a district court admits a prior conviction of a Government witness, then I don't believe they could appeal under 3731. William H. Rehnquist: But you could. Benjamin L. Coleman: We certainly couldn't take an interlocutory appeal, but we would be able to appeal after the final judgment. William H. Rehnquist: If you win this case. Benjamin L. Coleman: Correct. Ruth Bader Ginsburg: You agree, seem to agree with the Government that waiver is the right concept, but it seems to me that the rule the Government is urging is really forfeiture. You're not saying, here it is and I voluntarily give it up. You don't want to give it up, but the Government is contending that the consequences of your bringing it up on direct is that you forfeit the right to appeal. Am I correct in understanding that? Benjamin L. Coleman: I don't believe so, because again the distinction between the forfeiture and the waiver would be that under forfeiture we at least would have been able to obtain plain error review on appeal, but what the Government is arguing and what the Ninth Circuit held was that we're not entitled to any review whatsoever, and that's why it's waiver, and so I don't think that the Government is simply arguing forfeiture. They're actually endorsing the Ninth Circuit's rule that we don't get any appellate review at all, which is a waiver. Anthony M. Kennedy: Under your view, would it be an abuse of discretion for a trial judge to say at the beginning of every criminal trial, it's a matter of policy in this court that I will not make advance rulings on prior convictions? If and when the Government brings up the prior conviction, then I'll make my ruling, not before. Abuse of discretion if your rule prevails, and if you win? Benjamin L. Coleman: It would be difficult for me to say whether it would be abuse of discretion. I do think that the district court, making that per se blanket statement that it will never, ever consider a ruling, could be violating Rule 12(e). Rule 12(e) says that a district court can only defer a ruling for a good cause. Now, there may be an almost... in a wide variety of Rule 609 cases that the district court will, in fact, have good cause, but to simply make the blanket statement-- Anthony M. Kennedy: Well, the district court says, I'm going to... my good cause is, I might get reversed if I make a mistake. [Laughter] Antonin Scalia: Defer it from when? I mean, may only defer it for a good cause, to be sure, defer it from the point at which he should have made the ruling, but really the normal procedure is to make the ruling when the matter comes up, and it's really a novel... in the history of civil procedure, a novel arrangement to have all of these things presented before the trial, just a matter of efficiency. But the normal, and the final ruling on whether to exclude or omit evidence is when it's introduced, and Rule 12 applies to the judge saying, you know, when it's introduced, well, I don't know whether it's properly let in or not. Bring it in now and I'll think about it later, and I'll instruct the jury that it should have been admitted. That's deferring the ruling. But here, he made the ruling-- Benjamin L. Coleman: --We do believe he did make a ruling for purposes of Rule 103 and in order to obtain appellate review-- Stephen G. Breyer: --But he didn't-- Benjamin L. Coleman: --I'm sorry. Speaker: --No, it's your question. Stephen G. Breyer: I was going to say, he didn't have to make the ruling. I mean, your argument I thought was assuming that he has an obligation to make that ruling in limine, and to my knowledge he has no obligation to make the rule... the rules allow him to do so, but he has no obligation to do that. Benjamin L. Coleman: No, I hope I didn't misspeak. We agree, he does not have an obligation to render the ruling at the in limine stage. Stephen G. Breyer: Okay. Then isn't... why would it be an abuse... going back to Justice Kennedy's question, why would it be an abuse of discretion if he-- Benjamin L. Coleman: The only way I could ever foresee that being abuse of discretion is, the way he posed the hypothetical, a district court judge says, I am never, ever going to consider this, consider a Rule 609 issue at the in limine stage, and the only point I was trying to make is that such a blanket statement could potentially violate Rule 12(e), because Rule 12(e) says that motions that are made before trial should be entertained before trial unless the court for good cause feels it needs to determine-- William H. Rehnquist: --Well, why wouldn't it be good cause for a district judge to say, I will just... I will never know at the in limine stage as much as I do about the state of the record at the time it's being offered, and so I'm just... that's my good cause. Benjamin L. Coleman: --I agree, that generally will be... that will be enough. That will be good cause, and in almost all cases, if the district court wants to defer, it certainly has the power to defer. Stephen G. Breyer: Well, isn't that what it is likely to do if you win your case, or perhaps let me give you a second alternative, or maybe a variant on Justice Kennedy's. Either the judge is going to say, look, I'm going to... I'm going to wait until the evidence is offered before I make a ruling, or the judge is going to say, I will entertain an in limine ruling, and I will make one before trial, but it is subject to reconsideration when we get closer to the point of introduction, and I will not make a final ruling until the moment comes that the Government offers it, because only then can I make the most intelligent judgment about the relative prejudice and probative force. That would certainly I take it the latter position would not be an abuse of discretion, and so isn't a cautious judge going to take that position? Benjamin L. Coleman: A judge could take that position. However, I don't think that judges will always do that as a result of this decision. There are many reasons why a judge will want to render a definitive Rule 609 ruling or other in limine ruling before trial. Stephen G. Breyer: Well, tell me why... as against the risk of reversal that is the assumption of Justice Kennedy's question and mine, why is the judge going to want to go out on the limb? Benjamin L. Coleman: Number 1, the judge-- Stephen G. Breyer: If you win. Benjamin L. Coleman: --The judge may believe that a definitive ruling at the in limine stage will help the parties settle the case, so he doesn't even have to go through a whole trial and then an appeal. A judge may think that in fairness the parties should have such a ruling so that if the Government wants to take an interlocutory appeal they can, or if the defendant wants to be able to figure out his trial strategy throughout the trial he can do that. A judge-- John Paul Stevens: There's another reason too, Mr. Coleman. I don't think all our district judges are nearly as timid as my colleagues seem to suggest. [Laughter] Benjamin L. Coleman: --I agree, and I can attest to that. They-- John Paul Stevens: At least they weren't when I was trying cases. Benjamin L. Coleman: --And it hasn't changed. They have no problem making definitive rulings and letting you know-- Anthony M. Kennedy: Along that line, can you tell me, and this relates to an observation Justice Scalia made. In the civil area, with pre trial orders, in limine rulings shaped the whole course of the civil case. Are there many in limine rulings in criminal cases? Is there always a conference in chambers, and there are four or five in limine rulings made? Just... can you give me some practical sense of how often this happens-- Benjamin L. Coleman: --Of course, I can give you-- Anthony M. Kennedy: --in areas other than prior convictions, as well as prior convictions. --Of course, I can give you a flavor of what occurs in the Southern District of California. I'm not quite certain as to other districts, but there are many in limine rulings that are brought. Benjamin L. Coleman: In fact, if you notice in this case, the district court specifically said an in limine hearing, because that is the normal course in criminal cases in the Southern District of California. In limine motions are brought with respect to expert testimony. The Government these days uses expert testimony in all sorts of cases. As you indicated, 404(b) and 609 issues are usually dealt with at the in limine stage. You know, again, after Old Chief there may be certain Rule 403 issues that are going to be dealt with at the in limine stage. So there are a variety of issues that are dealt with at the in limine stage, and-- Stephen G. Breyer: Does this matter that much? I mean, doesn't the same problem exactly arise if you have your witness on the stand, the defendant's testifying, you're well into the thing, and then you go to the judge, say judge, excuse me, now, I have a final question I want to ask my client. I'm going to elicit the information that she has a prior conviction, and I'm going to do that, but I'm not going to do it... you know, I don't want to do it, but I'll do it if you let them cross examine and bring it out on cross. Now, the judge is going to have to say yes or no. What's the difference if he does it at that point, frankly, or if he did it 15 minutes earlier, or if he did it 15 hours earlier? Benjamin L. Coleman: --I agree, I don't think there is too much-- Antonin Scalia: Would he have to say yes or no? I would say, you know, it's up to you. You want to introduce evidence, introduce it. Speaker: He's not a trial judge. Antonin Scalia: Evidence that you introduce, you can't complain about. I am still unable to understand what seems to me the premise of your whole case, and that is that you have a right to eliminate the sting without paying a penalty for it. It seems to me the normal rule is, you introduce evidence, you have no right to complain about the introduction of that evidence, and your response to that is, oh, well, I'm only doing it to... quote, to eliminate the sting. I don't care why you did it. You put it in. Why do you have a special right to eliminate the sting? It seems to me you take your chance. If you want to eliminate the sting, you don't complain about the admission on the Government's part. If you're confident that it shouldn't have been let in, then you cannot eliminate the sting. What is so evil about make... putting you to that choice? Benjamin L. Coleman: --The reason why I believe that we do have a right is because, again, in 1990 Congress specifically amended Rule 609 to say you have a right to do that, so that's why I believe we do have a right. And in addition, again it's our position that there wasn't a general rule before the Federal Rules of Evidence were enacted if you look at the common law, that if you brought in the conviction first, you waived your right to appeal and, in fact, the second Circuit and the D.C. Circuit held to the contrary, and a revised version of Wigmore-- William H. Rehnquist: The common law, they never had in limine motions, did they? Benjamin L. Coleman: --At the... if you take the common law taking it all the way back, in limine motions were rare. However, as you get closer-- William H. Rehnquist: Not only rare, but nonexistent, weren't they? Benjamin L. Coleman: --At one time they were nonexistent, but as you take that closer to the adoption of the Federal Rules of Evidence, in limine motions did become a habit within trial courts, you know, in the United States. William H. Rehnquist: When? Because you know, I practiced for 16 years. It was just unknown in my time. Benjamin L. Coleman: Well, we look at the cases, for example, United States v. Maynard and United States v. Puco, where this specific type of issue with respect to prior conviction evidence was addressed at the in limine stage, and the district court made rulings thereon. Ruth Bader Ginsburg: Mr. Coleman, in this particular case, if I remember right, the judge was genuinely in doubt at the outset. He asked for briefing, he had an oral argument on the issue, and then he made a ruling that he considered definitive, but he said it's a close call. Is there... relevant in this picture at all that maybe district judges would like to know what the law is, so that's a reason for saying, if the judge has made a definitive ruling that he called a close call, there should be appellate review? Benjamin L. Coleman: We certainly agree, and that hits home with our point with respect to Rule 102, that one of the purposes in construing the rules that Rule 102 indicates is that we should further the progress and development of the law of evidence. And this is a classic case, where the district court had real trouble determining whether a prior conviction for simple possession of drugs is probative of veracity, and this is exactly the type of reason why we do not want to have blanket waivers of the right to appeal. There will be no development of the Rule 609 case law under those circumstances, so we certainly do agree with that. Your Honors, if there are no more questions, I'd like to save the remaining time for rebuttal. William H. Rehnquist: Very well, Mr. Coleman. Ms. McDowell, we'll hear from you. Barbara B. McDowell: Mr. Chief Justice, and may it please the Court: A criminal defendant who chooses to reveal his prior conviction on direct examination waives any claim of error with respect to its admission. That's the undisputed rule where the district court has not ruled in limine on the admissibility of the conviction, for it's well settled that a party cannot introduce adverse evidence as its own for its own tactical purposes and then challenge the admission of the evidence on appeal. There's no reason to depart from that sensible rule where, as here, the district court did issue an in limine ruling on the admissibility of a conviction. Anthony M. Kennedy: What happens in some of the other in limine ruling areas that we were discussing? Suppose the defense said now, Your Honor... at a pretrial hearing... I want the Government instructed right now they're not to introduce hair sample evidence. The hair was found too far from the scene, and so on, and the judge said, I'm going to admit it. Can the defendant then, in the defendant's own case, introduce the hair sample and... evidence and an expert who said it's not the defendant's, or would that be a waiver under your principle? Barbara B. McDowell: We would take the position that that's a waiver. I don't recall any cases specifically presenting-- Anthony M. Kennedy: So you don't know any case in which the in limine ruling entitles the defendant to anticipate? Barbara B. McDowell: --Only under the rulings of those circuits who have allowed the contrary of the rule applied by the Ninth Circuit in this-- Anthony M. Kennedy: You wait, you just wait for the rebuttal stage of the... the defendant should wait for the rebuttal stage of the case. But that case couldn't arise, could it, because the evidence of guilt has to be put in by the prosecution first, and the defendant doesn't have a chance to put in-- --Well, the defendant might do it on cross. --isn't that right? Isn't that why those cases don't arise? Barbara B. McDowell: --Well, there are other instances in which there's evidence that a district court has allowed in only as rebuttal evidence other sorts of impeachment evidence in addition to Rule 609-- Anthony M. Kennedy: In an impeachment context, sure, I understand that. But as to the main case you just don't have that problem. Barbara B. McDowell: --Typically not, Your Honor-- Anthony M. Kennedy: Yes. Barbara B. McDowell: --that's correct. Sandra Day O'Connor: Ms. McDowell, does your position depend on taking the view that the judge's ruling was necessarily tentative? Barbara B. McDowell: It doesn't depend on that, Justice O'Connor, although that's one of the reasons why we think the rule is particularly justified in those 609(a)(1) cases. Sandra Day O'Connor: I'm very curious because, as you know, there is a proposed amendment to Rule... is it 103? Barbara B. McDowell: That's correct. Sandra Day O'Connor: That then will speak in terms of definitive rulings and preservation of objections and so forth, so I wondered to what extent your argument depends on the notion that it's not a definitive ruling. Barbara B. McDowell: Well, we would take the position that even with respect to those evidentiary issues that the authors of the rule and those courts that have adopted the definitive nondefinitive distinction would classify as definitive, for example, rulings under 609(a)(2) with respect to whether a conviction involves dishonesty or false statement. Those can be resolved definitively before trial for purposes of not having to make a contemporaneous objection-- Sandra Day O'Connor: Well, can't this be resolved definitively by the judge? Barbara B. McDowell: --No, it can't. Sandra Day O'Connor: No? Barbara B. McDowell: No, it cannot. Sandra Day O'Connor: The judge can't say, look, if the Government wants to introduce it, it can. That's not definitive? What's tentative about that? Barbara B. McDowell: In order to be definitive, a ruling has to possess two characteristics. One, it has to be the kind of issue that can be resolved definitively before trial, and the courts have said that if it requires a balancing of-- Sandra Day O'Connor: The question-- Barbara B. McDowell: --prejudicial and probative-- Sandra Day O'Connor: --The question presented to the judge is, by the prosecution, judge, I intend to offer evidence at trial of the prior conviction of this defendant. May I do so? Yes or no. Judge says yes. I've looked at it, you may do so. That's not definitive, hmm? Barbara B. McDowell: --It's definitive in some sense, but it's the sort of ruling that requires the court to keep an open mind in the course of trial as to whether it's actually going to come in, because-- Antonin Scalia: He can always change his mind later, even if he... I know I said it was definitive-- Barbara B. McDowell: --Yes. Antonin Scalia: --but I hadn't seen all the evidence, and I've... you know, I've reconsidered it. Until it's put in, it's not really final, is it, until he does allow the evidence in? Barbara B. McDowell: That's correct. That's what this Court appeared to recognize in Luce. William H. Rehnquist: Yes, but a lawyer isn't going to get very far if he badgers a judge after the judge says, I have made up my mind and that's it. You can't come back every day and say look, change your mind. You're not going to do much for your case that way. Barbara B. McDowell: No, but it's not offensive to a judge to simply renew an objection and to point out-- Anthony M. Kennedy: Well, but isn't that the thrust of rule... the proposed Rule 103, which is at A-5 of the blue brief? Proposed Rule 103, and I know that it's not applicable in this case, but it indicates what perhaps is the better view. Barbara B. McDowell: --Yes, but-- Anthony M. Kennedy: It says, once the court makes a definitive ruling, it assumes there is such an animal as a definitive ruling. Barbara B. McDowell: --Yes, but those courts that have adopted that distinction have said that Rule 609(a)(1) rulings are not definitive because they require a balancing of probative value of prejudicial effects. Anthony M. Kennedy: So in other words there's now going to be a whole classification of rulings that by their nature cannot be definitive? Barbara B. McDowell: That's correct, and the advisory committee cited two cases holding that, or stating that in its notes, so what we suggest is-- Anthony M. Kennedy: I've read the notes, but I'm concerned with the text of the ruling. It does seem to me to contradict your position if you don't look at the advisory notes. Would you-- Barbara B. McDowell: --The text raises the question of what is definitive. Anthony M. Kennedy: --agree that it's more helpful to the petitioner than it is to you, absent the advisory comments? Barbara B. McDowell: The meaning of the word definitive is something that is not clear on its face. The courts that, as I said, have adopted that distinction, require both a ruling of the sort that can be made before trial without a balancing of-- Anthony M. Kennedy: But in the civil area all the time this happens. I say in a condemnation case, Your Honor... the pretrial... I don't think we should have valuation testimony about property on the far side of the river, and the judges says, you're wrong about that. We're going to have it. I take it that I don't waive my objection if I'm the first one to introduce comparable sales in my part of the case, and you seem to be arguing for a somewhat different theory. Is it because of the nature of the ruling? Is that what we're talking about? Barbara B. McDowell: --Generally under the rule applied in most circuits today, you would have to make a contemporaneous objection at trial to evidence that you wanted to exclude and that you wanted to-- Anthony M. Kennedy: How about evidence that you want to introduce? Barbara B. McDowell: --If it's evidence that you want to introduce, there's no reason, presumably, why you would want to preserve an objection to its admission. Stephen G. Breyer: Wait, suppose... let's leave out the definitive part, as follows. Imagine your client's on the stand. The defendant is on the stand. The defendant has now testified. The defendant's lawyer says to the judge, judge, you know perfectly well that the prosecution now is going to introduce her prior drug conviction. Now, if you're going to let that in, I'm going to ask her one final question which will be, Mrs. So and so, do you have a final drug conviction, an earlier one, and she will say, yes. So judge, I would like to know before asking that final question, just one question left to go, I would like to know how you're going to rule when the prosecution... you intend to offer that, right? Yes. All right. When the prosecution offers that conviction, now, that's my case. What's your view on that one? Can't... the judge says, I'm going to let the prosecution offer that conviction. The lawyer says, Mrs. So and so, do you have a prior conviction? Answer, yes. The lawyer now wants to appeal the judge's ruling, all right. What's your view of that? That gets all the preliminary, finality, definitive parts out of it. It's right in the trial. I want to know, what's your view of that case? Barbara B. McDowell: As we indicated, I believe in footnote 12 of our brief, that approach would be much less problematic. Stephen G. Breyer: Oh, no. I want to know whether or not, in that case, the lawyer can appeal or the lawyer cannot appeal. Barbara B. McDowell: We would say that it's still a waiver because the defendant is still trying to introduce adverse evidence as his own, for his own practical purposes. Stephen G. Breyer: So finality has nothing to do with it in my case. You're still not going to let him, so my question, then-- Barbara B. McDowell: Well, there's a second reason as well. Stephen G. Breyer: --Fine. All right. My... that would be my question. My question would be, an appeal is permitted where a substantial right is affected as a result of the ruling. The lawyer says, of course a substantial right was affected as a result of this ruling. You ruled that that came in, and that certainly affected my client. And your response is? Barbara B. McDowell: That's it's still a waiver. Stephen G. Breyer: I know that, but I mean, I want to know why? [Laughter] Barbara B. McDowell: Well, in the first place because it's contrary to generally accepted evidentiary law that if you introduce evidence yourself you can't complain about it later. Antonin Scalia: The ruling... I think your answer is that the ruling didn't affect... didn't affect the client at all. What affected the client was the evidence that the client, client's lawyer himself-- Barbara B. McDowell: The client's decision to testify. Antonin Scalia: --introduced. Stephen G. Breyer: I would say that would have to be your answer. Antonin Scalia: It is ultimately the client who put in the evidence, and that's what hurt the client, not the ruling. Stephen G. Breyer: Fine. I agree that would have to be your answer, and then I guess you'd have one further question, which is, that sounds very metaphysical to me. Anyone who doesn't think that my client wasn't affected by your ruling hasn't been in this trial. And you respond to that? Barbara B. McDowell: Well, it's not-- [Laughter] There are many ways in which a criminal defendant can seek to draw the sting, so to speak, of a prior conviction. Defendant doesn't have to do it by introducing the conviction first. For example, the defendant can explain the conviction on redirect examination. The defendant can bring out, as, in fact, petitioner's counsel did here on closing argument, that Maria really wanted to tell you her story of the case, and she knew that the conviction was going to be brought in by the Government, but she wanted to tell you the story anyway. Ruth Bader Ginsburg: But Ms. McDowell, if... isn't it a factor that the defendant is going to look like she had something to hide if she keeps her mouth shut on direct, then the prosecutor brings it out? Think of what happened in this case. She diffused it to the extent that the prosecutor just had one simple little question. He couldn't make a big deal out of it. Barbara B. McDowell: Yes, but she can diffuse it in other ways as well, as I was saying, by her explanation of the conviction on redirect, by the way she answers the question put to her by the prosecutor on cross examination, by seeking instructions saying that the jury is not to draw any inference from who introduces the conviction. There are many other ways in which to take the sting-- Antonin Scalia: I suppose his lawyer could ask her, you're not an angel, are you? She says, no, I'm not an angel. You don't pretend to be an angel, do you? No, I don't pretend to be an angel. But just not actually introduce the conviction. I mean, there are a lot of ways to do it. John Paul Stevens: Would that constitute a waiver under your view, if the defense lawyer asked her-- [Laughter] --if... have you had... have you ever been in trouble with the law before, but not asking any specific... would that constitute a waiver? Barbara B. McDowell: --It might be well... might well be viewed as opening the door to the subject matter. John Paul Stevens: So it would be a waiver. If you said, have you ever been-- Barbara B. McDowell: It might well, yes. Stephen G. Breyer: --No, but that's not a waiver-- John Paul Stevens: --Maybe we have the same kind of problem here as whether the trial judge's ruling is definitive or not. We get the same gray area as to when the waiver takes place. Barbara B. McDowell: That's correct, and there's another principle to remember here, and that's when we're dealing with these threshold evidentiary procedural questions, it's often beneficial to have a bright line rule, even if there are some cases where the rationale for the rule is not as-- John Paul Stevens: So there would be benefit... excuse me. William H. Rehnquist: Go on. If she answered the question that... suggested by Justice Stevens, have you ever been in trouble with the law before, if she answered no, certainly there would be no doubt that the Government could introduce that by way of impeachment-- Barbara B. McDowell: --That's correct. William H. Rehnquist: --without regard to the introducibility of prior convictions. Barbara B. McDowell: Yes. The question would-- Stephen G. Breyer: Yes, but our question is not the correctness of the introduction. Our question is whether there is a right to claim that it is not correct, and I take it that the response to Justice Stevens would be, that doesn't waive anything. It may make it more likely that the admission ruling is correct, but certainly the defendant has the right to raise the issue in the appellate court. Isn't that so? Barbara B. McDowell: --Not if the defendant has introduced the issue sufficiently herself. If she has been the one who has presented it to the jury, who has precluded the district court and the Government from a last clear chance to decide not to introduce the conviction, no, it's a waiver. Anthony M. Kennedy: In the hypothetical Justice Breyer put, where just at the close of the direct examination of the defendant by the defendant's own attorney he says, there's one more question, and the judge turns in a... what do they call these now +/? sidebar to the prosecution and says, now, do you propose to introduce the prior conviction, and the prosecutor says, well, I'm going to wait and see. Can the prosecutor do that? Barbara B. McDowell: Yes, because in many circumstances, or at least some circumstances, the prosecutor may want to know how the rest of the cross examination goes. It may turn out that the prior conviction is not necessary if the impeachment goes well on other matters, or if for some other reason during cross examination the introduction of the prior conviction seems particularly problematic, and a prosecutor should be able to preserve the option to decide later in cross examination whether-- Anthony M. Kennedy: But the forthright prosecutor who knows that the prosecutor is going to introduce the statement should say, well, yes, judge, I'm going to do it no matter. Barbara B. McDowell: --Yes, if that's his true intent, but it would still be a waiver, we would submit, even in that circumstance. However, as we point out, that's not what happened in this case. There was no opportunity given whatsoever to the Government or to the district court to reconsider the in limine ruling right before petitioner introduced it at trial. Ruth Bader Ginsburg: When you say the judge, the judge said before the examination of the defendant, obviously the prior conviction can be used for impeachment purposes. He made his ruling. He spent an extra day. He had briefs. He had argument. He decided it. It seemed to me that it was as definitive as a ruling could be, and then he backed it up later on by... said, obviously it can be admitted. Barbara B. McDowell: Of course, all of those statements were made before trial, and an in limine motion of this kind is made with the implicit assumption that a district court can reconsider it. The district court in this case also specifically said-- John Paul Stevens: Yes, but it's really made with the implicit understanding that this is the rule for this trial. We don't have in limine motions and say, well, we'll see what happens later on. I mean, you run a trial with some firmness on how the thing is going to go. Most trial judges don't say, I'm going to rule this way, but maybe I'll change my mind tomorrow. That's not the way we want our trial judges to conduct trials, certainly. Barbara B. McDowell: --Well, they may not explicitly say that, Your Honor, but certainly if they see an error arising-- John Paul Stevens: And this is not the most complex issue in the world, either. This is a very simple evidentiary issue that he can affect both sides on, the kind of thing you ought to get a firm ruling out of the trial judge that the parties can rely on. It certainly doesn't advance trial process to say, everything's tentative. William H. Rehnquist: Ms. McDowell, what was our ruling... what was our holding in Luce? Barbara B. McDowell: --The Court held that a defendant could be required to choose whether to take the stand, be impeached with a prior conviction, and preserve the objection for appeal, or alternatively choose not to testify and abandon the issue, and the Court said that was permissible. Anthony M. Kennedy: Of course, one of the problems with Luce was that if the Court had ruled the other way, every defendant would have announced that but for the ruling he would have taken the stand. He would be given a, sort of a free appeal. Here, you know the defendant's taking the stand, so at least that uncertainty is eliminated. Barbara B. McDowell: That's correct. Anthony M. Kennedy: And that makes this a harder case than Luce, it seems to me. Barbara B. McDowell: It may be, but there's still the question of not knowing whether the district court actually would have admitted the conviction or whether the Government would have tried to introduce it. William H. Rehnquist: Well, do you know for sure that the defendant is going to take the stand in this case? Barbara B. McDowell: Not until she takes the stand, no. She's not obligated to make a commitment to do that. Anthony M. Kennedy: And if she doesn't, Luce applies. Barbara B. McDowell: That's correct. Stephen G. Breyer: What does happen... I don't know this. With all... leaving... with all sorts of other evidence in a criminal trial, I mean, suppose it's just a relevance point, you know, and one of the lawyers, either side, says judge, are you going to let in all that Chicago stuff, and he says yeah. And then he says, well, okay then, what I'm going to do is, I'm going to try to introduce it first. There's a definitive ruling, you know, the Chicago stuff will come in, and so the lawyer whom that disfavors introduces the Chicago stuff himself. Is that a waiver? Barbara B. McDowell: Yes, it is. Stephen G. Breyer: Yes, and the case that I... I just look that up in a regular treatise. Is that just obvious? Barbara B. McDowell: The issue has generally arisen after motions in limine have been decided on the matter, specifically with respect to prior convictions. I'm not aware of a lot of case law that deals with matters other than that. Stephen G. Breyer: I mean, you could think it would come up in all kinds of conduct... contexts. I mean, it doesn't have to be prior convictions. All sorts of trials are managed because... yeah, because you know, there's whole vast realms of complicated evidence. The judge makes preliminary ruling, makes in limine rulings, makes definitive rulings, how I'm going to run this trial, so I'd think that there would be stuff on the... in reaction to that, you introduce it yourself, whether you lose the right that you'd otherwise have under the rules to object to a definitive ruling by the judge that hurt your client. Barbara B. McDowell: Well, typically the issue arises only with respect to impeachment evidence. In the other circumstance it would-- Stephen G. Breyer: Never rose in other circumstances that you know of? Barbara B. McDowell: --Not that I'm aware of. It may have. The general principle has, of course, arisen that has been articulated quite frequently and in cases dating back before the rules of evidence that if a party introduces adverse evidence for his own tactical purposes, he is bound by that decision and cannot challenge it on appeal. Antonin Scalia: It's rather... is it your proposal that is hypothetical, or is it the other one that was hypothetical? I think the objection being made here by the defendant is that if he had known that this evidence would not be introduced, he would not have introduced it, and therefore his introduction of it should be forgiven and should not be a waiver. Is that not the defendant's argument here? Barbara B. McDowell: I believe it is. Stephen G. Breyer: I didn't think it was. I thought the argument was, there is a definitive ruling by the judge that the rules give me a right to appeal to if it hurt me, and it did hurt me. Am I saying something different than Justice Scalia said? Antonin Scalia: No, it-- Barbara B. McDowell: I think it's the same. [Laughter] We ask that the judgment of the court of appeals be affirmed. Thank you. William H. Rehnquist: --Very well, Ms. McDowell. Mr. Coleman, you have 3 minutes remaining. Benjamin L. Coleman: Your Honor, unless there are any questions, I have no further rebuttal. William H. Rehnquist: Very well. The case is submitted.

William H. Rehnquist: We'll hear argument now in No. 91-119, the Wisconsin Department of Revenue v. William Wrigley, Jr., Co.-- Mr. Creeron, is it? F. Thomas Creeron, III: Yes, Mr. Chief Justice. William H. Rehnquist: Mr. Creeron, you may proceed. F. Thomas Creeron, III: Mr. Chief Justice, and may it please the Court: The question presented in this case is whether for the 6-year period at issue the respondent engaged in activities other than those expressly permitted by Public Law 86-272, thereby forfeiting the limited immunity from State taxation measured by income, which is accorded by that statute. It is Wisconsin's position that the respondent did engage in activities other than those expressly permitted, that its assessment covering that period is valid, and that the judgment of the Wisconsin Supreme Court should therefore be reversed. This case arose as a result of a franchise tax assessment made by the Wisconsin Department of Revenue against the William Wrigley, Jr., Company, which is the largest manufacturer of chewing gum in the world. The franchise tax is a fairly apportioned tax imposed only upon income attributable to business activities within Wisconsin. During these years, Wrigley's Wisconsin sales ranged from $2.8 million to $4.4 million, while its total sales ranged from $140 million to $230 million. The tax itself, exclusive of interest, is slightly in excess of $120,000, an amount which is not in dispute. The Wisconsin Supreme Court reversed the Wisconsin Tax Appeals Commission solely on the legal question of how it construed the provisions of Public Law 86-272, and agreed with the construction of that statute that Wrigley continues to advocate here. Harry A. Blackmun: Was that a unanimous opinion? F. Thomas Creeron, III: Yes, it was. This Court's decision in Heublein established two firm tenets for construing Public Law 86-272. First, Congress must speak clearly when it chooses to abridge the State's taxing powers, which of course are fundamental to their very existence. If Congress does not speak clearly, ambiguous terms in the statute will be construed in favor of the preexisting authority to tax. Second, clarity that would remove uncertainty was Congress' primary goal in enacting Public Law 86-272. While any of the activities listed by the Wisconsin Tax Appeals Commission would probably be sufficient to support taxation under the principles set forth by the Court in Heublein, the major activities engaged in by Wrigley, which we claim exceeded those listed in the statute, are maintaining stocks of goods in rented warehouse space in Wisconsin and in its employees' homes in Wisconsin; replacing stale or damaged product from that stock of goods; direct agency stock check sales and direct delivery of product from that stock of goods; and personnel management and similar activities engaged in by Wrigley's resident regional manager, which did not involve any customer participation. Harry A. Blackmun: How long does it take for gum to get stale? What's its shelf life? F. Thomas Creeron, III: I do not know. Harry A. Blackmun: It's 6 months. I do not chew gum. [Laughter] F. Thomas Creeron, III: The statute at issue is a minimum activity statute. It was enacted to assure continued entry by small businesses into new markets so that they could compete with large, multistate corporations like Wrigley that had already established themselves in those markets. Under the statute, a seller of tangible personal property is permitted to engage in three activities if they originate outside the taxing State. It may approve orders, it may fill orders, and it may deliver goods to the customer. Wrigley shipped fresh gum, carried on its books as inventory, to a warehouse and to its employees' homes in Wisconsin. That gum was not shipped to the customer, and most of it remained in storage at these locations. Once that gum was in Wisconsin, it is our position that it became a stock of goods within the State. Harry A. Blackmun: That was the only instance, wasn't it? F. Thomas Creeron, III: The only shipment of goods other than to the customer was to the warehouse and to its employees' homes, yes. Harry A. Blackmun: That's the only warehousing instance that the record discloses? F. Thomas Creeron, III: Yes, but that instance continued through all six of the tax years at issue. Harry A. Blackmun: Wasn't much of a warehousing, was it? F. Thomas Creeron, III: No, it was... they rented warehouse space, but gum isn't, and the space was not-- Harry A. Blackmun: How large a space? F. Thomas Creeron, III: --Excuse me? Harry A. Blackmun: How large a space? F. Thomas Creeron, III: I do not know how large the space was, but I believe the record indicates that during this time period the annual cost was no more than $300 a month. Antonin Scalia: When you say they did, I thought it was one salesman did, right? Do we know that other officers of the company knew about that? F. Thomas Creeron, III: Yes, the record clearly reflects that the regional manager in 1973 obtained permission from Wrigley to rent the warehouse, and was assured by Wrigley that he would in fact be reimbursed for those warehouse costs. Then when an employee was finally hired and the... he lived in an apartment, the stock of gum would not fit within his apartment, he continued that arrangement, and he also was assured by Wrigley that he would be reimbursed for those costs. So I don't think Wrigley can say that it did not approve of this particular activity. Once the gum was in these in-State locations, Wrigley's sales representatives would use that gum, travel around to dealer locations, and would fill display stands at the retailer's location. If the retailer did not have the correct sizes of product, the sales representative would swap product with the retailer, and place the different sizes of product in the display stand. It's our position that that activity constituted delivery of goods from within the State. On occasion, approximately once per month per sales representatives, the retailer would not have the correct size of product, the sales representative could not do the necessary product swapping, and the sales representative would then provide gum to the retailer through a device known as an agency stock check. The way that would work was that the stock check would be given to the retailer as a receipt, the wholesaler would bill the retailer, and Wrigley would then bill the wholesaler. Since billing did occur in these situations, it's our position that a sale did take place. Therefore, both approval and delivery of these agency stock check transactions occurred in Wisconsin. The plain and unambiguous meaning of the statutory terminology prohibits this product swapping and these agency stock check transactions. The statute does permit certain business activity within a State that would otherwise have jurisdiction to tax, but its language immediately limits the phrase "business activity" in such a way that the only activity of that kind that may originate within the State must constitute solicitation of orders. The plain and unambiguous meaning of the term "only" is that nothing else may occur. And the Wisconsin Supreme Court's decision, with which Wrigley appears to agree in every respect, holds that the ordinary and accepted meaning of the term "solicit" is to make a plea. The ordinary and accepted meaning of the term "solicitation of orders" therefore, is simply requesting orders. Even if solicitation were determined to be an ambiguous term, its possible meanings can be placed on a spectrum. At one end, simply requesting and receiving orders within the State would be permissible, and any other activity would result in payment of a fairly apportioned tax. At the other end of that spectrum, lease or ownership of physical facilities or the presence of a stock of goods would be prohibited, and every other activity conducted within a State which would otherwise have jurisdiction to tax, would nevertheless be tax exempt. Every presumption in Heublein is in favor of that end of the spectrum, where only requesting orders is permissible. Under the Court's decision in that case, Wrigley's burden to establish that the court should move away from that end of the spectrum any distance at all is enormous. Yet Wrigley's redefinition of the term "solicitation" to include what it claims are incidental activities is at the exact opposite end of the spectrum from its ordinary and accepted meaning. William H. Rehnquist: Well, Mr. Creeron, I think Wrigley's in their brief say that even you, your side, the State, doesn't insist that it be only solicitation, only would you like to buy, period. That even you concede there may be some incidental conversation and so forth in connection with that. They say you don't really limit it to the actual narrowest meaning you could, either. F. Thomas Creeron, III: We, the Wisconsin Department of Revenue, did not apply the narrowest test that is applied in some States, but it is our position that the activity must be part and parcel of the sales pitch. That may be slight... a slightly different definition than saying that all you can do is ask for the order, but-- William H. Rehnquist: How about restocking the gum at the... you know, at the same call would you ask him to buy some more? F. Thomas Creeron, III: --It's our position that you can't do that. That serves another purpose. It serves a quality control purpose of the company, which is other than solicitation. Sandra Day O'Connor: Well, it could be seen as part of the overall solicitation, saying this is the kind of service that we routinely perform and therefore you ought to deal with us. F. Thomas Creeron, III: Well, the statute, first of all, only protects the sale of tangible personal property. It does not protect the provision of services. Sandra Day O'Connor: No, of course. But it's the sale that we're talking about that would be the measure of the tax. But presumably do you take the position that nothing that enhances the chances of making the sale can be done and fall within the exemption? F. Thomas Creeron, III: Not at all. We take the position that if the activity is part and parcel of, inextricably bound, whatever terminology along those lines you chose to use, part of the sales pitch itself, that the activity is permissible. The pre-sale/post-sale test, I think, is useful in regard to the replacement of damaged goods because I think what that test is trying to get at is that you can't do more simply because the first sale or many sales have taken place. The first time you approach a customer who had never done business with you before, you would not be in a position to replace damaged goods, which I think indicates that that activity is something that is beyond the sales pitch itself. Antonin Scalia: Mr. Creeron, suppose you have a salesman who makes his presentation to the customer, the customer buys some gum, and then the customer says, but I'm telling you now, I'm not going to place another order unless you forward to the company and support these complaints that I have about the company... about the last shipment. Now I want you do that for me. And he says, okay, I'll do it. And he does it. He writes to the company and supports the customer's complaints. Is that activity... I don't see how that comes within your definition. That would render the company liable? F. Thomas Creeron, III: I don't believe that activity does come within our definition. I don't believe complaint handling is something that would occur the first time that you approach the customer. So that activity does not fit within our definition. Antonin Scalia: Meaning that it renders the company taxable? F. Thomas Creeron, III: Yes. William H. Rehnquist: But surely solicitation includes not just the first time you approach the company, but approaches thereafter to keep their sales going? F. Thomas Creeron, III: Absolutely. You can do the same things the second time, the third time. William H. Rehnquist: And if you're back the third time, and the customer said I've really got these complaints about the first two batches that I bought, forward them to the manufacturer, the salesman cannot do that without going beyond solicitation in your view? F. Thomas Creeron, III: Again, it's our position that's a quality control service, and that that is... that is not part and parcel of the sales pitch. John Paul Stevens: May I ask about the storage? How long... one salesman was it rented the space for a while and then used the gum. And the answer of the Wisconsin Supreme Court as I remember it was it was de minimis, that it if it had been a routine... major part of the, you know, regular storage of stuff that's delivered, it would be different. Do you recognize any de minimis exception? And if you don't... or if you do, why doesn't this come within it? F. Thomas Creeron, III: We absolutely do not recognize any de minimis exception. We feel that that's inconsistent with the word "only" that Congress used in this particular statute. And if you look in the legislative history, Senator Byrd, the sponsor of the bill, in the Congressional Record at 16355 says that the sale of a single sample within the State would result in a forfeiture of immunity under the bill. It seems that if you're going to apply that logic to warehouse rental, the rental of a single warehouse or a small amount of warehouse space would also result in a forfeiture of immunity under the statute. Antonin Scalia: Maybe Senator Byrd was wrong. F. Thomas Creeron, III: He may have been, but if we look simply to the unambiguous language itself-- Antonin Scalia: xxx Byrd. F. Thomas Creeron, III: --Excuse me? Antonin Scalia: Senator Byrd. But all that the statute says that only these activities. And whenever you have a de minimis exception from anything, it's a de minimis exception from some categorical prescription, otherwise you wouldn't need a de minimis exception. You'd have a regular exception. F. Thomas Creeron, III: Well. Antonin Scalia: So all you say is this is categorical. But every prescription is categorical and you have de minimis exceptions from all prescriptions, or almost all, anyway. F. Thomas Creeron, III: The plain an unambiguous meaning of the term "only" means that, and it's our position, anyway, that Congress did not want a de minimis exception with respect to this particular statute. You do have in various aspects of the law de minimis exemptions created, but I have not seen one with respect to a taxing statute that uses the word "only". Antonin Scalia: I don't know another taxing statute that uses the word "only", do you? F. Thomas Creeron, III: Perhaps that's all the more reason-- Antonin Scalia: xxx then. F. Thomas Creeron, III: --why this statute should not be construed to have de minimis exemption. Byron R. White: What if the salesman is seeking new customers, and he wants some samples. Here is some great Wrigley gum, why don't you try it out for a week, see if you can sell it. So he gives him a few samples hoping that he'll get an order next week. And he does. The guys says, gee, pretty good gum, sells well. And he... if he has to have samples at his house or in a warehouse, is that too much? F. Thomas Creeron, III: If he gives the... a prospective customer samples, it would be our position that that would be permissible because it has no other purpose other than solicitation of orders. If you rent a warehouse for a bunch of samples-- Byron R. White: Well, you got to put them somewhere, and your wife doesn't like them in your house. [Laughter] So what are you going to do? You go to some locker somewhere. Now are you out of bounds then? F. Thomas Creeron, III: --Well, first of all, that's not what happened here. I mean, most of this gum was used to replace product. But the-- Byron R. White: It's what? It's used to-- F. Thomas Creeron, III: --Replace stale product. Very little of it was used as free samples. But the act of renting the warehouse itself, it's our position, would not be solicitation. You cannot have rental of a warehouse full of samples. And if you look at the bills that-- Byron R. White: --Well, you can have a locker 2 feet square. F. Thomas Creeron, III: --If you're renting physical plant within a State, it's our position that that is not permissible with any unambiguous language of the statute. Antonin Scalia: Can you pay a taxicab to carry these samples? I mean, let's say a taxicab charges for suitcases, and you put the samples of suitcases in the trunk of the cab to show it. That's out, too? F. Thomas Creeron, III: No, absolutely you can do that. Antonin Scalia: Well, why can you do it? Why is that any different from storing the samples? I mean, it seems to me everything that you would reasonably be expected to do with samples ought to be okay if the samples... if giving the samples are okay. Otherwise, that's silliness. You say, well, you can give him samples, but you can't carry it in a cab. F. Thomas Creeron, III: I didn't say that you couldn't carry them in a cab. Antonin Scalia: I know you didn't, but you ought to if you're going to say you can't put it in a locker. [Laughter] F. Thomas Creeron, III: I'm saying you can't put it in a warehouse, which is what happened here. David H. Souter: Can you engage in activities to stimulate sales, since the ultimate purpose of doing that is of course to stimulate orders? F. Thomas Creeron, III: You can engage in the sales pitch itself. If by that you mean that is any activity which would generate additional profits permissible, we take the position that that activity is not allowed under the unambiguous language of the statute. David H. Souter: If the salesman arrives for the first time at a store and says we'll give you all of these posters to display in the store that advertise the virtues of the gum, pictures of the twins, and so on, is that impermissible? F. Thomas Creeron, III: No, I believe you can do that. I don't see what other purpose that activity would have, that that activity would be inextricably bound up in the sales pitch itself. David H. Souter: What about renting newspaper space for advertising in local papers or renting radio time? Is that like the posters? F. Thomas Creeron, III: If the term "solicitation" is determined to... is given its ordinary and accepted meaning, then I believe that would be permissible. John Paul Stevens: What about a warehouse to store the posters in? F. Thomas Creeron, III: I don't... again, I don't think you can do that. The bills that were... that did not pass indicated that if you had warehouse space or anything of that nature within the State, that those activities were not permissible. So the act of-- Byron R. White: But the cab's okay? F. Thomas Creeron, III: --The cab's okay. [Laughter] Antonin Scalia: If you just have them driven around constantly you'll be all right. [Laughter] F. Thomas Creeron, III: Probably an unlikely scenario, but transportation to and from the customer is a necessary consequence of solicitation. There is a suggestion in the respondent's brief that we take the position that you can't even drive away from the customer in your automobile, that you have to walk home, and that's absolutely not true. David H. Souter: Haven't you slipped pretty far down the slope when you let the... when you let the salesman go out and start renting or buying radio time and taking out newspaper ads? In the case of giving him the posters, you can say, well that is... he's only dealing with the person from whom he wants to solicit the order. But when you let him start going out to address the world in general, that is no longer true. And why on your view doesn't that cross the line from what is integrally related to an entirely separate activity, and therefore subject to tax? F. Thomas Creeron, III: Well, I don't know if I would look at it in those terms. If there is a problem with advertising, it would be, I think, that the statute only allows solicitation of the customer and the customer's customer. And advertising might be construed as what would be called third-tier solicitation where you're soliciting-- David H. Souter: I think that's what I was assuming in my question, yeah. That's why I... your answer surprised me somewhat. F. Thomas Creeron, III: --That is a problem. You... your first question, I assumed, just asked about is advertising solicitation, not whether advertising was permitted under this particular statute. Apparently I misunderstood your first question. David H. Souter: I probably wasn't clear. In any case, you're receding from the answer that I thought you were giving. I think he is, yes. What if the customer says, gosh, I'll order a lot of this gum, but how do I know I can sell it. Will you agree to take a space in the Denver Post and help me sell this gum. And he says, sure. Make it the Milwaukee Journal. [Laughter] That's all right, too. So I mean, his order... his order is conditioned on your agreeing to take out the ad. And you say sure, and he gives you an order. F. Thomas Creeron, III: Well, if the ad does in fact involve third-tier solicitation, which is... I take it your question assumes that, then... I mean, you can't do it simply because the customer imposes it as a condition. Byron R. White: All right. So he can't do that and stay within the statute. F. Thomas Creeron, III: I don't think so. Byron R. White: All right. Well, you're the Attorney General. Well, what if Wrigley simply advertises over WGM and WB... are those television stations as well as railroad... as well as radio stations in Chicago? Well, whatever the corresponding television stations are in Chicago, and those are beamed into Wisconsin. Does that render him... does that render Wrigley liable? F. Thomas Creeron, III: Again, with advertising you have a difficult problem. We're not relying on the advertising that occurred in this case. But it depends, I think, under the statute, on what audience you're reaching. If you're reaching the customer or the customer's customer, you can do it. Antonin Scalia: What's a customer's customer? I don't understand what you mean. Wholesalers or retailers, is that what you're talking about? F. Thomas Creeron, III: Right. Antonin Scalia: But not the consumer. F. Thomas Creeron, III: Well, you see in this case, the problem with that is, and why advertising really is a difficult issue here and why we're not relying on it, is in this case some retailers were Wrigley's customers. So you're reaching a mixed audience with the advertising. Antonin Scalia: I don't know why you concede customer's customer. I would think the line would end at customer. F. Thomas Creeron, III: I believe section (e)(2), which refers to missionary activities, does permit solicitation of the customer's customer. Byron R. White: Well, if the advertising... if just advertising in the State from out of State would give you jurisdiction to tax, why you would just be home free and so would every other State because there... national advertising. F. Thomas Creeron, III: Well, that... that's the next case. Byron R. White: xxx. [Laughter] F. Thomas Creeron, III: Jurisdiction to tax-- Byron R. White: Not if you lose this one. [Laughter] F. Thomas Creeron, III: --Jurisdiction to tax is present is this case. We're not claiming and it's not an issue in this case that advertising itself creates jurisdiction to tax. The question is if there is otherwise jurisdiction to tax, what activities are exempt solicitation? In conclusion, it's our position that the Wisconsin... the-- John Paul Stevens: Can I just ask one other little... maybe this is stupid, but supposing we could identify the percentage of Wrigley's business that was done in the ways that you say established something more than solicitation in the State. Would that, in your view, entitle Wisconsin to tax the portion of their income attributable to those activities, or would it then allow you to tax all the income they've gotten from everything else they've done? F. Thomas Creeron, III: --It's our position that it's an all or nothing statute. Once you engage in activities beyond those expressly permitted by the statute, you're taxable for the whole tax year. John Paul Stevens: Has anybody passed... have courts passed on that particular point I've raised? You see, the text of the statute, I think, is somewhat ambiguous on that point. F. Thomas Creeron, III: I'm not aware of any court which has taken a contrary position and required some kind of a percentage apportionment based on what activities are solicitation and what are not. John Paul Stevens: So that if 99 percent of their sales and solicitations were exempt under the statute, but they have 1 percent that is generated by an... by a taxable method, the whole 100 percent becomes taxable. F. Thomas Creeron, III: Well, some courts have accepted the de minimis argument, but I'm not aware of any-- John Paul Stevens: But it's either all... it's always an all or none proposition. F. Thomas Creeron, III: --As far as I know, there's no court that's held to the contrary. In conclusion, we urge reversal of the judgment of the Wisconsin Supreme Court. William H. Rehnquist: Thank you, Mr. Creeron. Mr. Prettyman, we'll hear from you. E. Barrett Prettyman, Jr.: Mr. Chief Justice, and may it please the Court: General Creeron has touched upon a number of activities that he says that we engaged in, and I'm going to deal with those in just a moment. But I thought it might be helpful in starting just to focus on some of the things that we didn't do in Wisconsin in an effort to comply with this statute. We were not, for example, licensed within the State. We didn't have a bank account there. We didn't invoke the jurisdiction of any Wisconsin court. We didn't own real estate or a manufacturing plant or a sales office or a warehouse. We didn't collect delinquent accounts or investigate credit-worthiness or grant credit or handle complaints. We didn't approve or accept orders. We didn't hire or fire within the State. We didn't even have a listing in the phone book. And when the salesman gave out cards, they had-- Byron R. White: How did you check credit? E. Barrett Prettyman, Jr.: --Pardon me? Byron R. White: Didn't you even check credit? E. Barrett Prettyman, Jr.: Illinois did. The office in... the Wrigley office, but it was not done in Wisconsin. Byron R. White: You mean they did it on the phone to Wisconsin? E. Barrett Prettyman, Jr.: Well, the Wisconsin office, whenever a prospective customer came in, the name was forwarded to Illinois for a number of reasons, among them, to make sure that they could pay their bills. And Wisconsin... I'm sorry, Illinois-- Byron R. White: So they corresponded or used the telephone to check the credit. E. Barrett Prettyman, Jr.: --Yes, they would either send in a written notice-- Byron R. White: Into Wisconsin. E. Barrett Prettyman, Jr.: --No, to Illinois. Byron R. White: Well, I know but what would Illinois... how would Illinois check the credit? E. Barrett Prettyman, Jr.: I have no idea how they checked the credit. I assume they looked up-- Byron R. White: Well, I assume they communicated with somebody. E. Barrett Prettyman, Jr.: --Well, there's no evidence in this record that-- Byron R. White: Well, you mean they just sat in Illinois and said, gee, here's this name, and it must be good? [Laughter] E. Barrett Prettyman, Jr.: --Well, the-- Byron R. White: They must have written into Wisconsin. E. Barrett Prettyman, Jr.: --What this record reflects, Justice White, is that credit matters were handled out of Chicago. Byron R. White: Yes, I know. [Laughter] E. Barrett Prettyman, Jr.: That's what the record reflects. As I was about to say-- Byron R. White: All right. Go ahead. E. Barrett Prettyman, Jr.: --the cards that the salesmen gave out didn't even have a Wisconsin address or telephone number on it. I touch on that because we were making obviously an honest effort to comply with this statute. Now, General Creeron has focused on the word "solicitation", but I would remind you that that's not what that statute talks about. The statute talks about business activities within the State, which are the solicitation of orders. It's the business activities that we're trying to determine the meaning of here. I would further point out that he said that this statute abridged the State's taxing authority. In fact, this statute is an allocation statute, because what you have here is all of Wrigley's orders or business in Wisconsin is presently taxed in Illinois... 100 percent of it. So what this statute does is say that that is where it should be taxed. On the other hand, if Wisconsin was going to tax some of these activities, then under the so-called reverse nexus rule, Illinois would not tax so... those particular activities. So this doesn't take power away from the States to tax, what it does is to allocate power between the States that can tax. What we-- William H. Rehnquist: Well, I think it's an overstatement, Mr. Prettyman, to say it doesn't take power away from States to tax. Because in the absence of this statute, don't you think that Wisconsin would have a better case for taxing? E. Barrett Prettyman, Jr.: --Absolutely. And in fact I... we don't contest that there's nexus in this case. This is not a Quill case. It has nothing to do with nexus. We would concede immediately that there's nexus to tax. What I meant by that was it isn't as if it was telling the States you cannot tax this activity. What it is is saying that Illinois can tax it, but Wisconsin can't. It allocates that power between the States. Now, General Creeron, if I understood him, in answer to a question from Justice Souter, conceded that dropping off posters would be part of the business activities that was covered here. And he said because that's inextricably bound up in the solicitation process. That is our case. That is our position, that everything that we did was either inextricably bound up in the solicitation process or it was of a de minimis nature. Now let me go to the four or five points that he mentioned that he thought went too far. And the first was what he called the agency stock transfers. This was not a-- William H. Rehnquist: The what? E. Barrett Prettyman, Jr.: --The agency stock transfers. This is not a sale. There was no price involved, no billing, no money accepted, no invoice. What this was was really an internal check of the company to make sure that there was no sale. And it was also de minimis. And it was established that it represented 7/100, 000 of 1 percent of the business done there. And what this process was, it was very simple. If you went in, for example, to a new customer, say a retailer, and he's found that he didn't have any gum on his shelf. You said... and you want to get him as a customer and you want to solicit his sales, you took out some gum from your car, and you put it on the shelf, and you said, look, try this and, you know, we'll get some orders from you. Then you made out one of these agency stock transfers and you sent it either to the wholesaler or to the company, which in turn would bill. That's all it was. It represented, it was estimated, like 5 percent of the gum that was carried in the car. William H. Rehnquist: Who was billed for what? E. Barrett Prettyman, Jr.: Either the wholesaler billed that... retailer, or if it was a large account, Wrigley billed the whole... the retailer. David H. Souter: But de minimis or not, it was a sale of gum. E. Barrett Prettyman, Jr.: No, it was not... it was not a sale... I don't think it was a sale in the normal sense, Your Honor, because-- David H. Souter: Well, it was not a sale to a consumer, but neither was it a gift to the retailer as an inducement. It was in fact a sale to the retailer. E. Barrett Prettyman, Jr.: --If it will help move us along, I will say it's a sale because it was totally de minimis. I... when I said it wasn't a sale, I meant it wasn't in the normal sense of a sale where you go and tell the fellow the price and you haggle with him. And then you... he pays you the money and you give him the gum. That isn't how it happened. But I would concede that if this was the way that the company did business on a regular basis with all of its people, it could possibly go beyond solicitation. But what I'm saying is that when you have an activity that is 7/100, 000 of 1 percent of your business, surely, once you accept the de minimis concept, you would have to say that that's it. Sandra Day O'Connor: Well, is there a de minimis concept that we should accept here? It certainly isn't reflected in the text of the statute. E. Barrett Prettyman, Jr.: I don't think most statutes that have a de minimis exception to them express language in that way, Justice O'Connor. I would point out that not only has this Court recognized a de minimis exception in numerous cases, but Congress itself in the legislative history of this act referred to de minimis exceptions. Petitioner's own regulations implicitly recognize have been de minimis exceptions. Some of the State-- Sandra Day O'Connor: Well, do we have to worry about the word "only" that appears in the statute? E. Barrett Prettyman, Jr.: --You know it's interesting, Your Honor, if you look at the statute and take out the word "only", I think the statute would mean exactly the same thing. "Only", I think is a matter of emphasis. I would certainly agree with you on that. But if it said no State shall have power to impose a net income tax if the business activities are the solicitation of orders, it would mean exactly the same thing. So I take the word "only" to be a matter of emphasis, but I don't see that it does away with a de minimis exception at all. Some of the amici in this very case that support petitioner agree that there is a de minimis exception. And I would remind you, for example, of the Abbott Labs case, which we cite in our brief. There you have a... it was a Robinson-Patman exemption for sales to nonprofit hospitals that used the goods for their own use. And the question came up, well, what about purchases for walk-ins? And you said, well, walk-ins wouldn't be for the hospital's use, and then somebody said, yeah, but what about emergencies where the walk-ins are connected with the hospital. And you said, well, that's de minimis. Now, you carved that right of the statute. So I don't think there can be any question that there has to be a de minimis exception because look, you're dealing with companies large and small here. And to say that the taxing authority can kind of peek around the corner and find in an exigent circumstance some exception during the course of an entire tax year, where somebody went a bit too far, and that brings me to the warehouse situation-- Antonin Scalia: Before you get to the warehouse, what is the relationship that renders something de minimis or not? You gave a very tiny percentage of Wrigley's total sales-- E. Barrett Prettyman, Jr.: --In Wisconsin. No, only in Wisconsin. Antonin Scalia: --Of their total sales in Wisconsin? E. Barrett Prettyman, Jr.: Yes. Antonin Scalia: You think that's the way to decide it? E. Barrett Prettyman, Jr.: Yes. I think it relates either... can relate either to the size of the sales or to kind of a minor exception to your normal practice. And if I can move logically then to the warehouse situation. John Paul Stevens: But may I just interrupt there? E. Barrett Prettyman, Jr.: Certainly. John Paul Stevens: You said minor exception to the normal practice, but we're talking about a normal practice, aren't we, the replacing of stale gum and doing this delivery and having this billing you described here? E. Barrett Prettyman, Jr.: Well, there's a big difference between replacement of stale gum and the agency stock. John Paul Stevens: Well, aren't they both normal practices? E. Barrett Prettyman, Jr.: Well, the agency stock is a normal practice, but it's de minimis because it constitutes such a tiny percentage of what we do. Replacement of stale gum is as inextricably bound up in solicitation as anything you can possibly conceive. John Paul Stevens: Does the retailer pay for the fresh gum that's used to replace the stale gum? E. Barrett Prettyman, Jr.: No, he's already paid for it. You see, the sale has been made, the shipment has been made. It's on his shelf. The salesman goes in and he finds it's over 6 or 8 months old, and he says this is out of date. Now why does he do that? Because he knows that if that salesman gets caught with stale gum and his customers tell him, we'll never get another order. A salesman will tell you that there's nothing more inextricably bound up in solicitation than replacing stale gum. He's not going to get any orders unless he's got-- Antonin Scalia: This is gum that has not gone stale on the retailer's shelf. It is gum that is stale when delivered to the retailer? E. Barrett Prettyman, Jr.: --No, no, no. It would normally have gone stale on his shelf, Your Honor. I hope we don't deliver stale gum. Antonin Scalia: And he doesn't pay for this new gum? E. Barrett Prettyman, Jr.: No. It's exchanged free. He's not charged for it. Antonin Scalia: So he only pays for the gum that he either sells, or that stays perpetually fresh? E. Barrett Prettyman, Jr.: If he-- [Laughter] It's not in the contract, but that's what we do as part of our solicitation. Because if we put packs on his shelf and then a customer comes in and says, you know, that stuff I chewed the other day was hard as a board, he's not going to put any more orders with us. Byron R. White: xxx wasn't gum. Suppose it's a very expensive piece of machinery, and all you do... the only thing you do besides solicitation, and you're going to claim that it's solicitation, is that you service that engine. He calls you up and says this engine won't... isn't running. And so you rush out there. You have a mechanic or the same salesman, he's a serviceman, and he goes out and services the engine. That's part of his regular duties. Why? He'll never get another order from that company if he doesn't service that engine. Now, do... is that in the same category? E. Barrett Prettyman, Jr.: Your Honor, I think you make a very good point. And that is, what you look to-- Byron R. White: What point was I making? [Laughter] I was asking a question. E. Barrett Prettyman, Jr.: --The fact that there are some duties that can go beyond solicitation depending what is customary in the industry. If... you said technical people who may go out... you said two things. You said, first of all, technical people, and secondly, you said salesmen. If they're technical people, they're not salesmen and they're not soliciting. When you look at what a salesman ordinarily does within the industry-- Byron R. White: Say the salesman is a qualified technician and he... part of his duties is regularly answering customers whose engines won't run. E. Barrett Prettyman, Jr.: --I think, Your Honor, that you'd look at what was customary in the industry. Byron R. White: Well, say it is customary in the industry. E. Barrett Prettyman, Jr.: Well, if it's customary in the industry, and in fact he's doing most of his time selling, and as... he also spends a portion of his time doing something which he thinks he has to do in order to get the next order, then I would say that it's covered here. It's inextricably bound up in solicitation. But if he's primarily a repairman, and we use in our brief the example of the 60-ton generator, if somebody's going to go out and fix that, that's not a solicitation of orders. If I could move then to the warehouse because something has been made of that. I mentioned a few minutes ago the exigencies of a given situation, and surely that was this one. What happened was somebody was fired and we were stuck with his gum that he had in his car. And so it was temporarily put into a warehouse. But then the next fellow who came along had an apartment. He couldn't get it in his apartment apparently. I don't know whether they wouldn't allow it in or he didn't have room, or what. Antonin Scalia: It was his wife. [Laughter] E. Barrett Prettyman, Jr.: I'm not going to touch that one. But... so they kept the warehouse on for the period when he was aboard because they didn't have any place else to put it. Now, that is not the kind of warehouse that was referred to in the legislative history, that Congress didn't want you to have a plant or a sales office or a warehouse. This was an exigent circumstance demanded by the... because you couldn't leave stuff out on the street. And that again was a de minimis situation under the view of the Wisconsin Supreme Court, and I would suggest to you, fully supported here. Sandra Day O'Connor: Are there any cases that you rely on for the proposition that there's a de minimis exception in this kind of tax situation? E. Barrett Prettyman, Jr.: Well, I don't have a tax case for you, but I gave the example, Your Honor, of the Abbott Labs case, where you did carve a diminishment... de minimis exception right out of the statute itself. Sandra Day O'Connor: Yeah, but the argument is that you have different presumptions that play when it's a tax case and when it is restricting the State's otherwise existent jurisdiction to tax. E. Barrett Prettyman, Jr.: Your Honor, I think you have to look, if I may suggest it, at Congress really had in mind with this statute because I don't think you give it the most conceivably restrictive interpretation that you possibly could. Congress here was worried about the fact that you have over 6,000 taxing jurisdictions. They have all kinds of different bases and rates and timing and all the rest of it. And compliance with this kind of local taxation was so onerous that in some cases it was pointed out that the cost of compliance was more than the tax. So that was number one that they were worried about. Number two, they were worried about the possibility of double taxation. In the situation here, Illinois would continue to tax and Wisconsin taxes, and you've got double taxation. Because of that, this statute was overwhelmingly passed. The House passed it 359 to 31, the Senate did it on House vote. It's been in effect for 30 years and more, since 1959. Congress has had at least one complete report on it, the so-called Willis Report in 1962, where they essentially approved of how it was being carried out. Sandra Day O'Connor: Well, there's a wide variety, is there not, among the States as to what exemptions they say are covered and what aren't? E. Barrett Prettyman, Jr.: The language in some of the decisions is widely varying, Your Honor, but I would suggest to you I do not... I think I can honestly say I do not know of a single State decision that I would disagree with the result in, because in every one of those cases, they were doing something which we would concede is beyond solicitation. So, although the language-- Byron R. White: You concede it's all or nothing? E. Barrett Prettyman, Jr.: --In answer to Justice Stevens' question it was... that's an interesting question. I'm not sure what the answer of that is. It has not been raised. I can assure you that I go back and lose this case I will argue that it's not all or nothing. But what the result would be, Your Honor, I honestly-- Byron R. White: Have you covered all the four things that-- E. Barrett Prettyman, Jr.: --Let's see. I have covered the agency stock. I haven't covered personnel or home offices. Byron R. White: --But you've covered the stale gum. E. Barrett Prettyman, Jr.: Replacement of stale and warehouse. Byron R. White: And the warehouse. E. Barrett Prettyman, Jr.: Yes. Byron R. White: All right. E. Barrett Prettyman, Jr.: Shall I touch briefly, then, on-- John Paul Stevens: Can I ask one other question about the stale gum? What did your figure of 7/100, 000 of 1 percent pay into? Of all of these activities or the smallest of the group? E. Barrett Prettyman, Jr.: --It covered some $600 worth of sales divided into the total sales in the State. John Paul Stevens: I understand. But that's just the agency stock. E. Barrett Prettyman, Jr.: Yes. John Paul Stevens: That didn't include, for example, replacing the stale gum. E. Barrett Prettyman, Jr.: No. And the agency stock-- John Paul Stevens: How big a percentage is that? E. Barrett Prettyman, Jr.: --Pardon me? John Paul Stevens: Do you know how big a percentage that is? E. Barrett Prettyman, Jr.: No, but that was... the salesman testified that it was 85 percent of the stock that they kept on hand. And the 10 percent was samples, and then the 5 percent was the agency stock. John Paul Stevens: Eighty-five percent is used to replace stale gum. E. Barrett Prettyman, Jr.: Yes. So that ought to give you some idea of it. John Paul Stevens: Would the case be different if instead of replacing stale gum, you bought it back? E. Barrett Prettyman, Jr.: I think if you make an actual sales, as a-- John Paul Stevens: I'm... not sale. If you bought from the retailer his stale inventory, you paid him for it, and then sold him, would that be a different case? E. Barrett Prettyman, Jr.: --You mean you buy back what you've sold him? John Paul Stevens: Well, because you don't want him to sell that. He's got some merchandise that you think is going to hurt the goodwill of your company. E. Barrett Prettyman, Jr.: Oh, I see. In other words you buy... the salesman on the spot buys back the... I think that could well go beyond the statute because-- Byron R. White: What do you do with the stale gum you take off the shelf? Throw it in the wastebasket? E. Barrett Prettyman, Jr.: --No. Byron R. White: It's really a trade, isn't it? E. Barrett Prettyman, Jr.: Well, first of all-- Byron R. White: You take it and you replace it. That's a trade. E. Barrett Prettyman, Jr.: --Back during this period, most of it was packaged and sent back to Chicago. A little bit of it-- Byron R. White: So it's a trade. It's a trade. E. Barrett Prettyman, Jr.: --A little bit of it was thrown into the local dumps. Byron R. White: So instead of money, you give them new gum. So it's sort of a sale. E. Barrett Prettyman, Jr.: It's an exchange. Byron R. White: It's sort of a sale. But he's billed for it. That's what he was billed for. E. Barrett Prettyman, Jr.: No, not for the stale gum. No, no. Let's distinguish now between the agency stock, which is a tiny little percentage, and the replacement of stale gum, which is completely free. Harry A. Blackmun: Mr. Prettyman, why did they send it back to Chicago? Can't they dump it in the Wisconsin landfill? E. Barrett Prettyman, Jr.: Your Honor, the reason it is sent back to Chicago is that in those days it could become part of new gum. It could become a base for new gum. That is not longer done. Harry A. Blackmun: Recycled. [Laughter] So when you chew gum, you're chewing stale gum, too. E. Barrett Prettyman, Jr.: Well, they treat it. If I can deal with the personnel matter that he mentioned. Personnel decisions were made in Chicago. The final decisions were all made in Illinois. The local man, of course, had to do some things and make recommendations. But it's interesting that there are instances in the record where the local man made recommendations about raises, for example, which were turned down by Chicago. In one instance where they were going to fire someone, the regional manager, who was in Wisconsin, got permission ahead of time. He said if the facts prove true, do I have permission to fire him, and they said yes, and he fired him. So the personnel decisions, I think, are well taken care of. They're outside the State. In so far as the home offices, which I believe is the last thing that General Creeron mentioned as concern, we did not have a sales office. There was no evidence whatever that Wrigley knew about the fact that this gum was kept in the home. It didn't pay for it. The use was strictly incidental. You had a file cabinet here for your normal reports, or you used the kitchen table or a part of the basement. You had one or two meetings a year of the sales personnel, and in one case they were sent... they were in the home. They were usually in a home. But the sales meetings were completely taken up with solicitation. That is, how are we going to sell more gum. And even the manager, the regional manager who was within Wisconsin, his chief job was solicitation. He spent from 80 to 95 percent of his time in soliciting orders. I think that's all that the... that my opponent has mentioned, but I do want to talk about the pre-sale/post-sale test for just a moment. If you look on page 2 of his reply brief, something that I had noticed before in his main brief, he says that you don't have to have a sale in order for you to be covered under the pre-sale/post-sale test. Now if that's true, it seems to me we fit his test. If you don't have to have a sale, and all you have to do is the activities that would lead up to a sale, or if you have a sale, then you keep going to try to get the next sale, why, I think we meet the pre-sale/post-sale test. Or to put it another way, I don't thing the so-called pre-sale/post-sale test makes any sense. Because certainly in the gum industry, and Justice Blackmun, you put your finger on it, was that you not only have a short shelf life, but you have, you know, 95 percent of it is impulse buying... 95 percent is impulse buying. And so you... when you put those two together, what you have there is activity that is ongoing in every sense. The gum industry is different from that 60-ton generator that I mentioned to you. Antonin Scalia: That's one of the things that troubles me. I can't believe that Congress enacted a statute that would be almost impossible of application, and I'm looking for a criterion that would be readily applicable. And maybe the categorical solicitation test is easier than what you're proposing. The State authorities, under your test, would really have to know each individual industry. If servicing normally goes along with solicitation for this industry, it's okay. If it doesn't normally go along with solicitation for that industry, although it does for another one, then it's not okay. That makes life very complicated. Why should we buy in to that kind of difficulty? E. Barrett Prettyman, Jr.: Your Honor, I don't think it is at all. I think it... first of all, you're looking for a criteria. I would say that the business activities... and don't forget I go back to that. It's just not solicitation. It is the business activities that are solicitation. The business activities that are covered are those which are directed toward achieving an immediate or a future sale, and which is normally done by a salesman or a supervising salesman in that industry. Now, that is not different than the kinds of determinations that have to be made all the time, based on custom and usage in an industry... in tax matters. For example, section 482 of the Internal Revenue Code, where a company's lending money to a foreign sub, says you can charge the interest rate that's customary in the industry. And the IRS-- Antonin Scalia: But it says that. I mean, it goes to the trouble of saying that. And this doesn't say what's considered solicitation in the industry, it says solicitation, as though that's something everybody understands and it's the same everywhere. E. Barrett Prettyman, Jr.: --Well, don't we have to be practical about this, Your Honor, and-- Antonin Scalia: I'm trying to be. E. Barrett Prettyman, Jr.: --try to make sense out of what Congress did. They obviously intended something by this statute, and I think what they intended was that whatever you normally do for... to solicit orders is what is covered. And what salesmen do not ordinarily do is not cover it, absent a de minimis exception. Antonin Scalia: Well, that would make me think that maybe carrying your samples around in the taxicab, yes, is part of solicitation, but I don't know why replacing stale gum is. E. Barrett Prettyman, Jr.: Well, I can only tell you that the evidence in this case, Your Honor, is that there is nothing more inextricably bound up in a salesman's mind and in common usage and practice than replacing stale gum. Because you're not... look, if you go to a retail store, and you're selling $10 worth of gum, that's not going to do anything for you. But if he's a regular-- John Paul Stevens: May I interrupt you right there? E. Barrett Prettyman, Jr.: --Certainly. John Paul Stevens: I take it a regular practice of delivering gum by the salesman would not constitute solicitation. And I would... the problem I have with your example is I wouldn't... it would fit perfectly if he took away the stale gum and then said I'll give you a free order and have the wholesaler ship it into you. So that... but he is doing the delivering himself, on a regular basis, of a portion of the inventory sold by the retailer. And that's the question that troubles me the most. E. Barrett Prettyman, Jr.: Well, Your Honor, I will submit to you that it is not delivery, that's... that it's an exchange. And what the statute contemplates is a delivery order sent for approval outside the State. And that's not this. That order has been sent from outside the State. It's in the store. That has been completed. John Paul Stevens: No, what's in the store is the gum that's being exchanged. The stuff he's delivered hasn't been ordered. Do you... it would be... see, what I'm saying is it would be a quite different case if the replacement gum were shipped by the wholesaler... free. But he just takes away the old. And taking away the old gum, no problem. But delivering the new gum, that's what troubles me. E. Barrett Prettyman, Jr.: Well, that's funny. I don't look at it that way because I don't think that's what the statute is talking about when it means delivery. I think this is a simple exchange for gum which has been delivered, and he's going to get further deliveries in the future. And all he's doing is he's taking a gum which is really no longer what the man bargained for, what he paid for, and just saying, we'll give you what you originally paid for and what was originally delivered to you. If there are no further questions, we would strongly urge that the Wisconsin Supreme Court, which as I think Justice Blackmun pointed out, was an unanimous view, and which ordinarily you would not expect from the taxing State, be affirmed in this case. Thank you. William H. Rehnquist: Thank you, Mr. Prettyman. Mr. Creeron, you have 2 minutes remaining. F. Thomas Creeron, III: On the de minimis exemption, the word "only" is what gives the statute its character protecting small business. If you make $600 of sales, and you say that's de minimis, a small business who comes into the State and makes that same $600 of sales, and it's their total sales, loses out under the statute. That's totally at odds with the statutory purpose of protecting small business. The de minimis exemption also hasn't been defined in any way-- John Paul Stevens: I don't know if I understand that argument. Because a small business could make de minimis mistakes, too, and be protected. I mean, a small business isn't one that has only $600 of sales. That can have a couple hundred thousand and still be a small business. F. Thomas Creeron, III: --Well, even if-- John Paul Stevens: What I'm saying is if there's a de minimis exception, the small business will get the benefit of it as much as the big business. F. Thomas Creeron, III: --But how do you determine what the de minimis exemption is? I mean, they have no definition-- John Paul Stevens: Well, that's another problem. But I just don't buy your argument that it's loaded one way or another based on the size of the company. At least I don't understand it on that basis. F. Thomas Creeron, III: --But I mean, a small business couldn't claim a de minimis exemption if all its $600 of sales involve direct delivery. You know I... it seems to me that that removes the character of the statute of protecting small business. Also, the statute was designed to protect those corporations that couldn't afford attorneys and accountants to examine the tax laws of other States. I think there's a certain irony in this case, if you just look at the front of Wrigley's brief, that they're claiming the benefit of the statute in light of the great number of able counsel that they're able to employ. John Paul Stevens: Just because you're such a worthy opponent. [Laughter] F. Thomas Creeron, III: Thank you very much. William H. Rehnquist: Thank you, Mr. Creeron. The case is submitted.

William H. Rehnquist: We'll hear argument 99-1702, the State of Texas, Petitioner, v. Raymond Levi Cobb. I have misplaced my... here we go. Mr. Coleman. Gregory S. Coleman: Mr. Chief Justice, and may it please the Court: Before Raymond Cobb confessed to murdering Maggie and Korie Rae Owens, he was more than once meticulously informed of his right to counsel and the consequences of his choice to waive that right. His confession was properly admitted at trial and should not have been rejected under Jackson, because Cobb's Sixth Amendment right to counsel had never attached to the murders and therefore did not need to be waived, or, alternatively, because Cobb validly waived whatever Sixth Amendment right to counsel had attached. Applying McNeil's rule of offense specificity to exclude factually related but uncharged crimes from the scope of Sixth Amendment attachment is true to and, we think, required by both the text and the purposes of the Sixth Amendment. In evaluating attachment, the court is interpreting the Sixth Amendment terms, criminal prosecutions and the accused, and for decades this Court has consistently interpreted that text to limit attachment of the Sixth Amendment right to counsel to the formal initiation of judicial criminal proceedings. Indeed, setting aside Escobido-- Ruth Bader Ginsburg: Mr. Coleman, do I understand from what you just said that if everything had occurred in Walker County, if there had been no moving of Cobb to Odessa, no bail, everything happens in Walker County, and Ridley is appointed to represent Cobb, the Walker County law enforcement personnel never consult Ridley before interrogating Cobb repeatedly, it would still be, in your view, no violation of any Sixth Amendment right; is that correct? Gregory S. Coleman: --The fact that the interrogation occurred in Odessa makes no difference, you're exactly right. If Ridley had been appointed on the burglary and had not yet been appointed on the murders because there had been no indictment, the police were free to interrogate Mr. Cobb. Ruth Bader Ginsburg: So what the police did was something they didn't need to do. In other words, the police did twice call Ridley while he, while Cobb was still in Walker County. Gregory S. Coleman: That is correct. Ruth Bader Ginsburg: Twice called him and said, is it okay if we question your client, and Ridley said yes both times, but that was something extra the police did they were not required to do, in your view? Gregory S. Coleman: That's correct. I don't think that they were obligated to do it. I don't think that they called. I think the record indicated that, in fact, he was in court with Ridley when they asked if they could talk, and so he was there. Ruth Bader Ginsburg: But in any event, they did tell him, we're going to talk to your client, is it okay, and he said yes? Gregory S. Coleman: Yes. Anthony M. Kennedy: Taking Justice Ginsburg's question a little bit further, suppose you have this situation: the counsel is there, they begin questioning him on the break in. The police then say, counsel, we'd like to see you outside a minute, and they go outside of the interrogation room and they say, counsel, you know, we're not interested in the stereo, we're interested in the murder. Could a responsible attorney say, oh, well, I'm not representing him on that, go back in the room, ask him all the questions you want? I would be amazed if an attorney could do that. Gregory S. Coleman: I don't know if it would be a responsible thing to do, but the Court made clear in Davis that until there's been an initiation of criminal proceedings the Sixth Amendment constitutional right to counsel doesn't attach, so it would be poor practice, perhaps malpractice, but not a Sixth Amendment violation. Sandra Day O'Connor: Well, a number of courts have come to the conclusion that where the two crimes arise out of the same conduct and are closely related, that you're going to go ahead and apply the Sixth Amendment requirement to the related but yet uncharged crime. Is that the majority view of lower courts today? Gregory S. Coleman: I don't think that courts have established any kind of consistent test, but yes, most of the courts that have addressed this issue have said there is this test, although most of them have found that there is, in fact, no violation. It's a relatively small number that have found a violation. But we would go back and say that they're erroneous in applying that test at all, and as I was saying, Escobido aside, this Court has never, ever held that the Sixth Amendment attached prior to the initiation of formal judicial proceedings, prior to indictment or arraignment. Anthony M. Kennedy: Well, under the hypothetical we were just discussing and the answer you gave to Justice O'Connor, I suppose the police could say, and we're now going to question him about that murder so we want you out of the room. You can't go back in that room. Gregory S. Coleman: Under Moran that might be constitutionally permissible, but remember, the important aspect of the analysis is what happens in the room, because the defendant does have a Fifth Amendment right to counsel that he needs to be informed about, and he has an opportunity to waive that, so that would only happen if the defendant or suspect has actually waived his Fifth Amendment right to counsel. Anthony M. Kennedy: That's true. What I'm concerned about is the possibility for some manipulation, if the police hold and charge on the lesser offense merely to bide their time until they begin questioning about the more serious offense. Gregory S. Coleman: I'm actually very anxious, Justice Kennedy, to debunk this idea of abuse or manipulation, because when the police are doing an investigation, and they might be investigating a number of related crimes, once they have enough evidence to convict, admissible evidence to convict on one of them, there's certainly no problem with them bringing that charge. They have a serious societal interest in continuing to investigate other crimes, but if you compare that defendant who has had one crime charged against the defendant where they haven't brought any of the charges, once you charge that defendant he has the right to counsel that has now attached not only to the Fifth Amendment but also the Sixth Amendment, and our system ensures that that person will not only have a right to counsel but will relatively quickly actually be represented by counsel, who will then, of course, advise the client as to the charged offense and almost certainly as to the uncharged offenses and will say, don't talk to the police about this charged offense or anything else and, in fact, Mr. Ridley had given that counsel to Mr. Cobb. He simply didn't follow it. But I don't think-- David H. Souter: Well, that... that isn't the-- Gregory S. Coleman: --there's a real serious risk of manipulation. David H. Souter: --As I understand it, that isn't the advice that he gave him. He... there's no indication that I know of that he gave him any advice that he should not talk to the police about anything else. He in fact said to the police sure, go ahead and talk with him about the murder. Gregory S. Coleman: In September 1995-- David H. Souter: Is... just as a matter of fact, isn't that correct? Gregory S. Coleman: --Yes. David H. Souter: Okay. Gregory S. Coleman: On two occasions he told the police to go ahead and talk to them. In September 1995, when Cobb was returning to Odessa, Ridley said, here's my card and my number. If the police try to contact you, call me. Stephen G. Breyer: Well, the obvious problem is the person is accused, or the police think he kidnapped, murdered and raped a person, or they think he distributed drugs, you know, and my first example could involve three separate crimes, my second example could involve possession, a telephone count, a distribution count, and if there was more than one person a conspiracy, all right? So the police indict the person for one of those four, or two of them, and he gets a lawyer, and the next minute they turn around and start asking him questions. They say, oh, we were asking him about the other two. It's all the same event. So I mean, what could a Constitution mean that creates that situation? That's why every court has decided that it doesn't mean that. Gregory S. Coleman: Not every court, Justice Breyer. Stephen G. Breyer: Well, I mean most. Gregory S. Coleman: But that-- Stephen G. Breyer: What's the answer? I mean, that... I think my problem is what has led almost all the courts to adopt this fuzzier test, and what is the response to that rather direct problem? Gregory S. Coleman: --I think if you can establish trickery then you create a Fifth Amendment issue, because it is the Fifth Amendment and not the Sixth Amendment that goes primarily to the issue of coercion. Stephen G. Breyer: It won't be trickery. If the rule is you cannot... you know, the counsel relates only to the offense charged, there's no trick involved. The police, in total good faith, go and ask the same set of questions relating to the kidnapping without telling the counsel. There's no trick, and that seems not a trick, it seems absurd. Gregory S. Coleman: I don't believe that it is. I believe that the police have a strong societal interest in continuing to investigate crimes that have not yet been solved, just as the police were trying to solve two murders in this case. They suspected Cobb but they had no evidence, and I don't think that the Constitution, particularly the Sixth Amendment, prevents the police from going back in and interrogating-- Stephen G. Breyer: And the lower courts have all agreed with you. They've all agreed with you, if it's actually a separate crime. Gregory S. Coleman: --I don't believe that the fact that there is a factual connection between the crimes makes any constitutional difference, distinction. William H. Rehnquist: Well, doesn't McNeil say that it's offense specific? Gregory S. Coleman: McNeil specifically does say that it's offense specific and that should be interpreted, as I was arguing, to exclude factually related crimes, because factually related crimes are in no better position to receive those kinds of constitutional protections that the Sixth Amendment gives than are unrelated crimes. This Court has said that the purpose of the Sixth Amendment is to protect the unaided layman at critical confrontations with his expert adversary, the Government, after the adverse positions of the Government and the defendant have solidified with respect to a particular alleged crime. There are three parts of that statement that this Court has given in several cases that can't be satisfied by a factually related crime. Certainly the particular alleged crime doesn't meet it. We don't think that there's a solidification of the adverse positions with respect to factually related crimes. The police are still investigating a related crime. They don't know if the defendant did it or not. Generally speaking they won't have sufficient evidence to bring that charge, certainly there was not sufficient evidence in this case, and so there's no solidification, and there is not a critical confrontation, which has been defined to be a critical stage, which is a very well established part of this Court's Sixth Amendment jurisprudence. There's simply no critical stage because it is pre indictment. Antonin Scalia: Mr. Coleman, would it make any difference to you if the other crime about which he's being interrogated is not only factually related but, under the Blockburger test, would be a greater offense of which the offense on which he's indicted is a lesser included offense? That is to say, he has an attorney on a burglary charge, and he's interrogated concerning the offense of murder in the course of burglary. Gregory S. Coleman: We have argued, and it is our position, that if it is not simply a factually related crime, but the argument is that it is the same crime, then we think that there's a strong argument the Sixth Amendment would, in fact-- Antonin Scalia: Well, it's not quite the same crime, but if he got acquitted on the burglary he'd have to be acquitted on murder in the course of burglary. I mean, Blockburger would cover it and it would be double jeopardy. So in that case you'd say he could not be interrogated without consulting his lawyer concerning murder in the course of burglary? Gregory S. Coleman: --We would say that this Court's rule would prohibit the introduction of evidence relating to that interrogation. William H. Rehnquist: Why? Now, why is that, because it satisfies the, or doesn't satisfy the Blockburger test? That's quite a burden to put on a police officer. I mean, we have a hard enough time applying that test ourselves, and to say that the police officer would be responsible for a Blockburger analysis really is quite demanding. Gregory S. Coleman: We think that the Court recognized in Moulton that when the police interrogate suspects they're frequently trying to get evidence about any number of crimes, and one of those might be a previously charged crime, and that is why the Court has very consistently said that the remedy we're going to impose is simply that if you get evidence as to a charged crime for which the Sixth Amendment has attached and been asserted, then we will not allow you admitted at trial but if you have evidence related to other, uncharged crimes, and we would say also factually related uncharged crimes, then you may admit it. So it's not the police that are really having to make a hard determination at the time that they do the interrogation. That is made later, when you try to introduce the evidence at trial. Anthony M. Kennedy: Well, I think it's become even harder. I assume the police officer ought to know that if he has a constitutional right to interrogate or not, and you say well, maybe he does, maybe he doesn't, depending on what the defendant says. That... we've never given that insufficient guidance to the police. Gregory S. Coleman: Well, Clanky is the only case we think in which there was actually the same offense, and we think that if the police are still investigating, or they believe-- William H. Rehnquist: What was the name of the case you said, Clanky? Gregory S. Coleman: --Clanky v. Illinois. I'm sorry. It's an Illinois Supreme Court case applying the factual relation test. The police are still investigating other crimes for which no charge has been made. We think that they have at that point... and that's all they need to know. They can then interrogate the suspect, give them their Fifth Amendment rights, and do what they can to protect those, and then if they end up getting information about a charge that has been... a crime that has been charged and for which the Sixth Amendment has both attached and been asserted, then they can't use it at trial, but they can use it, under Moulton and under this Court's precedents, for any uncharged crime, a crime for which the Sixth Amendment had not yet attached at the time of the interrogation. But what respondent would have the court do is make the court, make the police apply a test that asks the police to know ahead of time if the crime for which they are going to interrogate the suspect relates to something that the suspect has previously been charged, or with respect to something that the suspect and his counsel may feel that there is an attorney client relationship, and we don't think that that can be the test. Ruth Bader Ginsburg: Mr. Coleman, there are... there's quite a range. There's one, the McNeil case itself, where the uncharged offenses were wholly unrelated, different time, different place, and here you have one continuous episode. Don't most courts, if I understand them correctly, think that if there is a close relationship between the offenses, if they're all part of one series of events, that the Sixth Amendment right would attach? Gregory S. Coleman: The fact that there is a close relationship cannot overcome the fact that that closely related crime cannot fit within the stated purposes of the Sixth Amendment, and the fact that it would improperly and unnaturally hamstring the police's legitimate efforts to investigate and solve a crime for which no one has been brought to justice. David H. Souter: Mr. Coleman, as I understand your argument on why the permissibility of this kind of interrogation for related offenses is not likely to cut back, in effect, on the Sixth Amendment right which has attached, your best argument seems to be that you don't have to recognize a Sixth Amendment right here because there's going to be, as there was in this case, an adequate warning that one doesn't have to speak, and an adequate Fifth Amendment opportunity to get a lawyer, probably the same one, but in any case to get a lawyer prior to the commencement or continuation of any interrogation. Do you agree that's probably your strongest response to the concerns expressed by people like Justice Breyer? Gregory S. Coleman: I believe so, and I believe that's exactly what the Court said in Patterson when it indicated-- David H. Souter: Right. Gregory S. Coleman: --that the reason to have counsel at a custodial interrogation for Sixth Amendment purposes is not any stronger than it is for Fifth Amendment, and the Fifth Amendment-- David H. Souter: What about-- Gregory S. Coleman: --test protects them. David H. Souter: --I'm sorry. What about, then, the concern for noncustodial interrogations? If the person who has been charged with the first offense is out on bail, and the police want to go and interrogate, simply see if they can strike up a conversation with a guy at his apartment, we're not going to get... I presume we're not going to get into any Miranda rights. Isn't the opportunity for abuse there, so that on your best argument, if the police are subtle about what they do, and they have a defendant who's not in custody, they will, in fact, raise the, I think the specter of cutting back on the Sixth Amendment right with respect to the crime that has already been charged. Gregory S. Coleman: The Court in Patterson made it clear that, as to the charged offense for which the Sixth Amendment has attached, there must be an express waiver, so that is why-- David H. Souter: So that there would be an exclusion if anything were said about that offense? Gregory S. Coleman: --If there was no valid waiver for the charged offense. I think that's the meaning of this Court's decision in Patterson and Moulton. David H. Souter: And that would be enforceable by the exclusionary rule? Gregory S. Coleman: Yes. David H. Souter: Okay. Gregory S. Coleman: If I may, I'd reserve the rest of my time for rebuttal. William H. Rehnquist: Very well, Mr. Coleman. Ms. Blatt, we'll hear from you. Lisa Schiavo Blatt: Mr. Chief Justice, and may it please the Court: Police have a compelling interest in investigating uncharged crimes and in obtaining voluntary confessions from suspects who have been advised of their right to counsel under Miranda and are willing to speak to the police about those uncharged crimes. That questioning does not violate the Sixth Amendment right to counsel because that right is offense specific. Under that rule, the statements may not be used to prove the charged offense, but the statements are admissible in a trial for the uncharged offenses. It does not matter, under this rule, whether the two crimes are factually related. The test is rather whether the two crimes constitute the same offense. Stephen G. Breyer: Why? I mean, you see my problem from what I said before, don't you? I mean, crime is ambiguous as to whether you're describing a set of events in the world, or a legal concept. Look at the set of events in the world. It would have all been over in 15 seconds, and it could constitute any one of 15 crimes, and the police charge on the basis of that 15 seconds of real world behavior three crimes, and he gets a lawyer for those three. Why should the police be able, without a lawyer, to interrogate him about what happened in the real world because there are eight other things that weren't charged? Lisa Schiavo Blatt: Because the Sixth Amendment, the text of the Sixth Amendment only applies to someone who has been accused in a pending prosecution, and the prosecution is limited by the actual offenses that are charged by the State, and it is only at that time that the right to counsel attaches under the Sixth Amendment. Stephen G. Breyer: So it's purely formal. Your argument is purely formal. Lisa Schiavo Blatt: No. This Court has repeatedly recognized that the requirement that there must be a shift from investigation to accusation is more than just a formalism, because the purpose and the essence of the Sixth Amendment is to make sure the defendant has an opportunity to consult with counsel and prepare for a defense against the pending charges. A suspect has no Sixth Amendment right to counsel, to have a lawyer appointed or assist him in connection with charges that have not been brought by the State, that may never be brought by the State. The suspect has never indicated any unwillingness to talk to the police about those uncharged offenses. Ruth Bader Ginsburg: Ms. Blatt, you gave the example, or I think your brief indicates that you would support the example that if the crime for which the person is already charged is burglary, and they can't ask him about the homicide at the time of burglary because that would be a greater... that would be the same crime, yes, in that legal sense that we understand for double jeopardy purposes. But this has got to be administered by police officers, and a police officer will say gee, homicide is a lot different from burglary. I don't understand when it's okay and when it isn't. Lisa Schiavo Blatt: The same elements test under Blockburger leads to consistent and predictable results, and can be ascertained ahead of time by the police officer, and if he needs to consult with the prosecutor, he can do that. By contrast, pegging the Sixth Amendment right to a transaction test leaves police officers in the untenable position of not knowing before they question the suspect what-- Ruth Bader Ginsburg: Well, I would think the lay person would understand, it all happened in the same episode, more readily than would understand Blockburger. Lisa Schiavo Blatt: --He may not know that. It may be that they know that there's been a burglary and that there are missing bodies, but have no idea whether those victims were murdered by someone else 2 weeks from then, whether there had been a kidnapping, whether it was in a different location. I mean, he can't possibly know ahead of time, without talking to the suspect, nor can a court ask at the time of appointment of counsel, would you mind telling me everything you did as part of the same transaction so I can make sure you're appointed counsel with respect to all possible offenses that may be brought against you. They just... they don't know that. They're in a phase of investigation, and this case is a perfect illustration of that. There's no contention in this case the State manipulated the charges when they indicted him for burglary and 15 months later questioned him about the murder, nor is there any suggestion that they had enough proof at the time that they charged him with burglary to charge him with murder, and there's a hypothetical assertion that there might be incentives for selective manipulation, but we don't believe that those incentives necessarily exist. Once the State initiates a prosecution, the suspect will not only be afforded the right to counsel, but at the time that he's approached, if he's in custody, he will be given his Fifth Amendment Miranda warnings and, under this Court's decision in-- John Paul Stevens: May I ask this question? It seems to me it's not the question of when the lawyer was appointed, but what is the scope of the representation by the lawyer who has been appointed. Assume a lawyer is paid $20 an hour by the State for representing a defendant. He's appointed then to represent him in the robbery charge, then he talks to the client, the client says, there's a lot of other stuff I think you ought to know in order to represent me well, and then he goes and interviews him at great length about all these things that happened in the same transaction, but they've never been indicted. Would that lawyer be entitled to be paid for the time he spent on questioning about the related crimes? Lisa Schiavo Blatt: --I think to the extent that the... yes, and to the extent that the defense relates to the pending charge. John Paul Stevens: It has no relation to the pending charge, except it was part of the same bunch of transactions. Lisa Schiavo Blatt: If he said to his lawyer, I also murdered these two people, I think it would be perfectly clear that the... if the defendant went off and started researching capital sentencing procedures under Texas law he very well might not get paid for that. He was appointed to represent his client on the burglary charge. He certainly can take on a scope of representation that's greater than that, and can work out an arrangement with his client to get paid for that. John Paul Stevens: So he's... the lawyer, the good, conscientious lawyer would say, well, don't talk to me about that because I'm not going to get paid for any advice I give to you on that, on those matters? Lisa Schiavo Blatt: No, he certainly will want to talk to his client with respect to the conduct that constituted the offense for which he's been charged, and there might be other things he needs to know about. John Paul Stevens: But if it doesn't survive the Blockburger test, the fact that it happened at the same time, that wouldn't justify the lawyer spending any time on it? Lisa Schiavo Blatt: He will need to spend whatever time is necessary to defend him on the pending charge, but he's certainly free to tell his client, I'm not competent to represent you in a death penalty case and you ought to retain separate counsel for that offense, and moreover, you haven't even been charged with that offense. In all these cases where there is a pending charge, the court in McNeil and in Moulton represented... excuse me, recognized the compelling interest that the police have in investigating and solving uncharged offenses, and if the suspect never indicates any unwillingness to talk to the police about those offenses, there's no basis for excluding what is concededly a voluntary confession to those crimes that might otherwise go unsolved. The other thing I wanted to say, just about the Blockburger test, is that this Court, in the context of double jeopardy and the lesser included offenses context, has recognized that that test is workable, and is predictable, and can lead to consistent results. Ruth Bader Ginsburg: Workable in court from double jeopardy determinations; workable when you're talking about the police officer, I'm less certain. Lisa Schiavo Blatt: I think the police officer can certainly ascertain immediately what the pending charge was against the suspect, and if he has any questions about the elements test he can certainly ask a prosecutor, but generally the police can be advised, as this Court recognized in Moulton, that it's okay to approach a suspect that's under indictment about additional crimes, and so the question just simply becomes, what's a separate offense, and that's a lot easier question than, is it possible that the suspect may say something that's so... a court may or may not later deem inextricably intertwined, such that the statements can't be used. If there are no other questions-- William H. Rehnquist: Thank you, Ms. Blatt. Mr. Greenwood, we'll hear from you. Roy E. Greenwood: Mr. Chief Justice, and may it please the Court: We are asking only that this Court follow its prior precedents in Brewer and Maine v. Moulton. We don't want to expand any constitutional application. Sandra Day O'Connor: Well, but we've said in McNeil that it's offense specific-- Roy E. Greenwood: Yes, ma'am. Sandra Day O'Connor: --this Sixth Amendment right, and here there was at the time of the burglary charge no evidence of the murder... the murders, or the defendant's connection with them, so why isn't that a separate offense? Roy E. Greenwood: Your Honor, in looking at the Court's, initially the Fifth Amendment cases on the right of counsel and then the stair stepping and the filling in of the blanks of the various phases where counsel has come in, as we've all had to do in the research for these cases, and we get to McNeil... and we have no problem with McNeil. McNeil makes sense in the context in which it was written. William H. Rehnquist: Well, how about its statement that Sixth Amendment right is offense specific? Roy E. Greenwood: Your Honor, in-- William H. Rehnquist: You have to go beyond that, don't you? Roy E. Greenwood: --Your Honor, I can... under... in the context of the way, the facts of McNeil, I can see that statement being legitimately and perfectly reasonable, but McNeil-- William H. Rehnquist: But it's a categorical statement. Roy E. Greenwood: --Yes, Your Honor, it is. William H. Rehnquist: So you are asking us to go beyond our cases. You're asking us to distinguish McNeil and very sharply limit it. Roy E. Greenwood: No, Your Honor. That statement, taken in separation with the facts of McNeil and the issues presented I think are really different, and I recognize... we've reviewed you all's decisions, concurring and dissenting opinions here, and we understand you all's concerns about that, but in our view, in starting with McNeil, the Wisconsin Supreme Court, the question before them was unrelated offenses, and this Court granted cert on unrelated offenses, and during the argument of counsel the Government on at least three separate occasions in McNeil, and we've got their transcripts, said this is... the situation here is completely separate and distinct offenses, different counties, different victims, different facts. William H. Rehnquist: Yes, but you can limit any one of our opinions in that respect to say, you know, this happened on a Tuesday and not on a Wednesday, but we employ statements as to what we think the law is and so on in deciding these cases, and it isn't always limited just to the particular facts. Roy E. Greenwood: That's true, Your Honor, and... but it just, from our viewpoint, even though McNeil makes sense as to separate and distinct offenses, when you look at Brewer, and Moulton, and the interrelated, intertwined defenses, to us you just simply cannot say, well, the line of Brewer just stopped, because-- William H. Rehnquist: What is your definition of, quote, intertwined, close quote, or interrelated, close quote? Roy E. Greenwood: --In looking at all of these things and trying to make a decision, the simplest and easiest definition we got to is just the related offenses, where those that occur in one single immediate transaction and incident. William H. Rehnquist: Well, okay. What is a... you know, this doesn't make it any easier. What's a transaction? What's an incident? Roy E. Greenwood: Okay. Well, transaction is defined... is not even defined under Texas joinder law, so you get a dictionary out, but at the same immediate temporal time and place. William H. Rehnquist: And you think this case meets that definition-- Roy E. Greenwood: Yes, sir. William H. Rehnquist: --of the same time? Roy E. Greenwood: Absolutely. David H. Souter: Mr. Greenwood, I think your, sort of your strongest argument is that, if you don't recognize the scope of the right as you argue for it, that the risk that the Sixth Amendment right in the... with respect to the first offense will be infringed is simply too great, and you cannot run that risk, and this is the way to avoid it. Mr. Coleman has essentially two responses to that, and I'd like you to comment on them. The first response is that if the subsequent interrogation is a custodial one, the Miranda warnings are going to be there, and they functionally will assuage your concern and that in any event, even in a noncustodial case and, a fortiori, in the custodial case, if, in fact, there is a violation of Sixth Amendment right with respect to the first offense, any evidence so given will be excluded with respect to the first offense. And he in effect says, these two avenues of warning or relief are sufficient to reduce the concern about the risk that you raise. How do you respond? Roy E. Greenwood: Initially, Your Honor, one of the concerns that I have is, as the Chief Justice wrote in one of his dissenting opinions, I think in Moulton, correct me if I'm wrong, that there has not been in the past wholesale violation of Sixth Amendment problems by law enforcement. I think to allow... but over the years in this, these more than two decades of cases that dealt with this related offense concept have generally kept the police away from the defendant in these related contacts, so you haven't had wholesale-- David H. Souter: Right, but let's assume we no longer have that regime, but we have the regime that your brother argues for and he says the two safeguards are Miranda in custodial cases, exclusion in noncustodial cases if the interrogation strays into the evidence on the first offense. Roy E. Greenwood: --The immediate, most immediate concern I have is that a statement by this Court that that is permissible will encourage police officers to make those contacts. David H. Souter: Let's assume that it does. Let's assume that no, this relatedness test is not the proper test, there's going to be more interrogation. Roy E. Greenwood: Absolutely. David H. Souter: We're all assuming that. Now, why are his two safeguards going to be insufficient? Roy E. Greenwood: Under the facts of this case, and because the... and I must preface this just briefly. This can be a complicated situation, with regard to Sixth Amendment and the related offenses, and that's why most of the courts of appeals, Fifth Circuit and Third Circuit, have devised a list of factors, totality of the circumstances, which we think are necessary. Having said that, in this case, for example, you have a long term, 17 months or more, attorney client relationship. Counsel has been dealing with the courts, actively filing motions. He has been dealing with the district attorney, theoretically, with law enforcement concerning this immediate burglary, but everybody knows there's these other potential crimes out there. They're still investigating them. Stephen G. Breyer: What about the circumstance of, I didn't know that the word, offense specific, in McNeil, whether it referred to something on paper-- Roy E. Greenwood: Right. Stephen G. Breyer: --namely, the definition of a crime, or something in the world, such as the robber entering the bank, hitting the teller and taking the money, which, of course, could be one of several crimes. Roy E. Greenwood: Yes, sir. Thank you for filling in the-- Stephen G. Breyer: Well, I don't want you just to accept it because maybe what I've just said is wrong. Antonin Scalia: Well, take it, Mr. Greenwood. Take it. [Laughter] Roy E. Greenwood: --Your Honor, in dealing with all this, we have looked at the term transaction, because that's a series of acts of conduct which can have one offense or dozens. The term crimes means different things in this context. The term-- Antonin Scalia: Mr.-- Roy E. Greenwood: --offenses does, and I don't want to get into a semantic battle with you all. You all are the experts in that, and need to write this thing. Antonin Scalia: --It's what we do. Roy E. Greenwood: Right. Antonin Scalia: Can I get back to your description of what was going on here? The man had a lawyer, the police had dealt with him over many cases. What I can't understand about your case, or about the rule that you're urging upon us, is why it makes a difference that the other offense was factually related, was simultaneous. I mean, I can understand the position that, look, once a man has a lawyer... I have a lawyer for embezzlement. Speaker: I'm a stockbroker, and I'm charged with having embezzled on May 13th. Antonin Scalia: I'm charged with an entirely separate embezzlement... or, I'm interrogated about an entirely separate embezzlement on May 14th. I would feel just as strongly as you do about, well, it's only fair they know the man has a lawyer, they shouldn't go to him without going to his lawyer. They know the man has a lawyer to represent him vis a vis the police. What difference does it make whether it's factually related or not, if you're going to appeal to that, I don't know, that feeling once you know a guy has a lawyer, you ought to deal with his lawyer? I don't see that the factual relationship makes me feel any worse about it. Roy E. Greenwood: Your Honor, I agree with that, but since-- Antonin Scalia: Okay, well-- Roy E. Greenwood: --Since McNeil, it does make a difference, and-- Antonin Scalia: --Well, I think unless we're going to go all the way down to the bottom of that slippery slope it makes sense to say what you have a lawyer for is for the charge, and that the choice is between saying you have a lawyer for that charge, and the police can deal with you separately on any matter that is apart from that charge, and if you're not going to adopt that rule you really ought to jump all the way over to the rule that once you're represented by a lawyer with regard to this police department, with regard to matters that... concerning this defendant, they ought to contact that lawyer for everything they have to do with that defendant. Roy E. Greenwood: --Well, and that's part-- Antonin Scalia: And that's a big extension of what we've said up to now. Roy E. Greenwood: --In the decisions of the courts of appeals on this issue dealing with the totality of the circumstances, one of the important things in making sure that the concerns of the court with regard to really hamstringing law enforcement are not overdone, is limiting it to a single criminal investigation in a jurisdiction by the same type of law enforcement, and we'll go along with that, because we can think of hypotheticals-- William H. Rehnquist: What do you mean, you'll go along with it if we do that? You don't have much choice. Roy E. Greenwood: --No, I understand. [Laughter] We will take that, Your Honor, as to a limitation. There are limitations on this. McNeil, obviously, Koolman v. Wilson. We concede in our brief that ongoing and future crimes should be exempted from this related offense rule. Stephen G. Breyer: It's not just an exemption. You've said that, I think, the law enforcement would be seriously hamstrung-- Roy E. Greenwood: Absolutely. Stephen G. Breyer: --if the simple fact that a person had a lawyer stopped policemen from asking him questions. Roy E. Greenwood: Right. Stephen G. Breyer: All right. But that isn't true where you're talking about a single offense defined in terms of what happens in the world, I take it. Roy E. Greenwood: That's correct. That's correct, and we are afraid that if the Court follows the petitioner's argument that, because of the ability of law enforcement and prosecutors to charge in a matter of discretion at their will, they can, in fact pick different crimes and then make dozens of confrontations with the defendant. For example, in this case-- Stephen G. Breyer: But to stop to ask a less friendly question, I think what's worrying the department and others is that once you depart from the definition of offense in terms of some words on paper, i.e., once you start looking to what happened in the world, there's no good way to define what is the same offense, and therefore they get into a mess, and therefore we have six different circuits trying to do different things. Roy E. Greenwood: --Right. Stephen G. Breyer: And you say in response to that, no, there is a good way, and what is it? Roy E. Greenwood: I... in the brief before the Court of Criminal Appeals we followed the Third and Fifth Circuits' totality of circumstances test, and followed it right down the line with regard to that. Any one of those factors could have totally thrown off the analysis of this case. Antonin Scalia: Of course, the problem that the law enforcement has is not only that they don't know how to define what is a related offense, but that they also don't know whether the offense that they're inquiring about meets that definition or not. That is a totally separate second problem which existed here. They did not know whether the kidnapping was done at the same time as the murder, whether the two were related or not. It's a real problem, not just figuring out a definition, but also figuring out whether what they're asking about falls within that definition or not. They won't know that until the facts are fully known. Roy E. Greenwood: That is true, and in our attempt at definition to limit expansion of this concept any longer, is the transaction or incident in a temporal time and place seems to be the least expansive you can get, and most police officers-- Antonin Scalia: What if the police here thought that the kidnapping had occurred on a different day from the burglary, that he had done the kidnapping and the murder and then he'd gone back the next day and burglarized the place? Roy E. Greenwood: --I don't think under the facts you could have gotten there, but assuming that-- Antonin Scalia: Is it enough that they thought that and it turns out not to be the case, they're nonetheless not violating the Sixth Amendment rights? Roy E. Greenwood: --You would have... if you had something like that, you would have two separate crimes-- Antonin Scalia: I understand that. Roy E. Greenwood: --really, as opposed to the same transaction. Antonin Scalia: No, but it didn't turn out that way. It turned out that they were both done on the same day. Now, but you're going to let the police off because they thought it was on separate days, right? Roy E. Greenwood: Oh, well, thought, but you see, if the facts show otherwise, then you have a set of facts that can be analyzed. Antonin Scalia: So they can't talk at all then, because even though they think it happened on a separate day and therefore, believing they're in full compliance with the Sixth Amendment they interrogate the person without his lawyer, it turns out that they happened on the same day, and all this evidence has to be thrown out. Roy E. Greenwood: I may have missed some of that, Your Honor, but law enforcement officers deal with transactions and incidents daily-- Antonin Scalia: I understand. Roy E. Greenwood: --and that, it seems to me, would be the easiest definition. Antonin Scalia: Are you suggesting that what matters is the reality, or what matters is what the interrogator believes when he conducts the interrogation? Roy E. Greenwood: I will concede that at the time what he legitimately believes. Antonin Scalia: Okay. Roy E. Greenwood: Yes. That makes sense, under... in considering all this, because you could have a bizarre circumstance when no one would know when certain crimes occurred. Speaker: --just not sure. Antonin Scalia: I mean, does he have to know that it was at the same time, or suppose he's in a state of complete agnosticism. He doesn't know when it occurred. Roy E. Greenwood: In-- Antonin Scalia: Is he violating the Sixth Amendment? Roy E. Greenwood: --A police officer in a... I cannot answer the question. That... I do not think of that concept-- Antonin Scalia: I can't, either. Roy E. Greenwood: --But... but, if I knew a police officer who had no knowledge or intent, really... I'm trying to separate it from this case. That's my difficulty... had really no knowledge that an investigation was going on and that we want to interrogate him about this serious crime, then I could see a judge under the totality of the circumstances test saying, there's no either bad faith or negligence or intentional or even accidental violation of the Sixth Amendment. I haven't been able to work out your factual question far enough down the line, sorry. But I do believe... in this case, for example, in the Texas statutory scheme, this defendant could have been charged, well, with nine different capital crimes, and three of them, at least three of them are under statutorily different offenses which would have allowed prosecution under Blockburger, even though it's the same offenses, same exact conduct, and where... we are concerned that under a circumstance where an attorney has been representing a defendant for a substantial length of time, and he consults and investigates on this limited, immediate transaction about various crimes, and he tells, and he consults the attorney about what we're going to do... for example, in the example it was asked if he was arrested on one offense, he said, by the way, I killed two other people. Well, I know what I would do if I was his counsel, and take all possible avenues to try to protect him under my responsibility. I give a lot of credence in this whole issue here with the responsibility of the scope of counsel. In the McNeil argument one of the attorney-- Anthony M. Kennedy: Well, I know what you'd do, too. You'd say, take the Miranda advice seriously, refuse to answer any questions now, later, a week from now, a month from now, and then you're protected. That's it. Roy E. Greenwood: --That, of course, is what their position is, Your Honor, and-- David H. Souter: Isn't that implied by what you were just saying? I mean, any prudent lawyer is going to say to his client, don't talk to them about anything, no matter what, unless I'm there, and why isn't that one of the answers to the concerns that you're raising? Roy E. Greenwood: --We believe that if the Court allows this continuous conduct where law enforcement can come in on a regular basis, in this case, literally dozens of times could have come back at Mr. Cobb to interrogate him about all the potential offenses, that it gives certain rise to complete abuse. Ruth Bader Ginsburg: But Mr. Greenwood-- William H. Rehnquist: --He can say no any time. He can refuse to talk to them. His lawyer has advised him. Roy E. Greenwood: And we say they... once he has counsel, in these facts they know he has counsel, they ought to stay away from him. Ruth Bader Ginsburg: They... first, the Odessa people didn't know that he had counsel. Roy E. Greenwood: They didn't know. Ruth Bader Ginsburg: But there's another aspect to this that I hope you will address. In this... it seems to me that this case may not be a strong case for your position, even if we were to take a related offense view of it. As I understand Jackson, the purpose was to keep the police from badgering a defendant, keep coming back at him and back at him, and even though he's been given Miranda warnings, to wear down his will. In this case there was a considerable interval of time. Defendant was out of custody, he was living with his father, and in that interval he could have talked to his lawyer many times. When he has that interval why, in that case, isn't Miranda enough, when he's not in custody where he's-- Roy E. Greenwood: I still maintain that as long as that formal charge was pending, and the counsel relationship continued, that when you throw law enforcement into talking to the defendant without his counsel, that you're still subjecting the defendant to abuses because, primarily, of the Moran v. Burbine decision that allows police officers to lie to the defendants, and you're getting a conflict, more than likely, which will encourage a conflict of statements between what the lawyer's telling him and what the police officers are telling him. Speaker: --I suppose, Mr. Greenwood, that your response to the contention that it ought to be enough that his lawyer tells him at the very beginning, look it, I'm only representing you on this crime, but you shouldn't talk to them about any other crime, you got that? Antonin Scalia: Yes. Don't talk to them at all. Yes, yes, I understand. The argument that that suffices, what's wrong with that is that if it suffices here it would have sufficed or ought to have sufficed in Michigan v. Jackson as well. I mean, doesn't Michigan v. Jackson assume that that's not enough? The lawyer's going to tell him, look it, I'm your lawyer now, don't talk to the police without me, and yet Michigan v. Jackson still says, even though the lawyer's told him that, if the police try to talk to him without him, it's a constitutional violation. Roy E. Greenwood: Right. Antonin Scalia: So maybe Michigan v. Jackson is wrong. I mean, if-- Roy E. Greenwood: No, Your Honor. We still maintain that Jackson is a proper continuation of Sixth Amendment jurisprudence. David H. Souter: --And I suppose the same answer that Justice Scalia just outlined for you is your answer to the question that I raised earlier about your brother's argument. If Miranda is good enough to protect him here, why wasn't Miranda good enough to protect him then? Roy E. Greenwood: We just believe that if you rely on this, the invocation of the Fifth Amendment on these related offenses, you're going to have officers, encourage them to make more and more contact with the defendant and invade that attorney client relationship with false information, which I think will lead to more abuses. That's all the questions? Speaker: Maybe... well, this is just to clarify something that I had trouble understanding. Roy E. Greenwood: Yes. Stephen G. Breyer: Suppose that a person is... what's the law in the following situation? The person, a defendant is put into custody, a suspect, he's interrogated. He's told about his Miranda rights. He gets a lawyer, and then he's not charged, all right? He's not charged. The next day, although the police know he got a lawyer, he has a lawyer, they call him back to question him again without telling the lawyer. Can they do that? Roy E. Greenwood: I think they could, Your Honor. William H. Rehnquist: Thank you, Mr. Greenwood. Roy E. Greenwood: Thank you, Your Honor. William H. Rehnquist: Mr. Coleman, you have 1 minute remaining. Gregory S. Coleman: I'd like to very quickly address Justice Stevens' question about the scope of representation and real world fact scenarios that are uncharged, and I think in both of those instances I can go back beyond the cases of this Court and say, those are not criminal prosecutions, and that person has not been accused of those factually related crimes, and the Sixth Amendment by its own text simply does not apply in those types of circumstances. When... and also, in both of those circumstances, if the defendant or the suspect is questioned he can say, at the advice of his counsel, I don't want to talk to you, in other words cuts him off. William H. Rehnquist: Thank you, Mr. Coleman. The case is submitted.

Warren E. Burger: We'll hear arguments next in United Brotherhood of Carpenters against Scott and others. Mr. Gold, you may proceed whenever you are ready. Laurence Stephen Gold: Thank you, Mr. Chief Justice. This case concerns the scope of 42 U.S.C. Section 1985(3), the lineal descendent provision of Section 2 of the 1871 Civil Rights Act. As the Court of Appeals majority stated, this case grows out of an episode of mob violence at the Alligator Bayou Pumping Station construction site near Port Arthur, Texas that caused both serious injuries and substantial property damage. That wrongdoing led to this federal court suit brought by two individuals and by the general contractor at that job site and to avert it in favor of the plaintiffs and against three local unions which are the petitioners here. The basic legal questions on which the Fifth Circuit sitting en banc split 14 to nine concern the meaning of the phrases "equal protection of the laws" and "equal privileges and immunities under the laws. " as used in Section 1985(3). Sandra Day O'Connor: Mr. Gold, why would a plaintiff or group of plaintiffs file a suit under Section 1985(3) instead of a state tort action? Is it because of the recovery potentially of attorney's fees or what? Laurence Stephen Gold: I am hard pressed to understand that myself, Justice O'Connor. I take it that the hope here was that this would be a more effective law suit from the plaintiffs' standpoint despite the-- Sandra Day O'Connor: You think that would center around the recovery of attorney's fees question? Laurence Stephen Gold: --That is, certainly in light of the Civil Rights Act attorney's fees statute, that could well be a motive, and the countervailing... why the plaintiffs were not impressed by the countervailing consideration that there are very, very difficult legal questions here and a straightforward tort case in the state court system, I am really not privy to-- William H. Rehnquist: Well, I suppose in Beaumont, Port Arthur you have got elected judges and there might be some feeling that you do not get quite the same neutrality from elected judges as you do from lifetime federal judges. Laurence Stephen Gold: --There are also appellate judges in Texas up and down the system, and I can only say that there isn't a whisper in this record that the state justice system was not open to and fully protective of the rights and interests of plaintiff companies and non-union employees in the State of Texas. Indeed, there were 13 indictments growing out of this episode, three convictions, two people in jail for substantial terms indeed. So in all those respects this is not your garden variety case for choosing a federal court as opposed to a state court. The en banc majority below analyzed Section 1985(3) as requiring a showing aside from the conspiracy and acts pursuant to the conspiracy and injury are the violation of some protected right and moreover class-based invidiously discriminatory animus motivating the invasion of that right and motivating the conspiracy. The court found that the right of economic association is such a protected right and, indeed, analyzed the matter as comprising a protected right under the First and Fourteenth Amendments. That court rejected our contention that for 1985(3), as is generally true, to show the invasion of a First and Fourteenth Amendment right as opposed to the invasion of the rights guaranteed by the Thirteenth Amendment or the rights guaranteed by the right of travel. There has to be a showing of state action. That court took the view that the contention I have just outlined had been rejected in Griffin v. Breckenridge, this Court's leading modern case on the scope of Section 1985(3). We cannot improve upon, and we have quoted at page 39 of our opening brief, the blue brief, the analysis of this issue by Justice Stevens in Novotny. We rest on that analysis and in terms of an analysis of the statute, neither the court below nor the respondents challenge the accuracy of the insights stated there. Rather both contend that that view of the statute is precluded by Griffin. It is our view that Griffin simply did not address this problem. Griffin was a case involving a conspiracy aimed at black Americans attempting to assert their civil rights and those who would assist them. The court analyzed the matter as resting on the Thirteenth Amendment base and the right and power of Congress to do away with the badges and incidence of slavery. It is perfectly well settled that Congress in no way, shape, or form is limited by a state action requirement in those regards and that those constitutional rights, both the rights vouchsafed by the Thirteenth Amendment and the rights stated by the right of travel are protected against private interferences. William H. Rehnquist: Can you think of any more rights, Mr. Gold, that would fall on that side of the line that Justice Stevens drew? Laurence Stephen Gold: From our view of the cases, Justice Rehnquist, we know of no other constitutional rights which are, of those stated in the Thirteenth, Fourteenth, and Fifteenth Amendment, which do no have a state action component to them. And it is hardly surprising that Congress would be particularly concerned about Thirteenth Amendment rights in terms of the 1871 Act because the voluminous legislative history is instinct on every page with a desire to protect the rights of the newly enfranchised freedmen and to ensure that the wrongdoing that was taking place in the South against them would have a federal remedy. At the same time, Section 2, which was the point of controversy in the 1871 Act, was shaped by the moderate Republicans in the House who were not only mindful of that major interest and concern, the one I have just outlined, but also saw an important value in maintaining a system of federalism at the time as they understood that system. The debate in the House and the strong controversy that Section 2, as originally introduced, created, which has been noted by this Court in numerous decisions, concerned how to advance both these values. If there had only been one value, the need to end what was seen by every segment of the majority party at that time, the Republicans, as outrages in the South, there would have been no division, no compromise, no internal controversy in the House. But there was this understanding of the fact that there were two values and a desire to put down Klan violence without doing violence to the Thirteenth, Fourteenth, and Fifteenth Amendments as the moderate Republicans understood those amendments. The moderates prevailed. The Section 2 was rewritten in response to Representative Garfield's speech, which we have laid out at perhaps overly great length in our brief. There is no doubt when you read the debate that Section 2 of the 1871 Act was redrafted to meet that speech and had probably been redrafted before the speech was given because it concludes with Representative Garfield saying I'm confident that language can be drafted which will meet these concerns, concerns about the federal government intruding into the proper state domain and becoming the primary guarantor of property and individual rights. Low and behold the next day Representative Shellabarger, who was managing the bill, comes in and says here is an amendment presented by friends of this legislation to assure that we can go forward, and the amendment, by adding the terms "equal protection of the laws" and "equal privileges and immunities of the laws. " met precisely the lines and the concerns stated by Representative Garfield. If we are right in that point, since there is not a hint of state action in this case, the decision below must be reversed. But even if it is viewed, even if the statute is viewed as protecting basic constitutional rights against private conspiracy where there is no state action, we think the same result follows, because the court below was of the view that working for a non-union employer is a First Amendment right. It is our understanding based on this Court's cases that the particular economic relations between employers and employees is not governed by the First Amendment but is governed by state law and Congress' power to enact legislation pursuant to the commerce clause. William H. Rehnquist: You do not think the right to work for a union employer stands on any different footing than the right to work for a non-union employer? Laurence Stephen Gold: No. If Smith v. Arkansas does not take away our dreams on that point, I do not know what will. Lewis F. Powell, Jr.: Mr. Gold, I want to understand you. Are you saying that, though a constitutional right for an individual to decide whether he wishes to work for a non-union or prefers to work for a union employer... in other words, a man is looking for employment. He may choose a union shop, a closed shop, or an employer with no union connections whatever. You are saying he does not have that right to make that choice? Laurence Stephen Gold: He may have a right in some abstract sense of that term-- Lewis F. Powell, Jr.: You think the state could forbid it? Laurence Stephen Gold: --Could the... I apologize-- Lewis F. Powell, Jr.: Could the state enact a statute that said everyone who seeks employment in this state must seek non-union employment? Laurence Stephen Gold: --I do not think that the First Amendment-- Lewis F. Powell, Jr.: Would any provision in the Constitution forbid that? Laurence Stephen Gold: --Whether substantive due process would return-- Lewis F. Powell, Jr.: You would not like it, would you? Laurence Stephen Gold: --No. I think we had as much substantive due process is we could stand through the first third of this century, but it is our understanding and our view that insofar as the state regulates whether there will be a collective bargaining system or there will be a system of managerial prerogative and insofar as the state regulates whether individuals will work in a system where terms and conditions are set one way or another and insofar as the state regulates even a matter such as, or the Congress in each instance, regulates whether there will be a union that represents all the people on a particular job, those are not First Amendment questions. There is no right of economic freedom of association of the kind the Court of Appeals was talking about any more than there is a right of free association to set up certain kinds of corporations or certain kinds of partnerships of the kind entrepreneurs may find beneficial to their interest free and clear of state regulation of the field. We do not believe that the Sherman Act is either required by or is to be tested against the First Amendment. Lewis F. Powell, Jr.: But I was wondering about the right of an individual to make a choice as to where he wishes to work and with and for whom. Laurence Stephen Gold: I do not believe that an individual has such a constitutional right under the First Amendment. Let me-- Lewis F. Powell, Jr.: Under any provision of the Constitution-- Laurence Stephen Gold: --I know of no provision. Lewis F. Powell, Jr.: --This sounds like the Soviet Union to me where they tell you where you can work and where you cannot. How about the Thirteenth Amendment? Laurence Stephen Gold: I was wondering about that. I do not think that if, for example... let me try to grapple with the question in this way. If in a particular area there are no places of employment where unions have succeeded in becoming majority representatives as provided for in the National Labor Relations Act, I do not think an individual could sue anybody on the view that he was being deprived of his right to work under union conditions. On the other hand, if unions succeeded in organizing the places of employment in the locality, I do not believe that the opposite law suit would lie, either. Obviously the individual has a freedom. Perhaps this is the clearest I can be in answering this. I believe that the individual has a freedom to move from place to place and to look for employment that suits him. I do not believe that he has a constitutional right to demand that certain conditions obtain. The second element that the Court of Appeals understood to be encompassed in Section 1985(3) or at least in the aspect we are discussing here, the equal protection of the laws and equal privileges and immunities of the laws aspect of the statute, is a requirement that there be a showing of class-based invidiously discriminatory animus and that court segmented that requirement as follows: First the court stated that such animus is shown if there is animus against a class of those with common characteristics of an inherent nature and secondly, a particular application here, recognizing that there was no such class, the Court of Appeals said that the statute also encompasses conspiracies motivated by an animus of the kind Congress was trying to protect against in enacting the 1871 Act. The Court of Appeals read the legislative history of the 1871 Act to show an intent to act against conspiracies motivated by an animus against exercises of the right of economic association, which exercises of that right ignite regional hostility. It is our view that that dramatically overreads the statute and Congress' intent therein. We know what the core of what Congress sought to do was. It was to protect the freedmen and those who were seeking to assure that the freedmen secured the rights provided by the Thirteenth, Fourteenth, and Fifteenth Amendment. Every page of the legislative history is instinct with that intention except for scattered passages and in the very considerable legislative history debated, I might say, at a very high and intense level given the gravity of the moment, there are no other references to a congressional intent. In Griffin the Court left open the question of whether any intent under other than racial animus or bias supports a 1985(3) cause of action. It is our position that given the fact that this is a statute stated in general terms, one can generalize from the particular concerns of Congress. We would formulate the animus test as class-based animus against those who have common characteristics of an inherent nature who are offered special protection under the Equal Protection Clauses and in that sense that is the first part of what the Court of Appeals understood class-based animus to be and those who are aiding the former to secure that protection. The area, I think, of legitimate dispute is what is one to make of the repeated references in the legislative history to the interest in protecting not only the freedmen but Republicans and Northerners and others who were also the object of the Klan. In the legislative materials we set out, both in our opening brief and at pages 11 to 18 of our reply brief, it seems to us apparent that the understanding at the time was that those in addition to the freedmen who were to be protected were the individuals who were seeking to assure the protections to that group of Americans guaranteed by the Thirteenth, Fourteenth, and Fifteenth Amendments. It was not Republicans as such. It was not the Northerners as such. It was to those who were embarked in the enterprise of making those amendments real. William H. Rehnquist: Mr. Gold, what if say up in Vermont the natives of Vermont have the same attitude toward Democrats that many Southerners at that time had towards the Republicans. Do you think that if a Democrat went up to Vermont and was set upon that he would have an action under this section? Laurence Stephen Gold: The-- William H. Rehnquist: Nothing to do with freedmen, obviously. Laurence Stephen Gold: --No. We would think that the comparable situations that one can envisage that the statute would extend to would be those such as actions against Japanese-Americans at the beginning of the Second World War is a possibility, but we do not believe that Congress had any intent in going beyond classes that are defined by more than the fact that people are doing certain things which other people do not like and therefore are set upon. Indeed, the broadest statement, that of Senator Edmunds, which is relied on, and it is wholly unique in this entire legislative history, proposes an antithesis between feuds which are generated by particular activities that individuals do not like and class-based animus. So my answer to your question would be that the weight of the legislative evidence is that the protection extends to classes of inherent characteristics who are the objects of discrimination and depravation-- William J. Brennan, Jr.: Would illegitimates be such a class? Laurence Stephen Gold: --Under this Court's cases in the development of Fourteenth Amendment law, that might be. Again, while I do not think it was a subject of interest, immediate interest to the 1871 Congress, women could be such a class. The question is is it a class marked by an inherent characteristic-- William J. Brennan, Jr.: Discrete, insular-- Laurence Stephen Gold: --Right, and is the animus against either the people of that class or those who were assisting members of that class to enjoy the full panoply of rights stated in the Thirteenth, Fourteenth, and Fifteenth Amendments. Thurgood Marshall: --Mr. Gold, the Slaughterhouse case set a law there, did it not? Laurence Stephen Gold: If it-- Thurgood Marshall: Nobody pays any attention to it any more, but that is an awful clear language in that. Laurence Stephen Gold: --We have pondered whether that case throws light on it, and in a sense-- Thurgood Marshall: Do you think it is just dead? Laurence Stephen Gold: --We are not sure. Thurgood Marshall: I might breathe some life in it. Warren E. Burger: Mr. Keith. Robert Q. Keith: Mr. Chief Justice, and may it please the Court. At the outset of my presentation, may I revert to the facts momentarily, and we might start with the dissent of the Fifth Circuit who called this an unprovoked and brutal attack on law-abiding citizens. The trial court in his opinion which is in the Joint Appendix stated that this arose out of a demonstration or citizen protest where people were voicing concern over outside, non-union workers in a union area much like the Vermonter, the Northerner, who was traveling to the South in Reconstruction times. These two statements were based on fact, and they were best capsulated by the attorney for defendant in the opening statement to the trial court when he said, and it becomes important to the legislative history, what happened here... and this is the attorney for the defendant... what happened here arises from the fact that the labor organizations are strong in this area when outside contractors come into the area employing people from outside the state. Just as Senator Edmund in 1871 was concerned with the Northerner, the Vermonter, the Republican, the Democrat, the Methodist, the Catholic and the recently freed man, this case comes as close factually to any case that has ever been before any of the courts under 1985(3). In Griffin the Court set out four elements, and if I may respectfully refer to them as the Court did and gave them a separate number. One, that the defendants conspired, and there was a conspiracy. Secondly, that such was for the purpose of depriving any person or class of persons of equal protection of the laws, or equal-- Thurgood Marshall: Counsel, isn't Texas a right-to-work state? Robert Q. Keith: --Yes, sir. It is. Thurgood Marshall: I have trouble with your argument about it, so well organized by labor unions. Robert Q. Keith: The record shows, Your Honor, that in this particular geographic locality, and all of the evidence is that the labor movement and particularly in the construction trades, is very, very pervasive. This is on the Texas Gulf coast. The oil and chemical industries are the dominant employers, and there is very heavy union organization. It has been since the 1930s. This dispute arose and this attack arose out of the outsider coming in and choosing to associate with other non-union workers. In Griffin, the Court spoke of this equal protection concept, meaning that there must be some class-based invidiously discriminatory animus. The Circuit found, and I think there is clear evidence, that there was pervasive animus both in extent and intensity. Men were beaten with two-by-fours, with iron bars. Equipment was turned over, drag lines, bulldozers, big saws, offices. Men were beaten over the head. They were hospitalized. Buildings were pillaged and burned. This was the act done in furtherance of that conspiracy, and then we come respectfully to Section 4(a) as analyzed by Griffin and that is, whereby another was injured in his person or property. Very clearly my clients as plaintiffs were injured in their personal property. This injury arose out of this invidiously discriminatory animus. Byron R. White: What did it deprive them of? What right? Robert Q. Keith: Best said, it deprived us, if I may code myself as a plaintiff for the moment... it deprived us of the equal enjoyment of personal security which all of us enjoy under the law. Byron R. White: Do you think 1985(3) covers that? Robert Q. Keith: Yes, sir, and I believe the Court's decision in Griffin and the legislative history will support that. Furthermore-- Byron R. White: How does Griffin have gotten to the Thirteenth Amendment case? Robert Q. Keith: --Griffin was at least a Thirteenth Amendment case and a right to travel case, and Griffin spoke in this instance of a class-based invidiously discriminatory animus. Byron R. White: You always have to have that. Robert Q. Keith: Yes, sir, but that is the right that is violated. Bear in mind this, that the federal statute was aimed at the conspiracy. Byron R. White: Tell me again, what right is it? What is it in this case? Robert Q. Keith: In this case I have, we have the right to enjoy equally the security from unprovoked attack. We also have under the privileges-- Byron R. White: So 1985(3) covers any assault that is performed by two people? Robert Q. Keith: --No, sir, not at all. There must be a class-based-- Byron R. White: If they just attacked red-headed people? Robert Q. Keith: --If there is a class-based invidiously discriminatory animus that is both pervasive as in... to extent and intensity, yes. Warren E. Burger: Class basis on both sides? Robert Q. Keith: Not necessarily, Your Honor, but there must be a conspiracy. I could not... in abstract one person cannot commit an act and thus violate 1985(3). There must be those acting in concert under conspiracy. Byron R. White: So you do not think there is any necessity for the conspiracy to interfere with the efforts of the state to protect people? Robert Q. Keith: That is correct. Nowhere in 1985(3) is that necessary. You see, at the time they adopted this there were four other provisions that were adopted also, and state action and interference with state action are dealt with separately. So we do not need to look to those as you consider 1985(3). Thurgood Marshall: Eighty-five three says equal protection. Robert Q. Keith: Yes, sir, or enjoyment of equal privileges and immunities. Thurgood Marshall: Well, so you will claim under immunities? Robert Q. Keith: We claim in this instance, sir, under-- Thurgood Marshall: You cannot claim equal protection. Robert Q. Keith: --Yes, sir. Thurgood Marshall: Well, where is the state? The state says equal protection. Robert Q. Keith: We do not claim-- Thurgood Marshall: Well, where did you get equal protection from if you did not get it from the Fourteenth Amendment? Robert Q. Keith: --The Congress, Your Honor, did not say equal protection under the Fourteenth Amendment. They say-- Thurgood Marshall: But you say equal protection of the law-- Robert Q. Keith: --That is correct, yes, sir. Thurgood Marshall: --and the only place you find that in the Constitution is in the Fourteenth Amendment. Robert Q. Keith: Yes, sir. Thurgood Marshall: Isn't that correct? Robert Q. Keith: That is my understanding. Thurgood Marshall: So they took it from the Fourteenth Amendment. Robert Q. Keith: They took the concept of equal-- Thurgood Marshall: But they left the state in the Fourteenth Amendment. Robert Q. Keith: --They left the state in the Fourteenth Amendment. Thurgood Marshall: They just took the equal protection and left the state. Robert Q. Keith: Now, there is a view supported by the legislative history that at the time Congress enacted this that they thought they were enacting a statute under the Fourteenth Amendment, Section Five, but we do not need to reach that in this case. Bear in mind this, if I may pursue it a moment more, when we speak of the equal protection, we are speaking about the animus. We are not speaking about some violation of a constitutional right. We are speaking about the animus, and in this instance that animus was to deprive us of equal enjoyment of the law in peace and security to our person. The animus also extended to equal privileges and immunities in that we had the right to choose with whom we associated. In the exercise of that right under the First Amendment if you bring the state in, but in the exercise of our right of association we then became brutally and violently assaulted. The animus, Your Honor, was affected in this case both by equal protection and equal privileges and immunities. William H. Rehnquist: Well, Mr. Keith, how do you get... I have the same basic question Mr. Justice Marshall had. How do you get deprived of equal protection of the law by private individuals? These people were not deprived of any protection of the law that I can see. Robert Q. Keith: Sir, it is not that you were deprived, thus injured, thus you have a cause of action. There was no depravation which in a causal proximate cause sense led to this cause of action. The denial, if you will, relates to the animus. William H. Rehnquist: But I want to get back to the Fourteenth. To what extent are you relying on the Fourteenth Amendment as a basis for Congress' enactment of this statute that you say gives you a claim? Robert Q. Keith: None. William H. Rehnquist: Well, then what is the authority for Congress to act? Robert Q. Keith: In this instance the commerce clause. William H. Rehnquist: You say Congress relied on the commerce clause in passing 1985? Robert Q. Keith: At this time-- William H. Rehnquist: You mean then 1983, the present-- Robert Q. Keith: --Today, yes, sir. Congress clearly has a constitutional authority-- William H. Rehnquist: --I am talking about 1871. Robert Q. Keith: --At the time Congress adopted 1985, their perception was that this was a wrong that needed correcting and that they had the authority to do so under Section 5 of the Fourteenth Amendment. This Court does not need to address that question in this case. That may be another day and another time. The Congress has the authority under the commerce clause, clearly under the facts of this case, to adopt 1985(3). This was a federal project. It involved-- William H. Rehnquist: But there is not the slightest indication from the legislative debates that I have seen in 1871 that Congress gave any thought to the commerce clause. Robert Q. Keith: --That is correct. Byron R. White: And if they had given some thought to it, they could not possibly have imagined that the commerce clause would authorize this kind of an interference with it. Robert Q. Keith: As I understand the test today, sir-- Byron R. White: No, but as of that time. Robert Q. Keith: --The commerce clause was given a more restrictive application 100 years ago, yes, but the question today is the constitutionality of the Act and the authority of Congress to enact it. Byron R. White: No, the question is construing the statute they read. Robert Q. Keith: Yes, sir. Byron R. White: And if they purported to act under the Fourteenth Amendment, I am sure they thought they were complying with, they were staying within its limits. If you say the limits were so and so, those are the limits of the statute, if you say that is what Congress intended. Robert Q. Keith: No, sir. The Fourteenth Amendment did not limit Congress' action. Congress was federalizing a particular offense. Byron R. White: Under what authority? Robert Q. Keith: Under the authority of the Fourteenth Amendment, Congress says-- Byron R. White: All right. Do you think Congress, purporting to act under the Fourteenth Amendment, could just have passed a murder statute of general applicability all over the country on the theory that they were... do you think that would be-- Robert Q. Keith: --That was the type of question that was subject to the debate, exactly. When Congress enacted what this Court has called Section 2, that is, the discriminatory animus, instead of adopting this general murder statute, Congress adopted the limiting amendment which requires the animus that we have spoken of. The animus is to deprive one under these circumstances of equal protection, that is the equal enjoyment of the laws or equal privilege under the laws. Now-- Sandra Day O'Connor: --Mr. Keith, would just any group that shared common political or social beliefs qualify for the class of plaintiffs that you would see covered by the statute? Robert Q. Keith: --No, Justice O'Connor. Bear in mind that class is really defined in the mind of the defendants. It is the defendant's perception that these people, whomever they may be, in this case those who were associating on this job, are morally inferior. For some reason they lack the same standing under the law as the rest of us. They are not entitled to the same protection under the law. In this instance-- Sandra Day O'Connor: So to define the class we look in the minds of the defendants to see-- Robert Q. Keith: --As represented by their res gestae statements at the time and as represented by their conspiratorial actions before and in the acts done in furtherance of the conspiracy, yes. In this instance the res gestae statements are, man, get out of here. You are crazy. This is union country. Get out of Jefferson County and don't set your feet back in here. Much like the Jewish people at the synagogue, or the Catholics at mass, these people were assaulted at a place where they congregate, where they associate, as they have under state law as well as federal law a right to do. Hypothetically there may be some other circumstance that would be more arguable as to whether it is or is not a class, but clearly it is not a Rule 23 class such as numerocity, commonality, and definiteness. William J. Brennan, Jr.: --Mr. Keith, under your view would a private men's club be subject to a 1985(3) suit by women? Robert Q. Keith: No. Sandra Day O'Connor: If the women thought they were inferior? Robert Q. Keith: No. I could limit it in a number of different ways, but there would not be class... it would not necessarily be a conspiracy, although you might say the men by their charter agree to something. There would not be any animus of the type, and the Fifth Circuit spoke of this, of the type the framers of the amendment were intending. William J. Brennan, Jr.: Well, instead of women suppose it is blacks. Robert Q. Keith: If they are beaten and assaulted because of that status-- William J. Brennan, Jr.: No they are just denied-- Robert Q. Keith: --Excluded-- William J. Brennan, Jr.: --excluded from the white male club. Robert Q. Keith: --I do not perceive that as the animus conceived by the-- William J. Brennan, Jr.: The original purpose I gather... animus initially was in part at least the freedmen, was it not? Robert Q. Keith: --Yes, sir, in part the freedmen, but it was basically economic in that the Northerner, the Vermonter, the freedman was now taking over the place or taking a place in this new economic order. The Act was basically derived at those who were exercising economic activity. Thurgood Marshall: You keep talking about economic and all. I thought the basis of these statutes were the Black Codes of the south, the Black Codes. Robert Q. Keith: Yes, sir, they were. Thurgood Marshall: Don't tell me you never heard of them. Robert Q. Keith: Yes, sir. I did not understand the question. The-- Thurgood Marshall: Is that not the reason for this statute? Robert Q. Keith: --Yes, sir, but what was happening was-- Thurgood Marshall: Your people do not qualify under that, do they? Robert Q. Keith: --What was happening was that the Northerner was going to the South, was being elected to the legislature, was operating stores. He was being beaten and pillaged and violated just as was the freedman. Thurgood Marshall: In '71? Robert Q. Keith: Yes, sir, and that is exactly what the legislative history spoke to was the conduct toward the black man and toward these new persons in the community. Thurgood Marshall: How come none of the early cases mentioned it? I mean, the earlier decisions of this Court. Robert Q. Keith: Well, respectfully, there are just two. Thurgood Marshall: Just two? There are four of them in Volume 100. Robert Q. Keith: Well-- Thurgood Marshall: In one volume. Robert Q. Keith: --Speaking of the-- Thurgood Marshall: I think either three or four. Robert Q. Keith: --Griffin since 1962 is the only time that this Court has really written on this 1985(3), and those men-- Thurgood Marshall: The whole point is you have got a clear almost undefendable action in the state court. Right? Robert Q. Keith: --There is an action in the state court, yes, sir. Thurgood Marshall: You are going to have a dual recovery here? Robert Q. Keith: No, sir. Thurgood Marshall: Sir? Robert Q. Keith: No, sir, not in any way. Thurgood Marshall: Are you going to drop your state one? Robert Q. Keith: I have never brought a state court suit. Thurgood Marshall: Sir? Robert Q. Keith: I never brought this as a state court suit. Thurgood Marshall: I thought you said there were two involved in this same one. I am talking about your plaintiffs. Robert Q. Keith: My plaintiffs in this case brought one law suit and that was in this Court. Thurgood Marshall: Yes, but you could have brought it in the state court. Robert Q. Keith: We could have brought a law suit in the state court. There is no question about that. Thurgood Marshall: Now, to get back to Justice O'Connor's question before, why the federal instead of the state court? Robert Q. Keith: Am I free to answer that question as the lawyer who brought the case? The reason why it was, at the very time I brought this suit, there were two state court proceedings going on involving identical issues where the parties plaintiff were getting their brains beaten out, unable to get an injunction, and I was first seeking an injunction for my clients to protect them as they returned to work. I was confident that with the difficulties these other plaintiffs were having at the exact same time, I could not get an injunction. So I sought a remedy under the federal law where I could obtain an injunction. That is why I brought the suit in the federal court. It is the only law suit that we have ever brought-- Thurgood Marshall: And it was easier. Robert Q. Keith: --Well, it has not been easy. [Laughter] Speaker: It is no easier today, is it? Robert Q. Keith: No, sir, it is no easier today. But very clearly, and if I may respectfully distinguish my case from Dombrowski or Novotny. In this case, my clients suffered injury to person and property as described by Section 4(a) very clearly. In Dombrowski out of the Sixth Circuit, the Seventh Circuit, or Novotny, neither of those plaintiffs suffered injury to person or property. And in Griffin the Court said that there was a recovery for those who suffer injury to personal property or to those who are denied equal privileges and immunities as citizens of the national government. So I would respectfully say to you that this case is legally and factually different from each of those for that very reason. Those two cases were what we have called, in our brief, Section 4(b) cases which, Mr. Justice White, would or do call for a "violation of a constitutional right" which in this instance would call for either a racial violation, a travel violation or a state action involved. If I may answer the question of Mr. Justice Rehnquist, are there other constitutional rights that may be involved. We can conceive of none except as a person may be enjoying security or freedom or peace from assault. William H. Rehnquist: Do you think that is basically a right protected by the federal constitution, the right to security or respite or freedom from assault? Robert Q. Keith: Equal protection under the laws-- William H. Rehnquist: Supposing everybody is getting beaten up? Robert Q. Keith: --Then there would be no inequality of protection. Certainly that is true, but in this instance and in no circumstances have been presented the case that you posit. Byron R. White: Where is the right... where do you get that right of physical security under the federal constitution from assault? Robert Q. Keith: I have-- Byron R. White: A private person. Robert Q. Keith: --I have the right under the state law to this freedom, and then I have the right as a federal citizen, a national citizen, to equal application of that law. When the marauder takes it in his own hands and treats me differently, irrationally, for no legitimate reason, then-- Byron R. White: So you do suggest, I suppose, that the federal government could have a general tort law, general criminal law to pick up all the crimes around if they involve some injury to person and property? Robert Q. Keith: --No, sir, indeed not-- Byron R. White: If they were conspiracies. Robert Q. Keith: --And if they were class-based-- Byron R. White: Yes. Robert Q. Keith: --animus-- Byron R. White: Then yes. Robert Q. Keith: --and with this invidious discrimination, yes-- Byron R. White: Then yes. Robert Q. Keith: --but only if there is that conspiracy with that class-based discriminatory animus. William H. Rehnquist: You say that the gist of the thing is denying your clients the equal protection of the law even though the State of Texas apparently is perfectly willing to enforce the law against everybody evenhandedly. Robert Q. Keith: That is correct, but that is the animus, Your Honor. That is not necessarily the cause of action. That is just an element of it, and this so-called violation does not need to lead to injury in a proximate cause sense. All this does was show that the animus arose in this violation of my equal protection. William H. Rehnquist: So there is really no state action involved in all. Robert Q. Keith: That is correct. There is no state action here, nor is there any required if you have injury to person or property as described under Section 4. Thurgood Marshall: In this case if they had not said this is union country or if they had not said anything and they just beat him up, would you be here? Robert Q. Keith: It would be a much more difficult case. Thurgood Marshall: Would you be here? I mean, do you think so? Do you think you would have gotten a judgment below? Robert Q. Keith: Not without showing that there was, in fact, this animus. I may have been able to do so circumstantially. But-- Byron R. White: Do you think this is the theory of the Court of Appeals that you are pushing? Robert Q. Keith: --No, sir. I do not. The Court-- Byron R. White: Are you defending the judgment of the Court of Appeals? Robert Q. Keith: --We do not have to go that far. Byron R. White: So your answer is no? Robert Q. Keith: That is basically correct. If this Court should hold that Section 5 of the Fourteenth Amendment grants this power to Congress, then the Court of Appeals judgment is correct on that basis. Byron R. White: You do not say they are wrong. You just do not want to defend it. Robert Q. Keith: We do not have to go that far. That is a heavier load to carry than we need to carry to prevail in this particular case. Byron R. White: Did you present this narrower ground to the Court of Appeals? Robert Q. Keith: No, sir. We did not. We submitted the larger view to the Court of Appeals. Thurgood Marshall: If you do not want to defend the court below, do you want us to? Well who is here defending them? Robert Q. Keith: Well, I am here defending them, Your Honor, but I say that-- Thurgood Marshall: I thought you were. Robert Q. Keith: --We can affirm my case without going as far as we ask-- Thurgood Marshall: I was trying to keep you from pulling the rug out from under yourself. Robert Q. Keith: --Thank you, sir. Harry A. Blackmun: Well, you certainly are defending the judgment below. Robert Q. Keith: That is correct, yes. Harry A. Blackmun: A little while ago you said you were not, but certainly the judgment below-- Robert Q. Keith: Indeed, and that is the only difference that we have with the Court of Appeals is this-- William J. Brennan, Jr.: --Why are you afraid of the Section 5 argument? Robert Q. Keith: --We did not think it was necessary-- William J. Brennan, Jr.: There have been opinions of the Court that have addressed it, as you know. Robert Q. Keith: --We did not think it was necessary to make, Your Honor. Byron R. White: Well, it is not necessary to make it except that... where else did Congress get the authority to pass this law? Robert Q. Keith: That is probably the answer to my question, yes. William J. Brennan, Jr.: I still do not understand your concern. There have been opinions that have addressed that question and have concluded that, indeed, Section 5 was the basis upon which the 1871 Act was adopted in United States v. Guest. Robert Q. Keith: Yes, sir. William J. Brennan, Jr.: There were six of us in that case that thought so. Robert Q. Keith: Yes, sir. John Paul Stevens: May I ask you once more. I know you have covered it but I keep turning it over in my mind. Define for me again the class at which the conspiratorial activity was directed. Robert Q. Keith: In the minds of the defendants and those whom they struck out against were a group of men associated at a particular work site who had chosen to-- John Paul Stevens: Is it all of the employees of this particular employer? Robert Q. Keith: --Yes, sir. John Paul Stevens: That is the class. Robert Q. Keith: As it turned out there was also a subcontractor on the job who had been notified-- John Paul Stevens: But you think that the employees of a particular employer satisfies the class concept in the class-based animus language? Robert Q. Keith: --Yes, sir, because they were associated as non-union workers exercising that right, not the right to work non-union but the right to associate. They were at this place just as the Jewish people might be at the synagogue. John Paul Stevens: Do you think they were there because they wanted to be with other non-union people or because they wanted a job? Robert Q. Keith: Either way, they had the right to be there and to express themselves in that manner and they chose to do so. Byron R. White: I thought you said this group of people at this site had the right not just to associate, and maybe you are saying that, too, but they had the right to have personal security. Robert Q. Keith: They do. Yes, sir. One is equal protection. One is privileges and immunities, yes. They have both rights as federal citizens. Have I answered your question? Thank you, sir. Warren E. Burger: Do you have anything further, Mr. Gold? Mr. Gold, you have two minutes. Laurence Stephen Gold: I have nothing further unless there are questions. Warren E. Burger: Thank you, gentlemen. The case is submitted.

William H. Rehnquist: We'll hear argument now in Number 94 896, BMW of North America v. Ira Gore. Mr. Frey. Mr. Andrew L. Frey: Thank you, Mr. Chief Justice, and may it please the Court-- When an automobile comes off the assembly line it has to be transported to the location where it's distributed. In the course of that happening, it sometimes suffers some damage and BMW, like other manufacturers, has means at hand to restore the car to factory condition as best they can using the same techniques that would be used in the factory if the same incident happened in the factory parking lot. The question arises, when this happens, whether or under what circumstances there might be an obligation or it might be good business practice to inform the dealers and prospective purchasers of the automobile that there has been work done on a repair or refinishing work. Now, BMW looked at this question in 1983, and the way they went about that was to examine the various State laws that were on the books then that addressed the subject and to comply with the strictest of those laws, which was to make disclosure, or at least not to sell without disclosure, any car that had had repairs or refinishing that exceeded in cost 3 percent of the manufacturer's suggested retail price. David H. Souter: Mr. Frey-- --Well, Mr.-- Mr. Andrew L. Frey: --I'm sorry. Sandra Day O'Connor: Mr. Frey, I guess Alabama at the time did not have a statute-- Mr. Andrew L. Frey: That's correct. Sandra Day O'Connor: --in effect dealing with the subject. Mr. Andrew L. Frey: That's correct. Sandra Day O'Connor: And do you question whether Alabama courts could properly find some award of punitive damages here for at least the conduct-- Mr. Andrew L. Frey: Well, I-- Sandra Day O'Connor: --that occurred in Alabama at that time? Mr. Andrew L. Frey: --I do question it, although I'm not questioning it in this case. Sandra Day O'Connor: It's not before us in this case, is it? Mr. Andrew L. Frey: See, I believe that what you have here is actually a species of malum prohibitum and not malum in se. Sandra Day O'Connor: But we take it on the assumption that-- Mr. Andrew L. Frey: The conduct is punishable-- Sandra Day O'Connor: --punitive damages could be awarded-- Mr. Andrew L. Frey: --In Alabama. Sandra Day O'Connor: --in Alabama-- Mr. Andrew L. Frey: Yes, that's correct. Sandra Day O'Connor: --at the time this incident occurred. Mr. Andrew L. Frey: At the time of the sale of this car. Sandra Day O'Connor: Now, do we also assume that it would be perfectly proper during the course of trial for evidence to be admitted on the existence and frequency of similar conduct outside of Alabama to show a course of conduct or the defendant's state of mind or something of that sort? Mr. Andrew L. Frey: Again, we are not challenging that. I have difficulty where the evidence is not relevant. I question its relevance here to any legitimate purpose question. Sandra Day O'Connor: Well, haven't there been many cases, including ones decided by this Court, where evidence-- Mr. Andrew L. Frey: Yes. Sandra Day O'Connor: --of other similar conduct outside the jurisdiction has been admitted? Mr. Andrew L. Frey: Absolutely, and there's no question, for instance, if it were admissible for Rule 404(b) kind of purposes under the Federal Rules of Evidence-- Sandra Day O'Connor: Well, just admissible to prove the intent-- Mr. Andrew L. Frey: --Right, now if intent-- Sandra Day O'Connor: --and the egregiousness of the injury. Mr. Andrew L. Frey: --That's true, and I think my problem with it, and it may not be a constitutional problem, it's a kind of rule 403 problem, that it's highly prejudicial in a case like this, where it was agreed that there was a policy and there was no question of intent-- Sandra Day O'Connor: Well, again, do we assume-- Mr. Andrew L. Frey: --You can assume-- Sandra Day O'Connor: --here that the evidence of conduct out of State properly was admissible? Mr. Andrew L. Frey: --You can assume that, yes. That's what the Alabama supreme court held-- Sandra Day O'Connor: Okay. Mr. Andrew L. Frey: --and we're not challenging that. Sandra Day O'Connor: Does this case boil down to kind of a fluke because it was submitted to the jury on this multiplier theory instead of... what if the jury... what if it had not been presented to the jury that way, and just the egregiousness of what happened to the plaintiff here, and the fact that similar instances occurred elsewhere, it was a standard practice of the company, could the jury properly have awarded the 4 million in punitives based on conduct in Alabama alone? Mr. Andrew L. Frey: No. I'm going to argue that they couldn't, but that is a different argument. There are two separate issues in this case. The first issue is whether BMW was punished for non Alabama conduct, conduct to which Alabama law does not extend, but punished under Alabama law; if so, whether that was improper-- Sandra Day O'Connor: Well-- Mr. Andrew L. Frey: --and if so, whether inadequate remedy was-- Sandra Day O'Connor: --I know you are, but is that because this case has peculiar facts? I mean, could-- Mr. Andrew L. Frey: --This case I think, Justice O'Connor, highlights what is more submerged in a lot of other cases, product liability, or mass tort, or consumer fraud cases where you have nationwide conduct, which is the invitation to the jury to punish the defendant not only for the conduct that was done in the State or to the plaintiff, or plaintiffs in the case, but to punish them for their national conduct. Ruth Bader Ginsburg: --But Mr. Frey, that came in only because a lawyer said it in summation. No judge charged it. No Alabama law permitted it. It was an impermissible summation. There was no objection to what the lawyer said. The source for that notion that you could multiply by all the incidents came from an unobjected to lawyer's summation-- Mr. Andrew L. Frey: On any-- Ruth Bader Ginsburg: --and the Alabama supreme court said it's dead wrong. You're not supposed to compute the size of the remedy on that basis so you can't trace that error to any flaw in the Alabama law. Mr. Andrew L. Frey: --Well, I'm not... except for the unconstitutionality of the holding of the Alabama supreme court, I'm not sure that I am, but I don't accept your premise that there was not a proper objection. I'd note-- Ruth Bader Ginsburg: Where was the objection... I didn't see it... to the lawyer's summation? Mr. Andrew L. Frey: --No, it wasn't during the summation, but what happened was there was a motion in limine. During the motion in limine, counsel for BMW, who had just been through the Yates trial, said, Your Honor, I know what they're going to do with this. They're going to improperly invite the jury to punish on the basis of sales outside of Alabama, and the law in those States is different. It's not the same as Alabama. A lot of these States have statutes. That was one of the objections that was made. I can give you the page of the transcript. Ruth Bader Ginsburg: Mr. Frey, there was no objection after the lawyer made that statement in summation, and isn't it common-- Mr. Andrew L. Frey: The court had already ruled that that was a permissible use of the evidence. Ruth Bader Ginsburg: --Well, perhaps we won't... I don't want to detract you on this any longer-- Mr. Andrew L. Frey: No. No, but I think-- Ruth Bader Ginsburg: --but you can give me the place in the record where the judge makes an error of law in saying it's proper for the jury to take into account the... to use as a multiplier sales in other States. Mr. Andrew L. Frey: --Well, I think you'd have to look at page 451 to see our argument, of the transcript... the Clerk's record, I'm sorry, and then at 585 to 591 of the Clerk's record, but I believe that what happened here was that we said this improper use is going to be made and in fact Mr. Bolt, counsel for Dr. Gore, said they wanted to use it on damages. Now, I understand that there are different ways in which it can be used, but because the Yates trial had already been held, and it had been used precisely in the way it was used here, and that was called to the attention of the court, I can't see that we had to do more, and besides-- Ruth Bader Ginsburg: But Mr. Frey, even if you were right about what the record would reveal, and even if we can pass over that there was no objection to the statement that was made, the Alabama supreme court itself said, such evidence may not be considered in setting the size of the civil penalty. Mr. Andrew L. Frey: --I agree, and I am willing to accept that as the premise and proceed to the question, which is really the question we presented, whether the use of that evidence to set the size of the civil penalty was properly remedied by the reduction of the punitive damages award from 4 million to 2 million. David H. Souter: May I just ask you one question before you get into that? You have argued, as I recall, that one of the aspects of the error was that Alabama was allowing the jury to punish for conduct which was lawful in the States in which it took place and that, as I understand it, is premised on your statement that when BMW adopted its 3 percent cost policy it was complying with the most stringent of out of state laws. Mr. Andrew L. Frey: I don't... I believe it is true... the situation is this. There were statutes-- David H. Souter: Well, let me just tell you what my question is, then-- Mr. Andrew L. Frey: --Okay. David H. Souter: --My question is, in those States in which... which had adopted this 3 percent rule, is it also the case, as counsel on the other side have claimed, that the common law fraud action was preserved and any plaintiff in any of those other States could still have brought a common law fraud action based upon repairs, undisclosed repairs, even though they did not amount to 3 percent of the cost? Mr. Andrew L. Frey: Well, the answer to that is, the action might not have been dismissed for lack of jurisdiction or preemption, but the action would have been, I believe, bound to fail. Now, let me say this. First of all, at the time of the sale of the car to Dr. Gore, there had not been a single suit brought anywhere in the United States on the theory that not disclosing paint refinishing is fraud... by the manufacturer is fraud at all, let alone in a State that had a statute that says here is the standard under our Deceptive Trade Practices Act, and then you comply with that standard and then we're going to go ahead and not only find you liable for any damage that may have been suffered but find you... but punish you. Now, there are... we cite in our brief a case from Louisiana which held that because the amount of the refinishing exceeded the statutory threshold, there was a cause of action, and I have a case from Wisconsin that was-- David H. Souter: Did you understand the court's reasoning to be that had it not exceeded it would have been no fraud cause of action? Mr. Andrew L. Frey: --I think that was implicit-- David H. Souter: Okay. Mr. Andrew L. Frey: --in the fact that their decision turned on whether or not it exceeded it. David H. Souter: Is there... I take it that is the extent of the out of state discussion of the subject. Mr. Andrew L. Frey: There's a case called Tesh v. Best Motors, decided by the court of appeals in Wisconsin on August 15, 1995, and the cite I have is 1995 Westlaw 478413, which is to the same effect. That is, it turned on that-- Now, let me make the point, to my mind there is something slightly Kafkaesque about saying, this is the standard, more than 3 percent, you must disclose less than 3 percent. It's not material, which is what the current Alabama statute says, and then turning around and solely on the evidence of compliance with that statute... solely on the evidence of conduct that complies with that statute, no separate evidence of fraudulent intent except what you infer from the conduct... holding somebody liable for fraud and punitive damages. David H. Souter: Well, it's not... why is it Kafkaesque? I mean, can't a State simply say, look, we're not going to provide the administrative machinery of the State to go after these dealers unless the dereliction reaches a certain point, but if any individual who has been defrauded wants to go after them for the amount of his loss, the individual is free to do it? Mr. Andrew L. Frey: Well, I guess... I guess my problem with this is that if virtually every State that has considered this conduct has found that there... that in a statute, has set a statutory threshold... those statutes are passed to balance the interests of consumers, and having information that's important to them, with the interests of the business community in doing business free from restrictions that may increase costs or have other adverse effects. Now, you know, it seems to me that... it's hard to say that this conduct is malum in se, and remember, the only evidence-- David H. Souter: Well, it may be hard to say, but do you... are you saying or would you argue that the courts of Alabama should have instructed the jury that so long as the damage did not reach this 3 percent threshold that as a matter of law it could not be considered as-- Mr. Andrew L. Frey: --No. No. David H. Souter: --Okay. Mr. Andrew L. Frey: We're not saying that to this Court. I'm not-- David H. Souter: So aren't you then making a jury argument to us? Mr. Andrew L. Frey: --No. No. The argument... on this particular point, the argument about the lack of any notice that this conduct was unlawful, and there was no notice in any judicial decision, any statute, or any regulation anywhere in the United States that this conduct would be considered fraud, but the only argument I'm making here is that that bears on the reprehensibility of the conduct when you're assessing whether it's excessive. Now, for purposes of my argument about extraterritorial punishment, it does not matter, because the problem here is that Alabama law was applied, and I think nobody can dispute that this case was decided only under Alabama law. Alabama law was applied to conduct that Alabama had no business regulating. Ruth Bader Ginsburg: Mr. Frey, I think that that argument is not genuinely in the case, and let me tell you why. There's a statement made by the lawyer. It's not in the judge's charge. The Alabama supreme court says that was wrong. The jury determined liability. The Alabama supreme court then... we think, after a thorough and painstaking review of the record, 2 million is an apt award, and that's what we set. Shouldn't we, as a Federal court, give the Alabama supreme court the respect of assuming that once it recognized the extraterritorial computation was no good, it then set what it considered a permissible award without regard to any extraterritorial multiplier? Mr. Andrew L. Frey: Well, but the issue we're raising is that we believe the Constitution prohibits it from doing that, and the reason we believe that-- Ruth Bader Ginsburg: Let's just assume that the Alabama supreme court said the jury has determined liability. We, as judges, are determining amount, and the amount we as judges arrive at has nothing to do with multiplier based on out of state sales, it has to do with what happened inside Alabama and the amount we set for that is 2 million. Mr. Andrew L. Frey: --All right, and my answer to that is, what is wrong with that is that that is first of all not what they did. It's not what Alabama law calls for them to do. It is very clear under Alabama law that what they do is, they reduce the punishment to the largest amount that is constitutionally permissible. That is not the same as having a de novo determination by the court of what the punishment should be. I would agree with Your Honor that if the court had determined the punishment de novo, that we would not have an objection based on what happened before the jury, but Alabama law is clear that you defer to the jury. Our problem is, you're deferring to a jury which the Alabama court itself recognized imposed punishment on an unconstitutional basis. David H. Souter: Let me ask a question which is an alternative, or rests on the alternative of Justice Ginsburg's premise. Let's assume that they did indeed... that whatever is left on that verdict rests upon a consideration of out of state conduct. Why isn't the answer to that that in fact Alabama was not punishing anything other than Alabama conduct? On the analogy with the argument which is common in the enhanced damage area in criminal law, we say, well, the enhanced penalty is not a further punishment for prior crimes which may be considered, and why do we not look at the Alabama rule as simply saying Alabama says if you've done it in other States, you better watch it here, because we're going to sock you hard as a result of it? Mr. Andrew L. Frey: I have no problem... I think this was Justice O'Connor's question in the beginning. I'm not here saying that Alabama cannot consider that conduct to enhance the punishment that should be imposed for every plaintiff who sues, not just Dr. Gore, and it's an issue I want to talk about which is very important that I'm afraid I'm not going to get to, but... but you have to decide... there is a difference... the Witte case that Justice O'Connor wrote for the Court last year recognized that there is a difference between punishing for the tort that is being adjudicated and enhancing the punishment for that based on other conduct, and punishing for the other conduct. Now, the Alabama supreme court was quite clear, and I don't see how anybody could fail to conclude each additional sale that took place outside of Alabama was punished an additional 4,000 by this jury. David H. Souter: Was it punished, or was it used as a measure for enhancement in punishing the Alabama-- Mr. Andrew L. Frey: It was used... in my view, you cannot let that kind of a subterfuge conceal the fact that the more activity which presumptively we have to assume was lawful in other States that was engaged in, the larger the punishment that Alabama is imposing on the defendant. Now, there is a problem with that, it seems to me. The problem is, the reality is, and the Alabama supreme court recognized this, that what happened here was that the punishment was being measured by... in order to take away the profits. This was the express purpose, take away the profits that BMW made in New Jersey or Hawaii or California from selling cars that for all we know were perfectly lawfully sold in accordance with the law of that State. Sandra Day O'Connor: --Well, the Alabama supreme court did grant a remittitur, and how do we know that what it did in granting the remittitur is somehow unconstitutional, and are you relying on the Due Proces Clause-- Mr. Andrew L. Frey: Well, I have-- Sandra Day O'Connor: --or the Commerce Clause, or what? Mr. Andrew L. Frey: --Well-- Sandra Day O'Connor: What principle is it-- Mr. Andrew L. Frey: --Okay-- Sandra Day O'Connor: --that tells us what they did in granting the remittitur was unconstitutional? Mr. Andrew L. Frey: --I have two separate arguments, and I need to be clear about this. The first argument has to do with the remedy if there was a constitutional violation in the way the punishment was measured. Is the remittitur to the constitutionally maximum amount an adequate remedy? And I'd like to read to the Court from a case called Hicks v. Oklahoma at 447 U.S. 345, where the Court said, had the members of the jury been correctly instructed in the this case, they could have imposed any sentence of not less than 10 years. That is, they could have imposed a sentence of less than the one they did. Then the Court said, it is argued that all that is involved in this case is the denial of a procedural right of exclusively State concern. Where, however, a State has provided for the imposition of criminal punishment in the discretion of the trial jury, it is not correct to say that the defendant's interest in the exercise of that discretion is merely a matter of State procedural law. Ruth Bader Ginsburg: But Mr. Frey, I keep coming back to where the State has. There was nothing in Alabama statute law. There was nothing in the judge's charge that permitted the size of the civil penalty to be set by the number of incidents all over the country. The Alabama supreme court said that was wrong, and then it said, we are determining the size of a verdict that would be permissible without regard to that-- Mr. Andrew L. Frey: No, but Your Honor, it's... there is a vast difference, and this Hicks case makes it clear, between determining the verdict that is proper for this conduct, and determining the largest constitu-- Ruth Bader Ginsburg: --The Hicks case relied, as you read it, on a judge's charge. There was no source of Alabama law. There was no authoritative Alabama law-- Mr. Andrew L. Frey: --If the jury had not believed, and had not punished for non Alabama sales, it presumably... we don't know for sure, but the best evidence is that it would have imposed a punishment of 56,000 if it-- Ruth Bader Ginsburg: --I'm forgetting what the jury does. Mr. Andrew L. Frey: --No, but you can't-- Ruth Bader Ginsburg: I'm asking why we don't owe the Alabama supreme court the respect of saying that when it recognized that what the jury did was impermissible, it then substituted a figure that it thought a proper construction of the law, not permit-- Mr. Andrew L. Frey: --No, what... it substituted a figure that it thought was the largest figure that... the largest amount that a jury could punish BMW. When that happens, what happens is the right to have the jury determine the punishment is wiped out, because this jury would have picked a smaller number. David H. Souter: --And conversely you're saying what is left is still a punishment for extraterritorial conduct and that's wrong, whether it's 2 million or 2. Mr. Andrew L. Frey: No. If it were reduced to 56,000, that would expunge the effect of the extraterritorial punishment. David H. Souter: Because there wouldn't be any extraterritorial punishment. Mr. Andrew L. Frey: That wouldn't... there would not be any. David H. Souter: Yes, but so long as there's some extraterritorial punishment-- Mr. Andrew L. Frey: We are saying that we are still subject to extraterritorial punishment. That's-- Sandra Day O'Connor: --And do you rely on the Due Process Clause or the Commerce Clause? Mr. Andrew L. Frey: --No, the Due Process-- Sandra Day O'Connor: I have yet to hear your theory. Mr. Andrew L. Frey: --No. We rely on the Commerce Clause for the proposition that it's wrong to punish us, that Alabama cannot project its law outside of Alabama to do what Dr. Gore said, which is to force BMW to stop its conduct everywhere. For that we rely on the Commerce Clause, the Due Process Clause, and the Full Faith and Credit Clause. On the question of remedy, I think we rely on the proposition which is implicit in the Due Process Clause that if there is a violation of your Federal constitutional rights, ordinarily, barring exceptional circumstances, you're entitled to an appropriate remedy that expunges the effect of that violation, and that's what we're asking for here, and we say the reduction to 2 million does not expunge the effect, and I think you'll see when you look at the Hicks case or the death penalty cases, where a jury imposes the death penalty-- William H. Rehnquist: Well, they're criminal cases. I'm not so sure the same standards carry over from criminal cases to a civil case. Mr. Andrew L. Frey: --Well, it might not, although certainly we're dealing with punishment here. Sandra Day O'Connor: But can't a State court in a criminal case consider conduct that occurs out of State at the time of imposing sentence-- Mr. Andrew L. Frey: Absolutely. Sandra Day O'Connor: --to determine the sentence range? Mr. Andrew L. Frey: Absolutely. We have no problem with that. I want to be completely clear about that. What they cannot do is punish for that conduct if they don't have jurisdiction over that conduct. Anthony M. Kennedy: Mr. Frey, I'm glad we've come to this point, because I think it's a very important issue that we haven't considered in these punitive damages cases before. What would happen if the Alabama resident went to Tennessee, bought his car there, and then came back to Alabama? What measure... and he sues in Alabama court under Alabama law? Mr. Andrew L. Frey: I think the Constitution would permit the application of either Alabama or Tennessee law in that circumstance. I don't have a problem with that. Anthony M. Kennedy: Well, could Alabama count the sales both in Tennessee and in Alabama? Mr. Andrew L. Frey: You mean one sale, and say-- Anthony M. Kennedy: No. Could it count all... could it take into account all of the sales under this alleged fraudulent-- Mr. Andrew L. Frey: --No, no, no, because... no, it can't do that, because it has no interest... it cannot take into account sales to residents of Tennessee or Illinois or some place that are made in Tennessee. It can't-- Anthony M. Kennedy: --But why not, if Alabama residents are going there to buy their cars? Why couldn't they say, well, we'll take Tennessee sales plus Alabama sales, or if we have the-- Mr. Andrew L. Frey: --Well, because I think the-- Anthony M. Kennedy: --If we have the metropolitan area around the District of Columbia-- Mr. Andrew L. Frey: --Well, in Healy v. Beer Institute people were going to New York to buy the beer because it was cheaper. The Court said, well, that doesn't give Connecticut the right to enact a system which affects the prices that are going to be charged in New York. Anthony M. Kennedy: --But it seems to me that what we would have to do if we adopted your rule is to have a jurisprudence of apportionment something like our interstate tax jurisprudence. Mr. Andrew L. Frey: Well, the apportionment issue is very important, and it relates to a different question, which is our excessiveness argument. Remember, even if the Court were to disagree with us on everything we've been talking about so far and were to accept 2 million as a de novo punishment set by the Alabama supreme court that expunged any error that may have occurred, there is the second issue in this case, which is, is 2 million too much for what happened to Dr. Gore? Ruth Bader Ginsburg: And that aspect-- Anthony M. Kennedy: --Well-- Ruth Bader Ginsburg: --is not quirky. There was a question raised, this is an ordinary... this is a strange case. It will never happen again, presumably, because trial judges will be instructed by the Alabama supreme court's absolutely clear statement such evidence may not be considered in setting the size of the civil penalty, so this is not going to be repeating the issue in Alabama. Mr. Andrew L. Frey: I can't agree... well, in the narrow sense that it comes up here, that's true, but in the broader sense the question would be, is the defendant, for instance, entitled to have the jury told that they can't punish for conduct that occurs outside-- Ruth Bader Ginsburg: But the one issue... your second issue is the one that will be a continuing one. Is 2 million too much for this kind of injury? But the other one you would be asking us to make a correction that the Alabama supreme court has already made-- Mr. Andrew L. Frey: --Well-- Ruth Bader Ginsburg: --an issue as far as I can see it which will never repeat in this jurisdiction, and-- Mr. Andrew L. Frey: --Oh, it will repeat in a slightly different form where it's less obvious what's happening, in the form that is common in product liability cases, for instance, where the argument is made that there are so many thousands of people around the country who have bought this product, or been injured by it, or so many thousands... and the jury will be invited to punish for that without any kind of explicit mathematical formula, and that will raise a different problem, but the first step on that particular road is this case. Ruth Bader Ginsburg: --I did-- --Wouldn't every defense lawyer be able, then, to tell the judge, the trial judge please instruct the jury that such evidence may not be considered in setting the size of the civil penalty? Mr. Andrew L. Frey: Well, if the Court would hold that, I think that would be extremely valuable in the development of the law. Ruth Bader Ginsburg: Well, that's the marching orders that the Alabama supreme court has given. Mr. Andrew L. Frey: Well, it is less clear, and I can tell you from looking at this litigation around the country that this problem recurs in a slightly more insidious or less, you know, obvious form than it recurred in this case, but-- Stephen G. Breyer: Could you just say a word about excessiveness? That is, as I see it, and I thought that was probably in this case-- Mr. Andrew L. Frey: --It is. Stephen G. Breyer: --you have 4,000 of damage of economic nature. A company is going to have to pay 2 million in punitives. I take it the total amount of evidence of this kind of conduct in Alabama amounts to 56,000, so I suppose the underlying question which some people complain about is that juries are free to transfer possibly the entire gross national product, or some significant portion thereof, under a standard that has no limit. I'm not saying I buy that argument. Mr. Andrew L. Frey: All right. No, I-- Stephen G. Breyer: But the problem... the problem is, is there not some Federal limitation and then, of course, it raises, what? What is the standard, federally-- Mr. Andrew L. Frey: --The first part-- Stephen G. Breyer: --that could be possible to prevent tremendous transfers of property on minimal evidence of significant harm? Mr. Andrew L. Frey: --The first part of the problem, Justice Breyer, is not a problem any more because the Court has decided in Haslip and in TXO and in Honda that there does exist a substantive due process limit. Stephen G. Breyer: But what, is the question. Mr. Andrew L. Frey: Now, I understand the question is what, and I think there are... the nature of the inquiry inherently cannot be reduced to a mathematical formula. You have to consider the reprehensibility of the conduct, other civil penalties, and in this case I think it's extremely important that the penalties provided under the Deceptive Trade Practices Act for fraud in selling automobiles is 2,000 if it's a civil penalty, or treble damages plus attorney's fees in a private action. There is a fascinating question about whether the denominator of the fraction, when you're looking at the reasonable relationship between the punishment and the wrong, is the plaintiff's own injury, or potential injury, or whether it's all 14. I wish I had the chance to talk about this, because there's a procedural due process as well as a substantive due process aspect to this question, but I haven't got the time, so I think I'd better reserve what I have left for rebuttal. William H. Rehnquist: Very well, Mr. Frey. Mr. Gottesman, we'll hear from you. Michael H. Gottesman: Thank you, Mr. Chief Justice, and may it please the Court-- I'd like to begin by rehearsing a little bit more the procedural posture in which this case got to the Alabama supreme court, because it bears heavily on this first question that's presented in the petitioner's brief. As Mr. Frey explained, before the trial, BMW moved to bar the admission of these... the evidence of out of state sales, and the judge denied that motion, and BMW now concedes that that denial was correct, the evidence was in fact admissible. The parties went to trial. They were admitted, and then in closing argument counsel made the unfortunate statement which the Alabama supreme court thought created an improper issue for the jury. BMW did not, as Justice Ginsburg observed... BMW did not object to that. If it had objected to that, under Alabama law, as the supreme court has told us it is in Alabama, the Judge either would have had to give a corrective instruction to the jury which said, look only at Alabama sales, or, if the judge had refused to give that correction, they would have been entitled to a new trial, not to a remittitur. Under Alabama law, if there is a judicial error that affected the outcome, Alabama will not remit, it will give the defendant a new trial. Now, because BMW didn't-- William H. Rehnquist: Does the supreme court of Alabama insist that an objection be made during the course of argument? That's a very difficult thing to do, to stand up in the middle of your opponent's argument to the jury and object. Michael H. Gottesman: --Well, you can do it either then or at the end, but they do, Your Honor. I'll give you the cites to two cases in which Alabama says that unless the counsel says something that's uncorrectible, and they've made it clear that's an appeal to racial bias, or that kind of thing, unless it is uncorrectible, the failure to object to it means that you have waived the right to a new trial or to appeal from it. There's the Alabama-- Sandra Day O'Connor: Is that true even where there has been a motion in limine in advance of the argument and the issue is resolved? Michael H. Gottesman: --Yes, because the motion in limine was only to the admissibility of the documents, not to... it did not address-- Sandra Day O'Connor: Well, what if a motion in limine addressed or should be interpreted to address counsel's argument as well? Michael H. Gottesman: --Well, it didn't-- William H. Rehnquist: Well, suppose it did. Michael H. Gottesman: --Okay. Sandra Day O'Connor: Do you think Alabama law would then not permit a new trial? Michael H. Gottesman: Well, I guess I don't know the answer to that. I would give the Court reference to Alabama Power, 342 Southern 2d, at 327, and Southern Life, 518 Southern 2d at 77, where the court explains its practice respecting the failure to object to counsel's statements. Now, BMW understood that because it had not objected it could not move for a new trial on this ground, and it did not. It moved for a new trial on that the judge erred in admitting the evidence, because there they had gotten the ruling from the judge and they were challenging it. But on this issue, they realized that they couldn't move for a new trial because they hadn't objected. They had waived it. What they did instead is, they were fortunate that Alabama has a very generous remittitur practice. The defendant in any case where punitives has been awarded can ask for a post judgment hearing, put in any evidence that it wants, and say, on the basis of this evidence, please reduce the verdict, and they invoked that, and in this post judgment hearing for the first time they introduced the evidence that only 14 of these 983 cars were Alabama cars. They had... before the jury they had made no reference to the location of these cars at all. There was no reference by either party to where these 983 cars were sold, and the only point that BMW made in response to counsel's statement which the Alabama supreme court was unhappy with was, there's nothing wrong with those 983 cars. They're just as good as any other car, so you shouldn't punish us for them. But now, in the remittitur proceeding, they did make an issue of the geography. They did put in the fact that only 14 of those 983 cars were Alabama cars, and they asked the Alabama courts to reduce the punitive damage verdict-- John Paul Stevens: May I ask, Mr. Gottesman, in the remittitur proceeding did they also bring out the fact that in a lot of States these sales would not have been unlawful? Michael H. Gottesman: --Well, they made the argument. It is not a fact. They made the argument that in a lot of States there are statutes that-- John Paul Stevens: There's no evidence that they would have been unlawful in any State, is there? Michael H. Gottesman: --That they would have been unlawful? John Paul Stevens: If there's a presumption of innocence, we would presume-- Michael H. Gottesman: Right. That's right. John Paul Stevens: --all these sales were lawful. Michael H. Gottesman: That's right, and the Alabama supreme court said-- John Paul Stevens: And that was brought out at the remittitur hearing. Michael H. Gottesman: --Right. The Alabama supreme court said there's no evidence of whether they are unlawful or not in other States, so they brought that out at the remittitur hearing as well. Now, the Alabama supreme court was in this case in a peculiar posture. John Paul Stevens: Let me just be sure I understand. You say there's no evidence one way or another. Did they at least have before them the fact that there are all these statutes out there that do have this 3 percent standard in them? Michael H. Gottesman: Yes, that there were-- John Paul Stevens: That wasn't-- Michael H. Gottesman: --At the time they adopted the policy, 15 States had those statutes. At the time of the trial in this case, 25 States had those statutes. Sandra Day O'Connor: --Including Alabama by the time of trial-- Michael H. Gottesman: No. At-- Sandra Day O'Connor: --is that right? Michael H. Gottesman: --Well, Alabama by the time of trial, but after the sale in this case. Sandra Day O'Connor: Right, which-- Michael H. Gottesman: But the Alabama statute-- Sandra Day O'Connor: --makes it particularly-- Michael H. Gottesman: --Well, except that the Alabama supreme court has construed that statute not to preempt the common law fraud action. David H. Souter: --I was going to say, in your brief you make the claim that in your... of course, you could still have common law fraud in Alabama. Do I remember correctly that you also made the statement that there is no... there is at least no reason to believe that there couldn't have been a common law fraud action in any of the other States with the limits? Michael H. Gottesman: Yes. That is, with the possible exception of one of those statutes, they don't contain safe harbor language in them. They don't say, if you comply with this statute that means that you can't be sued under the common law-- William H. Rehnquist: Well, it's really a matter of statutory interpretation-- Michael H. Gottesman: --Yes, of course. William H. Rehnquist: --in each State which has some-- Michael H. Gottesman: That's correct, Your Honor. William H. Rehnquist: --I would think it would be very difficult to generalize one way or the other in the absence of decided cases. Michael H. Gottesman: Well, of course, that's right, and Your Honor, the Alabama supreme court said as far as we're concerned, we don't think you should consider the sales out of State at all in determining the amount. That's relevant to the culpability, but not to the amount of-- John Paul Stevens: Why is it relevant to culpability? Would you explain that? Does it show that they were honorable or dishonorable if they're complying with the law throughout the country? Michael H. Gottesman: --Well, the... it's... they haven't shown that they complied with the law. John Paul Stevens: I thought you said to me a moment ago there was no example of a case anywhere in the States that reached the same result as the Alabama court did in this case. Michael H. Gottesman: No, I... there's no case. I'm talking about-- John Paul Stevens: So if you presume that the conduct is innocent unless proven guilty, there's no proof that they violated the law anywhere else. Michael H. Gottesman: --No, that's right. John Paul Stevens: Right. Now then, in that regard, what is the relevance of the out of state conduct? Michael H. Gottesman: Well, they concede it's relevant. The Alabama supreme court-- John Paul Stevens: Well, everybody concedes it. I'm still curious, why is it-- Michael H. Gottesman: --The relevance is that it goes to show the, among other things we have a-- John Paul Stevens: --A lot of lawful transactions. Michael H. Gottesman: --Pardon? John Paul Stevens: It goes to show 983 lawful transactions. Michael H. Gottesman: But it also goes to show why they... that it is a nationwide policy, that-- John Paul Stevens: Right. Michael H. Gottesman: --they are reluctant to change it, that they are making a profit off of the-- John Paul Stevens: Why should their interest in either changing it or maintaining it be the business of the Alabama court? Michael H. Gottesman: --Well, Your Honor, at best-- John Paul Stevens: I don't understand. Why does Alabama have any authority to tell them what policy to follow in New York? Michael H. Gottesman: --It doesn't. It doesn't have... Alabama has to be Alabama regarding-- John Paul Stevens: Right. Michael H. Gottesman: --in determining the amount of punitive damages. In determining the quality and the character of the party before them and how it should be punished for its Alabama behavior, just-- Sandra Day O'Connor: But admittedly it was applied here by the jury, as has been determined by the Alabama supreme court, in a way that directly tried to affect the conduct of BMW in other States. Michael H. Gottesman: --That's correct, and now I want to come back to where I was on the procedural posture. If they had objected, they would have been entitled to a new trial. They didn't object, and the Alabama supreme court said you're asking us to give you a remittitur for this. We agree with you, the counsel shouldn't have said that, and we agree with you that the likely thing the jury did was to do this arithmetic computation, and therefore you're entitled to a remittitur. Now, the question... and now, it said, we are going to redetermine the amount of punitive damages, and the question is, did that remove... we'd still have the second question, which is, is their own redetermination excessive, but did that remove the taint, as BMW calls it, of the jury's consideration of the out of state sales? Now, in their-- Antonin Scalia: Did they say that they're going to recompute the amount, or... you're in direct disagreement here with your-- Michael H. Gottesman: --Yes, and I-- Antonin Scalia: --colleague, Mr. Frey, who says that it's clear under Alabama law that what the remittitur amounts to is a reduction of the verdict to the maximum constitutionally permissible amount. Michael H. Gottesman: --All right, and that's exactly where-- Antonin Scalia: You dispute that. Michael H. Gottesman: --We do, and I've advised Mr. Frey that we would, because our brief didn't, and it's reading his reply brief that made us realize the following mistake. The court in this case did not say it's reducing to the maximum. On page 21a of its opinion, in the appendix, 21a, it said, we hold that a constitutionally reasonable punitive damage award in this case is 2 million. Now, those are the words it used. It didn't say maximum, it didn't not say maximum. It's not clear what they meant by that. In their brief, Mr. Frey and BMW said that, well, look at other Alabama cases where the court has said that our practice is to reduce to the maximum that would be constitutionally permissible, and they cited a case called Big B, and there are other cases to the same effect. Now, we went back, after reading their reply brief, and read each of those cases that has said we're reducing to the maximum. Each of them is a case where the trial was error free. The only thing that was being complained about was that the amount the jury brought in exceeded the maximum amount that could be justified for punishment and deterrence, what are called in the jargon mere excessiveness cases, and in that context the Alabama supreme court has said, when the only problem we have is that the jury's verdict is higher than could be justified, we reduced to the maximum that would be justified, and the inference was drawn in BMW's brief... and as I say, and I apologize for this, we acquiesced in it... that that must be what they did here as well. But this case is unique in that it is a case where we don't have an error free trial, but because they didn't object, they're not entitled to the new trial they would automatically be entitled to. Antonin Scalia: But why... if the Alabama court does what you suggest, if only in the pure excessiveness cases they reduce it to the constitutional maximum, but in error cases they reevaluate on their own, there is simply no explanation for the term, constitutionally reasonable punitive damages award. The court would have simply said, we hold that a reasonable punitive damages award in this case is 2 million-- Michael H. Gottesman: Well, I-- Antonin Scalia: --and that a remittitur of the 4 million jury verdict is appropriate. They don't say that. They say, we hold that a constitutionally reasonable punitive damages award. Michael H. Gottesman: --Yes. Antonin Scalia: Why is the adverb there? Michael H. Gottesman: Well, I think the adverb is there because they're saying that what made this one constitutionally unreasonable was the consideration of out of state conduct. What makes it constitutionally reasonable is that we have determined the award without considering the out of state conduct. I believe that that's the meaning of it. It's... I don't mean to claim that I can tell you with absolute certainty that Alabama did not use a maximum here. What I'm saying is, it's not at all clear that because they do in those other cases they did here. Two things are striking. One is that they didn't say... this language is pretty standard in their cases, we reduce to the maximum amount, and we don't find it here. And the second thing is that when we realized this and followed up on it we found one other Alabama case where, because of peculiarity of posture, the court had before it a remittitur where there was error. The error in that case was found to be genuine bias by the jury. That case was the Harmon case at 525 Southern 2d 411, and it seems clear from the face of that opinion that in that case where there was a tainted jury verdict Alabama supreme court did not remit to the maximum possible amount but to something less than that, because it said, since this was a tainted award, the plaintiff, if it rejects this remittitur, will not be bound to this as the maximum that it can seek, so they plainly didn't think they were imposing the maximum. Ruth Bader Ginsburg: Mr. Gottesman, if we don't know what operation the Alabama supreme court in fact performed, on a remittitur there are three, at least three positions, the highest a jury could award, the least that a jury, reasonable jury would award, and what the court itself thinks is reasonable. We don't know which of those three choices. Do we make an assumption, or do we remand to the Alabama supreme court and say, tell us what you did? Michael H. Gottesman: Well, in the case that we cite in this section of our brief, Clemons v. Mississippi, this Court had a similar problem. It didn't know exactly what the State court had done as between two alternatives, one of which would have been constitutionally okay, and the other of which would have been constitutionally troublesome, and what the Court did in that case is say, now, if this is what you did, court, it was okay, but if this is what you did, it wasn't, and we remand for further proceedings consistent with this opinion, and that would certainly be an option. That is, if the Court thinks that a maximum would have tainted the award but that a redetermination would not, it could say that. I think it would be dangerous to try to conclude from this language that you know which of these choices the Alabama supreme-- Anthony M. Kennedy: Well, do you agree with the Alabama supreme court that the jury could not use the number of similar acts that a defendant committed in other jurisdictions as a multiplier? Michael H. Gottesman: --Certainly, in the absence of evidence that it's unlawful in those States, we would agree that they-- Anthony M. Kennedy: And is that because of interstate commerce concerns or due process concerns? Michael H. Gottesman: --I think due process concerns-- Anthony M. Kennedy: Well... well-- Michael H. Gottesman: --but I want to be clear what we're agreeing to-- Anthony M. Kennedy: --on interstate... does interstate commerce enter into the calculus? Suppose Alabama enacted a statute saying that an auto company that defrauded consumers in Alabama had to disgorge all of its national profits, would that be constitutional? Michael H. Gottesman: --For conduct that didn't... did or did not occur in Alabama? Anthony M. Kennedy: Well, the sale occurs in Alabama, they do business in Alabama, but the measure of disgorgement is profits nationwide. Michael H. Gottesman: You know, we have a... there's a grossly excessive test under the Due Process Clause that this Court's-- Anthony M. Kennedy: What about... is there any interstate commerce objection to the statute that I hypothesize? Michael H. Gottesman: --There might be, Your Honor. I don't... you know, it's not this case, but it might or it might not. I could see a problem if a State did that. Anthony M. Kennedy: In other words, you're not sure whether or not there is an interstate commerce problem. Michael H. Gottesman: I think the answer is I would not be sure... Alabama removed it by saying you can't... Alabama went further than both we and BMW thinks the Constitution requires. Alabama said that we are not allowed to consider the out of state sales in determining the amount. Anthony M. Kennedy: Well, let's just-- Michael H. Gottesman: Now, we agree that Alabama-- Anthony M. Kennedy: --Let's just assume that either a statute, and of course then we'll next get to the fact that our hypothetical jury instruction considers out of state conduct as a multiplier in fixing the amount of the award, or out of state profits as being part of the sum that must be disgorged to this plaintiff. Are there not interstate commerce concerns with such measures of damages? Michael H. Gottesman: --There might well be, Your Honor. Anthony M. Kennedy: And how do you... well-- Michael H. Gottesman: Alabama has absolutely foolproof protections against that happening. Alabama, uniquely among the States-- Anthony M. Kennedy: --Well, if you say there might well be, then I take it you concede the surface plausibility or reasonable content to the proposition that Alabama may not punish by way of damages for acts that have occurred out of State. Michael H. Gottesman: --Stated that way, I agree with it, yes. Alabama at least without a determination that it's unlawful in another State, Alabama can't. The reason I'm putting that-- Antonin Scalia: Ah... ah... ah... ah... ah, that's a big qualifier you just threw in there. Michael H. Gottesman: --Yes, of course. Yes, of course, and in this case-- Antonin Scalia: I don't think Justice Kennedy had that qualifier in mind. Michael H. Gottesman: --Well, here's my-- Antonin Scalia: I didn't hear it in his question. Michael H. Gottesman: --Yes, I understand, but here's my concern. Suppose this case had not been filed in Alabama but because perhaps they couldn't get in personam jurisdiction, and so it were filed in New Jersey. If the issue were whether New Jersey, applying Alabama law, would be allowed to award punitive damages or not, that's an interesting question. Ordinarily, one State doesn't punish conduct in another State. Antonin Scalia: Well, it certainly does in criminal cases where-- Michael H. Gottesman: It takes account of out of state-- Antonin Scalia: --where recidivist criminals-- Michael H. Gottesman: --Of course. Antonin Scalia: --are punished more severely if they've committed crimes not only in that jurisdiction but in other jurisdictions. Michael H. Gottesman: Of course, and that's the point I'm making, is that while Alabama can't say, we want to punish you for what you did in Texas, Alabama can say that in determining the quality and character of your actions in Alabama-- Antonin Scalia: How bad a person you are. Michael H. Gottesman: --Exactly... we can look to the conduct that you've engaged in in other States just as this Court has held that the Due Process Clause allows that in sentencing by a State in a... or by a Federal court, for that matter, in a criminal case. David H. Souter: But implicitly you're relying, I guess, so far as analogies go, on the fact that in the criminal enhancement field we... at least there is no authority to the effect that it would be proper for a State to say, we will set our punishment for conduct in this State by multiplying a... you know, a particular term of years for every similar act that took place elsewhere. Michael H. Gottesman: Well, in some sense, that's what a recidivist statute does. It doesn't do exactly that-- David H. Souter: Well, if it does it like that-- Michael H. Gottesman: --You know, the three strikes you're out statutes are going to-- David H. Souter: --Yes. Michael H. Gottesman: --give a greatly increased punishment because of actions-- David H. Souter: But it's harder... it's not a kind of a multiplier punishment. Michael H. Gottesman: --It may be much more than a multiplier. Antonin Scalia: Do we really have-- William H. Rehnquist: --How much of our jurisprudence in the recidivist statutes do you think is dependent on the Double Jeopardy Clause, which of course doesn't have any applicability to a civil proceeding. Michael H. Gottesman: Well, of course, Your Honor, but both due process and double jeopardy apply to the criminal proceedings, and to the extent that courts are allowed to do this in sentencing in a criminal case, it would seem to follow a fortiori that-- William H. Rehnquist: Yes, but perhaps the reason that the courts have said that you're not sentencing again for the same conduct in a recidivist statute is because there would be a double jeopardy problem if you were, and you're not bound down by the double jeopardy clause in a civil proceeding. Michael H. Gottesman: --Well, I think that's right. I want to be-- Anthony M. Kennedy: And it's not only double jeopardy, it's the problem that a State can't really, consistent with known juris prudential postulates, divide up a sentence and say, well now, you serve this part of your sentence in Nevada, and this part of your aggravated sentence back in California, where you committed the crime, but we can do that under the Commerce Clause. We can do that with apportionment. We do it with interstate taxes all of the time. Michael H. Gottesman: --Well, you know, I don't think the Court should take too much counsel from what I say about this, because since in this case Alabama has removed all these issues from the consideration-- Antonin Scalia: I'm saying, do we have to grapple with all of this? Michael H. Gottesman: --No, Your Honor. Antonin Scalia: I thought that both you and-- Michael H. Gottesman: Yes. Antonin Scalia: --your opponent concede that these out of state things should not have been considered by the jury. I mean, I thought that that's-- Michael H. Gottesman: Right. Well-- Antonin Scalia: --for purposes of punishing those acts separately. Michael H. Gottesman: --That's right, absolutely. That's why... and therefore, since I-- Ruth Bader Ginsburg: But Mr. Gottesman, there is another multiplier that is alive. The other, I quite agree the Alabama supreme court has said, that's wrong, you don't do it, but this one 2 million, if you just take account of the 14 other in Alabama-- Michael H. Gottesman: --Okay. Ruth Bader Ginsburg: --Does every plaintiff get the 2 million, and what about the other States? How tolerable is a single award of 2 million when you consider that that 2 million can be replicated again and again and again? Michael H. Gottesman: Okay, let me address that, Your Honor, because... and thank you for bringing me to that. There are two things I want to say about that. Number 1, the Alabama court knew and had... was entitled to find that there were many, many, many more than 14 cars that had been sold in Alabama. They told us that they did a thorough and painstaking review of the record in arriving at the award. Now, I can't tell you for sure, because they didn't tell us what the elements were that led them to the 2 million, but this record gives a basis for believing that there were hundreds of cars in Alabama that were sold that were repainted. I'll come to that in a second. And then secondly, I'll address the other implications that would flow even if it were only 14. Incidentally, as to the question of whether everybody can do the same thing, the answer is no. Alabama... remember that punitive damages are not just to punish for past acts, but to deter future acts. Alabama had a practice that was on going, and so it needed to have a penalty large enough to deter the practice from continuing. John Paul Stevens: Do you think that it was... in your brief, you argue that it was appropriate to deter the nationwide policy. Have you abandoned that position? Michael H. Gottesman: If we said that... I don't believe-- John Paul Stevens: You've said it over and over again. You said over and over again that this-- Michael H. Gottesman: --Oh, I'm sorry, yes-- John Paul Stevens: --this jolt was necessary to change a national policy. Michael H. Gottesman: --Well, because-- John Paul Stevens: Do you adhere to that position? Michael H. Gottesman: --If they would not stop in Alabama-- John Paul Stevens: You don't know whether they would have or not. There's no evidence that even if they knew they were liable for compensatory damages they wouldn't have changed their policy. There isn't anything one way or the other on that point. Michael H. Gottesman: --Well, that's right... it's always true, when you have to set punitive damages-- William H. Rehnquist: Well, the respondent says that BMW had stopped shipping cars to Alabama by the time of this trial. Michael H. Gottesman: --Well, that's right. They didn't put this before the jury. In the post judgment hearing they put on testimony that-- William H. Rehnquist: Well, does that make it-- Michael H. Gottesman: --immediately prior to this trial a phone call was made saying, don't send cars to Alabama. There are two things to be said about that. One, that... as that testimony developed, it became clear that cars would continue to come into Alabama, because dealers trade cars all the time. They're all linked into a computer network, and when a customer wants a particular kind of car, you trade. The testimony was, our dealers trade lots of cars, and this record shows a lot of interstate trades, and the witness was then asked, well... this was a phone conversation, this changed policy. It was just a phone conversation... don't do it. The witness was then asked, well, what change did you make to assure that these repainted cars wouldn't then just get traded back into Alabama from one dealer to another, and he said, we did nothing about that. What's most interesting... so at best what they were saying was, okay, we've been caught. We promise from now on we will reduce the amount of fraud that we commit in Alabama, because what they weren't willing to say is, we will disclose, because they couldn't just disclose in Alabama without disclosing nationwide. There was no way they... even when they wanted to fix this problem, they couldn't fix it by disclosing it in Alabama because, since they knew cars came from other States, they'd have to disclose in other States as well, and they didn't want to do that. And so the first argument we made, and I want to defend the court here today on the ground it itself used, which is, it didn't consider the out of state at all, but the first argument we made in our brief is that they were entitled to look at the out of state conduct in this case, because BMW had constructed an engine that was a nationwide engine and couldn't figure out a way to tailor it so that it wouldn't do harm to Alabama. John Paul Stevens: --Well, there's no evidence they couldn't figure out a way to do it. Michael H. Gottesman: Well, except-- John Paul Stevens: The one phone call doesn't discuss all possibilities that-- Michael H. Gottesman: --Well, but it-- Antonin Scalia: --executives might think of faced with this problem. Would be unwilling to do it, is what you mean. You don't even have that-- --They'd have problems nationwide doing it this way, that they're not going to stop in Alabama alone. You don't even have evidence they were unwilling to do it. Michael H. Gottesman: --Well, at least-- John Paul Stevens: You just have this one phone call, they got a problem in Alabama, this is the way we'll try to solve our Alabama problem. Michael H. Gottesman: --That's right. John Paul Stevens: That's all that shows. Michael H. Gottesman: But recall that they were trying to solve the Alabama problem, and even then they couldn't find a way to do it, right-- William H. Rehnquist: Well-- Michael H. Gottesman: --so they didn't proffer... they certainly didn't proffer a way to do it. William H. Rehnquist: --How many 2 million awards can Alabama give in a case like this-- Michael H. Gottesman: Well-- William H. Rehnquist: --against BMW? Michael H. Gottesman: --It can only once deter them. It has deterred them, right. They have stopped, so there is no longer a-- Stephen G. Breyer: You would deter them with a judgment of a billion dollars-- Michael H. Gottesman: --Yes, sure. Stephen G. Breyer: --Fine. So does that mean they can award 2 billion? Michael H. Gottesman: No. Stephen G. Breyer: Or 5... my question, really, I want to get you back-- Michael H. Gottesman: Yes. Stephen G. Breyer: --to what you were about to say. You were saying, number 1, there's evidence of hundreds of cars. Michael H. Gottesman: Yes. Stephen G. Breyer: All right, and you have two prongs to it, and I want to hear what you have to say, and what I'm thinking in my mind, though I'm not adopting it, is, is there some procedural aspect of due process that says when there is no obvious relationship between damages and minimal harm, when historically it can't be justified, at least the court has a procedural obligation to explain some rational theory, maybe a little stronger than a legislature, maybe the same, maybe weaker. And the second thing is, is there any such theory here, whether you say hundreds, or whether you say two, or whether you say one. Michael H. Gottesman: Okay. Stephen G. Breyer: Those are the... that's the excessive part that's-- Michael H. Gottesman: Okay. Stephen G. Breyer: --bothering me, and I think you were going to discuss-- Michael H. Gottesman: Right, I do. I want to address both those. Here's what the record shows about the number of cars. Plaintiffs got discovery from BMW of the records of repainting that they still had. Remember, this thing had been going on for 9 1/2 years, and so on the record it was explained to the court, we only got discovery for portions where, you know, particular places where they had them. What they got were 5,856 repainted cars... that's in the record... of which, 983 involved repainting that cost more than 300, and counsel said, now, we don't want to... to the jury, we don't want to bombard you with 6,000 of these, so we'll give you the 983 that are more than 300 of repainting, and that's where... of those 983, 14 were Alabama cars, so we don't... there's no evidence as to how many of the other 6... roughly 5,000 were Alabama or not. But beyond that, there's a very important thing in the record. Stephen G. Breyer: --explain, assume that's so. Michael H. Gottesman: Right. Stephen G. Breyer: Okay. Michael H. Gottesman: Okay, now-- Stephen G. Breyer: Still, isn't there some obligation on a court under the Due Process Clause... and I'm not buying this. I'm putting it for you to discuss... a procedural obligation under this kind of circumstance... the people who are paying this judgment did not intentionally cause harm, the people who are paying it. There is purely economic harm. Michael H. Gottesman: --Yes. Stephen G. Breyer: It is fairly small in amount compared to the amount of damages. Michael H. Gottesman: For this one person. Stephen G. Breyer: Is there not an obligation to explain some rational theory? That would be the theory I'm asking you to discuss. Michael H. Gottesman: Well, let me explain the rational theory, and I leave it to the Court whether the Court wants to say the Due Process Clause requires that. There is no case that has said that in the past. The Court could say we want that, and-- Stephen G. Breyer: But we would say it if that's the law, presumably, and what I want to know is-- Michael H. Gottesman: --But I do want to tell you that they could rationally get there if they in fact did the thorough and painstaking review that they claim they did. There is evidence in the record, and it's cited in our brief, that 2 to 3 percent of all the cars that come to this country from BMW have to be repainted. Now, we don't have the universe of all the sales in Alabama, but we do have the evidence of the sales by the dealer who sold Dr. Gore his car. His testimony, and it's at page 297 of the trial transcript, is that he sold 300 to 400 BMW's a year. Now, 2 to 3 percent of that would be 6 to 12 cars a year at that one dealer. For 9 1/2 years this practice continued, from January of '83 to July of '92. Nine and a half years' time, 6 to 12, would be something between 57 and 114 cars for that one dealer. The record also shows in Plaintiff's Exhibit 13 that there were at least four other dealers in Alabama that were BMW dealers. John Paul Stevens: --Are you including the repainting jobs less than 300? Michael H. Gottesman: Yes. John Paul Stevens: Yes. Stephen G. Breyer: I've got the point. On that theory-- Michael H. Gottesman: Okay. Stephen G. Breyer: --then wouldn't a rational connection be to take the total global amount of conceivable damages and divide by the number of potential lawsuits, and then you'd have a number, and that would be this person's rational share on such a theory. I'm saying, I don't know what that number would come to, but isn't there an obligation, at least to articulate the theory? Michael H. Gottesman: Well, I don't think it's right... and my time is up, Your Honor. May... so I'm not sure I can finish. William H. Rehnquist: Answer the question briefly. Michael H. Gottesman: In fraud cases, very few people sue. If you're going to divide it up and say each person only gets a fraction, then the defrauder will never be brought to a halt. The profit will never be taken out. William H. Rehnquist: Thank you, Mr. Gottesman. Mr. Frey, you have a minute remaining. Mr. Andrew L. Frey: Thank you. I would like, then to... first of all, on this waiver argument, which is brand new, it's not made in the brief in opposition, was not made in the merits brief, we'd like an opportunity to submit a post argument brief. That's the first half of Mr. Gottesman's argument. I'd like to answer Justice Breyer's question with a procedural reason why it violates due process not to divide, as you suggested, and to allow Dr. Gore to collect the full amount, and that reason comes... you can see it from the first issue in Phillips Petroleum v. Shutts, which was the standing of the defendant to complain about the plaintiffs, jurisdiction over the plaintiffs. What you have here is a one way class action under which, if BMW wins, it gets no credit. It won the Yates case on punitive damages, zero punitive damages. Now along comes Dr. Gore, and BMW loses the Dr. Gore case, and the jury imposes the full punishment necessary to deter the entire conduct everywhere in the United States. That is manifestly unfair to BMW, because what it does not allow for is the fact that every other jury that hears this might find that there is no punishable conduct. William H. Rehnquist: Thank you, Mr. Frey. The case is submitted.

John G. Roberts, Jr.: We will hear argument first this morning in Case 12-895, Rosemond v. United States. Mr. Elwood. John P. Elwood: Mr. Chief Justice, and may it please the Court: It has long been a bedrock principle of American law that aiding and abetting liability requires proof that an accomplice acted with purposeful intent to facilitate or encourage the crime of conviction and that mere knowing assistance is insufficient. Anthony M. Kennedy: Do you agree that the jury could find the defendant guilty of the firearms charge under a proper instruction? In other words, was there sufficient evidence so that if a proper instruction were given, there could have been a conviction? John P. Elwood: Even if the -- I think in this particular case, even if the jury had been given a proper instruction, it would have been a difficult charge to make out because the government never really argued facilitation after getting knowledge of the firearm. There was never evidence of foreknowledge; the government never asserted evidence of foreknowledge. Anthony M. Kennedy: Well, I guess we can get into later to whether or not if you know a firearm is being carried and if you then facilitate the commission of the underlying felony by driving the car, participating in the transaction, whether that's sufficient. But let me ask you this: Would the instruction that was given, which was at JA 196, would it be okay if Paragraph 1, "The defendant knew his cohort used a firearm. " I think there is a real problem with that, because it's retrospective. Would the instruction have been sufficient if the defendant knew his cohort would use or was carrying? Would that change it? John P. Elwood: Well, I think at least that would have required foreknowledge. But I think it would still have been problematic because it would only have required knowing facilitation. And courts, traditionally, have required intentional facilitation, that is, they intend to further the crime. Antonin Scalia: You do not agree, then, that if you know that there's -- that there's a bank robbery afoot and you're cooperating in that, you're -- you're the wheelman, and you also know that the -- you know that the people who are conducting the bank robbery are carrying firearms, you say that there's no criminal liability for the firearms unless you intended them to use the firearms; is that your position? John P. Elwood: It's our position that you could infer from the fact that you're assisting the transaction involving-- Antonin Scalia: No, no. John P. Elwood: --Knowledge is not itself intent. Anthony M. Kennedy: Justice Scalia can -- his own question. But the question is: What -- what does the jury have to find? I know they can -- I know what they can infer, but the question from Justice Scalia is, you're the -- you drive -- you drive the car, you know firearms are there and might be used, is that sufficient? And that's his question. John P. Elwood: I -- I think that that would be -- that would support a verdict. That would support a verdict. The only question-- Antonin Scalia: Now, wait. It would support a verdict -- you're saying it would support a finding of -- of intent. John P. Elwood: --That's correct. But the question is whether you don't even have to instruct a jury-- Antonin Scalia: Let's assume there's a lot of evidence that he didn't really want them to use firearms, that there's no way you can say he intended them to use, but he knew that they had firearms. John P. Elwood: --And I think that you can conclude from that that his purpose in assuming that he's driving-- Antonin Scalia: No. No, no, you can't. It's my hypothetical. And you cannot conclude from that. There is so much other evidence. This -- this man hates firearms. He does not like firearms. There is no way he could have intended them to use firearms. But he knew they had firearms. John P. Elwood: --You know, I hate to be accused of resisting the hypothetical, because in that -- in that case, I don't think it matters whether you have the subjective desire, like you think, boy, I sure wish those firearms weren't involved. But because at that point, your goal is to facilitate and make sure that this bank robbery-- Antonin Scalia: Facilitate the crime. John P. Elwood: --with the gun succeeds. The whole thing with the gun. Antonin Scalia: So you don't have to -- you don't have to-- John P. Elwood: But that is your -- we would say that that is the purpose in facilitating. And the question is not just that. The question is whether you-- Antonin Scalia: --Okay. So if you intend a crime -- if you intend a crime and you know that the crime is being conducted with firearms, that's enough. John P. Elwood: --I don't think that that -- I think that you have to have the fore -- the foreknowledge. And I think that there are certainly hypothesize-- Antonin Scalia: Beforehand. Before -- you know beforehand that the crime is going to be perpetrated with firearms. That's all you do. You know beforehand, and you facilitate the crime. John P. Elwood: --I think that you -- the question is whether -- you can't even conceive of the circumstance where knowing -- that is, participation -- knowing that a firearm would be used or carried. Samuel A. Alito, Jr.: Well, give me an example of that. Give us-- John P. Elwood: For example, if you agree to drive your neighbor to pick up drugs at some place in Philadelphia or -- let's make it Pittsburgh. And then you drive him to West Virginia to spend the weekend dealing. On the way there he tells you, the guy who distributed these to me, you know, he always carries a Derringer in his boot. And at that point, you don't facilitate his use or carriage of the gun with respect to the drug distribution offense. It has no role in -- in the crime. And so I think you can conceive of enough circumstances-- Samuel A. Alito, Jr.: --And I don't -- I don't understand the example. The -- the alleged aider and abetter learns about this after it's happened? That's the idea? John P. Elwood: --Yes, but he's still facilitating the drug distribution offense at a time he knows that a gun is, you know, being carried in relation to it. Samuel A. Alito, Jr.: Well, let me change -- let me -- maybe this is the same as Justice Scalia's hypothetical, but let me try it. Suppose that two guys have a meeting and it's -- it's in a place that's -- where there's an electronic eavesdropping device. In fact, there's a camera. So it's all recorded. So we know exactly what was said. And the principal says, here's the deal, I'm going to rob a convenience store and I'm going to carry a gun. And the aider and abetter says, well, all right. I'm in on the -- you know, I'm in on robbing the convenience store, but I don't want anything having to do with the gun. I think you should carry a baseball bat. The principal says, no, that's the deal. I'm robbing the store. I'm carrying a gun. Take it or leave it. Are you going to drive me there? And -- and the other guy says, I hate guns, I don't want to have anything to do with guns. I -- I hate this idea about the guns. They go back and forth. And the -- the principal says finally, look, this is it. This is the deal. I'm using a gun. Are you going to help me or not? And the guy says, well, all right. I'm going to drive you, but I want it noted for the record that I'm opposed -- I'm opposed to the use of a gun. [Laughter] John P. Elwood: And at that point, it's his purpose to facilitate a transaction and to, you know, help it succeed and it's at a time when he knows that a gun will be used and that -- I think you can conclude that that is his purpose. Samuel A. Alito, Jr.: See -- so I don't really see -- I can't -- I can't think of a situation where a person facilitates the crime, knows what the crime is going to be, knows that a gun is going to be used but doesn't intend for the gun to be used. John P. Elwood: The question is-- Samuel A. Alito, Jr.: In those two situations, knowledge and intent, seem to me to be -- to be the same thing. John P. Elwood: --The question is whether there are -- because there are just no instances that are more like my hypothetical than like your hypothetical. So you don't even have to bother troubling the jury about whether they had the intent. Samuel A. Alito, Jr.: Well, I don't understand your hypotheticals. If you could give it to us again. John P. Elwood: Well, the point of it is that at a time when you are -- when you are still participating in the underlying offense, the drug trafficking offense, you know that a gun is being carried in relation to it. But you don't have any intent to facilitate it. You don't care one way or the other if it gets used. You don't intend to facilitate it, and you don't facilitate it. And the question is whether you-- Samuel A. Alito, Jr.: But you facilitate-- Anthony M. Kennedy: Well, that's -- that's a conclusion. The jury, it seems to me, could say you do facilitate it if in these hypotheticals you drive the car-- John P. Elwood: --But the thing is-- Anthony M. Kennedy: --with knowledge that the gun might be used. John P. Elwood: --No, but the gun is not going to be used in your act of facilitation. It may be used over in Philadelphia, and you aren't doing-- Anthony M. Kennedy: Well, the submission is the jury can find otherwise. John P. Elwood: --And the question-- Anthony M. Kennedy: The -- the gun would never have been used if you didn't drive the -- or carried if you didn't drive the car. John P. Elwood: --But I think the jury could equally well conclude that you did not intend to facilitate the use of the gun and you did not facilitate the use of the gun. And the question is whether you even need to trouble the jury with it. Because the government's instruction conclusively presumes both knowledge -- or conclusively presumes intent from knowledge alone and it conclusively presumes facilitation of the gun from facilitation of the underlying offense. Samuel A. Alito, Jr.: --Or in my -- in my hypothetical, could a rational jury say he knew about it, but he didn't intend it? John P. Elwood: I think that in your case with the foreknowledge and where he, you know, facilitates, he carries the gun and he carries the person to the offense, I think that that would be a tough slog. In a case -- but ours is a case where there isn't foreknowledge and the government never argued that he knew before the gun -- before the gun was fired that it was his associate who was the shooter. Samuel A. Alito, Jr.: Well, in my case -- and I'll finish. I want to ask another question about this. But in my case, if the judge had given the instruction, it's enough that he knew about it. He facilitated the crime when he knew there was a gun. Would that be error? John P. Elwood: I think it would be error because you're instructing them on the wrong elements. It might be harmless error. But the point -- both sides agree here that you have to facilitate the crime of conviction and you have to intend that the gun be used. Antonin Scalia: I don't think it's ever harmless error to not instruct the jury -- or to instruct the jury not to find one of the elements of the crime. If, indeed, intent is necessary, it seems to me he has to instruct the jury to find intent. It's not up to the court to say, well, there surely was intent anyway so it's harmless error. The jury has to find intent. John P. Elwood: I think -- you know what, I'm fine with it being a harmful error, too. But my point was merely to note that I think that it is something that you have to instruct the jury on as a proper element-- Sonia Sotomayor: Excuse me. But what are we instructing-- John P. Elwood: --even if it winds up not making a difference. Sonia Sotomayor: --I think what we're driving at here, and I think this is the moment you're resisting, but to me, and as you can tell from my colleague's questions, if you know that someone's carrying a gun, and whether you want them to use it or not is irrelevant, if they take it out and use it and you have gone along with them in the crime, you're guilty. Okay? That -- that's what we're driving at. Assume that I believe that. Assume that I believe that if you have knowledge of the gun, and that I am participating in the crime with your knowledge of that gun, whether the knowledge is secured before the crime starts or during the crime, if I continue to participate in the crime knowing that you have a gun, then that's knowledge of the gun and intent to facilitate. I thought the example that you were relying on here or the issue that got confused in the briefs was whether or not, from the sequence of facts in this case, you can actually discern that intent to facilitate the crime because the alleged shooter, which your client said was someone else, jumped into the car and the car took off before anybody could abandon the crime. That's what I actually thought this case was about: At what juncture do you instruct the jury to say that you have to be a participant with knowledge of the crime? But you're saying something different right now. You're almost suggesting that there has to be a pre-knowledge that the gun will be used. John P. Elwood: No, I don't think -- I don't think that there has to be pre-knowledge. My point is this: That there are circumstances I think where you can know of a gun and be participating in the underlying -- underlying predicate offense and not facilitate the use of the gun. And I-- Sonia Sotomayor: I'm hard to imagine that. Give me an example. John P. Elwood: --For example, if you -- your job, you're the lowest level guy in a drug organization. You stand on a street corner every night and you hand out drugs to anybody who comes up. You don't carry a gun. Nobody has ever carried a gun at that street corner. One night you're doing it and you see that the guy is -- that the guy who you work for, his enforcer is coming by and you know he always carries a gun. He walks behind you and, you know, he's present and around you for about 90 seconds, but during that time, you do exactly what you always did. I think a jury could conclude -- and I'm not saying that they couldn't conclude otherwise, but they could conclude that he didn't facilitate the use or carriage of the gun. He was just-- Sonia Sotomayor: What would the instruction look like? John P. Elwood: --It would just-- Sonia Sotomayor: To -- to -- what would it look like to capture the difference you're trying to convey? John P. Elwood: --It would just say that the -- that the jury has to find that the defendant facilitated the use or carriage of a gun during and in relation to a crime of violence or a drug trafficking offense-- Sonia Sotomayor: Well, then you come-- John P. Elwood: --and that they intended to do so. Sonia Sotomayor: --you come up against the government's argument that you don't have to facilitate every element. John P. Elwood: Right. But that's the thing. Those are what we think would be the proper instruction, that they just have to be instructed on the facilitation and on the intent. Antonin Scalia: I'm surprised to hear you say that you don't need prior knowledge. I think you need prior knowledge. John P. Elwood: I think you have to have prior knowledge before you facilitate it. I think that-- Antonin Scalia: Yes. John P. Elwood: --Right. Exactly. Antonin Scalia: So what did you mean by -- by you don't need prior knowledge? John P. Elwood: You don't need prior knowledge before the whole transaction happens. If you continue to -- if there's an act of facilitation after you learn of it-- Antonin Scalia: After you know. John P. Elwood: --Right. Exactly. That's all I mean by the absence of prior knowledge. But I mean, everyone here agrees that you need to have knowledgeable or facilitation. Ruth Bader Ginsburg: Mr. Elwood, you're dealing with all kinds of hypotheticals. But in this case we had a jury determination that Rosemond was the person -- he was convicted of carrying ammunition, right? There were two counts of carrying -- possession of the ammunition. And couldn't one infer from that that he -- he possessed the ammunition, he was the gun carrier? John P. Elwood: Two things, Justice Ginsburg. First, the government never raised this below and it wasn't pressed or passed on below, and so I think under Glover v. United States this Court wouldn't ordinarily consider that in the first instance, would leave it for remand. But secondly, I think that it's not clear enough. I mean, you can't say beyond a reasonable doubt that the error didn't infect that, too, because the jury was instructed four times that you can possess something through constructive possession, through a confederate. And I think when the jury concludes that he is guilty of a possession offense, which is 924(c) as a possession offense, as an aider and abetter, and they marked on the judge's instruction that he used the gun, he carried the gun, that the jury could have believed that they were -- that he constructively possessed the gun and thereby constructively possessed the ammunition. Ruth Bader Ginsburg: What was the evidence that the jury had on whether he possessed the ammunition? John P. Elwood: I think the only evidence of possession was that it was inside the gun that was fired. And I think the jury rejected the idea that he was the shooter because the two eyewitnesss said that the shooter was someone else, that the shooter was the guy in the backseat, who was Ronald Joseph. Anthony M. Kennedy: I just didn't -- you said the only evidence was that it was inside the gun? John P. Elwood: The ammunition was inside the gun. And the only evidence of his-- Anthony M. Kennedy: And what was the evidence? I thought there was evidence that he possessed cartridges. John P. Elwood: --No. The only evidence was that the evidence was inside the gun -- or I'm sorry, the evidence -- that the ammunition was inside the gun. Anthony M. Kennedy: And was there any evidence that he had the gun? John P. Elwood: The evidence that he had the gun was the -- the guy who was the other shooter-- Anthony M. Kennedy: I mean, was the evidence that he had the gun and the evidence of the cartridges are exactly the same? John P. Elwood: --They are exactly the same. The only evidence was that the cartridges were inside the gun. And the evidence -- the two eyewitnesss who were at the scene said that the person got out of the driver's side, and the evidence suggests that Mr. Rosemond was on the passenger side, and that he got out of the backseat, and he was in the front seat. So the -- the evidence, I think, is that he was -- he was merely in the car, not that he was a shooter. And the jury, remember, asked: Do we have to answer question 3, which was the -- all the different ways you can use the gun -- if we find him guilty on an aiding and abetting theory? Which certainly suggests they did not believe he was the shooter. Antonin Scalia: Did -- did he facilitate the crime after the shots were fired? John P. Elwood: The government did not ever argue facilitation after the shots were fired, I suspect because -- they only argued that he -- that what happened afterwards was evidence he was the shooter. I suspect because they appreciated that the offense was over with. He was only charged with possession of marijuana with intent to distribute. When Mr. Gonzales took off with the marijuana and they lost control, you know, they went around afterwards looking for him, which, you know, there's not even very much evidence of that. Anthony M. Kennedy: But do we have cases that say that assisting flight immediately after the crime is not aiding and abetting the crime? The crime is over? So everybody says the crime's over. Let's -- let's walk home. John P. Elwood: I -- I am not aware and the government hasn't cited any. I mean, there's -- there's -- for different crimes, you know, there's -- there's different law about whether flight is part of the offense. But in any event, the question is whether that would be aiding and abetting that crime, the possession offense or some distinct crime, or whether that would be being an accessory after the fact. And that was never charged. John G. Roberts, Jr.: Is it -- is it just flight? I thought there was evidence that they were chasing the people who robbed them. John P. Elwood: There was no evidence that that intent to chase them was ever communicated to Mr. Rosemond. John G. Roberts, Jr.: Well, he jumps in the car and, you know, they're going after them. John P. Elwood: That itself was disputed. But the question is, even if they're chasing him, that might be attempt to possess the marijuana to get it back. It might be conspiracy to possess the marijuana, but that wasn't -- wasn't charged. The only thing was possession. John G. Roberts, Jr.: Well, it might be -- it might be an effort to continue the crime of -- in other words, it might make a difference whether the people who are being chased look and see two guys in the car or three guys in the car. If somebody says -- and I realize you dispute these facts -- let's go get them and the guy jumps in the car, it seems to me that that's aiding and abetting the underlying illegal activity with knowledge, of course, that guns were used. John P. Elwood: I agree. But first, that's not a theory that the government ever espoused. They never argued that facilitation. And secondly, I don't know that that would be facilitation of possession of marijuana with intent to distribute it. That ended under the court's instructions when they lost control of the marijuana when Mr. Gonzales disappeared. Samuel A. Alito, Jr.: I understand your argument about intent, but are you also arguing that the -- that the actus reus instruction was insufficient? The instruction about what your client did? John P. Elwood: Yes. Samuel A. Alito, Jr.: Do you think it's necessary for an aider and abetter to facilitate every element of a criminal offense? John P. Elwood: We're not saying that. We are saying that when you -- you have to instruct them did he facilitate the actual crime of conviction. Because what the government is doing here, what their instruction does is it conclusively presumes that he facilitated the distinct offense, which this Court has said, the entirely new crime of 924(c), from the fact that they did the underlying offense. Their favorite example in the brief is a mail fraud example. But under the government's theory, because you engage in an act of mail fraud, you could be convicted of racketeering without any additional actus reus because that is a predicate crime to RICO. And that's the thing is we're just saying you can't presume the full offense -- facilitation of the full offense from the fact that you just facilitated one element. Samuel A. Alito, Jr.: So if there were not -- if the -- the drug offense were not illegal, there -- there wasn't a drug offense and then the -- the additional firearm element, it wouldn't be necessary for him -- for the defendant to facilitate every element of that offense. It's dependent on the fact that there's this other criminal conduct. John P. Elwood: We're just saying that they have to be -- the jury just has to be instructed to ask, did he facilitate the crime of conviction? And they're asking a different -- they're asking a different question, essentially. And it wouldn't present the same risk that you would convict someone twice and they'd serve two consecutive sentences under the hypothetical you suggest, but we still say they should be asked whether they facilitated the right crime. Antonin Scalia: Well, but the crime of conviction was -- was a drug offense with the use of a firearm, right? John P. Elwood: It was 924(c), a crime with the long name. Antonin Scalia: And so I thought -- I thought that the law is pretty clear that if you -- if you facilitate an offense, you do not have to facilitate each element of that offense, so long as you have knowledge that that element existed. John P. Elwood: And our submission is just that the jury still has to be asked, did he facilitate the crime. This is -- both sides agree that you have to ask -- that one of the elements is whether they facilitated the crime. Antonin Scalia: But -- but more precisely, they could be asked did he facilitate the drug deal knowing that a firearm was going to be used in the drug deal. Would that satisfy you? John P. Elwood: No. We think they're asking both the wrong questions then. But -- is there-- Antonin Scalia: I don't understand what your position is. He has to use the gun himself? John P. Elwood: --No. His -- our only position is that they have to ask the jury, did he facilitate the 924(c) offense. Anthony M. Kennedy: No. I think it would help if you told us what the definition of the crime is. We'll talk about the jury instructions later. Justice Scalia is asking whether or not if you facilitate the drug crime knowing that a weapon is being carried, if that is sufficient for aiding and abetting as a legal matter? Forget the jury instructions. John P. Elwood: And it's our submission that you have to both facilitate the 924(c) offense and that you have to have the intent that the gun be used or carried during and in relation to the crime. Ruth Bader Ginsburg: Does that -- does that have to do with the additional 120 months? The underlying crime is 48 months and then the -- the gun makes it 120 months more consecutive? John P. Elwood: That's right. But it's -- I think our -- the reason why we think it makes a difference is because it's a different crime. And the government is trying to get the jury to conclusively presume from the fact that you did the one crime, that you must also have facilitated the other. And we just don't think that that is something that you can say with 100 percent certainty so you can remove it from jury determination. Elena Kagan: Isn't criminal law -- isn't criminal law replete with crimes which have lesser included offenses as part of them? So wouldn't your rule be a very difficult one to apply because it would suggest that the person had to facilitate some part of the crime that was not a part of a lesser included offense? John P. Elwood: There are some courts that apply this, our rationale to lesser included's as well. But lesser included crimes are the same crime for Blockburger purposes. You can't be sentenced to both the greater and the lesser. And I think most courts require that you show the intent that the gun be used. They don't as often require that you facilitate the discreet use of or carriage of a gun. Samuel A. Alito, Jr.: Well, let me go back to my earlier hypothetical about the taped conversation. Suppose that the alleged aider and abetter there says, I intend for you to use the gun. I have that intent. However, I'm not going to do one thing to help you get the gun or use the gun. I don't want to -- I'm not going to. There's an actus reus problem there because he doesn't facilitate the use of the gun? John P. Elwood: Well, he may say that he is not going to facilitate it, but, depending on what his actions are, he may -- very well may facilitate it. If he drives the gun and the person to the -- the crime, you know, that is an act of facilitation. And so, you know, it doesn't depend on what the person says. It depends on what the person does. Anthony M. Kennedy: I just want to make clear, and we'll get back to the bank robbery hypothetical. Driving the car, knowing a gun is being carried and might be used, is or is not sufficient facilitation to make you an aider and abetter in the drug -- in the gun aspect of the crime? John P. Elwood: I think that that would be enough, because you are carrying the gun as well as the person. If I could reserve-- Anthony M. Kennedy: But you are not carrying. Your -- your cohort is carrying the gun. John P. Elwood: --Oh. Yes, you're carrying -- you're -- by carrying -- the gun is in your car. Anthony M. Kennedy: You are driving the car, the cohort has the gun, the cohort is going to rob the bank. Are you or are you not aiding and abetting because you're facilitating it by driving the car, yes or no? John P. Elwood: We would say that, yes, that is certainly enough to go to the jury and that -- I think that that would be enough to show that, because you're carrying both the gun on your cohort and you're carrying the cohort, that that would be enough to facilitate that. I would like-- Antonin Scalia: But only -- you say it's enough to go to the jury and what you would ask the jury to find is intent, right? John P. Elwood: --That's correct. You would still have-- Antonin Scalia: Not just to find those facts that were stated by Justice Kennedy. John P. Elwood: --That's correct. Intent and facilitation. Antonin Scalia: In addition, the jury would have to find intent. John P. Elwood: That is correct. Antonin Scalia: Okay. John P. Elwood: I'd like to reserve the remainder of my time for rebuttal. John G. Roberts, Jr.: Thank you, counsel. Mr. Bash. John F. Bash: Mr. Chief Justice, and may it please the Court: I'd like to start by defining exactly what the government contends the mens rea requirement is for aiding and abetting, and then give the Court an example -- two examples to show how it differs both from what Mr. Elwood is saying and how it differs from a knowledge standard. Aiding and abetting requires an intent to facilitate or encourage the commission of an offense. And I think that breaks down into two constituent parts: One, an intent to make some action easier or to encourage some action by the principal; two, the knowledge that the principal intends to commit a crime of which that action is a constituent part. What Mr. Elwood is saying is something quite different. It's that you have to intend that the crime succeed. If that's true, all paid accomplices are out if they don't intend that the crime succeed. If the -- if the bank robbers say, hey, can you look the other way, security guard, while we go into the bank, we'll give you a thousand dollars if you do it, that's not aiding and abetting under his theory if the security guard says, well, I only wanted a thousand dollars; I didn't care whether you ultimately succeeded in the bank. We give an example in our brief: If the person actually gives the gun so it meets the actus reus requirement that Mr. Elwood has proposed, he actually gives the gun to somebody, not because he cares if that person commits the crime, which he knows he intends to commit, but as a favor for his friend-- John G. Roberts, Jr.: That's a very fanciful hypothetical, because the one thing the guard is going to know, that if the robber gets caught, he's in great jeopardy of -- of being caught himself and convicted. Of course he wants the crime to succeed because he doesn't want the people to be there and being pressured by investigators or whatever to say, okay, you know, who was in on -- who was in on this with you? So if you're -- if you're being paid for a crime, to assist in the commission of the crime, you want it to succeed. John F. Bash: --Well, if your payment is not coming from the loot, I don't think that's really true. But let's take that as true as given. I mean, go back to my example about the guy that's just doing a favor for somebody. Sure, you can use my gun to commit a robbery. I don't have any stake in it. If you decide tomorrow that you don't want to commit the robbery, that's fine with me. John G. Roberts, Jr.: He has a stake in it. If the guy is caught, the police are going to say, where did you get the gun? He may turn him in or not, but it's certainly a danger, a danger that wouldn't be there if the crime succeeded. John F. Bash: I don't -- I don't think that's the sort of intent requirement that Mr. Elwood is talking about. I mean, I think he's talking about an intent that's abstracted from the idea that if you get caught, everybody might go to jail. I mean, that sort of seems to beg the question of whether you're actually going to be liable for the gun. Ruth Bader Ginsburg: Well, why don't we just take it that we have a crime, the underlying crime, it's a 48-month crime, and then if you have a gun in connection with that crime, it becomes 120 months consecutive. And your position seems to be that all you have to prove is facilitation of the underlying drug offense. And it seems to me to -- to get 10 years of your life for the government proving no more than the 48-month charge is a bit much. John F. Bash: It's not proving no more than the 48-month charge. And I'll just -- as a footnote, it's 10 years only if the gun is fired. It's 5 years if it's carried or used, and which obviously creates a much greater danger to people's lives and property if it's fired. But it's not only proving that you facilitated the drug offense. It's facilitating the drug offense with the foreknowledge that a gun was going to be involved in it. Anthony M. Kennedy: But this instruction at J196 says that the defendant "knew his cohort used a firearm. " It really should say that "knew his cohort would carry a firearm. " John F. Bash: Justice Kennedy, two points. Anthony M. Kennedy: Because as I -- when I read this, I thought, well, given these confusing facts, a jury might think that there's liability if he knew that a firearm was used, which is a very odd interpretation, but that's -- the instruction lends itself to that interpretation. John F. Bash: Justice Kennedy, that is an odd interpretation and it's wrong and we do not contend that liability could be imposed if you learned of the gun only after your participation ended. A couple points on that. Anthony M. Kennedy: But do you agree that, taken by itself, that one could be read that way? John F. Bash: Well, I don't think read in the context of the full instruction. If you look at-- Anthony M. Kennedy: I said taken by itself. John F. Bash: --Oh, so not the instruction taken by itself, but one phrase in the instruction taken by itself? Anthony M. Kennedy: Yes. John F. Bash: I think it's possible, but I think if you read it in the context of the full charge and what reasonable jurors would think, you have the formulation right above that on page 196 that mirrors exactly the Peoni standard. And I don't think reasonable jurors reading that in conjunction with the more specific instruction on count 2 could think that he could be liable if his participation ended only after the firearm was used. And, Justice Kennedy, nobody below thought that, because Petitioner never objected on the grounds that the particular wording of this instruction allowed conviction if you gained knowledge only after your participation. So at minimum-- John G. Roberts, Jr.: Well, he proposed -- he proposed a different instruction that departed from the instruction that was given on that point. John F. Bash: --Mr. Chief Justice, first of all, under Rule 30 it is not enough to propose an alternative instruction that does not contain the defect. You have to lay out the specific grounds for your objection. He did not do that here, so it should be plain error review. That is doubly true here where his instruction had its own error. His instruction would have required intentional facilitation of the gun, which is the question on this Court granted certiorari. His instruction had-- John G. Roberts, Jr.: Two -- two wrongs don't make a right. John F. Bash: --Two wrongs don't make a right, but he certainly did not comply with the Rule 30 standard for raising the objection with respect to foreknowledge that he -- that he's proposing now. So, at minimum, that should be reviewed for plain error. In addition, even if the Court believes that we waived the harmless error argument by not raising it below with respect to his primary argument, the Court should certainly hear our plain error -- or harmless error argument with respect to the ammunition counts, with respect to the instructional error that he did not raise below. We should have the opportunity-- Anthony M. Kennedy: Look at his -- look at his instruction and think about the bank robbery hypothetical with the driver of the car. His number 2 is that they intentionally took some action to facilitate or encourage the use of the firearm. I think that would be an okay instruction in the bank robbery hypothetical. John F. Bash: --It would be-- Anthony M. Kennedy: He drove the car. Principal object was to rob the bank, not to use the firearm, but he facilitated the use of a firearm. I can see that a judge could give that instruction. John F. Bash: --I think the only way Petitioner fits that instruction into his view of the law is because the driver started out driving the people to the bank, so he says, oh, well, you are satisfying my actus reus requirement because you actually transported the guns to the bank. But tweak the hypothetical a little bit. Suppose the getaway driver is paid only to show up at the end and to, you know, ferry the bank robbers away. He knows all along that it's going to be a firearm offense. I'm pretty sure Mr. Elwood would say: Because you took no act facilitating the gun in that case, you only sort of showed up at the end, even though you knew a gun would be used, that that's not facilitation. So I take your point, Justice Kennedy, that in a wide swath of cases it may not matter, but I think in some cases it is going to matter. And -- take his intent requirement. I mean, the person that lends the gun just to be a good guy, not because he cares about the offense, I'm pretty sure he is out. And if the jury is convinced, hey, I knew he was going to commit a robbery or assault but I just did not care, if the jury is convinced by that, he is acquitted, and that can't possibly be right. He would not be guilty of any 924(c) offense at all. I mean not only the ten-year-- Sonia Sotomayor: Could you talk practically about what the difficulties are for the government in this scenario? It's nice to put hypotheticals in where you know, where you say someone knew X, Y and Z. The reality is in most cases you don't. Occasionally you get a co-conspirator that will tell you, but in most cases you have just the actor. A defendant is present during a crime, a gun is pulled, and he leaves with his cohorts. You don't know if he had advance knowledge that the gun would be used because he wasn't carrying it and he may have done nothing but be present during the crime, left, and got a split of the money later, correct? John F. Bash: --If he continued participating after he learned of the gun, yes. Sonia Sotomayor: That's your point, right? John F. Bash: Yes. Sonia Sotomayor: That's your-- John F. Bash: If he learned of the gun and said, hey, I'm out of this, he's not guilty. Sonia Sotomayor: --So isn't this really an argument about how you define facilitation? You are not arguing that -- that some form of participation in the crime with knowledge that the gun is being used is required. You are really arguing about how far the proof has to go. John F. Bash: Well, I-- Sonia Sotomayor: Because your adversary keeps saying mere knowledge of the gun's being used is not enough. John F. Bash: --I think it's more qualitative than that and the question suggests it's purely quantitative. It's qualitative in the sense that the facilitation can relate to either element. So it can relate to the gun in particular or -- and this could be the guy that set up the drug deal knowing that a gun would be involved, or set up the robbery knowing that a gun would be involved. I think you see in the courts of appeals cases here the practical difficulties that come in because, although most court of appeals, I think eight, have technically adopted the position that you have to facilitate the gun in a direct way, if you look a the actual holdings of the cases it doesn't differ in practical application from our approach. It's -- there is one case, I think it's Price out of the Third Circuit, where the guy may have learned of the gun -- I may have the case name wrong, but the guy learned of the gun only as the robbery was -- was taking place, but he continued to participate in the robbery while his confederate brandished the gun, he collected the money and so forth. And as far as your question about the practical problems, I think explaining to a jury what does it mean to facilitate the gun in a specific way during a crime like that is incredibly difficult. I mean, we say in the brief: What if you are exchanging the money while the other person is brandishing the firearm? Maybe that person-- Sonia Sotomayor: What is so hard about saying, did you have knowledge that the gun would be used, either -- and you facilitate -- but you continue to facilitate the crime? John F. Bash: --We-- Sonia Sotomayor: --the underlying crime. John F. Bash: --We agree that that is law. Elena Kagan: Well, Mr. Bash, what about this case? Suppose that there are two guys and they are talking about committing a crime, and they have the same kind of conversation that Justice Alito was referencing, you know, one guy says I want to bring a gun, the other says, no, I think that's a really bad idea. But this time, the guy says: Okay, you've convinced me, it's a bad idea to bring a gun, I won't bring a gun. And so then they go out and they rob whatever they are robbing, and in the middle of it, you know -- or they do a drug transaction, and in the middle of that drug transaction the guy who said don't bring a gun looks over and he realizes that, notwithstanding the promise, his confederate did bring a gun. But there they are, they are in the middle of their drug transaction. So the guy, you know, they're right -- they are handing the money to each other and the guy keeps on doing it, all right? Is -- is that enough, even though, you know, there's foreknowledge, there's acts after he -- he realizes that the guy has a gun? Is that sufficient? John F. Bash: If the gun is drawn and the person continues to facilitate the drug crime or the violent crime, that is enough. Elena Kagan: Well, what exactly would you want him to do at that point to not be convicted of this, of this offense? Would you want him to just say, you know, sort of like drop everything, I'm out of there? Is that the idea? John F. Bash: Yeah. Take this case. This is an $800 marijuana deal. It's a small-scale drug deal that happens all the time without firearms. As Mr. Elwood says, usually this kind of deal is not done with a firearm; only 5 percent of marijuana offenses have a firearm. Yes, if you are on that kind of small-scale deal and all of a sudden it becomes an armed offense, you do have an obligation to withdraw. Now, of course, I think you might have a duress defense if you felt like if I withdraw I'm going to get shot, or something like that. Elena Kagan: Right. I mean, I guess that's the question: Is there always a reasonable opportunity to withdraw after you see that there's a gun in the offense that you didn't expect to be there? And do you think that there has to be a reasonable opportunity to withdraw, or would you say, no, everybody has a reasonable opportunity to withdraw all the time; you can just leave? John F. Bash: Two points on that. First, I think a lot of that would come in through the duress defense. I mean, if you really feel like, oh, my God, this guy has a gun and he might shoot me if I withdraw, it can give a pretty solid duress defense. The other point I would say which is maybe a little tangential to the hypothetical, is there's a traditional doctrine of aiding and abetting law. This is at 2.06 of the Model Penal Code. It's in the LaFave Treatise and the Wharton Treatise, that if you countermand your assistance after you have assisted but before the crime is accomplished or completed -- for example, if your assistance was only encouraging and you start discouraging, or if you take all actions possible to prevent the crime -- for example, you assisted, you have a change of heart, you call the police to prevent the crime, you are not liable for aiding and abetting. And I think that reflects a broader point, which is that the traditional common law contours of aiding and abetting work pretty well with the contemporary purposes and problems that this statute was designed to solve. I mean, this is a statute about the mix of guns and drugs or guns and violence. And I don't see why Mr. Elwood contends that if you assist one side of that equation or the other it is a different result. I think if you assist either side of that equation, knowing that the equation is going to happen, by the principle, that is aiding and abetting. It's aiding and abetting under the historical test, I think it's aiding and abetting under this Court's cases, and I don't see why it would be a different result here. Ruth Bader Ginsburg: Mr. Bash, would you explain why in this situation the guy abetted a drug deal when there was no drug deal? It had been thwarted. The drugs were stolen. They were not engaged in any attempt to sell the drugs. That was a failed attempt. So how is this done, abetting a drug deal, when the deal failed? John F. Bash: Well, of course, the prosecution's principal theory was that he was the gunman; he brought it along to facilitate his drug deal. But assuming the theory of the facts that the gun was fired after Gonzales absconded with the drugs, I mean, I think one way to think about it is like this: Suppose that what had happened is that Gonzales had gotten ten paces, and Petitioner or Joseph had tackled him and immediately snatched the drugs back. I don't think this Court or courts generally would expect the government to charge two counts of possession with intent to distribute for that brief period in which someone snatches possession away and you get it. That wasn't certainly what the prosecutor thought here, and it's obviously not the issue in this case. The only way that question comes into this case is that Mr. Elwood is trying to say that the prosecutor understood that -- that you didn't need foreknowledge of the gun. And that's not what the prosecutor understood. The prosecutor understood that this offense could continue for at least some period after in which the Confederates gave chase to -- to reclaim the drugs. And that may have been a wrong theory, but no one below ever understood that you could be convicted if you didn't know of the gun until your participation ended. That's why Petitioner never objected on that ground, and that's why, of course, we submit that it should be reviewed for plain error. Anthony M. Kennedy: And -- and you agree that for aiding and abetting, you must -- the gun offense, you must have knowledge that the gun is being carried by the cohort. John F. Bash: Yes. Anthony M. Kennedy: You agree with that. John F. Bash: Carried or used, yes. Samuel A. Alito, Jr.: Could the defendant here have -- could the defendant here have been convicted of possession of the ammunition on the theory that -- under the instructions -- would the instructions have allowed that conviction on the theory that the defendant aided and abetted somebody else's possession of the ammunition? John F. Bash: I don't think so, because the judge never instructed that if you aid and abet, that's is the equivalent of constructive possession of -- of the bullets. And, in fact, I mean, what constructive possession means is that you have the ability to exercise control over this -- over the ammunition. So it doesn't gel with his theory that, oh, I didn't know about the gun until after the shots were fired. I mean, I don't think anyone thought that you could get a conviction because the shells were on the ground or something and you could pick them up after they were fired. The obvious view was that he was -- the person who shot the gun -- and at minimum, I think those convictions, because there were no aiding and abetting instructions on them, show that he must have known about the gun ahead of time if he could exercise, at minimum, constructive possession over the ammunition fired from-- John G. Roberts, Jr.: What -- what's the point of charging him with possession of the gun and possession of the bullets in the gun? It would seem to me that the proof would be pretty much the same. John F. Bash: --The proof -- the proof was the same in this case. They didn't charge him with possession of the gun. They charged him with use or carrying during and in relation to the drug trafficking offense. And then there were two counts of possession of the ammunition, which were linked to his felony status and his alien -- unlawful alien status. John G. Roberts, Jr.: Well, I guess, then, the question is: What's the point of charging him with possession of the bullets if you're not charging him with possession of the gun? John F. Bash: It -- we could have charged him with possession as a felon. We didn't. It's not totally clear to me why we didn't. But we certainly could have charged him with being a felon in possession of a firearm in this case. Elena Kagan: Mr. Bash, you know, what sticks in my craw a little bit about your position is this: Usually, we want punishments to -- two people and they do very different things and they have very different intents, we want them actually to be punished differently. And what you're suggesting is that there is -- let's say a crime, two people are involved in it. One person does almost everything. You know, he does 90 percent of the stuff. And the other person does just a little thing, but something, you know, that goes to the offense that helps facilitate the offense. But it's really pretty small compared to the overall crime. And then in addition to that, that person does not have really full-fledged intent, just has a kind of knowledge that this other person with real purpose of intent is going to bring a gun. So -- so, you have a lesser act and a lesser intent, and notwithstanding that, you're saying that the person ought to be punished in the exact same way as his confederate. John F. Bash: We are saying that. I think that -- that -- that gels with the historic law of aiding and abetting, which, as Judge Friendly said in a case we cite in our brief, Garguilo, assistance of even slight moment counts. And-- Elena Kagan: But I just add, what I would have thought was that the actus reus can be very small, but almost to compensate for that, you have to have full-fledged intent. You have to have a really kind of purpose of -- a -- a purpose that the crime succeed as opposed to just knowledge of -- of what will happen. John F. Bash: --Justice Kagan, I don't think that can be right for the examples I gave, paid accomplices that don't have a stake or the person who lends the gun to be a good guy. And let me contrast that -- I never got to this example -- with what a pure knowledge standard would look like. Suppose there was looting, and the defendant breaks into the -- a store to facilitate his own entry in the store to steal goods. But he knows there's 20 people coming behind him, and he has now facilitated their entry into the store, too. That is not aiding and abetting under our theory because he did not even bear the intent to facilitate, by which we mean the intent to make some step in another person's crime easier. He knew it would do that, but that was incidental to an intent to facilitate his own crime. So I do think the mens rea is significantly ratcheted up from what a pure knowledge standard would look like. Anthony M. Kennedy: Would you agree that in order to show aiding and abetting -- and I'll just quote from a California case here -- that, "The aider and abetter has to have knowledge of the criminal purpose of the perpetrator and the intent to facilitate it? " John F. Bash: Yes. I think what that formulation masks is exactly what intent to facilitate means, and I think that might be part of the disagreement among the parties. And what we say is that it means an intent to make some step in what you know is a crime that he intend -- the principal intends to do easier. And we think it's got to be that. That's also the formulation in the historical sources we cite at page 47 at Footnote 10 of our brief. It's either the intent to commit the crime yourself or knowledge that the other person has that intent. And I don't see how it can be anything else. I mean, if -- if you assist someone in a -- just to be a good person, not because you care if the crime succeeds, and if you ask them in -- with the truth serum, do you want the crime to succeed, you say, well, I'm totally indifferent to the crime. Anthony M. Kennedy: Would you -- would you agree that the statement -- that the first part of the instruction that the district court gave, "defendant knew his cohort used a firearm. " is inaccurate? Is incomplete? John F. Bash: Not-- Anthony M. Kennedy: Potentially misleading? John F. Bash: --In isolation, potentially misleading. I think in context, how reasonable jurors would understand this and how the parties understood it, because nobody raised an objection to this below, I think they understood that your knowledge had to arise before your completion-- John G. Roberts, Jr.: You would-- John F. Bash: --of your participation in the offense. John G. Roberts, Jr.: --You would never -- if you got a call from the U.S. -- assistant U.S. attorney in the field said, this is the instruction I'm going to use, you would tell him, no, don't do that. John F. Bash: We -- we wouldn't. But the reason this Court has -- or the reason courts generally have objection rules is when questions about particular verb tenses and phrasings arise, the defendant or one of the parties is supposed to actually object to that in the district court. That didn't happen here. John G. Roberts, Jr.: No, I know you have arguments about failure to object and harmless error. But on the substance of it, you think the instruction -- you would never counsel someone to give that instruction. John F. Bash: Well, I think as we said in the brief, it would have been clearer to say “ would use ” or something that -- that makes absolutely clear that you required foreknowledge. I think if the Court has questions about this sort of case-specific issue along with the forfeiture and waiver and harmless error and plain error issues, it could do this, and this would be a sensible result, it could clarify, one, facilitation with respect to either conduct element is enough as far as actus reus. Two, the intent to facilitate means an intent to make some step in that crime easier combined with knowledge that the principal bears the intent to complete the crime. And then it could remand to the court of appeals to say, sort out whether this instruction was wrong, whether that objection was forfeited, whether harmless error or plain error concepts come in here. Antonin Scalia: Why -- why do you say -- you say in context, it was okay. What -- what context? John F. Bash: The -- Justice Scalia, the instruction -- or part of the same instruction, the paragraph immediately before just mirrored-- Antonin Scalia: That's it? Just that? "In order to aid or abet another to commit a crime, it is necessary that the defendant willfully and knowingly associated himself in some way with the crime. " John F. Bash: --Well, to help make the crime succeed. And I think a reasonable person reading that would not think I helped make -- helped make the 924(c) crime succeed if I didn't even know about the gun until I was after doing -- I was done doing whatever I was going to do. And I also point the Court to page 194, which makes clear that “ knowingly ”, in that second part of the instruction, is defined as voluntarily and intentionally. So you certainly had to intentionally participate in the drug trafficking crime. And that -- part of the context, as this Court has said, is also just-- Sonia Sotomayor: Knowing that a gun would be used. You had to intentionally participate knowing that a gun would be used. John F. Bash: --Basically a slight tweak, which is knowing that the principal bore the intent to use a gun. Obviously, you can't know the future. It's that you know that the principal bore that intent, which is a little bit different, but I think we're saying the same thing. John G. Roberts, Jr.: I -- I don't see how “ make the crime succeed ” helps you because you would say the crime that he has to help make succeed is the underlying drug offense, not the use of the firearm. John F. Bash: No, Mr. Chief Justice, we wouldn't say that. This umbrella instruction applied to Count 1 and 2. The crime you're help making succeed is 924(c). What I was saying earlier was that, what does it mean to help make a crime succeed? It makes -- it means intent to make one -- at least one step in that crime easier, knowing the other person bore the intent to do the crime. And I think that's how we normally think about it. If there's an armed robbery, and you say, well, I'll drive the getaway car, I think you would naturally say in ordinary English you intended to help make that crime succeed even if you didn't bear a specific intent with respect to the gun. I certainly think on -- you know, if this had been objected to below, it might be a different matter with Mr. Elwood, but he did not object to this below. He didn't -- he didn't raise this -- this wording issue even in the court of appeals. He raised a sufficiency challenge with respect to foreknowledge. But he -- even in his court of appeals brief, he didn't say that the instructions in this case were wrong because it said “ used ” versus “ would use ”. So I don't think the issue is properly here, but I think it would be a sensible resolution if the Court were to remand these case-specific issues after clarifying the basic standard of aiding and abetting to the court of appeals to work through the forfeiture and waiver of harmless error and so forth. If there are no further questions. John G. Roberts, Jr.: Thank you, counsel. Mr. Elwood, you have four minutes remaining. John P. Elwood: Thank you, Mr. Chief Justice. One point that I want to emphasize is a point made by Justice Kagan, which is that traditionally because the actus reus is relatively small for aiding and abetting cases, that is exactly why courts have adopted a standard of purposeful intent. And they have said that because the act of an accomplice tends to be less harmful and tends to be more equivocal than that of the principal, that they ordinarily require purposeful intent. And as Professor Wayne LaFave said, who obviously doesn't have a stake in the case: "Liability has seldom been imposed on the basis of knowing assistance. " "The background rule is that it has to be purposeful intent. " Stephen G. Breyer: What cases should I look up for that? John P. Elwood: I think-- Stephen G. Breyer: That is to say, I thought generally in the criminal law a person who commits an illegal act is liable for the known consequences of that act. That is the general rule. I can't think -- I mean, people use all kinds of terminology, different kinds of terminology, but I thought that's the basic principle. John P. Elwood: --The standard for accomplice liability requires purposeful intent. It's generally-- Stephen G. Breyer: When you say “ purposeful intent ”, He didn't want it, but he knew it would happen. John P. Elwood: --It was his purpose-- Stephen G. Breyer: And moreover, he helped to produce the occasion on which it would happen. John P. Elwood: --It was his purpose for doing it. And the cases you can look at are Nye & Nissen-- Stephen G. Breyer: Would you just tell me where in the brief they are, or whatever's easier. John P. Elwood: --I mean, Nye & Nissen, the -- Nye & Nissen, which is a case of this Court from 1949, where the Court adopted the standard from the Learned Hand Peoni, that adopted the purposeful intent standard. And Peoni is obviously a very important case as well. But Hicks. In Hicks, in 1893 this Court reversed a conviction because the jury instruction did not require proof of intent to encourage the crime. Stephen G. Breyer: You use the word “ intent ”. Some people used it in order to encompass the situation-- John P. Elwood: Right. Stephen G. Breyer: --of the known but undesired consequence. John P. Elwood: Right. But the Court went on to say that action for any other purpose, even if with the -- even if it had the effect of encouraging-- Stephen G. Breyer: It's language. I am sure you will find language. I want really an instance where the holding of the case is that a person who commits an unlawful action with knowledge that the other unlawful action will occur is not liable for it. John P. Elwood: --I would-- Stephen G. Breyer: You know, blowing up the carriage and you kill the maid, who you didn't want to kill. You are liable. John P. Elwood: --I would point you-- Stephen G. Breyer: Which one is it? John P. Elwood: --I'm sorry to LaFave -- I'm sorry, I don't have a case off the top of my head. I know that they state the principal. But LaFave in Chapter 13.2 collects cases and he makes the point there that liability has seldom been imposed on the basis of knowing assistance for aiders and abetters. You have to have purposeful intent-- Stephen G. Breyer: LaFave. John P. Elwood: --LaFave, Wayne LaFave. Stephen G. Breyer: LaFave. John G. Roberts, Jr.: Counsel, do you have anything for us on Rule 30? John P. Elwood: You know, on Rule 30, I won't pretend that it was a model of clarity in preserving the error about after-arising intent. But I will say that there is no contrast. I mean, that is to us just a sign of how messed up the jury instructions are. But we did preserve, we say, our objection both with respect to the absence of facilitating the right offense, and the intent to commit the crime as opposed to knowledge that the gun would be used. And so-- John G. Roberts, Jr.: How did you preserve that objection? John P. Elwood: --With respect to intent, by objecting to their instruction on the basis that it didn't include intentional facilitation of the 924(c) offense. And if there are no further questions, we will rely on our submission. John G. Roberts, Jr.: Thank you, counsel. The case is submitted.

William H. Rehnquist: submitted We'll hear argument next in Number oh oh twelve forty-nine, Caren Cronk Thomas and Windy City Hemp Development Board versus the Chicago Park District. Mr. Wilson. [Inaudible] Richard L. Wilson: Mr. Chief Justice, and may it please the Court, in the unanimous opinion in Freedman versus Maryland this court stated that when the government imposes a permit requirement on the exercise of free speech, that permit scheme must include certain procedural safeguards which are there, quite obviously, to prevent the unwarranted and perhaps unlawful delay or suppression of speech that might occur without them. [Inaudible] William H. Rehnquist: Well, Freedman was q- a quite different case from the present one. D-, You agree with that, don't you? I mean, there you're talking about some form of censorship. Here you're prob- talking about a permit to use a park that one-, a lot of other people want to use. Richard L. Wilson: While I agree that there's a difference between the two cases, this case begs for more protection than the speech involved in Freedman. Because after all, the Freedman case was specifically specifically arose from a censorship scheme which was aimed at sexually explicit speech. This is a case involving core political speech. And although... Richard L. Wilson: the... Well... Sandra Day O'Connor: is this... Sandra Day O'Connor: content neutral... Speaker: in your... Sandra Day O'Connor: in your view, the regulation? Richard L. Wilson: I I believe that the regulation in this case is content... Speaker: neutral. Richard L. Wilson: It is rife with the opportunity to make viewpoint based decisions, but not on its face. Anthony M. Kennedy: Well I I I I h- h- h- have to say that I, in thinking about the case, I suppose analytically this is a prior restraint. Richard L. Wilson: Justice Kennedy, with respect, I could not disagree with you more, and I think we can look at a few cases to show that this is surely a prior restraint case, and the one that comes to mind most readily is where that exact same question was presented to this Court when, in FW PBS versus The City of Dallas, the Fifth Circuit had held that the Dallas licensing scheme, which was content-neutral, period, in all regards, which a content-neutral licensing scheme licensing sexually oriented business in Dallas, was a time, place, and manner restriction, and this Court rejected that approach and said, first we find that it is an unlawful prior restraint, and therefore... Speaker: it is... Sandra Day O'Connor: I think your premise may be one that w- we're going to have trouble adopting. Richard L. Wilson: Justice O'Connor, there's no indication in this record or in any... Speaker: situation that I'm aware of... Sandra Day O'Connor: answer whether that is possible, under First Amendment time, place, and manner doctrine. Speaker: Is that not possible? Richard L. Wilson: Certainly, Justice O'Connor, that's possible. Speaker: But aren't you... Ruth Bader Ginsburg: the standards there was a list of thirteen, and they seem to be reasonable, fairly cle- clear standards, and you are coming to us with a facial challenge, and are we to project that those standards will not work properly? You're not coming to us with any concrete case. Richard L. Wilson: Justice Ginsburg, the record in this instance is a solid, concrete case. Ruth Bader Ginsburg: And then he was granted it, as I understand it. Richard L. Wilson: Mr. McDonald never received a permit. Speaker: for permit... Ruth Bader Ginsburg: conduct his expression. Speaker: He was allowed... Richard L. Wilson: to conduct a spontaneous rally on a very limited basis. Speaker: no structures. Ruth Bader Ginsburg: in the list that we have are functions that were being held at the park. Richard L. Wilson: One of the events in the lodging material? Ruth Bader Ginsburg: Yes. Richard L. Wilson: Yes, that is true. Speaker: to go some place else. Speaker: In any... Anthony M. Kennedy: point remains that I I I just think you overstate the case when you tell us this is a Freedman case. Speaker: Now... Richard L. Wilson: I think clearly it's a prior restraint. Speaker: I mean, there are two... William H. Rehnquist: disagree with Justice Kennedy's suggestion. Richard L. Wilson: Mr. Chief Justice, from Neer versus Minnesota forward, the Court has said that when speech is prohibited in advance, that is a... Speaker: prior restraint. William H. Rehnquist: Neer was the shutting down of an, a padlocking of... Speaker: a newspaper of a private... William H. Rehnquist: y- the the the shoe is on the other foot here. Richard L. Wilson: My problem with that, Mr. Chief Justice, is not that you have to get in line with other people and and share the use of the park, which was Justice O'Connor's concern when she posed the time, place, and manner re- question. Speaker: line will be silent... Sandra Day O'Connor: language of, may grant, is something that allows too much discretion? Is that your complaint? Richard L. Wilson: It is one of our... Speaker: complaints, and s- even that... Sandra Day O'Connor: read may as shall grant, if these conditions are met? Speaker: Well, it says, it says may deny is what it says. Sandra Day O'Connor: but maybe it mean means that the permit must be granted if the categories are met. Richard L. Wilson: But that's not what it says, Justice O'Connor. Speaker: creates the potential... Antonin Scalia: You agree it must be granted if the conditions are met. Richard L. Wilson: Correct. Antonin Scalia: You you you agree that if the conditions are met, your, if your client meets all the conditions, he gets in. Richard L. Wilson: I agree with that, Justice Scalia. Speaker: What I... Antonin Scalia: client doesn't meet some of the conditions, he may not be allowed in, whereas somebody that the park district likes more will be allowed in. Speaker: That's what your complaint, David H. Souter: That same thing was true, wasn't it, in Poulos? I mean, the language in Poulos was even more protean than the language in in in in the may phrase. Richard L. Wilson: I think Poulos w- would have been decided differently by this Court... Speaker: had the... David H. Souter: got to overrule it to... Speaker: to hold... David H. Souter: your way. Richard L. Wilson: Had had the had the had your had your court, the supreme court of New Hampshire, not construed that statute in such a limiting way to say that if you apply for a permit under Poulos and under Cox you get the permit, there was no discretion to deny, and in the opinion that this Court wrote in Poulos, it pointed that out, that that cured the problem in that case, and I think realistically this Court has recognized... Speaker: the... David H. Souter: wasn't the discretion left the same discretion, in effect, to evaluate facts, and to act based upon that evaluation which the Chicago scheme allowed Chicago? Richard L. Wilson: My understanding of that case is that after the construction of the Hamp- the New Hampshire Supreme court placed on it, that became part and parcel of the statute, and even though the statute retained the discretion, it had authoritively[:authoritatively] been limited by the New Hampshire Supreme Court, so the discretion was gone by judicial act and not by legislative change. Antonin Scalia: The discretion was gone to deny somebody who met the conditions? Richard L. Wilson: Yes, sir. Antonin Scalia: But there, was there no discretion to grant someone who did not meet the conditions? Did the s- New Hampshire supreme court speak to that? Speaker: Well, the interesting... Antonin Scalia: the latter that you're complaining about, not... Speaker: the former. Richard L. Wilson: By the way, Justice Scalia, there's another aspect of your inquiry, a- and we both agree, obviously, that if you meet the qualifications, you're entitled to the permit. Speaker: But that didn't... Ruth Bader Ginsburg: but that didn't happen, and you you say you give us this one instance. Richard L. Wilson: First, in direct answer to Justice O'Connor's inquiry, a scheme that says you may not obtain a permit for an event at a day and time for which another permit has already been issued, no question. Anthony M. Kennedy: W- well but of course that s- that assumes that you're going to have a permit scheme. Richard L. Wilson: I'm sorry, Justice Kennedy. Anthony M. Kennedy: That that that assumes that you can have a permit scheme. Richard L. Wilson: Surely you can have a permit scheme. Speaker: can have a... Anthony M. Kennedy: the what what what the requisites are for the permit scheme. Richard L. Wilson: i- i- The question may well be, when can you lawfully deny a permit for free speech under this under a permit scheme in what is the traditional public forum, a public park, and what is the most precious of speech, core political speech. William H. Rehnquist: Well, you're saying the most precious speech. Speaker: No. Richard L. Wilson: No, Mr. Chief Justice. Speaker: or at another location. Antonin Scalia: before the board. Speaker: It would seem... Antonin Scalia: positing a situation in which somebody has already been granted a permit for the time. Richard L. Wilson: A first come, first serve rule would certainly help the situation and, of course, these permit applications are dated, time-dated and time-stamped when they are submitted, but there is no requirement that it be first come, first serve. David H. Souter: Okay. Richard L. Wilson: Well, obviously it's a very difficult question on facts which might never, ever occur, and I'm not claiming that when the park district is making a decision on whether to issue a permit, for space A on day A, it has to look at these permits and say, oops, political speech, first in line, Speaker: and that's the diff- David H. Souter: If it doesn't say that, doesn't it retain exactly the discretion that you're complaining about? Richard L. Wilson: No, sir. Speaker: hypothetical assumes... David H. Souter: we've got the collision at the door. Richard L. Wilson: Well, I would certainly think that this case need not turn on on that somewhat... Speaker: unlikely occurrence. David H. Souter: I'd like to know what the principle is that you want us to apply, and I think the principle that you want to us to apply means that when they, that when they bump each other's foreheads at the door, political speech has got to win, or there's an unconstitutional discretion left, amounting to the possibility of a prior restraint. Richard L. Wilson: I believe that's wrong because well, first of all, a- again, we're not going to find that situation, but let's assume we did, and they bump their heads on the way in. Speaker: Yes, but you just keep... David H. Souter: changing the hypothetical. Richard L. Wilson: When first come, first serve does not work? David H. Souter: Yeah, the hypo. Richard L. Wilson: It would seem that as long as the event is suitable for that particular park, first come, first serve should always work. William H. Rehnquist: But by hypothesis, Justice Souter's question is that you can't apply it here because they both came at the same time. Richard L. Wilson: Well ju- Antonin Scalia: You don't have an answer for that, right? Speaker: Y- You don't have an answer for that situation. Okay. Yeah, Antonin Scalia: yeah, but you think first come, first serve is a is a thoroughly reasonable rule. Richard L. Wilson: I do. Speaker: But you're going to tell us that, your brief tell us that... Antonin Scalia: When when when when Pope Paul visited John Paul visited Chicago there there was a rally, or a gathering in the Chicago parks. Richard L. Wilson: Justice Scalia... Antonin Scalia: So that it it finds, gee, you know, the Pope is only going to be here one day, and y- you know, ma- may- maybe maybe we can have this this... William H. Rehnquist: Hemp concert... Antonin Scalia: Hemp concert later, yeah. Richard L. Wilson: One one would assume that... Speaker: the holder... Richard L. Wilson: the holder of the permit would be reasonable in accommodating... Speaker: such as an extraordinary event as this, and if... Antonin Scalia: No, no, no this is an unreasonable... Richard L. Wilson: I've met them. Antonin Scalia: Well, it's it's not Pope John Paul, it's the Beatles, and the Beatles are only going to be there for one day. Richard L. Wilson: No, sir, and that's why I believe that a first come, first serve rule is going to be reasonable in almost all... Speaker: situations. Anthony M. Kennedy: your your brief, you say that even under the first come, first serve rule the Government has the obligation to go to court to validate the permit, under Freedman, and I I just don't get that out of our c-, that's a sure, that's what Freedman said, but Freedman was a very special case, and a time, place, and manner regulation for a park is not. Richard L. Wilson: Well, of course, Freedman ha-, I mean, that they analysis from Freedman has been used in non censorship cases, but in that case the Government needs to bear that burden. Speaker: It's a... Ruth Bader Ginsburg: Where? You say, the Government goes to court. Richard L. Wilson: No question, of course, the Supremacy Clause makes Freedman applicable to that State court, but the likelihood that an individual is going to insist on going forward with judicial review when his permit was denied because another permit had already been issued is slight. Speaker: No, but I'm asking you... Ruth Bader Ginsburg: I asked you before, what is the scheme that you said would be constitutional, and one part of it surprised me. Richard L. Wilson: The problem with that, we have brought a facial challenge in this case because of the difficulty, every single time one is refused a permit, in going to State court or Federal court and litigating whether that particular denial was appropriate, and the medicine here is to get rid of the bad ordinance which allows inappropriate and content-based, or viewpoint-based decisions behind closed doors, even if they are not authorized on the face of the scheme. Speaker: Do you know any park district... Ruth Bader Ginsburg: that does it that way? Richard L. Wilson: Well, some have to now. Speaker: The govern- Ruth Bader Ginsburg: a business, a permit to operate a business, not to hold an event in a public park. Speaker: Well, I would... Richard L. Wilson: suggest, Justice Ginsburg, that a permit to hold a core political speech rally in a public park deserves at least as much protection as the permit to operate an adult... Speaker: bookstore. Speaker: for content neutral... Speaker: cases there. I say you're, I think... William H. Rehnquist: you're wrong under our cases there. Richard L. Wilson: But this Court has said that in cases of public parks, the power of the Government to restrict free speech activity is as, at its most circumscribed. William H. Rehnquist: And where did we say that? Richard L. Wilson: We said that in Hague versus you said that in Hague... Speaker: versus CIO... Richard L. Wilson: But no one has ever suggested, Mr. Chief Justice, that that is not the law today, and indeed, that one quotation from Hague appears in core political speeches through this day, and it is one of the most oft-repeated... Speaker: statements from the cases. William H. Rehnquist: valid today. David H. Souter: But isn't isn't your argument for applying it this. Richard L. Wilson: No, it is not, s- Justice Souter. Stephen G. Breyer: That's that's why I the there's no need to retreat from Hague, I wouldn't think. Richard L. Wilson: Justice Breyer, i- in order to do that it would seem that this Court would have to retreat from what it said in Forsyth, in which it stated that when a prior restraint in the form of a permit to conduct a political event in a public forum is involved, a facial challenge is appropriate, Speaker: and the court... Stephen G. Breyer: nobody denies you can make the challenge. Richard L. Wilson: My answer is that this is a particular situation where facial challenges are appropriate. Speaker: stand I... John Paul Stevens: one question about your rule about priorities, the, and it's the basic rule. Richard L. Wilson: Content of the speech. John Paul Stevens: One is a one is a baseball game, another is a concert, another is is a lecture on on dinosaurs, and another is political speech. Richard L. Wilson: If there are competing applications and one of them is a free speech event and one of them is a softball game, and the decision is made based on what the free speech event is urging, what the message is, that is entirely inappropriate. John Paul Stevens: It, if you.... Speaker: I agree completely. John Paul Stevens: But just supposing all you know about it is, they want to make s- it's a political rally of some kind on the one hand, baseball, music, all those can the content, without any hostility to the particular message, be one of the criteria that can can break ties? Richard L. Wilson: If your question assumes that each of those events would be appropriate for that specific... Speaker: location... Richard L. Wilson: then no. Speaker: I'd like to reserve the remainder of my time. William H. Rehnquist: Mr. Strauss, we'll hear from you. David A. Strauss: Thank you, Mr. Chief Justice, and may it please the Court. Speaker: has been... John Paul Stevens: the earlier application to be accepted, Speaker: at least not as I read it. David A. Strauss: Well, first come, first serve if the application is is valid, yes. John Paul Stevens: It is required to be accepted? W- Which one of those says that. David A. Strauss: Well, it- i- the a valid applica-, a fully executed prior application for a permit has been received, and a... Speaker: permit has been granted... David A. Strauss: That's a reason for denial, Speaker: right. John Paul Stevens: doesn't say the converse, that it must be accepted if it's earlier. David A. Strauss: Well, the a the , the only ground for denial there are other ground- possible grounds for denial, but one ground for denial is someone was there first. Antonin Scalia: Well, it it works out that way because of the provision that says applications shall be processed... Speaker: in the order of receipt. Speaker: So will effectively be... John Paul Stevens: I don't see I really don't see it, and I'm not sure it's commanded, either, but... Speaker: I guess... John Paul Stevens: Do you think that that's constitutionally required that it be a first come, first serve rule? David A. Strauss: Well, it is our system, Justice Stevens. Antonin Scalia: Can you ask for the park three years in advance? David A. Strauss: My understanding, Justice Scalia, is that we have a practice, although I don't know if it's in, if it's written down anywhere, of not accepting applications for more than some period of time in advance, Speaker: I think six months. Speaker: There's some some provision... Sandra Day O'Connor: whole scheme is written on the basis that the permit may be denied, and there are a set of criteria, but it doesn't appear to be any affirmative requirement that anything be granted if it meets all the requirements. David A. Strauss: Oh, Justice O'Connor, we we we do have to grant it if it meets those requirements. Sandra Day O'Connor: May deny. David A. Strauss: may deny is an authorization to the park district to deny in these circumstances. Speaker: And not otherwise. Sandra Day O'Connor: And and it doesn't do anything to govern how you grant competing applications, other than the fact that you say there is some kind of built in first come, first serve basis. David A. Strauss: The way the competing applications are handled is on a first come, first serve basis. Anthony M. Kennedy: One one of the objections made by the petitioner was that either in this case or, reading the regulations, you don't have to give written reasons. Speaker: respond to that. David A. Strauss: Justice Kennedy, we do provide reasons. Speaker: That was my and you did in this case? David A. Strauss: Yes, we did, in this case. Speaker: This is... Anthony M. Kennedy: based on on previous damage and material misrepresentations in the earlier... David A. Strauss: That's right. Speaker: application. Anthony M. Kennedy: regulations require that you give the reasons? David A. Strauss: Yes, they do. Anthony M. Kennedy: Thank you. David A. Strauss: It then goes on to say that where feasible, thif- if there is a com- if there is a competing use the park district will propose a way to accommodate the accomodate the use. David H. Souter: Could you explain the the degree of discretion to grant, in the event that the conditions are not satisfied? David A. Strauss: Yes, Justice Souter. Speaker: And the park district's -- Late. David A. Strauss: A late application, application that's not submitted. David H. Souter: Would there have been discretion in this case? Regar- Let's assume the only prior violation had been the the the fact that if that earlier gathering people were still hanging around at eleven o'clock, after the park or after eleven when the park closed. David A. Strauss: Yes, there would have been, if we had concluded that if if if the applicant said to us something that gave us reason to believe it wouldn't happen again, or if the nature of the event were such that if was scheduled earlier in the day, or something like that, that it wouldn't happen again, or if it happened again it wouldn't be so much of a problem, but we don't assert, and I don't think you can assert, consistent with the ordinance, a kind of free floating discretion to overlook violations for people we like and not for people we don't like. Sandra Day O'Connor: Does the record tell us how many permits are granted and how many denied each year... Speaker: by the park? David A. Strauss: Justice O'Connor, on the grants, the record, the the most precise number we have in the record is there are thousands of applications and thousands of grants a year. Speaker: How about denials? David A. Strauss: Denials, Justice O'Connor, is a hard number to come up with, and this bears on the Freedman versus Maryland point, because what often happens is that the denial takes the form of saying, well we can't accommodate you at this space at this time, but if you're willing to move your event a week later, or willing to move it to this alternative site, then we can accommodate you. Speaker: not involving speech. Sandra Day O'Connor: a permit was denied to Mr. McDonald based on some prior event where people stayed after eleven o'clock. David A. Strauss: Justice O'Connor, it was denied for multiple reasons. Speaker: There was also... Sandra Day O'Connor: administrative mechanisms in place for someone who wants to challenge the basis for the denial... Speaker: Yup- Sandra Day O'Connor: administratively? David A. Strauss: Yes, there is, Justice O'Connor. David H. Souter: I take it that's the second distinction from Freedman. David A. Strauss: Well, the second distinction Freedman while that that is a distinction, Justice Souter, but the second distinction really is that a a a key premise of Freedman is that the decision in question was one that the courts had superior competence to make, and that the agency was to be distrusted in making. Speaker: participation... David H. Souter: Does the same problem get injected by the exception clause in the ordinance, that in fact they can waive conditions if there would be a First Amendment violation? David A. Strauss: Justice Souter, that that clause, t- two two things about that clause are are salient, I think. Speaker: and the second thing... David A. Strauss: Which happened here. David H. Souter: And the third distinction that you want to rely on? David A. Strauss: The third distinction, Justice Souter, is that in the Freedman context the Court had indicated a strong preference for after the fact regulation, that if the co- if a community is concerned about obscenity, the way to regulate that is by after the fact criminal prohibitions. Ruth Bader Ginsburg: Mr. Strauss, you've ably distinguished Freedman, but do you think that none of the procedural safeguards that were involved in Freedman are applicable here, from here starting with the basic, the the administrator has to have some time limit to act on these petitions to hold events? David A. Strauss: Justice Ginsburg, I would put that part of Freedman in a different category. Anthony M. Kennedy: I I think there's considerable merit, what you have just said, although at the end of your brief you you make the final argument that this is really not a speech statute anyway. David A. Strauss: Yes. Speaker: which, of course... David A. Strauss: Or a zoning permit, variance of some kind, which, of course, apply to expressive activities, but to a lot of other activities, too. Speaker: I suppose the easy way to answer... Anthony M. Kennedy: that argument is to say we've never done this with reference to parks. David A. Strauss: Well, that's right, Justice Kennedy, but as some of the questions from the Court suggested during my colleague's argument, because these are parks, perhaps the Government has more leeway than it would have in telling people what they can do on their own property. Ruth Bader Ginsburg: But you did say that you you feel some impulsion from the First Amendment to have a, have to make a decision within a set time to guard against abuse of discretion. David A. Strauss: Justice Ginsburg, I think well, for anyone claiming a violation of a constitutional right, there should be an avenue for prompt judicial review, and I , further, I think that part of Freedman is intended to deal the situation like that present in some of this Court's cases, in FW PBS and in Shuttlesworth in particular, a situation where the applicant can't be quite sure when the permit's been denied, so so so the applicant doesn't quite know when it's okay to go to court. Speaker: ways. It can also be challenged... John Paul Stevens: you have those provisions in means it's a little different from the ordinary zoning ordinance or business license, because those are all motivated by c- First Amendment concerns, I assume. Speaker: prior restraint? Or are you just ducking the issue? David A. Strauss: No, Justice Stevens, I don't I don't I wouldn't I wouldn't want to duck the issue. Sandra Day O'Connor: So if s- if something like this is to be considered valid, what are the limits to make it reasonable as a regulation? We've already mentioned prompt action should be required, perhaps, by the park. David A. Strauss: If the Court does not accept our argument that this is more like a business license, Speaker: [Inaudible] David A. Strauss: then yes, prompt action or a specified time for action by... Speaker: the administrator. David A. Strauss: And an opportunity for prompt judicial review, that's right. Speaker: Otherwise, just, I'm sorry... Ruth Bader Ginsburg: adequacy of judicial review? I take it one objection was that you don't get any actual hearing in court. David A. Strauss: Justice Ginsburg, my reading of the Illinois cases is that that's not true even in State court and, of course, the pet- the applicant has the option of going to the Federal court. William H. Rehnquist: Thank you, Mr. Strauss. James A. Feldman: Mr. Chief Justice, and may it please the Court. Sandra Day O'Connor: Well do you think we should view it as Mr. Strauss urges, as a zoning ordinance, or a business license, or as some kind of content-neutral time, place, and manner restriction? James A. Feldman: I I think more the latter. Antonin Scalia: It would make it a lot fairer, wouldn't it? I mean, if if, you either meet the criteria, or you don't. Speaker: The a- the the problem would be exactly the... James A. Feldman: kind of thing that Mr. Strauss described, is that if there is a minor if if you put in your permit application slightly too late, or there was a stray mark on your application, requiring total strictness on any of these criteria would just mean that people who really should be entitled to have the opportunity to speak... Antonin Scalia: Well, they didn't foll- follow the rules. James A. Feldman: But I think... Speaker: Why don't you just say, these are the rules, Antonin Scalia: if you come in late, you haven't complied with the rules, period. James A. Feldman: I think as I think as Mr. Strauss I think it was Mr. Strauss said, the the the the that is whatever the flexibility or discretion that remains in a system like this would be exe- has to be exercised in accordance with those grounds for denial. Speaker: you can... Antonin Scalia: How do you say it doesn't frustrate the purpose of of the provision which says, you know, the the thing has to be in, you know, two weeks beforehand, if you get it in one week beforehand? How can you possibly say that doesn't frustrate the the purpose of the provision? The purpose is to give you two weeks to consider it. James A. Feldman: Right, but I I think well, you could, it could well be that the purpose is to make sure that the park district can guarantee it can consider it, but if they if it comes in on a day, one day late but there's nothing else on top of it that they're waiting to consider, if it's in the wintertime when they have very few permit applications, they can get to it anyhow, and there's no reason for them not to permit that use of the park. Speaker: In any event, that's... David H. Souter: from that, I assume there's no way to write a regulation that is not going to require some some judgment, some discretion. James A. Feldman: I I think that's right, and I think a crucial feature of this requirement is that, if, of the ordinance here is that the parks are used for multiple uses by multiple people. Speaker: Would it be... James A. Feldman: That should be addressed on a on a on an as applied basis, and and I think it could be in the State court proceedings, or in a nineteen eighty-three proceeding. Anthony M. Kennedy: Along the lines of Justice Scalia's question, would it be proper for a city council or municipality to draft an ordinance just like this one and then, then at the end saying, the commissioner of parks, in his sole discretion, may waive any or all of the foregoing requirements? James A. Feldman: I think the the only difficul- it would depend on what that meant. Anthony M. Kennedy: Well, we've said in in a case like Forsyth that the s- discretion has to has to have s- h- have some definition and some control to it, and if you have at the end an an absolute waiver provision, s- it seems to me that would contradict that. James A. Feldman: Oh, I I think well, I think that's right. Speaker: guided... Antonin Scalia: How do, where where does it say that that the may, the may grant anyway is limited to those applications that generally meet the purposes of the st-, where does it say that? Do we just take your word for it? James A. Feldman: Well... Speaker: Or or the park district's word for it? James A. Feldman: I think that that would at least be the most reasonable construction of an ordinance like this, where there's a- a- attempt to detail these thirteen specific criteria quite specifically, and there's no suggestion that there's any other basis on which the park district can act, and it it, I I think that that's just the most reasonable interpretation of this kind of ordinance. Speaker: to all. Ruth Bader Ginsburg: Federal regulations for the use of Federal parks, the use of the Mall, do they differ with respect to the may deny? James A. Feldman: No. Speaker: But there is the... Ruth Bader Ginsburg: the may deny, implying that there are cases where, although you could, you don't have to deny? James A. Feldman: That's correct. Antonin Scalia: And and no criteria for the waiver in the Federal s- Speaker: in the Federal scheme either? James A. Feldman: way those are, have consistently been applied is, those are the grounds that are suppose, to be considered i- in determining whether you can grant a permit, and there aren't other grounds on which a permit would be denied. Antonin Scalia: And and i- is there a first come, first serve rule? James A. Feldman: Basically, yes. William H. Rehnquist: Thank you, Mr. Feldman. Richard L. Wilson: Justice O'Connor, I'd like to address quickly two points that you raised. Speaker: prompt judicial review... Ruth Bader Ginsburg: does that mean if you pick the Fede- Federal court, that Illinois is going to write a statute that says, and if you choose to come to the Federal court rather than the State court, the Federal court is going to have X number of days to decide it? Richard L. Wilson: Justice Ginsburg, that would be the choice of the park district of the City of Chicago, because the park district is the is the party that has to go to court to seek... Speaker: Oh, if if... Ruth Bader Ginsburg: you're but that's not what Justice O'Connor said in in her case. Speaker: take that last part of Freedman. Richard L. Wilson: But there's certainly a distinction between those businesses that Justice O'Connor was writing about in FW PBS and a... Speaker: core political speech. Ruth Bader Ginsburg: your notion that the scheme is invalid unless the park goes to court, and the court has a tight time line? Speaker: We... Richard L. Wilson: I would then say, Justice Ginsburg, that this Court has elevated the kind of sexually explicit speech in that case above the core political speech in this case, based on the content of the speech, which would fly in the... Speaker: face of... Ruth Bader Ginsburg: follow that at all. William H. Rehnquist: Thank you, Mr. Wilson. The Marshal: The honorable court is now adjourned until tomorrow at ten o'clock.

Warren E. Burger: We'll hear arguments next in McCarty v. McCarty. Mr. Eytan, I think you may proceed when you are ready. Mattaniah Eytan: Mr. Chief Justice, and may it please the Court: Richard John McCarty, the husband in a California divorce action, appeals the decision of the California Court of Appeal, First Appellate District; which we've had affirmed a Superior Court determination that the husband's expectancy in receiving Army retired pay should be awarded in part to his ex-spouse. The Court of Appeal took the position that the Superior Court had properly applied California law... and that's a crucial matter in this entire case... and that having applied California law the expectancy in retired pay was indivisible and then divided the Army retired pay pursuant to established California formula. The husband contended then and contends now that federal law prohibits such a result, and federal law not only applies but preempts California from making such a determination. The facts in the case can very briefly be summarized. The parties were married in Oregon in 1957 and were divorced in California, or at least they were separated in California, in 1976. When the parties were married the husband was in medical school in Oregon. He was a domiciliary of Oregon, as was his wife. In his fourth year of medical school, the husband joined the Army and remained in the Army for the entire period up until the divorce. After spending one year in Oregon he was transferred by the military to Pennsylvania, the District of Columbia, Texas, Hawaii, California, staying in each place for a number of years. Before the Superior Court the husband contended that he was an Oregon domiciliary and that California could not apply its quasi-community property regime, which is encompassed in Section 4803 of the California Civil Code. That's a somewhat unusual provision which provides that property which is acquired by either party to a marriage while domiciled outside of California shall be treated as community property if the party would have been domiciled in California at the time of the acquisition of the property. Once property is classified as quasi-community property, it then is treated as community property. The issue before this Court is not the distinctive to community property matters. The issue comes up in a wide variety of contexts whenever a community property state or another state that under equitable division of property, in the context of a divorce seeks to divide Army retired pay. Now there is a threshold jurisdictional issue in this case, and by explaining what happened before the lower courts I can deal with that as a preliminary matter. Before the Superior Court the husband submitted the decision in Hisquierdo v. Hisquierdo of the California Court of Appeals. That decision was not terribly dissimilar from the decision of this Court in the same case, which came out sometime later. Warren E. Burger: Under California law, assume hypothetically that he had been a physician for General Motors or Du Pont all this time and had precisely the same experience. Ultimately, would his pension be subject to division under the California community property law? Mattaniah Eytan: Yes. What makes this case so distinctive is that the California Court here improperly assumes that California law applies of its own force. In your example, Mr. Chief Justice, there should be no question that California law has everything to say and federal law has nothing to say about the matter. Federal law tells us nothing about the pension rights of someone who works for General Motors. What we have here, however, is a very major federal interest. We have here the exercise by the Congress of elaborate legislation pursuant to congressional war power authorities to raise and support armies. Article I, Section 8, Clause 12. The Congress has passed legislation which covers in great detail all elements of Army pay, Army retired pay, various annuity programs, and the like. William H. Rehnquist: Mr. Eytan, supposing that this is ten years prior to the divorce in this case and the husband is in the military. He brings home his paycheck, it's deposited in the bank account, and a house is bought with it and paid for by the time of the divorce. Would it be your contention that that wouldn't be subject to equitable division under the California formula? Mattaniah Eytan: No, I would not so contend. William H. Rehnquist: So that it's just the in-the-future retirement pay and not the past accumulations that you're arguing about? Mattaniah Eytan: Well, I would argue, of course, that the future element of it is very significant, but of course my argument goes way beyond that. And if I can move then to what I consider to be the main part of the argument it will more fully answer your question. Unlike-- Warren E. Burger: Excuse me. Just one more before we go on to that. Then you implied that the Congress had established this elaborate scheme of compensation, which in part was to draw physicians into the service? Mattaniah Eytan: --Yes. And others. Warren E. Burger: And other services too, but we're dealing with a physician here now. Congress certainly must not be unaware that most physicians coming in would have wives accompanying them. Mattaniah Eytan: Yes, Congress has directed its attention specifically on several occasions to the question, how to deal with the needs of wives. It has done so on three occasions which resulted in legislation. In 1957 Congress addressed this problem and decided that Army personnel should be put under social security. Until then they weren't, and of course the federal Civil Service and Foreign Service are not. So that since 1957 Army personnel have been subsumed under social security in the way that when the Army man gets his paycheck, there's a subtraction for social security and if the wife never works a day in her life and never accumulates any credits whatever toward social security benefits in her own right, she collects benefits, the ex-wife collects benefits-- William H. Rehnquist: But she collects only a widow's benefit, not the benefit of a retired worker under social security? Mattaniah Eytan: --Oh, no, under social security she collects the same benefits as the spouse. William H. Rehnquist: Which is a widow's benefit, not that of the person who has worked, which are quite different. Mattaniah Eytan: No, I don't think that's correct, if I may respectfully dissent. When he reaches the appropriate age there is a benefit to his spouse. He doesn't have to die for his spouse to get a benefit, nor does he have to die for his ex-spouse to get a benefit. The only requirement in that regard is that they must have been married for ten years. In addition, there are separate benefits, of course, for the widow. And with respect to social security widow's benefits there is an offset configuration which applies to other programs that operate in conjunction with social security and those are the annuity programs that I believe you had in mind. There are annuity programs. There is also social security for the widow, and there's a combination, and at the top level if the widow gets the maximum amount of the annuity, she doesn't get social security by an offset and she doesn't get the maximum amount of the annuity she gets from social security. But interestingly, there's no offset as against the ex-spouse at all. The offset is only as against the widow. And the annuity program, you're correct, is only to the widow. Social security is not. Now, the main point in all this, if one can cut through the heart, is that obviously California law cannot apply of its own force and effect. This is a program established by Congress. This is a federal entitlement. There are very important considerations both to the national program involved. There are very practical, direct consequences, and as Hisquierdo taught us and perhaps, more importantly, as we know from Clearfield Trust and its multiple progeny, that where important federal programs, important interests of the federal government are implicated, are involved, we look to federal law. Now what does federal law tell us in this case? If we had a civil service situation here, if we had a civil service husband, we would have direct federal law telling us what to do because the Congress has in Title V, Section 8345(j)(1) told us that you defer to the states and whatever the state rule is, you apply it. The same thing is now true for the Foreign Service. But the Congress has not done that for the military. They have not passed a direct statement of their intention as to what federal law ought to apply and I would submit to you, the husband would submit to you, that the formula that the Congress has adopted for civil service cannot apply to the military, and I don't think I'm overreaching by saying I don't see how the Congress could pass such a law. And the reason for that is that the husband's status as a retired Army man doesn't mean that he's resigned his commission. An Army man who retires remains a commissioned officer in the Army. The consequences of that is that he's subject to the Code of Military Justice forever. William H. Rehnquist: Well, but, the Congress passed the Code of Military Justice, didn't it? Mattaniah Eytan: Yes, but the point that I'm trying to make, Mr. Justice, is that Congress could not... I don't believe it could... I am making the argument to you that it could not pass the same kind of a formula enactment as it did to the civil service because the consequences for the Army, for the Army retirees, would be far different than for civil servants-- William H. Rehnquist: You mean that a sensible Congress wouldn't pass it, not that it doesn't have the power to pass it? Mattaniah Eytan: --Oh, of course, it has the power to do anything it wants. The point that I'm trying to make is that it could not follow that same formula. Let me show you why. We know that an Army retiree remains subject to recall at any time, and any time means any time. It doesn't mean national emergency, it doesn't mean war, it means any time that the Secretary of the service says so. And apropos of that, on December 12, 1980, the Congress reaffirmed this insistence that the Army retiree can be called up at any time. I've mentioned in the reply brief that there is new legislation, so we're not talking about any "porey" scheme going back a long time or some disused statute. Now, at any time means that despite the fact that we have an all-volunteer Army today, as to the Army retiree the impact of this statute is conscriptive. He has to go, and the reason he has to go is because he is still an officer in the Army. If the Congress now were to pass a law-- John Paul Stevens: Mr. Eytan, may I ask you a question, Mr. Eytan? Supposing the retiree resigns his commission, does he lose his pension? Mattaniah Eytan: --Yes. John Paul Stevens: He does lose his pension. He loses... well, may I correct you and call it retired pay? He loses his retirement pay? Mattaniah Eytan: Yes. Now, the reason he loses his retired pay is because retired pay is not pay for, it's not deferred payment for past services. The federal rule, enunciated in some 16 cases which I call to the Court's attention, including five opinions of this Court, is that retired pay is current pay. It's reduced pay for reduced services. And that's really the whole point, what did California do? What does California always do? It said that whatever the retirement benefits are, those are deferred payments for past services; and once it makes that decision, it treats Army pay the way it does the General Motors official. William H. Rehnquist: Well, Mr. Eytan, supposing on a divorce order to show cause for temporary provisions pending a final decision, the wife asks for $300 alimony. The husband is an Army colonel. Do you say that California can't apply its own law there? Mattaniah Eytan: Certainly it can, and Congress has permitted that in express terms. What the Congress did in that regard was really quite drastic, because in 1975 the Congress changed the whole scheme of things. And had you asked me the question, what could the wife have done prior to 1975, I would have said that the wife would have a very tough time enforcing any California support order. But, look, in 1975 the Congress said that when it comes to support, any kind of support... and there's a long list in the statute; I'm talking about Title 42 of the Code, Section 659(a) and especially Section 662(c). What the Congress said there was that when it comes to support payments, the wife armed with a state court award may proceed to garnishee the funds directly from the financial officer of the appropriate federal agency. And ever since then we've had wives from California and elsewhere doing just that, and elaborate regulations implementing that statute have now been published. So that matter has been taken care of by Congress in the very limited area of support. And what the Congress did, just so that no one could mistake it, it distinguished carefully between support and property interest. It stated in Section 662(c) of that legislation that when we say support, we mean alimony, alimony pendente lite and all the rest of it, child support payments, but we don't mean community property awards, we don't mean property divisions pursuant to the decrees of state courts that have equitable division; a very careful distinction. So that, as we look at what the Congress did in 1975 you see that there as well as in social security amendments it had the spousal interest in mind. Hisquierdo put it this way: when the Congress provided for a spousal award for the railroad retiree, it had something like a community concept in mind. Indeed, I may point out a third instance where the Congress had support, and only support, in mind. There is legislation that says that the Army man may make an allotment. Again, for support purposes. Everything deals with support, not property. And what is the distinction? We're talking here about property rights, property rights that have no connection whatever with need. My opponent essentially makes the argument, as do the amicus briefs, that spouses, ex-spouses have great need. Their social security payments may come late, they have to wait a long time. They need more; they get the runaround, or whatever. But that's a question of need, again, that's a question of support. The Congress has directed its attention to that several times and it's come out with a formula. That formula now gives the spouse more than she ever had, because the Congress went so far as to allow the United States to be sued directly. But let me come again to what I consider to be the control issue. This case is much simpler than Hisquierdo ever was, because in this case if we apply federal law as the California courts should have, the California courts should have stated that under federal law Army retired pay is current wages, reduced current wages for reduced services. If that is so, the whole conceptual underpinning for the community property position evaporates, it doesn't exist. Now, what does the California court do? It stubbornly applies California law in the sense that it says, let us see whether there is any express statement by Congress that bars us from first characterizing the property and then dividing it and deciding to do anything we want to do with respect to that property. Now, that's not the right rule. The right rule has to be, what does federal law tell us that the appropriate rule should be? I would concede that the federal rule might well be that courts should defer to state law. That might be the correct rule, but that would then be a federal rule. In our case the federal rule is clear beyond peradventure, because we had this Court speaking five times and for a hundred years. The first decision on this was in 1881, and it stated very clearly that an Army man who was retired still wears the uniform, is still subject to the Code, the Code of Military Justice. He gets his pay for staying in the service and jumping to attention and going back into the service when he's directed. Now, if the California court had done that, that would have been the end of the matter. And I wouldn't be here talking about the anti-assignment statute, the Social Security Act amendments, the spousal awards, and all that. What the California court does, however, is it ignores the federal law, it gives it the back of the hand. There is not a single intelligent analysis in any community property state as to the large body of federal law that says, look, this is not deferred compensation for past services; this is compensation for your staying eligible for recall. It's your compensation for doing all kinds of other things, which are set out in the brief. I'd like to reserve the balance of my time. Warren E. Burger: As an economic matter, laying aside your statute-- Mattaniah Eytan: Yes? Warren E. Burger: --Isn't every pension a form of deferred compensation? Mattaniah Eytan: I of course would agree with you for those pensions which do not require current services and most important those which do not have current liabilities. Your question can't be answered uniformly for the military retiree because the Congress has spoken to that point, and this Court has spoken, and the Court of Claims has spoken. There is no authority to the contrary. And if it were so that I could agree with you for Army retired pay, then and only then would we come to the question whether, despite the fact that this is a pension, aren't there other economic considerations? Aren't there considerations concerning the operation of the Army? Those are set out in the briefs at length. Doesn't the community property division or any equitable division really substantially disrupt the Army? And of course, the answer to that is, yes. Warren E. Burger: Very well. Mr. Winter. Walter T. Winter: Mr. Chief Justice; may it please the Court: I would like to ask the Court's indulgence for one moment while I read to you one short sentence quoting Mr. Justice Gardner, from the case of In re Marriage of Brantner, when he said,-- "A woman is not a breeding cow to be nurtured during her years of fecundity, then conveniently and economically converted to cheap steaks when past her prime. " I think nothing is more appropriate than this particular phrase, when we are talking about the plight of the military wife, because the military wife's situation is unique. Unlike her sisters who are not military wives, she not only is supposed to be the companion, the homemaker, to bear and raise children, but the military wife has a very unique position in the military. From the moment that she marries a military man, she becomes part of the military as much as if she herself were wearing that uniform. She assumes the role of her husband. If her husband is a lieutenant, she is the wife of a lieutenant. She for all intents and purposes has to be subservient to the wife of the colonel. And so it goes. This is a very-- Harry A. Blackmun: You would say the same thing about a military husband these days? Walter T. Winter: --Pardon me? Harry A. Blackmun: Would you say the same thing about a military husband these days? Walter T. Winter: Yes, I think it is, it is very definitely so. But I think that what we have to do at the present time, Mr. Justice, is we have to recognize the fact that these women do serve and they are expected to serve, they are expected to participate in social functions. They are even given guides, "how to be a good military wife. " They are left alone for months at a time; they lead nomadic lives; their moves are approximately two years apart, and this is extremely important. So they cannot develop their own careers, they cannot develop their own potential. They are required to stabilize the children, because I think we all know and recognize that the children of military families do have peculiar problems, they cannot have any continuity. So this is part of their function again. And they cannot fulfill, Justices, the American dream of owning a home, their own home, because for all intents and purposes when you have to get up and move every couple of years, forgetting for a moment the fact that their incomes are extremely low, they simply do not have the time or the opportunity to purchase a home. They have a lower standard of living. For example, Dr. McCarty, who was a Board-certified cardiologist, had an income of $2,596.51 a month, $30,000 a year. And I think we all know that cardiologists can earn upwards of $150,000 a year. These people are giving up something for the future. They are working today for the future. You may recall... if I may direct your attention to the fact that after almost 20 years of marriage, what did Dr. and Mrs. McCarty actually accumulate? $13,000 in assets. Two automobiles, $200 in the bank, and a couple of thousand dollars that somebody owed to them. That is what they acquired after almost twenty years of marriage. Why do people do this? Why? Well, patriotism, perhaps. But actually I think we all know why they do it. They're in the military because they know that from the moment that they start, twenty years later they are going to have an income for life. This is the true asset of the marriage. And I don't think that we can possibly ignore that. Thurgood Marshall: Well, how in the world are there so many of them that don't stay in twenty years? Are they stupid? Walter T. Winter: No, I don't think they're stupid. Perhaps they don't want to put up with it, Mr. Justice, and that's precisely-- Thurgood Marshall: Well, but I mean, you said it's for the money that you get. Walter T. Winter: --Pardon me? Thurgood Marshall: You said, it's for the retirement money. Walter T. Winter: I think that anyone who goes into the service and stays in the service, Mr. Justice, stays in it because they anticipate that retirement. And that's something they all talk about. Thurgood Marshall: What does that have to do with this case? Walter T. Winter: Pardon me? Thurgood Marshall: What does that have to do with this case? Walter T. Winter: Well, Mr. Justice, it has everything to do with this case simply because what we're talking about is the supremacy requirement. Now, I might add, if I may, just, Mr. Justice, that in the first place, there's a big question of jurisdiction here. Thurgood Marshall: Do you want us to take judicial notice that military people and their wives are devoted people, period? Do you want us to take judicial notice of that? Walter T. Winter: Your Honor, I'd be delighted if you would take judicial notice-- Thurgood Marshall: Do you want us to do any more than that? Walter T. Winter: --Yes, sir. I really do. And if I may just point this out to you, there are two requirements of supremacy. And you see, this is not their entire argument. In the first place, they never actually raised the statute at the time that we were in court previously. The first time that the appellant here raised the unconstitutionality of the statute was when he filed this particular brief. He never mentioned it before. However, let's forget that for just a moment. Let's treat this as if this were a sur petition. We then get involved in the supremacy requirement, because after all, the only question here is, has the federal scheme actually mandated that the state courts can no longer act over pensions? And there are two requirements, Mr. Justice. One of them is, there must be an actual conflict or unambiguous mandate. Now, we don't have that here, because there is no conflict at all. It is not even mentioned in any of the federal statutes, and there has to be some interference with a federal interest. And Mr. Justice, this is precisely why I think it's very important for the Court to understand that, because, you see, they keep on saying that this country is going to fall apart if the ladies, or the wives, or the spouses are able to obtain their portion of the pension. And nothing could be further from the truth. The fact of the matter is, Mr. Justice, that it's exactly the opposite way around. Thurgood Marshall: I'd suggest you'd better address yourself to the other eight, because they don't usually agree with me. And you'd look cute talking to me. Walter T. Winter: I will address myself to the other eight Justices then, if I may. One of the points that is made and that is so often made in this particular case by the appellant is the fact that the military would allegedly fall apart, fall apart, the moment that we give the wives their share of the retirement. John Paul Stevens: Mr. Winter, I don't really think that's a fair statement of their position. Their position, as I understand it is, that Congress has said that the pension or the retirement pay should belong to the retired officer to the same extent in every state in the United States. You're saying that there's a different rule in community property states. Walter T. Winter: No, Your Honor, I think that there are two things, there are two portions to your questions, if I may address it. In the first place, insofar as what they have said, I believe that it is their statement that they are talking about preemption, and it is our position that there has not been a preemption because the Congress has not spoken about it one way or the other. Now, insofar as the second portion is concerned, I believe that if the Congress wished to speak on that subject and wished to have a separate rule for military divorces, then Congress can certainly do that. There is absolutely no constitutional prohibition saying that they may not have a federal divorce law. But the fact of the matter is, Mr. Justice, that there is no federal divorce law. Now-- William H. Rehnquist: But there is no railroad retirement divorce law either, and yet Hisquierdo came out the way it did. How do you distinguish your case from that? Walter T. Winter: --Very easily, Mr. Justice. One of the... in the first place, Hisquierdo had some very, very specific wording in that particular statute. They talk about, for example, that there not, be not any assignment. And in the present case, and in the military retirement cases, there is a specific provision that there can be an assignment of an officer's wages. The Hisquierdo statute talks about the fact that it is not subject to attachment. And in the present case there is a specific provision for attachment in the case of support, and Congress has in fact aided the wife in that regard. Third, in the Hisquierdo case they talk about the legal process not being mentioned in the statute. In other words, it is actually by case law only that we're talking about legal process and, as far as we're concerned here... in Hisquierdo it is not subject to legal process, but in the present type of a situation the legal process is not even mentioned in the statute. So that, for all intents and purposes Hisquierdo is easily differentiated. And another thing, sir, is about anticipation of payments, again in Hisquierdo. And again I'd like to point out to this Court that it is not mentioned in the military situation at all. So Hisquierdo is a very, very tightly knit scheme which I believe is restricted solely to the retirement scheme, the retirement benefits, and has absolutely nothing to do with a military retirement. Byron R. White: When does the wife's interest in this retirement pay arise? Walter T. Winter: That depends upon where they come from, Mr. Justice. Byron R. White: Well, how about California? Walter T. Winter: In California, in the event that the soldier comes to the State of California, our law with reference to quasi-community property would only arise if there were two very, very distinct requirements. One, both have to be domiciled in the State of California, so the mere fact that you come into the State of California does not in any way transmute this interest-- Byron R. White: But it does if you both move there? Walter T. Winter: --They have to do more than that, Mr. Justice. Byron R. White: They have to get divorced, don't they? Walter T. Winter: That's part of it, yes. That is a secondary part-- Byron R. White: The wife has no interest unless there is a divorce, is that right? Walter T. Winter: --Under quasi-community property, we have to differentiate-- Byron R. White: Well, I'm talking of this... I don't care about quasi-community property, I want to talk about this pension. When does her interest rise in that pension? Walter T. Winter: --The interest arises if they are California residents or domiciliaries... pardon me, and if it... then, well, if they start out in California and he earns it in California and they start out there and they stay there and get a divorce there, she's had this interest all along. Byron R. White: Well, I know, but she doesn't have it if they're not divorced? Walter T. Winter: Oh, yes, she does; she does unless it is under the quasi-community property scheme. Warren E. Burger: Are you saying it's an inchoate interest until there's some occasion like a divorce to take some legal action about it? Walter T. Winter: Only if it is under the quasi-community property. If they are residents or... pardon me... domiciliaries of another state, if they are domiciliaries of another state, then what happens is that as far as California is concerned, California will not touch that retirement because the laws of that particular state apply, Mr. Chief Justice. Byron R. White: But, doesn't the husband have the right to assign his retirement payments? Walter T. Winter: Well, again, the question then is-- Byron R. White: Well, here, again, here are two people married, and one of them is a retired Army officer, and they're not divorced, they're living together. And he assigns his retirement payments. Walter T. Winter: --He can't do that under California law, Mr. Justice. He cannot do that because the wife owns half of it. You see, this is the part-- Byron R. White: Well, that's what I wanted to know. Walter T. Winter: --This is part of... I'm sorry? Byron R. White: I'm just trying to find out when her interest arises. Walter T. Winter: Her interest arises as they earn it because under the community property scheme the husband and wife are working together. Our California courts recognize the fact that the husband, when he works, actually does not contribute any more to the benefit of the couple's life together, the community, as it were, than the wife who's home raising the children. And that's why this is so important. Byron R. White: So, she has... under California law she has an interest enough in the pension payments to keep him from assigning the? Walter T. Winter: Yes, sir, I believe that she does. Byron R. White: Or from encumbering them? Or from their being attached? Walter T. Winter: Yes, sir. I believe that that is so inasmuch... and this is only, now, this is only in the situation where we have a community property situation. If it is quasi-community property, it's a completely different situation because by the mere fact of entering into the State of California, this in and of itself does not change the property interest, but as far as California is concerned, when you both worked for it, you're both entitled to it. It's a property interest, Mr. Justice. Now, of course, under quasi-community property we have a different situation because under quasi-community property they both must be domiciled there and, of course, it has to be in a divorce situation only. In other words, again even though they both become domiciliaries, if they then leave the State of California, California has no interest in it anymore. And so I believe that it's very important for us to differentiate in this type of a situation. And I think it is still very important for us to consider the fact that the wife is an equal partner and should be considered an equal partner in this very important property right. Now, I would like to make one very short statement to this Court at this time, because yesterday when I came here to Washington I visited Arlington Cemetery. And I could not help but think of the millions of our brave fighting men who sacrificed so much, and also the millions of brave and patient women that they left behind, women who spent their lonely and fearful days and nights waiting and praying for their men to return home. These women provided, Justices, for their men's homes, reared their men's children, and most important, gave their men the courage and hope, something to come home, something to fight for. We have never turned our back on our fighting men. And I ask you at this time, let us not now minimize the importance of their courageous women. Potter Stewart: Mr. Winter, in addition to the conventional preemption arguments, it seemed to me that your brother on the other side made another argument, i.e., that California has misconceived what the nature of this property; that instead of it being a run-of-the-mill pension such as was involved in Hisquierdo or such as would be involved in a General Electric pension, this instead of being deferred compensation for present services on active duty is actually compensation for more limited services in retirement. And if that's true, then it wouldn't even be the kind of property that's subject to the community property laws, quasi-community property or any other kind, would it? Walter T. Winter: Well, Mr. Justice-- Potter Stewart: Wait, am I right in my assumption? Walter T. Winter: --Yes, to some degree, but perhaps not to another degree, Mr. Justice. In the first place, I think that we have to be somewhat realistic. Potter Stewart: Of course we do. We always have to be that. Walter T. Winter: The fact of the matter is, Mr. Justice, that the retired military officer doesn't really have to do anything any more. Potter Stewart: Well, no, assuming that's true, I said, assuming that's true? Walter T. Winter: Yes? Potter Stewart: That what it is, what so-called retirement pay is, is compensation for the more limited services for which he is liable in retirement, and rather than being deferred compensation for his services performed during active duty. Walter T. Winter: Yes. Potter Stewart: Now, assuming that's true? Walter T. Winter: But I don't think that-- Potter Stewart: Let's not argue about whether or not it is. Assuming it's true, then California would be quite mistaken in considering this property covered under its community property doctrines, wouldn't it? Walter T. Winter: --Well, I think that our community property law covers that in this way, Mr. Justice. Under community property law, once there has been a separation then the earnings of each of the spouses then becomes his or her separate property. Potter Stewart: Their subsequent earnings? Walter T. Winter: Their subsequent earnings. Potter Stewart: Right. Walter T. Winter: So that if we assume counsel's argument, the way that I can answer that is really simply this, the minute that he gets back into the military and he actually becomes part of the active duty again, then he is paid-- Potter Stewart: Full pay. Walter T. Winter: --number one, he is actually paid for his services, the services that he renders at that time. But furthermore, he also accrues further military retirement benefits all of which will then benefit him. So-- Potter Stewart: We're really now arguing about whether or not it is true, the assumption, aren't we? Walter T. Winter: --I don't think so, but perhaps I misunderstand you. Potter Stewart: Perhaps I misunderstood you. Walter T. Winter: I don't think that we're arguing about whether or not it's true. The question is whether or not it would then be a property interest. And what I'm saying is that you can't ignore one without the other. Now, it just depends upon how far you really have to go. If he's really, if he's factually only on limited duty, then I would have to agree. But the fact of the matter is, and in one of our cases the courts have addressed that issue. John Paul Stevens: Mr. Winter, do you agree with what your opponent said, in the event the doctor had not merely retired but had resigned his commission, would he not then have forfeited any right to the retirement pay? Walter T. Winter: Yes, but that cuts both ways-- John Paul Stevens: Would you not agree that he has the sole discretion as to whether to do that, and the wife cannot veto that decision? Walter T. Winter: --I believe that he has that sole discretion or he should have that sole discretion, Mr. Justice. However, I would like to point out to the Court that under the California scheme, under the California law, that the wife actually has no greater right to the retirement than the husband, or, I should say, actually, the spouse. Of course, I'm talking about wife and husband here, because from a practical standpoint it has been that situation in 99 percent of the cases. I might add parenthetically that now that we have more and more women becoming part of the military, it could easily cut the other way. But getting back to that for just one moment, the wife in that particular situation has absolutely no power at all to increase her right. In other words, if the husband chooses to give the whole thing up, then certainly he can do that, and there is nothing that she can do about it. John Paul Stevens: But it's not just... if your opponent's conception of the scheme is the correct one, it's not merely giving something up, he also gets something when he resigns, namely, he is no longer exposed to the risk of being called into active duty and running the risk of the danger that's associated with a military life. Walter T. Winter: Well, I'm not asking this Court to state that the wife should have the right to tell him whether or not he should remain in the service. John Paul Stevens: No, but this goes to the question whether it's in the nature of a pension or it's in the nature of reduced pay for a limited type of service, namely, availability to recall. Walter T. Winter: I believe that under these circumstances, Mr. Justice, I believe that this is nothing more than a play on words. And while I agree that it isn't-- John Paul Stevens: But there are a number of officers who do resign for that very reason. Walter T. Winter: --Yes. And in the event that they resign then they for all intents and purposes will defeat their spouse's interest, and that takes care of that, she's out. And I recognize that, Mr. Justice. I certainly feel that under those circumstances the Court should not have the power to keep him in there, or to make him work, or do anything that he doesn't want to do. This, of course, is part of the overall scheme, this is part of the community property law. And we recognize that. I will say that there is one Court of Appeal decision that came down recently, that was mentioned in the reply brief, in which the California Court of Appeal did go one step further. I personally disagree with that particular Court of Appeal decision. It never went on to the California Supreme Court, and I assume that somehow or other that point is going to be raised at a future time. But I don't think that that has anything at all to do with the situation as it is here today, because essentially, Mr. Justice, what we're talking about here is whether or not there has been a federal preemption. That's really all we're talking about. Has the federal law preempted? And the fact of the matter is that it hasn't even been mentioned. Nothing has been said about it at any time, one way or another. And I think it's every bit as fair to say that when the federal law has not said anything about it one way, then it certainly is every bit as fair the other. Except that, under the law, under what is required under the supremacy requirement, there actually has to be an actual conflict. And this is something that they have not been able to demonstrate. There is no conflict at all between our California community property law and military retirement benefits. There has not been an unambiguous mandate. And there certainly has not been an interference with the federal interest. You see, this is the other requirement. You can't just have this without a so-called damage provision. There has not been any interference at all. Harry A. Blackmun: Mr. Winter, suppose you lose this case here? Are you without remedy under California law? You have alimony in California? Walter T. Winter: Yes, we do, Your Honor. Harry A. Blackmun: And that could be enforced against... well, his pension, once it is received by him, I suppose? Walter T. Winter: Yes, it may, Your Honor. However, if I may point this out-- Harry A. Blackmun: What you want is a direct share of the pension? You want half? Walter T. Winter: --Yes, Your Honor, because actually-- Harry A. Blackmun: Payable by the United State Government? Do you want the United States Government to pay her half direct to your client? Walter T. Winter: --Well, I'm afraid that under present law that cannot be done. However, I would like to respond insofar as the alimony... you see, alimony has many, many provisions, many requirements. And one of the requirements, of course, is that immediately upon the remarriage of the party who is receiving the alimony, the recipient, that automatically then terminates the alimony. Now, this is a property right we're talking about. This is something that they earned, both of them together, during a marriage, and it is not something that should terminate. Because, after all, why should he get the windfall merely because she remarries? Why should she have to then worry about starting out all over again? This is something that they have both worked for-- Harry A. Blackmun: Of course, even that isn't true in all states. But in any event, I understand your property argument and I think I know what alimony is, but would your argument about service wives... I want to know whether they're without remedy in case you lose this case. And I take it they are not without remedy. Walter T. Winter: --They are without remedy, Mr. Justice, because they are losing a very valuable property right, and spousal support, as we call it, or alimony, I don't think is the proper remedy. Because that is subject to many, many conditions and it is not exactly the same thing as saying to her that this is something they have and something that is to be divided. It's something that he will keep, whether or not he remarries. So why should he keep it and she then lose it? Warren E. Burger: Very well. Walter T. Winter: Thank you. Warren E. Burger: Do you have anything further, Mr. Eytan? Mattaniah Eytan: Yes. Mr Justice Stevens, the wife can compel the husband to pay her damages in the event he refuses to resign. In the very recent case that my opponent mentioned, a case that did not plough new ground at all, we had an Air Force husband, Luciano v. Luciano, a 1980 case, where the Air Force husband refused to resign from the Air Force and the wife claimed that she had the right to collect her property interest in his retired pay and never mind whether he wished to actually start retired pay coming. He refused to resign. Potter Stewart: You mean he refused to retire? Not to resign? Mattaniah Eytan: Yes, I'm sorry; retire. Thank you for the correction. The Court held that she could declare when her portion of the retirement-- Potter Stewart: That is not involved in this case. Mattaniah Eytan: --I'm sorry? Potter Stewart: That question isn't involved in this case? Mattaniah Eytan: That's correct. The California court determined that it was up to her to decide when the retired pay would come, and that idea was further amplified in a more recent case cited in my reply brief, that said that the husband who refuses to retire so as to trigger the retirement benefits has to pay damages to the wife in an amount equal to what she would have gotten as her property interest had she retired. William H. Rehnquist: Is that like palimony? Mattaniah Eytan: Not at all. It's a property interest. It's not like alimony at all. It's damages for someone converting your property, someone depriving you of your property. California has had this doctrine a very long time, and it's fundamentally based upon the notion that if you have something within your control, you can trigger a set of consequences or not. And if you choose not to trigger them, then the person who suffers thereby is entitled to damages from you. The wife in this case, may I point out, is getting alimony. She wants half the retired pay. She's getting alimony. The husband has custody of the three minor children, the husband pays everything, she's getting her alimony based upon a court determination of her need. This case is not about needs, and if she has greater need at any time, she can always go back to the courts and get more alimony if she can sustain her burden of proof on that. Speaker: Is it fair to assume that if you win this case the court would reassess the alimony situation and perhaps give her a little more? Mattaniah Eytan: I think it's fair to say that she has the right to do so and if she can show need, the answer is, yes. But imagine this. Suppose she gets the money and then she decides to pledge it to a financial institution or suppose she decides to give it to her second husband if there is one, never mind the specific fact here. The point is that once you get into the property business you allow the states to determine that the wives can dispose of it by testamentary disposition. She could pledge it. Strangers start getting the money. Look, you have a new case here, In re Miller, as to which cert is pending. The Miller court from Montana decided that the wife has such a marvelous property interest in this that she can give this to any person she wants by testamentary disposition. Does anyone really believe that the Congress intended that the Army retiree, perhaps languishing in a nursing home, is going to share his retired pay with a second husband who secured it by testamentary disposition? Has anyone really considered that the Army intended for Army retired pay to be so abused as a property interest that husbands who have their retired pay taken away from them in substantial portions have to seek out bankruptcy relief? That's exactly what's been happening. If you take a look at the reply memorandum you'll see the cases cited there. Most importantly, I think that the statement that there's no anti-assignment statute here a la Hisquierdo is rot. There clearly is an anti-assignment statute. It goes back to the days before California entered the Union. The exact text has changed from time to time but the essential point is the same. There is as good an anti-assignment statute here, as in Hisquierdo, and when you consider that it's the United States Government that has all the benefits in this area, the pay, the retired pay, the social security, the annuity programs, obviously an anti-assignment statute in these circumstances for Army pay which the Congress protected as much as it protected regular pay... it's all in the same statute... cannot mean that someone can take active duty pay, retired pay, because of state law. Federal law applies here. Federal law is very clear; the wife has no interest. Warren E. Burger: Thank you, gentlemen. The case is submitted.

Warren E. Burger: We'll hear arguments next in 73-1288, Dunhill against Republic of Cuba. Mr. Friedman? Victor S. Friedman: Mr. Chief Justice, may it please the Court. This case is here on a writ of certiorari to the Court of Appeals for the Second Circuit which applied the act of state doctrine to hold the petitioner, Alfred Dunhill of London, could not obtain an affirmative judgment against the Republic of Cuba, awarded by the District Court. Certiorari was granted by this Court with respect to two issues. First issue is whether statement of counsel made at the trial can constitute an act of state. As to that issue, we contend that there is nothing in the record that in any way evidences, a sovereign act by the Republic of Cuba. All that the record shows in this respect are statements by counsel for the Republic of Cuba indicating a litigating position in the case. The second issue in which certiorari was granted sua sponte by this Court was whether assuming the act of state doctrine applies in this case, whether the affirmative judgment nevertheless should be reinstated under the counter claim exception set forth in First National City Bank against Banco Nacional de Cuba. As to that issue, we contend that under the totality of the circumstances in this case where Cuba has put into issue in a single proceeding far more than the amount of the counter claims awarded against us -- against it, and where all of the claims and counter claims arise out of serious of related transactions, put into issue by Cuba in our courts that that counter claim exception should apply. Because of the position taken by respondent's counsel in their brief in this Court, the position being that the record does not justified the phrasing of the questions as granted in the petition for certiorari. I think it'd important that the background of this litigation be set forth at some length so that we can understand precisely what is in the record and the significance of the questions as framed by the questions as framed by this Court. Litigation arose out of the action in September 1960 of the Republic of Cuba in nationalizing certain cigar factories in Cuba. That action was turned an intervention, a euphemist. And for that reason, the Cuban Government and its representatives in this case are often referred to as interventors. The persons whose factories were seized are very often referred to as the owners. For a long time prior to the intervention, Dunhill, as well as other importers had purchased cigars from the owners. Indeed, for a short period after the intervention, the importers, against including Dunhill continued to purchase cigars from Cuba. And during the immediate post-intervention period continue to make payments for shipments of cigars that had been shipped prior to the intervention. The owners of course immediately after the intervention fled Cuba; some of them coming here to the United States. In early 1961, the owner instituted nine actions in the Southern District of New York. Four of them were against Dunhill. By these actions, the owners in essence sought to obtain payments for cigar shipped both before and after the intervention. Shortly thereafter, the interventors brought their own action, not against the importers but against the owner's counsel in an action entitled Policio against Russian Block. By that action, the interventors in essence sought to claim the right to sue for the same matters on which the owners had already institute it suit. Since the importers were essentially in the position of stake holder in these actions, the District Court stay the actions against them and proceeded to resolve the threshold and significant disputes between the owners and the interventors regarding who is entitled to payment of what cigars. Insofar as relevant here, the District Court for Judge O'Brien in 1966 and under the decision that was later affirmed per curium by the Second Circuit held that the interventors were entitled to sue for the post-intervention shipments. In essence, the court held that at least with respect to Cuban assets under the ruling of this Court in Sabbatino and the act of state doctrine set forth there, the nationalization decree of 1960 was effective as to the seized Cuban assets. At this point in time however, the significant, and we're talking now about 1967, the interventors stipulated before the District Court that the owners were entitled to recover for free intervention shipments. The assumption by both the owners and the interventors some seven years after the event being that these amounts were to insignificant to concern themselves with. After the rulings in Policio against Russian Block, the interventors were allowed to intervene this time in the procedural sense in the nine actions in New York. The actions were in fact consolidated for trial, tried together and appeal together to the Second Circuit. During the course of trial preparation however and the course of the trial itself, it developed that as of the day of the intervention, there had been almost $500,000.00 in unpaid amounts for cigar shipped prior to the intervention. Hardly and insignificance on this had been thought by both the owners and interventors when they entered into their stipulation in 1967. It further developed during the course of these proceedings that the importers shortly after the intervention had in fact paid all of the sums in accordance with their long standing practice of paying on 30, 60 or 90 days terms. At that point, Cuba of course changed its position and sought to back off from its stipulation that had entered -- it had intervened to in Policio against Russian Block. They contended now that they should be entitled to the pre-intervention shipments as well. And not only that, they contended that they never received those payments if in fact they had been made. The District Court however found that not only had the payments been made by the importers, but that Cuba in fact had received them. In the case of Dunhill, those payments amounted to some $55,000.00 more than the District Court found Dunhill still owed for the post-intervention shipments. In the case of the importers as a group however, the situation was reversed because far more was still ode to the interventors by the importers as a group for the post-intervention shipments than the District Court found had been paid to Cuba for the pre-intervention shipments. Judge O'Brien ruled that the owners were entitled to payment for the pre-intervention shipments. He also ruled that the interventors had received those payments and reliable under an unjust-enrichment theory to return them to the importers. In his initial decision, he allowed the importers to set off against what they owed for the post-intervention shipments the amounts that they had paid for the pre-intervention shipments. He specifically ruled the act of state doctrine inapplicable to the payments received by Cuba, stating in part, and I'm quoting this portion of an opinion now. “Here, all that occurred was a statement by counsel for the interventors during trial that the Cuban Government and the interventors denied liability and had refused to make repayment.” This statement was made after the interventors had invoked the jurisdiction of this Court in order to pursue their claims against the importers for post-intervention shipments. It is hard to conceive how if such a statement can be elevated to the status of an act of state any refusal by any state to honor any obligation at any time could be considered anything else, should note panthetically at this point that it was apparent that the set off procedure described by Judge O'Brien in his initial opinion obviously did not take account of Dunhill's situation. Accordingly after the decision was rendered, we move for an affirmative judgment against the interventors. Despite the claim and trial of an act of state, the interventors expressed no opposition to this and there being no opposition, that motion was granted. The Second Circuit of course affirmed Judge O'Brien's decision in all respects except one. It reversed the affirmative judgment in favor of Dunhill on the ground of the act of state doctrine. It found the act of state in Cuba's failure to honor the importer's demand for return of the payments, and I'm quoting now, “confirmed by the Cuban Government's counsel at trial.” In short, regardless of what the Court of Appeals language was, there is no question that on the record, the only conceivable evidence of any act of state by the Cuban Government was simply the statements by counsel for the Cuban Government that its client would not honor a claim for return of the funds. The effect of the Court of Appeals ruling of course is to force Dunhill to pay twice for the same cigars, having already paid the interventors. Under the court's ruling, they must now pay the owners with interest. We submit therefore that despite the statements in respondent's brief to the contrary, the first issue is properly before this Court that is whether statements of counsel can constitute an act of state. And we submit as well that for the reason's set forth in our brief that they cannot. Potter Stewart: The Court of Appeals opinion reproduced any of the papers we have? Victor S. Friedman: Yes, that's in the joint appendix Mr. Justice Stewart. Potter Stewart: I don't have an appendix -- Victor S. Friedman: And there's a joint appendix as well. Potter Stewart: Oh, I don't have that. Thank you. Victor Rabinowitz: The page on which the quote from the Court of Appeals that I read is on 25 (a) of the joint appendix. Lewis F. Powell, Jr.: Mr. Friedman, is there really any doubt as to the fact that Cuba as repudiated these debts? Victor S. Friedman: Yes Your Honor, I would say there is. Lewis F. Powell, Jr.: Had they paid any of them to anybody in this country since Castro took power? Victor S. Friedman: Well Your Honor, this is a rather special circumstance. I think we must recognize that in all other instances were Cuba has been before this or any other court, they have appeared armed with a decree which states certain consequences, usually confiscation of property. We have a situation in this case however were up until that last year, not only has Cuba certainly not issued any decree with respect to these funds, but is been actively contending in our courts that they never receive them. Now, it seems to me that it is a far crime from stating that we have funds and we hereby seize them to say in the other instance that we are coming into your courts to try to collect those funds, and then when the proof come out that they already had them to deny received of the funds. That is not a seizure and I would respectfully suggest that the situation is far different and that there is a real debt, yes sir. Lewis F. Powell, Jr.: The Second Circuit as I read the opinion found an act of state in view of all of the circumstances and said that a form of declaration was not necessary, and you differ from that? Victor S. Friedman: No, I do not. Clearly, there are circumstances where some act, some public sovereign act of the state maybe proved by other than a formal decree. There are a number of cases, most of them occur in time of civil strife or rebellion where a military officer for example goes in and seizes property. That is not a formal act. But every case which has decided the act of state doctrine has insisted that there be some public affirmative act, something that one can look at and say “this is the affirmative act of the sovereign”, something with a sovereigness acting so that if this Court or any court in this country where to take a contrary position, it could be considered in a front to the sovereignty of that nation. Warren E. Burger: Well then, is it not also an act which takes place within the jurisdiction of that sovereign and then in turned his asserted in our courts? Victor S. Friedman: That is correct Mr. Chief Justice. Not only that in every case which has dealt with the doctrine, our courts have required a proof in our courts of the fact of that act in the foreign jurisdiction, that is correct. Warren E. Burger: Was that true in Pons against Cuba, do you recall -- Victor S. Friedman: Pon? Warren E. Burger: P-O-N-S against Cuba, was there an official act claimed -- Victor S. Friedman: I'm sorry. I'm not familiar with that case, I'm sorry sir. Warren E. Burger: Well, not important. I can track that down. Victor S. Friedman: Respondents appear to concede in their brief and I'm not sure it's a concession, but they do appear to concede that statements of counsel in fact cannot constitute an act of state. I refer the Court to page 12 of respondent's brief in that respect. They seek to avoid the issue by in affect asserting that counsel was simply the agency by which Cuba made known its legal position. We suggest that this simply does not square with the cases. As I have said, every case which has does far considered the application of this doctrine has insisted that there be some affirmative act of the foreign sovereign as the Chief Justice says pointed out within it's own territory, and then as a second requirement that there be confident proof of the existence of that act within our courts. Here, for all that counsel has said, we still do not know what the act was. We do not know when it took place or how it took place or who is responsible for it. In this connection, we've cited the case of the Navemar which all be the case dealing with sovereign immunity. I think his instructive in terms of the standards of at least minimal proof required when a sovereign comes into our courts and asserts a claim that it should be treated differently from private litigates. In the Navemar, there was a verified statement by the Ambassador of Spain that his Government had in fact seized possession and ownership of a libel vessel. There being some question about those facts. The court refused to foreclose these issues, but instead, invited the ambassador to intervene in the action and prosecute his claims as a litigant in the suit. Suggest moreover that in addition to the fact that the act of state application here was far broader than in any of the decided cases, that there are no policy reasons underlying the act of state doctrine which would require any less proof than we are contending for. The doctrine itself as the respondents concede of necessity works in unfairness. As to any litigant against whom the doctrine is applied, it denies him his judicial remedies. True, if the courts are attempting to deal with a public act or pronouncement of a foreign Government, certainly, they're maybe a realistic danger that the courts either maybe involved in political controversy in international affairs were may be usurping executive prerogatives in those affairs. But surely, we're -- there is no public act of a foreign sovereign. We submit that those dangers are unrealistic. And that to apply the doctrine, to create the unfairness, unless there is a realistic basis in fact on which the courts can operate, simply does not make sense. And we submit that that requires nothing less than competent evidence at the trial that an affirmative act of a foreign sovereign has in fact occurred. And here as we know nothing of a sort has occurred. I reviewed the history of the case at some length because I wanted to show that for some 10 years, Cuba apparently was either unaware or at the very least disputed the receipt of the varying monies, counsel for Cuba and assets, it has seized at sometime that we don't know and in some manner which we also don't know. There is a suggestion to respondent's brief that I feel should be discussed briefly. At page 17, respondents appeared to argue that the nationalization decree of 1960 might be the act of state which justifies the retention of petitioner's payments. The argument appears to be that since that decree nationalized, the accounts receivable of the owners that payments on those accounts, at least in so far as they reach Cuba may also have been taken under the authority of that decree. Both courts below and of course held under the Republic of Iraq case that the decree was in effective to reach those accounts receivable because they were assets located outside of the jurisdiction of Cuba being payable in New York. We believe that ruling was correct, but we do want to point out that if this is respondent's position now and if that word to be adopted, we must note that to the extent that the court rule in that fashion. The rulings of the courts below with respect to parties not now before it would also be affected because if the court were to rule that the decree somehow operated with respect to the accounts receivable insofar as payments on those accounts reach Cuba, then we would submit that the -- that such a ruling would then effect extinguished the accounts receivable themselves, and the owner's judgments against Dunhill to that effect would also be extinguished. I turn now to the second argument, one of the second branch of the argument which assumes that the court finds -- that the act of state doctrine is effective here. And the question is assuming that effect is this case within the counter claim exception created by City Bank in view of the fact that petitioners counter claim here does not exceed the net balance owed to Cuba by all of the other importers who are consolidated for trial in this case. We submit that in view of the totality of circumstances of this case that the counter claim exception should in fact be applied. In fact, we believe that the circumstances here are far stronger for justifying the application of that doctrine than they were in City Bank. In City Bank, of course, they were many differences of views among the different justices. But we think that two-threads run through the various opinions. I've have already alluded to them in my argument on the first point, they are that the act of state doctrine really serves two fundamental purposes. One is involved with not having this Court enter into areas which are more properly reserved for the executive, the other is that this Court should not be involve in deciding issues with may affect our foreign relations. I do not and I'm thankful, I do not for purposes of this case have to get into the question as to which of those is the more important because I think under either view, it is quite clear that allowing the counter claim here to the extent of all of the judgments in favor of Cuba would not violate either of those principles. We must recall that this case like any other that we have found involves Cuba's coming into our courts and affirmatively seeking relief on the questions of who was entitled to the payment of all of the cigars. Initially, they came in and asked for payments of all. They then retreated when they found that they were significant amounts due on the post-intervention ship -- for the pre-intervention shipments. They went back and again, sued for all of it. The only thing that happened after that was that having as the courts, as the evidence manted and as it became clear that they might loose on some of those issues. They retreated into an act of state defense to the assertion of a judgment. Cuba has never in this case said that anything they have done with respect to those accounts receivable and the amounts payable on the cigars should not be treated by this Courts as a judicial issue. In fact, Cuba has submitted these very issues to the courts. The only reason the act of state doctrine has been asserted here is because on some of those issues, Cuba seemed to being coming out a loser. That is -- Warren E. Burger: Has -- there was -- what has our State Department had to say about this case in -- Victor S. Friedman: So far as I know, nothing Mr. Chief Justice. Warren E. Burger: Is it not usual that our State Department does take a position or at least advices the courts that they have no position? Victor S. Friedman: My understanding sir is that they will do that if any party or the court requested. We did not feel it was appropriate to request it in this instance because we did not believe there was any proof whatsoever that an act of state had occurred. We believe -- Warren E. Burger: Well, wherever it is been thought, at least in my observation in cases of this kind over 18, 20 years, wherever the State Department has thought any relations between the two countries would be adversely affected. They didn't wait for anybody to ask. They affirmatively told the Attorney General what was the position of the State Department. Victor S. Friedman: Well, I'm perfectly prepared to accept that Mr. Chief Justice. In addition, I might point out that I believe that the Stevenson letter which goes beyond the City Bank case would also talks about like cases, would I believe be applicable here. If anything this case presents certainly far less rational for and abstention by the judiciary, then First National City Bank did. After all in First National City Bank, the effect of this Court's ruling was to have the District Court or the Court of Appeals actually rule on the legality of the seizure by the Castro Government of First National City's Cuban Bank. Here, we have nothing of the sort. All of the legal issues have already been decided. The factual issues have already been decided. The only that issue here is the entry of a judgment. We do not have a situation where this Court is being asked as against an act of state contention to rule on matters which may involve some kind of sensitive foreign relations possibilities. I might also point out that it appears that the -- Mr. Rabinowitz has been in contact with the State Department, although the appendix to his brief with regard to the Office of Foreign Assets Treasury Department. So, the executive branch is obviously where the case. I would conclude simply by saying that we have cited in our brief a number of instances where both the executive and legislative trends, it seems to us or distinctly going toward looking at this favor with any expansion of view the act of state doctrine where the doctrine of sovereign immunity. We think that this case to the extent that the Court of Appeals held that there was an act of state doctrine applicable. Clearly is such an expansion and we see no reason why the courts in the face of the decided legislative and executive trend to the contrary should get involved in expanding the act of state doctrine. Byron R. White: Can I ask you just one question. I suppose there were no act of state doctrine involved in the case and they came out as it did with owing money, debts due on either side. How about Dunhill being able to collect the excess of what the Cuba owes it from the other judgments, from the other assets available in the case? Victor S. Friedman: Well, -- Byron R. White: You say, they were consolidated for trial? Victor S. Friedman: That's correct, that's correct. Byron R. White: Now, under New York procedure, would it be technically a -- Victor S. Friedman: A set off? Byron R. White: Let's assume Dunhill have judgment against Cuba for this -- what is it, 80,000 or whatever it is that had that judgment, and it wanted to satisfy. Would it be technically a set off in that case? Victor S. Friedman: No, I believe it would not be. Byron R. White: So, you would have to utilize other procedures available -- Victor S. Friedman: That's correct. We would have to attach the judgment. Byron R. White: You have to attach the judgment? Victor S. Friedman: Yes. Byron R. White: Less the -- your assets are there before the court? Victor S. Friedman: That is correct, that is correct. But let me point out -- Byron R. White: But would it be really any -- for purposes of -- for our purposes, is it really any different than if you found the bank -- that you have this judgment and you found the bank accounts somewhere? Victor S. Friedman: I believe it is, I believe it is. Byron R. White: Now, that's what I want to know. Why is it like that? Victor S. Friedman: Right. Not on a technical or procedural ground. My point simply is that Cuba has put into issue in a single litigating mode all these claims and counter claims. And what I'm suggesting is that the rational for allowing a complete set off or counter claim within this framework, regardless of the precise form that it took is far stronger than was present in City Bank. There are no -- to my way of thinking, there are no justifications with underly the application of the act of state doctrine which in any way, should preclude that result, whereas in City Bank, they're very definitely were different policy considerations which could have let the court to the other result. So, I am not relying on the technicality of whether or not these were consolidated for trial or consolidated action. I do not think that New York procedural niceties should control the ruling of this Court in that respect. Byron R. White: Would it be your position or the -- I'm not sure that you need to go so far. But is it your position that whenever foreign sovereign comes into our courts, they must come in on our terms and have that case decided by traditional principles of law applicable to two American litigants? Victor S. Friedman: Well, I'm afraid if I answer that question, yes Mr. Chief Justice, I luminate to the act of state doctrine and -- Byron R. White: You don't think you need to illuminate it entirely in order to prevail on this case. Victor S. Friedman: No. I don't really at all Mr. Chief Justice. In fact, I think, I can live within the decided precedence on the subject. William H. Rehnquist: Mr. Friedman, your response to Justice White's question that you're not relying on New York procedural niceties has certain overtones of making a virtue out of necessity because I take it if you are to bottom the argument on procedural niceties that this is really nothing like a set off in the traditional synth that lawyers use the word. Victor S. Friedman: We -- to the extent that we would be reaching a judgment by a co-defendant. I would agree with that Mr. Justice Rehnquist. Warren E. Burger: Very well Mr. Friedman. Victor Rabinowitz: Mr. Chief -- Warren E. Burger: Mr. Rabinowitz? Victor Rabinowitz: -- Justice and may it please the Court. I would like to start off if I may with this discussion that Mr. Justice White and Mr. Justice Rehnquist had been having because I suggested in filing my brief here that this petition for certiorari was improvidently granted and should be dismissed. Then one of the reasons that I urge was that no judgment can be collected here, collected that can perhaps be obtain if the petition to wins, but no judgment can be collected here under any foreseeable circumstances, and therefore this case, well I'm not moot in the constitutional sense, that is a risk of a case of controversy under Article III. Nevertheless, it is for all practical purposes pointless. And it is pointless because all Cuban assets are frozen, and the Treasury Department which has the task of licensing the expenditure of funds out of frozen funds has indicated already as we knew all along it would that it will not license. The execution of any Dunhill excess judgment against assets which are of a wise frozen whether it be a bank account as Mr. Justice White suggest or one of the other judgments that has been obtained as against Faver, Coe as Mr. Friedman suggests. Therefore, we have a situation which is akin shall we say to an action in which plaintiff is suing a person who is concededly and obviously insolvent. The total number of claims filed against Cuban assets in the United States amounts to $1,799,000,000.00. Now, I don't know the amount of frozen funds are, but if they amount to a few million dollars, it's a lot. If this $53,000.00 judgment is collected from those funds and I don't believe it can be, but if it is collected from those funds, we have pennies depending on the outcome of this litigation. And I don't believe it can be because the procedure that is followed in all of these cases and that has been followed in the Cuba case is to require a debted to file a claim with the Foreign Claims Settlement Commission, and not to bring the lawsuit. Dunhill chose to bring a lawsuit instead of filing a claim. Now, I suppose it has the right to do that. But if passed precedent in handling these cases is any guide to what the future may bring, and of course, I have no crystal ball, but I can read what has happened, there is no possibility of even this $53,000.00 sharing in that $1 billion, excuse me, $1,000,800,000.00 claim. So, this whole discussion, although it involved very interesting questions of law, so far as return to Dunhill is concern is going to end in zero when I cannot understand any justification for Dunhill spending all his time and I of course why the court granted the petition for cert is not my business, but at least I suggest that perhaps that question might be reviewed. Byron R. White: What about -- what about the set off, face to face set off? Victor Rabinowitz: Well, so far as the face to face set off is concerned, it is my understanding that that will be recognized by foreign assets control. So to that extent, the face to face set off which of course is not subject on, would not the subject of this petition for cert. It is the subject of another petition for certiorari which Cuba's filed. Byron R. White: I understand that. I understand that but you don't claim that this present argument, you make with no rob off on any face to face set off -- Victor Rabinowitz: No, no. Byron R. White: Or anything that would like it as a matter of fact. Victor Rabinowitz: As far as I know now, it would not. I don't know that what the attitude of foreign assets control would be on that subject, but I'm been trying to think that a face to face set off would be recognized by the Treasury Department. Now on the question of is there an act of state here? I don't know whether I or to be flattered or the contrary that being suggested that is have the power to commit an act of state. I have no such power, and then no statement that I ever made in court is to be considered to be an act of state. Cuba here received funds and claims that it was entitle to those funds. Hence, it refuses to return the money and it is retained to counsel to plead its right to those funds and that's what counsel has been doing to the best of its ability. Now, that claim is not a frivolous or capricious or an arbitrary claim. It is based as Mr. Friedman was kind enough to state on a nationalization decree, a decree which was adopted on September 17, 1960 and which purported to nationalize all of the assets of Cuban, not American but Cuban concerns about manufactured tobaccos, cigars in Havana, and to nationalize not only the physical property in Cuba, but also the accounts receivable. The question as to whether this nationalization decree extended to the accounts receivable was litigated. We lost in the District Court. We lost in the Court of Appeals and pursuant to instructions specific I might saying, instructions by my client, I have filed a petition for certiorari, which is one of those issues that's pending in the other case. And the issue there involves or revolves around this rather metaphysical question, what is the situs of the debt? If the situs of the debt was in Havana, then, it was nationalized. If the situs of the debt was in New York, then, it was not nationalized. That's an issue which is not before us. I mentioned that only to show that the claim of act of state here was not disconnected or irrelevant to the nationalization decree because if the nationalization decree did in fact and I'm advised that under Cuban law, it would have. If that nationalization decree did in fact attached or nationalized the accounts receivable, then, we are entitled, Cuba is entitled to the funds for pre-intervention cigars. Byron R. White: And could you get them out? Victor Rabinowitz: Well, the set off would be cancelled. We got the money. We have the money. Byron R. White: How did you get it? Victor Rabinowitz: We got it because Mr. Dunhill over here paid it to us. Byron R. White: Well, could the -- Victor Rabinowitz: The whole problem now was whether we have to pay it back. Byron R. White: Yeah, I understand that. But for post-intervention shipments -- Victor Rabinowitz: Oh, yes. Byron R. White: You can be paid for those? Victor Rabinowitz: Oh, yes. Byron R. White: And you get the money out? Victor Rabinowitz: Can Cuba get the money out? Oh no, no. It goes into that frozen -- Byron R. White: Just what I thought -- Victor Rabinowitz: Well, no question about that. That's true of all of this Cuba litigation. Byron R. White: So you're litigating -- what you're litigating here is on funds to add to the claimed accounts -- Victor S. Friedman: Right. We're trying as hard as we can in all of these cases to build that fund up as high as it can. The same question was raised I think by Mr. Justice Blackmun in the City Bank case. Our goal in this case and in the Chase case which is behind us hasn't come up there yet, is just to increase that fund because that's what my client thinks is in its best interest. And that which I -- Warren E. Burger: Now when you spoke of Dunhill kindly paying that account, that was before the seizure or -- Victor Rabinowitz: It was after the seizure. Warren E. Burger: After the seizure? Victor Rabinowitz: It was after the seizure. Warren E. Burger: Any of it bracket the seizure, some before and some after? Victor Rabinowitz: Oh, yes. All during the months of August, September, October, November, December, it continued to send money down to Cuba. Now, why it did it? I'm not all together sure. Various reasons have been given and hadn't been proven as events later shown with the advantages of hindsight. It would have stopped when the nationalization occurred, it would have said had it had sufficient foresight. We don't know whose entitled to this money and therefore, we're not going to pay it to anybody. But it didn't do that. It continued to send the money down to Cuba. It sets and I will assume for purposes of this argument that that's exactly what happened because -- Byron R. White: Now this is all pre-intervention. Victor Rabinowitz: All pre-intervention and a little bit of post-intervention. I think perhaps -- Byron R. White: (UInaudible) well, -- Victor Rabinowitz: But there is no issue about that. Byron R. White: Well, out there, entitled any of it back -- if you have to pay anything, it comes up only this frozen fund? Victor Rabinowitz: The court held that the former owners are entitle to a set off, are entitle to a judgment against Cuba which is a set off, they're very complicated. The court held that the former owners were entitled to that money. They are entitled to that money from Dunhill which was the debtor. And therefore, Dunhill is ordered to pay that money to the former owners. Dunhill however paid the money to Cuba said the court by mistake. Therefore, it is entitled to get that precise sum back from us. So whatever it has to pay the former owners, it collects from us, except for this $53,000.00 because we contend there is no way in which it can collect an affirmative judgment of $53,000.00 from Cuba. I'm feeling a little bad, I keep saying us in here because it may give the court some idea that I am the state, but I am not. I am just speaking as counsel. Warren E. Burger: When you -- well, I think you've answered the question I was about to ask. Victor Rabinowitz: Now, counsel has made much in his brief, and again in his oral argument to the contention, to the argument which said that Cuba never admitted receiving the funds. Now of course, that's not so, what happened was that the claim was made at large sums of money had been paid. This claim did not come to like until 1967 which was some seven years after nationalization. By that time, the -- all of the relevant records had been lost, destroyed, at least they were not available. And so, the Republic of Cuba said in response to a set of interrogatories, we do not know as to $93,000.00 of the total, yes. We received it, as -- because they were records. They were endorsed checks. As to the balance, we do not know whether we received it or not. The District Court held that the evidence was sufficient that we had received it. The Court of Appeals held the evidence was sufficient that we had received it. We're not applying for cert on that issue and therefore, I will assume that of for so far as this record is concerned, we have received it. Now of course, if we didn't receive it, then Dunhill has no claim at all. Dunhill's whole claim here is based on the fact that it paid money to us by mistake. If it -- if we didn't pay it, then the whole of Dunhill's claim for and therefore, we really think the petitioner is faced with the fact that whatever maybe ultimate truth, so far as to the record is concerned, Cuba got the money. And also it is clear that so far as the record is concerned, Cuba, basing its argument on a nationalization decree says it does not have to repay the money, and we submit that that is an act of state because as has been conceded, no particular formality is required. Byron R. White: Wxcuse me Mr. Rabinowitz, Cuba got the money. The fund, they got the money or Cuba got the money, which? Victor Rabinowitz: Cuba got the money in September of 1960, September -- Byron R. White: Before the nationalization? Victor Rabinowitz: Bridging the nationalization; some of it before the nationalization, some of it after the nationalization. Byron R. White: But in any event, it didn't go to the fund? Victor Rabinowitz: It went to Cuba. Oh, by that time, money was being -- at that time, money was being shipped to Cuba. The freeze didn't come ‘till 1963. Up to that point, the money went down to Cuba. Now, it's perfectly clear from all of the cases that the court -- that a course of conduct is sufficient to constitute an act of state. We have a great deal of state action here, much more than Henrico, Cochin, Bernstein and the other traditional act of state cases. And as I've indicated this continuing interest and continuing determination by Cuba to assert this claim is an indication on the part of Cuba that it believes that under its own nationalization decree in its own view of the law, it is entitled to this money. Warren E. Burger: Mr. Rabinowitz, when you say that why this case is not technically moot in the traditional sense that it is at for all practical purposes, there's nothing left of it. Is that because the claims against the $1,800,000,000.00 will so far exceed the fund that they really get nothing or pennies issue -- Victor Rabinowitz: Right. Warren E. Burger: Is that -- Victor Rabinowitz: Right, right. Well of two reasons. That's one. The other is that at least so far as the President of the Soviet Union, Bulgaria, Romania, Yugoslavia, and two or three other similarly situated countries, people who didn't file claims with the Foreign Claims Settlement Commission don't even get those pennies. Potter Stewart: Was there a cut off date? Victor Rabinowitz: Oh, yes, cut-off date was two or three years ago. Potter Stewart: So, the claim couldn't be based on -- Victor Rabinowitz: No. Potter Stewart: A judgment now. Victor Rabinowitz: No. No, the claim could not be based on judgment why they didn't file before the Foreign Claims Settlement Commission, I don't know. But there certainly is not the slightest precedent, nor for there be the slightest justification for saying that a litigant who ignored the statutory procedure set up by Congress should find himself placed in a better position, so far as ultimately collecting this judgment against -- Byron R. White: Oh, it seems to have been -- is that mean if -- are you suggesting if Dunhill prevails and we reverse and Dunhill judgment is reinstated, it's useless? Victor Rabinowitz: Yeah, that's exactly what I'm saying. Byron R. White: Because they didn't file -- in the amount of the judgment of the claim, whatever it was, will be the commission within -- Victor Rabinowitz: They didn't -- it's useless for two reasons Your Honor. The first place, they didn't file. Second place, even if they had filed, the amount -- if they had filed, they wouldn't need a judgment. But even if they had filed, the amount involved would have been infinitesimal compared to the amount -- but even -- I don't know what disposition is going to be made to that. All I can say it that the precedent follow in all of the other cases was to say specifically the judgments will not be permitted, and that claims before the filed with the Foreign Claims Settlement Commission are the only source of getting money. And remember, so far as the settlements in the past have been concern, the issue becomes is really a dual one, one is between the United States and the foreign country, and that settles some which money as to be paid. The second step is that the United States distributes this money to its citizens. And in the treaties that have been entered into which Romania and the other countries that I've mentioned, the United States has specifically waived on behalf of its citizens all judgments which the citizen may have obtained or may in the future obtain against the foreign government for those pre-settlement claims shall we say, so that when was I say I can't even venture to predict what's going to happened here if the Polish and Romanian and other settlements are reached here, the judgment is really of absolutely no value in this situation. And what we're discussing here very interesting act --and to me rather vital questions of law, and I'm always delighted to discuss them. But in terms of the practical effect of what we're getting here, it's going to turn out to be nothing at all. Now, I would like to -- Warren E. Burger: Are you suggesting that your friend is overly optimistic about Cuba's voluntarily paying any judgments which maybe entered against it? Lewis F. Powell, Jr.: Well, I wouldn't. I would prefer not to have to characterize that as even with the word optimism. I think even that's too hopeful a word. No, I don't know why or why counsel is doing it. I suppose counsel is here because his client is instructed him to be here and he's got whatever motivation he has go ahead with this case, and maybe he thinks she can in some way or other collect it. And if he does, he's doing very well for his client. But -- William J. Brennan, Jr.: Mr. Rabinowitz, if there's no practical result to all of these, why is Cuba defending? Victor Rabinowitz: Well, Cuba is defending it right now because this Court issued a petition for certiorari and told me to come here and since I always enjoy arguing before this Court, here I am. But Cuba is proceeding with all of the other litigation because as I said before, my clients apparently and nobody has told me this, but I can grow a reasonable inference. My client feels that it will be good to have this money in that frozen account as against someday when there is going to be a settlement. And the more money there is in that frozen account, the better it's going to be for my client. Now maybe, it will be better for everybody, I don't know but it's going to be better for my client. To put in other way, if I may, I don't suppose this is a breach of professional confidence as one of my client said to me, is it better to have a million dollars in that fund or not to have a million dollars in the fund, and my answer was would it be better to have a million dollars in the fund. I don't know exactly why it's better. I just think it's better to have that much money in the fund than not to have that much money in the fund. William J. Brennan, Jr.: You pleaded why the case is not moot. Victor Rabinowitz: Pardon me? William J. Brennan, Jr.: You just stated why the case is not moot then? Victor Rabinowitz: The case is moot in the sense that the amount of money that will go -- William J. Brennan, Jr.: This is a new kind of conception of mootness. Victor Rabinowitz: Well, alright, I -- no. I don't think it's moot in any -- Warren E. Burger: This is a doctrine -- Victor Rabinowitz: -- in a constitutional sense, it certainly a case of controversy. Warren E. Burger: -- (Voice Overlap) is it? Victor Rabinowitz: That's right. It's -- as I think in my brief, I said is a practical matter its moot, and maybe I shouldn't have used the word moot. John Paul Stevens: If you are in control of the freezing mechanism, I suppose that's right, but you're not. Victor Rabinowitz: No, we have no connection with the freezing mechanism at all, quite the contrary. We've tried to break it on the few occasions without any success. William H. Rehnquist: But what if petitioners were to take their judgment to France to England and try to locate Cuban assets there and they ask for full faith and credit whatever the French or English are equivalent to that is. Victor Rabinowitz: I hadn't thought of that. I don't know, maybe I -- I don't know how the French courts or the German courts or the English courts would treat the matter like this and what, I'm sure that they have their own problem so far as foreign relations and the enforcement of the judgment obtained under these circumstances. I don't know. Warren E. Burger: I suppose Cuba must have some accounts receivable due somewhere for sugar these days. Victor Rabinowitz: I have read newspapers stories that indicate that that maybe the case. I just don't know. I -- anyhow, to conclude this part of is there an act of state, I submit that we have here as much evidence, as much of an act. I don't know what counsel means when he keeps talking about a public act. I don't know what exactly a public act is. In the French against Banco Nacional in the New York Court of Appeals, the act involved a piece of paper called an instruction which was posted on the bulletin board of the national bank or the currency stabilization for a board in Cuba and that was regarded as an act of state. Warren E. Burger: But sometimes, it's a document -- Victor Rabinowitz: Oh, something -- Warren E. Burger: -- of the foreign office of the sovereign filed in the litigation, is it not? Victor Rabinowitz: No question at all, but sometimes it is. But sometimes, it is the expropriation of a load of hides as in Ochin or of load of silver as in record. The seizure of these commodities by an army in the field and the -- this has been held to be an act of state by as I say the classic cases. Warren E. Burger: Are you free when I put that limitation on it, are you free to offer a hypothesis as to why the Government of Cuba as not made any formal claim of act of state, but has simply depended upon a litigation position asserted by you? Victor Rabinowitz: You mean why it has not made a decree written in a piece of paper? Warren E. Burger: Just written letters the Secretary of State of the United States often the -- Victor Rabinowitz: I think, I think that the opinion of the Cuban Government is that the nationalization decree is quite sufficient, and that there is no particular point in repeating over and over again that it claims that it nationalized these account receivable. And therefore, it is entitled to that money. Potter Stewart: That is the decree of September 15, 1960? Victor Rabinowitz: 1960, yes sir. Potter Stewart: They nationalized everything, didn't --? Victor Rabinowitz: That's right, nationalized everything. And I suppose that there is no -- the Government does not feel any compulsion to keep repeating this because the Governments are not always -- to issue documents. Warren E. Burger: Is not part of the debate, whether that decree of nationalization reached the assets outside of Cuba? Victor Rabinowitz: Yes. That is part of the debate and there is no question -- Warren E. Burger: No one is challenging this litigation that Cuba by its decree of nationalization could seize and exert sovereign power over assets in Cuba. Victor Rabinowitz: Oh no, no. That's not an issue -- Warren E. Burger: Was assets somewhere else is in on another issue, is it not? Victor Rabinowitz: Exactly, that is an issue. But whether that seizure is valid under United States law, the seizure of accounts receivable I mean, is valid under the United States law is not valid under United States law has nothing to do with whether it's an act of state. The fact is it's an act of state. Now, maybe they attempted to do something that they couldn't do. If it is true that a debt has its situs and as I said before, it's a rather metaphysical problem that a debt has it situs in the -- at the home of the debtor, then this was an ineffective nationalization decree because it sought to nationalize property outside the territory. But in the Cuban view, this is not so, and I have as I say so argued in this petition for certiorari which is before the Court pending at this moment. I would like to proceed to the second question which is the so called counter claim rule. As Your Honors will recall in Sabbatino, this Court held with only one judge dissenting, that the court of the United States would not examine it to the legality of the conduct of a sovereign done within its own territory. When the City Bank came before three years ago, the court had before it a claim by City Bank first that there was or should be a counter claim exception to the act of state doctrine. And second, the court had before it a letter from the State Department, and that State Department said that the act of -- Warren E. Burger: We'll resume there after lunch Mr. Rabinowitz Victor Rabinowitz: How much time do I have -- Warren E. Burger: You may proceed whenever you're ready Mr. Rabinowitz? Victor Rabinowitz: Thank you sir. I would like to spend my remaining time on the problem the counter claim rule, but just for a moment before I get to that, I would like to make one thing clear if it's not already clear. While I said that the nationalization decree of September 1960, nationalized not only the physical property, but also the account receivable, and therefore the problem arose as to where these accounts receivable were located. Of course, it is true that shortly after in the two or three months after the nationalization decree, the money represented by these accounts receivable did in fact to get to Cuba. So that it was no longer a question of nationalizing intangibles which will located in a foreign country, but was then became a question of the effect of the nationalization decree on that money which was then in Cuba, so that from the position of the respondent -- Byron R. White: Oh, is that all of it Mr. Rabinowitz? Victor Rabinowitz: Pardon me? Byron R. White: Is that all of it that was involved in the -- Victor Rabinowitz: All of it that was involved, yes. Byron R. White: In the Dunhill claim? Victor Rabinowitz: All of it, yes. All of it came to Cuba and that's why Cuba is under an obligation to pay it back. And of course, the nationalization decree -- Potter Stewart: That's a pre-intervention payments. Victor Rabinowitz: Pre-intervention payments. Potter Stewart: I mean payments for pre-intervention to that was stolen -- Victor Rabinowitz: Yes. Payment for pre-int -- that's right. So that as that money came back, it was the -- put down there, it was the position of the Cuban Government that as it entered Cuba, the nationalization -- Byron R. White: I think you said earlier, there was no freeze order until long after -- Victor Rabinowitz: Long after three years later. Warren E. Burger: Three years -- three years -- Victor Rabinowitz: Three years later. Now on the question of the counter claim rule, as I said in the City Bank case, this Court had before it a letter from the State Department which said that the act of state doctrine in its opinion was not to be applied in the counter claim situation and I quote “the amount of the relief to be granted is limited to the amount of the foreign states claim, and the foreign policy interest with the United States do not require application of the doctrine.” The letter then went on to say that the foreign policy interest of the United States do not require the application of the act of state doctrine to barge adjudication of a defendant's claim or set-off against the Government of Cuba in these circumstances. And hence the act of state doctrine should not be applied in this or like cases. Now, there is no State Department letter here of course, and I must with due respect Your Honor say that at least so far as the case is I am familiar with, the State Department has never sua sponte written a letter. In the Sabbatino case, the State Department participated not only as amicus but in argument, but that was on the motion of the court, not on its own notion or not by its own request. Thurgood Marshall: As a matter -- in fact in Sabbatino case, they refused to come in to the Court of Appeals. Victor Rabinowitz: Yes, they did sir. Yes, they did. And in -- it's quite right. And in the City Bank case, it's my understanding that they came in at the request of City Bank or at least at the suggestion of City Bank. And since then in other cases which are pending in the District Court, in one case, they did submit a letter. In other cases, they have refused to submit letters sir. What motivates them one way or the other, I don't know. The most recent was a refusal to submit three letters in cases involving three banks. Now, the petitioner's argument here is based on three assumptions, none of which I respectfully submit as valid. First, that there was a ruling by this Court in the City Bank case that there was the counter claim exception to the Sabbatino rule. Second, that the Stevenson letter submitted in City Bank is applicable to this case. And third, that there is an exception to what I contend is a non-existed counter claim rule which would permit the petitioner to get an affirmative judgment in this case. Now as Your Honors, I'm sure will recall the City Bank case, there was only one opinion out of Mr. Justice Douglas which opted for a straight out and out counter claim exception to the Sabbatino case. Three judges thought that there should be a counter claim exception when there was a State Department letter as there was in that case. Five judges as I read the opinion felt that there should not be a counter claim exception to the Sabbatino rule. So, it's rather difficult to say and talk about a counter claim rule in the National City Bank case because as I read those opinions, the vote was would have been on that issue four to five. Thank you. William O. Douglas: I just hope that the court doesn't follow my lead. Victor Rabinowitz: Your Honor, I hope it doesn't because with all due respect, I think your lead was a wrong one. William O. Douglas: Oh, you're protected by the First Amendment. Victor Rabinowitz: I understand that. I understand that and I'm going to take advantage of it by saying that I think -- William O. Douglas: As an exception to Sabbatino. Victor Rabinowitz: As an exception to Sabbatino. And I'm going to take advantage of it -- Warren E. Burger: Go ahead. Finish the sentence. Victor Rabinowitz: -- by suggesting that the counter claim rule is improper for two reasons. First, because as Mr. Justice Brennan pointed out in the dissent in City Bank, all the reasons for the Sabbatino case are equally valid with respect to a counter claim. And the second, that more often than not, the question of whether a case comes up as a counter claim or as an affirmative claim depends on who gets to the court house first because in all of these cases, it could have operated in exactly the other way if the other party had come in first. Byron R. White: So you're in the subject manner of that petitioner of yours not yet acted on that there shouldn't be any set off in this case? Victor Rabinowitz: Oh yes, yes sir. And just, may I say in final conclusion on that, I would suggest that this Court dispose of this matter here in one of two ways, either it grant those other two petitions that are pending, and that we really go at this rather tangled situation and decide all of the issues, or else that the petition be dismiss as in advertently granted because -- Byron R. White: Will the other be denied? Victor Rabinowitz: Pardon me? Byron R. White: If this is dismissed, is it proper that we granted this, do you suggest we deny the other two? Victor Rabinowitz: If this is dismissed, I would think that the others ought to be denied, yes. If this is entertained, I think the others ought to be entertained -- Byron R. White: What would you prefer -- Victor Rabinowitz: -- but unless Your Honors just want to make -- Byron R. White: What would you prefer? Which would you prefer, dismissal is improbably granted or in affirmance? William O. Douglas: Is that -- dismiss the -- inadvertently granted? Victor Rabinowitz: In providently. Inadvert -- no, it wasn't in advertent Your Honor. William O. Douglas: Oh, it wasn't, it's not like I can assure you. Victor Rabinowitz: No, I'm certain, it was not inadvertent. I misspoke. I think, inadvertently granted, which would I prefer? Well, I do love to argue the cases -- Byron R. White: That's really difficult, isn't it? Victor Rabinowitz: Yes, it is difficult. I love to argue cases before this Court and the prospect of another go around that this very attractive to me. Byron R. White: Still. Victor Rabinowitz: But still, I think it might best if every -- is like, we like the Court -- Byron R. White: You know, I wouldn't guess you wouldn't wanted it affirmed. Victor Rabinowitz: I think I would just like you to be of either affirmed, I've no objection to an affirmance. Byron R. White: You -- well, you -- would you prefer that to a dismissal? Victor Rabinowitz: I don't know that it matter -- Byron R. White: Alright, no. Victor Rabinowitz: A great deal. I think I would prefer dismissal to an affirmance. Warren E. Burger: Didn't -- just very often we give the counsel their choice. Victor Rabinowitz: I am under no illusion that you're giving me a choice. Warren E. Burger: Mr. Friedman, we'll extend your time to five minutes from your previous three. Victor S. Friedman: Thank you Mr. Chief Justice. I would just like to respond to a few remarks made by counsel for respondents. I turn first to the question again of what is the act of state in this case, and Mr. Rabinowitz is indicated that it may proceed from one of two standpoints, and I'm still confused is to where we really look to it. I simply want to point out again however that if it is the decree, I do not believe that this Court can rule with respect to that issue on this petition. That is something that has not been raised by the respondent's previous to this time, and I respectfully suggest that that would affect rights of other parties to this action that where are not now before this Court. If on the other hand, we are still dealing with the question of the possible seizure or retention of assets independently of the decree. I would suggest again that the remarks in our brief are fully applicable, and that is there has been no proof whatsoever that any sovereign act on the part of Cuba in any form that is acceptable as evidence in our courts. I'd like to turn now to the questions that our counsel has raised with respect to the enforceability of this judgment. I do not pretend for a minute that I will soon be a simple matter of simply going into court and enforcing this judgment the way one would and the other civil judgment. I do not agree with counsel for respondents that this is a worthless piece of paper. There are a number of possible ways the judgment might be enforced. I do not believe that this Court need consider how likely those possibilities are or just exactly what our chances will be to obtain a recovery under the judgment. The fact of the matter is that there are possibilities and we should be entitled to pursue them. Byron R. White: Well, your set off as money and the pocket, isn't it? Victor S. Friedman: The set off is not money in the pocket Your Honor, no sir. Byron R. White: Well, what its -- its money you don't have to pay? Victor S. Friedman: Its money we -- for -- the money that we owe for the post-intervention shipments, that has already been paid to Cuba -- Byron R. White: Yes. Victor S. Friedman: -- for the pre-intervention shipments. Byron R. White: Yes. Victor S. Friedman: To the extent that those are payments for the pre-intervention shipments, we still must pay the owners. So, there is no money in the pocket there. In fact -- Byron R. White: But -- Victor S. Friedman: If we were to recover on this judgment in full, there's still would not be a single penny coming to Dunhill; that would stay with Dunhill. Dunhill would simply have to turn that money over to the owners. The only question is whether we're going to have to pay the owners and not recover back from the -- from Cuba. There's no way that Dunhill can recover a single penny here that goes into Dunhill's pockets. That really raises another issue that was alluded to by counsel for respondents, and that is the question of why didn't Dunhill file a claim? The simple answer is here, that Dunhill was never seeking anything from anybody. The only reason that Dunhill is in the position that is in now is because of the conflicting claims that were asserted against it by both the owners and the interventors. Dunhill, as well as the other importers always considering themselves in the position of stakeholder, and along that same lines, I would suggest that the cut-off date, which was allude to for filing of claims, we do not think as it all applicable here for at least two reasons. First, that refers to expropriations of property. And as I've indicated, we do not believe there ever was any expropriation here. Secondly, whatever the claim is that we might file to our knowledge was not in existence as of that cut-off date sometime in 1967. If Your Honors will recall at -- Byron R. White: Is this to get the litigation approval? Victor S. Friedman: Well, I would hope not Mr. Justice. The problem is that as of that point in time, Cuba was still contesting that they'd ever received any money. So, it was hardly lay in our must to make a claim against them for money which a court might later judge. Cuba owed us, but we couldn't collect of them. William J. Brennan, Jr.: When did the owners start to press Dunhill? When did the owners start to press Dunhill for payment? Victor S. Friedman: The owners brought suit in the February or March of 1961. William J. Brennan, Jr.: Oh, was that the first knowledge Dunhill had out of the owner's claim? Victor S. Friedman: So far as the record shows, yes. Warren E. Burger: It was desserted as a defense in those cases that the money was owed to and payable to Cuba as the new owner? Victor S. Friedman: Mr. Chief Justice, so far as I know, as soon as those cases were filed, the interventors then started their action against the owner's counsel, and all proceedings, vis-à-vis, the importers were stayed. So far as I know, I don't believe that the importers had any connection with these cases, except to be named as defendants by the owners until 1967 -- or 1966 I guess. I would just make one other point with respect to the question of a license. Counsel has stated that the office of foreign assets control has said in no one certain terms that a license will not be issued. I think if the Court will look at the appendix to respondent's brief which contains the exchange of correspondents between the respondents and that office it will find that that is not the position of that office. They had set forth a general policy, but that does not say that that is their final position or if it is, then, it would not be subject to review in the courts, or that it might not be influenced by a ruling by this Court in this proceeding. Thank you. Warren E. Burger: Thank you gentlemen. The case is submitted.

Ray H. Lafky: May it please the Court. Hugo L. Black: Mr. Lafky. Ray H. Lafky: This case is but another facet of workmen's compensation. And in my 14 years of legal adviser to the Oregon Commission, I have gradually adjusted and adapted myself to the philosophy of the liberal construction of the law which must accorded all workmen's compensation actions to the growing field, the judicial expansion of the “twilight zone” which was enunciated in the Davis case. There were more recent cases where the conflict comes between various state jurisdictions where this Court has permitted actions in both States. And I think the “twilight zone” is certainly a proper judicial expansion of the philosophy of workmen's compensation. Now, actually, as we compare, for I want to oversimplify the Longshore Act and the Workmen's Compensation Act of Oregon, each of them require a certainty of compensation in the first instance. And if the employer fails to provide that certainty of compensation, the alternative of a negligence action is provided. Let us assume that the factual reverse, that the action was under the Longshore Act and he had failed to provide his workmen under the benefits under the Longshore Act. Then, if action were commenced there, could they say, “No, you have a definite right over into the workmen's compensation. And also, you can't have a damage action.” I think that that maybe an oversimplification. I -- I did wish to answer Judge Stewart's question in -- under the Oregon law, an employer must bring all of his employees in a given occupation under -- he may have separate occupations and have one under and the other. Potter Stewart: What do this employer could do? Ray H. Lafky: This one had rejected, so he hadn't -- so far as I know, none of his -- Potter Stewart: None of his -- Ray H. Lafky: -- employees were subject to the Workmen's Compensation Law to the extent that they were entitled to compensation. He could have, at any time withdrawn it and then his workmen would've been entitled to the compensation. Now, if we were to deal on hypothesis and what can happen, there are two cases cited in the briefs. One of which is Hess against the United States which have been cited by the respondent, 259 F. 2d 285. That case involved six workmen on the face of Bonneville Dam who were preparing to repair the floodings and faces of the dam. They set out from the Oregon shore. They got too close to the spillway, five of them were drowned. No question was raised by the Oregon Commission as to the maritime coverage on this particular case. The employer was shore based, he was out there working on a fix structure but there was a barge, there was an instrument of navigation. There was some delay of the question of whether Oregon or Washington should take. I mention this case not because of the law involve but because of the factual situation. That employer had lost his financial surety in the contract with the Government. He had state compensation with both Washington and Oregon, but he had a very minimal policy to protect him against any possibility of maritime injury like possibly applied to the skipper of a tug who was drowned, but he was very dubious if it would apply to any of the other carpenters and so forth. Now, what situation that we have there? If those workmen had proceeded against that employer, they would have a right but no effective remedy certain. The Oregon Commission voluntarily accepted those four fails probably, I think, $1000 are better in liability of the state fund. The Oregon Supreme Court is correct in its very narrow assertion that merely because navigable water are concerned to state laws of jurisdiction and that's just about as far as they went, I have ill-advised my client to the extent of $100,000 in that case. And in another case mentioned in the briefs, King against the Accident Commission mentioned in the petitioner's brief, 309 P. 2d 159. There were five workmen drowned on Elsie Bay, the tidewater and the river, navigable waters involved workmen out in a -- in a boat who were repairing a broom, protecting logs, preparatory to having these logs moved up in navigable waters of the Elsie River. So there are nine fatals along numerous dependent children left without fathers. And my interpretation of the Davis case would lead me to believe that in both cases, they were “twilight zone” injuries. Both cases, I -- it is not in the record but I know of known personal knowledge that there was no longshore insurance provided. And certainly, in this broad scope, I think that looking at the interest of the workmen and as I stand here now, actually, when I say this I -- I am referring to the liability in the State of Oregon and the state fund for these things but I think that that is a proper field of activity. And you do have the other facet here too and that is -- well, I have no direct interest with Mr. Hahn, I don't even know the gentleman. I see in these arguments here the question of the standard of care and -- and respondent here feels that the -- this employer should not be subjected to a higher standard of care. No injured workman can ever be made whole again. We can't put him back together again. All you can do is set up a yardstick to measure damages. But certainly, decision should be geared and tempered so that employers are required to maintain the highest standard of care to workmen because we may not put Mr. Hahn back together again but by insisting upon a high standard of care, we may prevent some other workmen from being injured and I think that that is -- Charles E. Whittaker: (Inaudible) Ray H. Lafky: That is the issue they raise that they -- to expose this particular employer to this particular action would incur to him -- require of him a higher degree of care and therefore, by some reason, upset the uniformity of the maritime jurisdiction and do grave damage to this litigant. I mentioned it because he has raised the issue and I do think that in all of these considerations of this nature in workmen's compensation, that is part of the picture. He himself has deliberately rejected state compensation, exposed himself to this damage action by virtue of that voluntary election on his part. Now, it comes before this Court saying, “I shouldn't be exposed to the higher degree of care that I have incurred by my own voluntary election.” Potter Stewart: Mr. Lafky, I don't want to hear of course the arguments (Voice Overlap) -- Ray H. Lafky: Well, I am practical through because I don't want to impose on his rebuttal. Potter Stewart: And perhaps your colleague would be -- would prefer to answer. Question that occurs to me is this. The Oregon court has, in fact, held that this injury was within the scope of the federal statute. Now, would that be res judicata in a subsequent -- to the benefit of the injured workman in a subsequent action of the Longshoremen's Act? Ray H. Lafky: I don't believe so. And -- Potter Stewart: Why? Ray H. Lafky: -- of course the -- under the Davis case, there, the Washington Supreme Court all the way through the four courts in Washington had held that he was not entitled to anything. Potter Stewart: And this Court said that he reversed all those (Voice Overlap) -- Ray H. Lafky: This -- This court reversed all of that, paid no attention to what the Washington court said, send it back in -- Potter Stewart: But that -- that doesn't quite get my question, does it? Ray H. Lafky: But -- Potter Stewart: Let's say perhaps your colleague would rather address himself to that or -- Ray H. Lafky: Yes. He was -- let's say -- that is the issue and of course, the question of whether or not my interest of course is whether or not in advising the Oregon Commission, we are properly accepting these borderline cases. Of course, the Oregon Commission has about 40,000 employers, entertains about 70,000 claims a year and rights not only workmen's compensation but by statute is permitted and also this right longshore workmen's compensation -- the longshore compensation. But we are interested and we were quite concerned with the Florida Supreme Court decision feeling that perhaps it was too narrow. It hasn't shown a complete disfavor with the Davis doctrine and the Fifth Circuit decision likewise. And I feel, as an administrator, having to advise administrators daily in a performance and acceptance of claim 70,000 a year but it is a wise doctrine to permit a little more laxity in leeway of the administrative level of where to accomplish the purposes of this type of legislation. Arno H. Denecke: Mr. -- Mr. Justices, I feel compelled at the outset to make some remarks which I think would be irrelevant except for the contentions of the petitioner in this case, and that is the inference or the direct statement that the defendant here, Ross Island Sand & Gravel did not carry state workmen's compensation. The statement of the Attorney General of the State of Oregon was as I said on the briefs here that the State Industrial Accident Commission is the only entity authorized by law to provide workmen's insurance as such in Oregon. We pointed out in our brief here from the Chairman's report of the Oregon State Workmen's Compensation Law that there is private workmen's compensation in Oregon and that the Chairman's report went on to say that the safer employers carried private workmen's compensation instead of compensation with the State. Now, in our -- what I think is rather peculiar set up, the state industrial accident fund is the only official -- officially recognized source of workmen's compensation. And any employer who rejects the state act and carries his own private compensation either with private carriers or self insured, he lays himself open to negligence suits or suits under our Oregon Employers' Liability Act. But as the report of the State of Oregon here points out, employers who reject the State Workmen's Compensation Act still continue to carry workmen's compensation either in private carriers or self insured. Hugo L. Black: You mean that -- you mean that this company has private insurance that would protect him in case his judgement was rendered against him? Arno H. Denecke: That is a part of the record, Your Honor. And I mean more than that, Your Honor, I mean that the -- that company is -- and this company although, this is not in the record, Your Honor, but it -- the company -- Hugo L. Black: I'm talking about this company. Arno H. Denecke: Pardon? Hugo L. Black: I'm talking about this company. Arno H. Denecke: Your Honor, this company has insurance to cover liability under a judgment also as insurance as to other employers to voluntarily pay workmen's compensation in accordance with the schedule of benefits of the State of Oregon. Hugo L. Black: In other words, this company is protected by insurance against the judgment of this kind or compensation pay? Arno H. Denecke: Correct, Your Honor. William O. Douglas: That was taken up under the Federal Act? Arno H. Denecke: Under -- both the State and the Federal Act, Your Honor. Charles E. Whittaker: (Inaudible) Arno H. Denecke: Your Honor, separate -- I -- I'm speaking now off the record. There's nothing in the records, Your Honor, but if I may, different private coverage or it's the same private coverage maybe had to cover liability under the Longshoremen's and Harbor Workers' Act to cover employer's liability, to protect against a suit such as this and to voluntarily pay compensation according to the workmen's compensation benefits as stated by the state law. Hugo L. Black: And I understood you to say he had all of these. Arno H. Denecke: He had all of them, yes, Your Honor. Hugo L. Black: He has to protect -- Arno H. Denecke: Yes. Hugo L. Black: -- any judgement rendered against him. Arno H. Denecke: Yes, Your Honor. And -- Potter Stewart: I -- Arno H. Denecke: Excuse me, Your Honor. Potter Stewart: Do I understand that an employer by voluntarily paying compensation as -- as would be provided by state law can -- he can't in any way thereby protect himself from -- Arno H. Denecke: Not from -- not from damage -- Potter Stewart: (Voice Overlap) -- Arno H. Denecke: -- actions, Your Honor. No sir. But -- William J. Brennan, Jr.: (Inaudible) Arno H. Denecke: Yes, he does, Mr. Justice Brennan. William J. Brennan, Jr.: All he did is place his insurance to private carriers. Arno H. Denecke: That's correct, sir. And -- William J. Brennan, Jr.: (Inaudible) Charles E. Whittaker: (Inaudible) Arno H. Denecke: Your Honor, it is -- and I -- I don't want to mislead the Court at all. It is purely voluntary on the part of the employer. The policy -- and I set out a standard policy in an appendix to my brief, Mr. Justice, that that -- by that policy, the insurance company agrees to pay workmen's compensation benefits to employees who otherwise would come under the Workmen's Compensation Act. William J. Brennan, Jr.: (Inaudible) Arno H. Denecke: Pardon, Your Honor? William J. Brennan, Jr.: (Inaudible) Arno H. Denecke: He would have, Your Honor, yes. William J. Brennan, Jr.: He would have. Arno H. Denecke: Well, if he had sought the compensation benefits payable according to the Oregon Workmen's Compensation Act, he would have been paid those. Hugo L. Black: I understood you to say that it protected against this kind of action here. Arno H. Denecke: Also, Mr. Justice -- Hugo L. Black: If he gets -- if this judgment is sustained, he is protected by his insurance policy. Arno H. Denecke: Oh, that is true, Mr. Justice, but in addition to that, in answer to Mr. Justice Brennan's question, that insurance policy also provides that the insurance carrier will pay Mr. Hahn or any other injured workman the same benefits that that workman would be paid by the state industrial accident fund if the employer had not rejected the Oregon Compensation Law. William J. Brennan, Jr.: I don't quite understand how this operates (Inaudible) Arno H. Denecke: It is -- William J. Brennan, Jr.: (Inaudible) judgment workmen's compensation? Arno H. Denecke: No, Your Honor. Charles E. Whittaker: (Inaudible) Arno H. Denecke: There would -- may I -- I'll try to -- it's -- I realize, it's a very complicated subject and -- but if I may state it this way -- William J. Brennan, Jr.: It might mean (Inaudible) of Mr. Hahn. Arno H. Denecke: Yes, certainly, Mr. Justice, that in the case -- Hugo L. Black: And this company? Arno H. Denecke: Yes, Your Honor. In the case of Mr. Hahn, he could -- if he had so desired, this company would have paid him compensation, and I'm speaking the insurance company, Mr. Justice Black, rather than the -- Hugo L. Black: Yes. Arno H. Denecke: -- employer. This insurance company would have paid him the same -- the benefits, I -- I better put it, the same benefits that are set out in the Oregon Workmen's Compensation Act. William J. Brennan, Jr.: (Inaudible) Arno H. Denecke: All he does is -- is apply to the insurance carrier. There is no administrative tribunal setup to cover private insurance coverage. William J. Brennan, Jr.: How would the (Inaudible) Arno H. Denecke: If -- Your Honor, if they cannot agree, that is the -- the employee and the insurance carrier cannot agree, if it's medical for example, it's a medical matter, the policies universally at least commonly provide for an arbitration. If it's other questions of construction, the policy would have to be done by the courts, Your Honor -- William J. Brennan, Jr.: How about percentage of disability Arno H. Denecke: Well, if -- if for example the physicians fixes this at -- at 50% of the loss of an arm for permanent tool disability, then the insurance carrier turns to the Oregon Workmen's Compensation Act and sees that for 50% loss of an arm, he gets so much money. William J. Brennan, Jr.: Is that the law? Arno H. Denecke: Well, yes, it would be, Your Honor. He doesn't -- he doesn't care for because I'm -- well, I haven't figured it out.I think it's quite obvious that he would receive more under the longshoremen and harbor workers schedule benefits than he would under the Oregon schedule of benefits. Now, I make that statement without -- Hugo L. Black: Could he -- could he sue you although you are not under the Act for compensation? Arno H. Denecke: Under that policy, Your Honor, yes. Hugo L. Black: Well, I'm not talking about on the policy, could he sue you under the Act? Arno H. Denecke: No, no, Your Honor. Hugo L. Black: Could he sue you for compensation? Arno H. Denecke: Yes, Your Honor. Charles E. Whittaker: (Inaudible) Arno H. Denecke: Yes, Your Honor. Charles E. Whittaker: (Inaudible) Arno H. Denecke: Yes, Your Honor. Charles E. Whittaker: (Inaudible) Arno H. Denecke: And there are -- Charles E. Whittaker: (Inaudible) Arno H. Denecke: Yes, Your Honor. Hugo L. Black: Is that done all the time that day? Arno H. Denecke: Well, Your Honor, I -- it isn't -- it hasn't been necessary. Hugo L. Black: Has it been done? Arno H. Denecke: It has been done and I cited one case, Your Honor. Hugo L. Black: Supreme Court case? Arno H. Denecke: An Oregon Supreme Court case, yes, Your Honor. Hugo L. Black: Now, when was that? Arno H. Denecke: In the 1930s, Your Honor. And (Voice Overlap) -- Hugo L. Black: (Voice Overlap) your compensation law? Arno H. Denecke: Pardon? Hugo L. Black: Was your compensation law the same then as it is now? Arno H. Denecke: But as far as this question is concerned, yes, the same, Your Honor. Hugo L. Black: It provided that a man was not covered unless he accepted it, and yet, a suit was sustained against the man for compensation who was not -- had not accepted yet, is that what I understood you to say? Arno H. Denecke: Yes, Your Honor. And because I'm not certain that I followed you -- Hugo L. Black: Well, I'm just asking. As I understand it, the law provides that if a man to be on writ has to accept the company employer. Arno H. Denecke: He has to reject it or else he is under time. Hugo L. Black: Well, he did not accept it. Arno H. Denecke: Correct. He -- in this case he rejected it. Hugo L. Black: And he is not under it, he rejected it. Arno H. Denecke: Correct, Your Honor. Hugo L. Black: And the law -- state law provides that when he is rejected, he is not under it, is that right? Arno H. Denecke: He's not insured with the state industrial accident fund, Your Honor. Hugo L. Black: And yet, you say that he could -- a person can still sue him -- Arno H. Denecke: On his -- Hugo L. Black: -- for compensation? Arno H. Denecke: On his -- on the private contract of insurance that he has procured, Your Honor. Charles E. Whittaker: But what question is could he sue him, the employer, under the Act? Arno H. Denecke: Your Honor, I am unable to answer whether you can sue the employer as distinguished from his insurance carrier. I am unable to -- to give the Court a -- an answer that I have any reliance in -- at this time. Hugo L. Black: You are sure, however, that any -- if a suit should be made on that, maintained by the Court and he was held liable, you insured against it and you insured also against the suit for negligence such as this. Arno H. Denecke: Yes, Your Honor. Tom C. Clark: You have direct action (Inaudible) Arno H. Denecke: Against the insurer, Your Honor? No, Mr. Justice. Tom C. Clark: You can't sue. Arno H. Denecke: Well, you could under this type of insurance because it has been -- it has been construed and I think even the -- the contract now states that it's for the benefit of the -- Speaker: (Inaudible) Arno H. Denecke: Yes, Your Honor, and I'm not positive whether that's been by judicial construction or it's now contained in the policy. At the risk of laboring a point, I would like to go into this subject and make one more statement on it. In Oregon, an employer who was in a hazardous -- hazardous employment such as this one, he has two choices -- three choices. Either he can go under the state fund, state insurance -- under the state fund and that's -- there's no actions possible against for damage actions, or he can reject the State Act and he doesn't have to. I don't want to mislead the Court. He doesn't have to but as -- as the report state here, they do and did in this case. He can take out private insurance coverage which will pay the injured employee according to the benefits in the -- is set out by the Oregon Compensation Law, or if he's a large employer, he can do the same thing by being a self insured. William J. Brennan, Jr.: (Inaudible) how -- how is the employer benefited (Inaudible) Arno H. Denecke: Primarily by lower rates, Mr. Justice. William J. Brennan, Jr.: Lower rates than the state fund? Arno H. Denecke: Than the state fund, that's correct. If -- I -- I don't -- Tom C. Clark: (Inaudible) or lose with the statute? Arno H. Denecke: He does lose it, Your Honor. And -- and of course, many times, the employee will prefer to bring a damage action against the employer. Hugo L. Black: Through all the time, isn't it, except one case you know. Arno H. Denecke: Well, the case that I was referring to, Mr. Justice, was one in which the employee was suing the insurance company for compensation benefits. I -- as I recall, it was the question of whether they had paid him all the compensation benefits that their contract insurance called for. So that the remarks -- William J. Brennan, Jr.: Justice Stewart just suggested -- Arno H. Denecke: Excuse me. William J. Brennan, Jr.: -- I suppose this is the answer, if the employee where you projected the Act and established negligence, he's likely to do what was done here, isn't that right? Arno H. Denecke: That's -- that's -- William J. Brennan, Jr.: But if he can't establish negligence, he might take advantage of this private insurance. Arno H. Denecke: That is in essence what the situation is. And of course that is the reason also why this is somewhat difficult for private insurance coverage to -- to stay in the State there because it's a -- they're subject to the verdicts rather than compensation benefits. Hugo L. Black: Am I correct in thinking that the counsel for the State and for this Board has said it that there is no right to sue under the law? If you -- for compensation, if your -- the employer has rejected it? Arno H. Denecke: I don't understand them to have so assert it, Mr. Justice. Hugo L. Black: They could sue under the Act? Arno H. Denecke: They could -- no, Your Honor, they could not sue under the Compensation Act. They sue on the -- on the contract insurance. Hugo L. Black: What you have is a situation where an employer wants to -- is advantage.He has a right like -- like anybody else provided by insurance against any prospects or suits that are filed against him for negligence or anything else. That's what you're saying, isn't it? Arno H. Denecke: Well, Mr. Justice, I think it goes beyond that -- and that is -- that -- that he has provided and employers generally do provide. Hugo L. Black: But does the statute say that he can provide it that way? Arno H. Denecke: No, Your Honor, this is -- this is beyond the statute. Hugo L. Black: So, it's just a volunteer thing on his part and if he decides, he can make more money that way or to cost him less, why, he buys his insurance. Arno H. Denecke: And as the -- as the Oregon Committee pointed out, Mr. Justice, generally, the efficient employers as -- so far as safety worker is concerned may withdraw and take the coverage under private companies. If I may ask the Court's indulgence to go into the history of this matter very briefly, I think it may be of some benefit in understanding the problem at least as the respondent sees it. This Court, if I may go back, the grant of admiralty power, and I use power rather than jurisdiction, is found of course in the -- the judicial article of the Constitution regards to all cases involving admiralty and maritime. It's also found in the grant of power concerning commerce between the States and among foreign countries and also among the -- the grant of all other powers. Now, it -- it was not until Southern Pacific versus Jensen in 1917 that the conflict between the States and the Federal Government came to focus on this particular point. And looking at Jensen just a moment, not in regard to compensation laws but generally, the two dissenting justices are the two justices that wrote the dissents in the Jensen case, those were Justices Holmes and -- and Mr. Justice Pitney, both were the opinion in 1917 that in state courts, the State was free to apply state laws and did not have to apply any admiralty laws if -- even if the event happened on navigable waters. The majority in that case held, and again, I'm leading out compensation laws, the majority in that case held that anything concerning navigable water, anything concerning maritime that there -- the Federal Government was supreme in that regard and that because of this supremacy, the State Workmen's Compensation Law of New York could not apply. Now, the Jensen decision, as the members of this Court are so well aware, has certainly been blunted. However, this Court repeatedly reiterates in its decisions the fact that in matters of maritime, the Federal Government is supreme and state law cannot be applied. Now, as the Court so well knows, this matter was wilt at the way after Southern Pacific versus Jensen. And courts, this Court as well as other courts held that even though it did occur on navigable waters, in the particular instance of workmen's compensation that the Federal Government was not necessarily supreme simply because the injury or death happened to occur on navigable waters. And then the Longshoremen's and Harbor Workers' Act was passed which of course gave the -- or was a federal statute covering injuries on navigable waters. Even after the Longshoremen's and Harbor Workers' Act, this Court as well as other courts said, “Well, even though it happened on navigable waters, still for various reasons, State Compensation Acts could apply." Then, because an injured workman, it was getting impossible to tell where his remedy was.Was it in the state or was it federal?The same thing was true of employers. So, this Court in the Davis case in 1942, in an effort to solve this problem of which compensation act applied, solve it for the employees benefit and for the employers benefit instead of leaving the line as Congress drew it under the -- drew it under Longshoremen's and Harbor Workers' Act set up a zone.And said in this zone, either state workmen's compensation or federal workmen's compensation is possible. Now, the Court, I don't think, attempted to say that that was a legally logical answer but it did point out that it did solve a very definite problem in supplying compensation benefits to employees and at the same time giving some benefit to their employers. Now, if the respondent understands the Davis case, the thread that the respondent sees in that case is if the only Act which would bring this under maritime and admiralty jurisdiction is the fact that it happened on navigable waters, if that's the only thing, then there's nothing wrong with defying State Workmen's Compensation Acts. On the other hand, if there is something else in addition to the fact that it happened on navigable waters, if there is something else, then the Davis case cannot apply. Hugo L. Black: Why? Arno H. Denecke: Excuse me, Your Honor. Hugo L. Black: Why? Wouldn't it be just as uncertain, if there were other facts to be considered? What facts ought to be considered? Who would know? Arno H. Denecke: Well, I think -- Hugo L. Black: How could you ever have any certainty? Arno H. Denecke: I think, Your Honor, if I may go into another line of cases which -- along this same point, I -- I would like to attempt to answer, Mr. Justice. Hugo L. Black: Yes. Arno H. Denecke: But I -- I've gotten this -- I thought I got this guidance from some other cases of the Court. This Court has held in other cases where an injury occurred on -- on navigable waters. This Court has held the fact that it occurred upon navigable waters alone made it a maritime tort. And this Court has said, if it's a maritime tort, there is federal supremacy and the Court cannot change the federal law in this regard. Now, I'm referring particularly to three cases of the Court which I think have been within the last six, seven, eight years. The first case in point of time was the Garrett case, now, that was a seaman's case, true, but the question there was what -- was who had the burden of proof in proving the validity of a seaman's -- of a release taken from a seaman? Now, the Court in that case said, “This happened on navigable waters, also, of course, it was brought under the Jones Act.” But the Court stressed the fact that this was a maritime matter and therefore, the state law, on the burden of proof in a release, could not apply that it was necessary to apply the maritime law, that applied customarily in seaman's case that the employer had the burden of proof of proving that this release was taken free from any fraud. Then I think a more important case on this subject, more important than this particular regard not because of the nature of the case was Pope & Talbot versus Hawn. Now, in that case, a carpenter was onboard the ship, went onboard the ship to make some repairs. Now, the ship was in Pennsylvania, in -- in a harbor in Pennsylvania, and the carpenter was injured by something alledgedly wrong with the ship and he sued the ship. Now, this was not a Jones Act case, he was a -- a ship repair man and was suing a ship for a -- I'll call it a maritime tort. He brought the suit in the law side of the federal court or perhaps it was removed to the federal court. In any event, it was on the law side in the federal court. This -- and the question before this Court, one of the questions was, “Will the Pennsylvania law of contributory negligence apply which would bar Mr. Hahn or will the general admiralty law of -- contributory negligence is merely a mitigation, will that apply?” Well, this Court held an unmistakable language that if the tort occurs on navigable waters, it's a maritime tort and the state law can have no application. It must be federal law. Then this Court in the last term, I believe it was in the McAllister case, when the question was when a seaman sued for both unseaworthiness and under the Jones Act and the question was, would the state statute of limitations on unseaworthiness, would it apply? If it did, the plaintiff would have been barred because it was brought after the two years, which I think was the Texas statute. This Court again held that this having occurred on water was a maritime tort and the state law could have no application. Now, it appears to us, and this, Mr. Justice Black, is an attempt -- Hugo L. Black: Did -- Arno H. Denecke: -- somewhat. Hugo L. Black: -- did he, with those cases, say that no state law could ever have any application? Arno H. Denecke: No, Your Honor, the -- the Pope & Talbot versus Hawn stated that the state law could supplement. I believe that was the -- the word that the Court used. Hugo L. Black: And Moore and -- Moore and McCormack made no such statement as that (Voice Overlap) Arno H. Denecke: No, I don't believe it did, Your Honor. Hugo L. Black: But what was behind that was the Knickerbocker Ice doctrine, there's a difference, isn't there, between supremacy of the law, the Knickerbocker Ice doctrine that even though Congress or the Government wants to leave the State's freedom and enforce their own law that they can't do it under the Constitution? That's the difference, isn't it? The Knickerbocker Ice case, in which was a part of the Jensen line, went further than Jensen, knocked out a -- a law of a State on compensation on the ground that a State -- Congress couldn't even agree for a State to have a compensation law, and the Federal Government couldn't agree that it is exclusive. Arno H. Denecke: That's correct. Hugo L. Black: But I don't think any of the cases you cited, unless I'm wrong, and I happen to have written the two as you just said it, if they did indicate that there could be no state law enforceable in that field, the -- I didn't know it. Arno H. Denecke: Your Honor, I -- I -- the case did not go that far. Your Honor used the -- the language there and I -- I can't put my -- in a -- Hugo L. Black: But it's something like it, as I understand it, it was something like the doctrine of interstate commerce that they have -- the State can be left free as it was in the old politics cases. It was pointed out in that ancient case, States had been doing something in interstate commerce all through the years and if it didn't conflict with the law of Congress or the Constitution itself but they were free to do it. I don't see where you get the idea that those cases would bar Oregon from having a compensation law whatever the Knickerbocker Ice Company case might be, if it was still the law. Arno H. Denecke: Yes, Mr. Justice. If I may presume -- Hugo L. Black: Yes. Arno H. Denecke: -- that same line, I think -- Hugo L. Black: I want to because I -- I'm interested -- greatly interested in your argument. Arno H. Denecke: If, and I have tried to think of some difficulties which would arise if this Court would pronounce that the -- that this would reverse the Supreme Court of Oregon and I obviously was not able to think of all of them but some -- some of the difficulties, and when I say difficulties, they are definitely difficulties of legal logic here. For example, this same Oregon Workmen's Compensation Act, if we can use it and it's not quite as -- well, assuming that in this same body of water here, there was a general contractor and a subcontractor, both not rejecting the Act but contributing to the state fund and those -- and a workman was injured on premises that were jointly controlled by this general contractor and the subcontractor, and it is happened on -- injury occurred on navigable waters. Now, if Oregon law is going to be applied, when this injured workman who's employed by the subcontractor sues the general contractor, the Oregon Workmen's Compensation Law says he can't bring a suit because it has a provision in there that employees on premises under the joint supervision control of two different employers, both of them have paid into the Act, why, then the suit is not maintainable under the Oregon Workmen's Compensation Act. So, the question then if such a matter should ever raise this Court would be, can the Oregon Workmen's Compensation Law be applied in one case? And in this particular case, which I attempted to set up, the hypothetical would not be applied. Hugo L. Black: Well, unfortunately, they don't have that -- Arno H. Denecke: I -- Hugo L. Black: (Inaudible) Arno H. Denecke: I understand that, Your Honor, but I -- I did think it was of some importance to show the difficulties that may occur, one other possibility -- Hugo L. Black: You mean the logical difficulty. Arno H. Denecke: I -- I understand, Your Honor, yes, the logical difficulty. Hugo L. Black: As I understand the Davis case, it was written on the premise perhaps that not logic but experience has been the life of the law. We were confronted with a situation where people didn't know how to proceed. And we just indicated that when one have of them got jurisdiction in that “twilight zone” case was brought there, it could proceed. Arno H. Denecke: If I may follow that -- Hugo L. Black: Yes. Arno H. Denecke: -- thesis, Mr. Justice, the Davis -- in the Davis case, it was pointed out by, I believe, Mr. Justice Whittaker, the choice there was between no remedy or a remedy of suing as an employer who had failed to subscribed to the Longshoremen's and Harbor Workers' Act or Washington Workmen's Compensation. So that in there, it may have been that a contrary decision would have meant that this widow would never have received anything, compensation or otherwise. Now, in this particular instance, there is no question but that Mr. Hahn, at the time of his injury and now -- and for one year after the termination of this lawsuit, in the event that the Court affirms the Oregon court will be eligible to receive compensation under the Longshoremen's and Harbor Workers' Act. He has a -- he has compensation and he always could have had compensation. But relying upon the Davis case now, he has chosen to gamble and attempt to get a jury verdict which would substantially exceed the compensation which have him under the -- under the Longshoremen's and Harbor Workers' Act. William J. Brennan, Jr.: Well, the question that Justice Stewart put earlier, what about the finding of navigable waters? Would that be res judicata in a proceeding if you would have bring it under the Longshoremen's Act? Arno H. Denecke: Well, I would think so, Your Honor, and -- and I realized that this is completely extra judicial here but I -- there's never been any question raised and -- but his eligibility for longshoremen's and harbor workers' compensation. Hugo L. Black: There's a plenty of objections raised that if it's covered by the State, it can't be covered by, isn't it? If it's covered by the State, can -- can the man get protection in the Longshoremen's Act? Does it say anything about that? Arno H. Denecke: No, Your Honor, it doesn't. But if I -- if the Court needs any assurance that this -- and -- that this man is going to receive that this Court affirms the Oregon court going to receive compensation under the Longshoremen's and Harbor Workers' Act. And as the -- as I'm sure the Court knows the -- that compensation, he doesn't even have to make a claim for it until one year after this litigation is terminated. Charles E. Whittaker: (Inaudible) Arno H. Denecke: Yes, thank you, Mr. Justice, I -- I didn't -- Charles E. Whittaker: (Inaudible) Arno H. Denecke: I would think it would be res -- Hugo L. Black: Why would it be? Why would it be conclusive in another case should the federal courts? Arno H. Denecke: Pardon, Your Honor? Hugo L. Black: Why would it be conclusive in another case in the federal courts? Arno H. Denecke: Well, it's between parties and -- and privilege -- Hugo L. Black: What parties before the administrative agency? Arno H. Denecke: Well, Your Honor, even though I don't think under the Longshoremen's and Harbor Workers' Act, Ross Island would be a party. Certainly, the insurance company is a privity of Ross Island Sand & Gravel Company. Hugo L. Black: They've had a litigation in which the Court cited that Oregon law doesn't cover.One of its reasons is that this was navigable water. And you think if the United States administrator of Employers' Compensation Act would be bound by that finding or would they have a right to hear evidence of their own? Arno H. Denecke: Well, Your Honor, I -- I would think that they would be bound. I would think that we would -- Hugo L. Black: I hadn't suspected that until -- Arno H. Denecke: Pardon, Your Honor? Hugo L. Black: I hadn't suspected that before (Voice Overlap) -- Arno H. Denecke: May I -- may I go this that we would be estopped, and I'm using that in a rather loose sense, or barred from urging that the waters were not navigable. I suppose that the Deputy Commissioner administering the Longshore Act would still, if he so desired, could -- could hear testimony on it. Now, I'm -- I'm not certain (Voice Overlap) -- Hugo L. Black: It needed to do so, wouldn't it, if he had doubt about it? Arno H. Denecke: I'm not -- Hugo L. Black: It's not -- it's not litigation. It's -- it's not in the nature of litigations (Inaudible) administrative matter whether use judgment feel whether they don't want to be tangled up in the technicalities of the law. Arno H. Denecke: Well, Your Honor, carrying one step further, if I may, Mr. Justice, suppose if the Deputy Commissioner administering the Act found that the waters were not navigable and then the matter were appealed from that decision to the appropriate Federal District Court, I would think there that the matter would be res judicata even if it were not before the Deputy Commissioner. Hugo L. Black: They take it overrule the Commissioner on the ground that he failed to decide what the -- what the -- one of the grounds that the State based its conclusion on. Arno H. Denecke: I think that would be possible, Your Honor. In any event, I -- I don't see how there could be any question here and I'm -- this a little side, Mr. Justice Brennan, from your question, but I don't see, as a matter of fact, how this could be anything but navigable because it was, as a matter of fact, navigated and as far as the waters of the United States, this area connected up with the Columbia River which connects with other States and which connects with foreign countries. So, as a matter of fact, I don't see how it would be possible to hold other than these were navigable waters in the United States. Hugo L. Black: But suppose it did, how could that ended? Before the -- under the Jensen case and under that doctrine, the Court had held that even one of the things occurred on navigable water, whether they look at the instance, see how local they were and how non-local they were, and how much by reason of the locals, the -- the situation it would interfere with the international aspects of the maritime law, it -- it's far more than just a mere question of navigability under those cases. What we held was, that the Congress acted on the basis the Jensen doctrine in that line of cases would decide the matter and nobody could tell where it was. And as I recall it, one of the reason was not merely that a man might be able to file a suit later but he'd already be put to the expense by making a bad guess with the cause in the lawsuit where neither he nor anybody else could predict whether the State or the Federal Government would decide he was within or without the laws. Arno H. Denecke: Mr. Justice, as I understand the situation and I think I do on this particular point here, the Deputy Commissioner will never, in the even this Court affirms the Oregon court, this -- the Deputy Commissioner will never see this case simply because as the -- the Act is itself goes into effect automatically. We pay, we, the insurance payer here, pays Mr. Hahn. And the Deputy Commissioner in this case and in all other cases does not see the case unless either insurance carrier controverts the thing the compensation or either the employee or the insurance carrier disagree about the amount of and time of compensation. So, the -- if it is of any assistance, I can give my personal assurance that the compensation would be paid and I -- and I don't -- that has never been an issue in the case. Hugo L. Black: What about the cause? Arno H. Denecke: The cause of this proceeding, Your Honor? Hugo L. Black: Yes. Arno H. Denecke: Your Honor, I would think we would be bound to make such a claim. Hugo L. Black: Neither with us. What I meant was if one of the difficulties of the quagmire that the situation put a man in, he might go to all the expense, go on to the highest court of the state of the nation and then have it held when he got there, that he had gone into the wrong court and puts all that expense in trouble and all that loss of time. So, your statement that you would see that he got compensation, doesn't settle it. The -- the problem that we saw would be continued if we didn't adopt some kind of rule to protect from the dilemma that the parties found themselves, both the employer and the employee. Arno H. Denecke: Mr. Justice, in a case such as ours here, it is not a dilemma because the employee from the very beginning in a case such as ours can receive compensation under the Longshoremen's and Harbor Workers' Act. If -- if he has a dilemma -- Hugo L. Black: Suppose you oppose? Arno H. Denecke: Pardon Your Honor? Hugo L. Black: Suppose you oppose that? Suppose you went to him and said he couldn't be paid there. Arno H. Denecke: Well, then, Your Honor, he would -- he would have to take this up with the Deputy Commissioner, and the Deputy Commissioner of course and among his award if he found that the employer and the insurance carrier was wrong, why, then, he would award a payment of at least a part of the cost. And I'm not saying, Mr. Justice, that it completely compensates the (Voice Overlap) -- Hugo L. Black: And then that could be appealed? Arno H. Denecke: That's correct, Your Honor. Hugo L. Black: So it's not merely a question, it is automatically get his money. I -- I didn't think it was, maybe it is. Arno H. Denecke: It's not if the insurance carrier controverts that -- that fact, Your Honor. Hugo L. Black: That's what I thought. I thought maybe I misunderstood. Arno H. Denecke: No, I -- I didn't mean to -- Hugo L. Black: Yes. Arno H. Denecke: -- to mislead the Court. One other feature which I would like to dwell very briefly on, two other features, if I may, first of all, as it been brought up in the argument here, one of our contentions is that if the petitioner were allowed to prevail in this suit, he is doing it at least partially on the basis of the Oregon Employer's Liability Act and the Oregon Employer's Liability Act imposes a standard, in fact is very different than the admiralty law employed in the ordinary maritime tort. Now, there are several difficult -- differences and the -- both the Ninth Circuit Court of Appeals and the Oregon Federal District Court have held that suits under the Oregon Employer's Liability Act may not be maintained when it is for a maritime tort. One of the differences, and as I said there are several, one is that the Oregon Employer's Liability Act imposes the standard of that the employer must use every device, care and precaution and then it has some -- some additions on to that.But it is our belief based upon these and other judicial decisions of inferior courts that the application, the Oregon Employer's Liability Act would not be permitted in the maritime tort simply because it would do as this Court has said in other kinds of cases involved in maritime torts destroy the uniformity if necessary. Thank you. Robert Y. Thornton: May it please the Court. I wanted to just mention briefly Mr. Denecke's argument concerning a suppose conflict between this case and the Pope & Talbot versus Hawn, Garrett versus Moore-McCormack and the McAllister case. Now, those cases are all cases where state law attempted to take away admiralty rights. In this case, no one is trying to deprive anyone of anything. State law here isn't trying to take away any admiralty rights and all the court said in those cases, as I understand it is that where state law conflicts with established admiralty rights or attempts to deprive a person of those rights that the federal law prevails. Now, obviously, there is no conflict here because in the -- the Garrett case and the Davis case were both decided the same day, and the opinions were written by the same justice. And the Davis case merely holds that where you have the “twilight zone” of course and you could -- you can go either way, you can either go for a federal or a state remedy. So obviously, there's no conflict. Now -- Potter Stewart: Of course, the Jensen case wasn't the case where the state law was trying to take away something from admiralty, it was this -- it was the opposite wasn't it? The Jensen case. Robert Y. Thornton: The Jensen case was a (Voice Overlap) -- Potter Stewart: For a case in which the State was trying to give something that admiralty hadn't given, isn't that right? Robert Y. Thornton: That's right. And of course, that was a Workmen's Compensation Law -- Potter Stewart: Yes. Robert Y. Thornton: -- which this Court has now decided can be applied by a State -- Potter Stewart: Yes. Robert Y. Thornton: -- in the “twilight zone”. So, actually, the -- the Jensen case, the old basis of it is -- is gone, you might say, because those cases can be [Laughs] -- those can be applied now. However, you want to look at the -- the whole basis of the Jensen case which is a workmen's compensation decision is -- is now been wiped away. Mr. Denecke mentioned in his argument here, this private insurance, and I think it caused some confusion with the Court and -- and I want clear it up as much as I can, this private insurance, there's -- there's nothing in the record on whatsoever. The record is completely silent about it, and it wasn't mentioned until we got into this Court. We went through the trial court, we went through the State Supreme Court and finally when we got into this Court, this private insurance was brought up by Mr. Denecke. I think in -- in answer to our contention that Ross Island Sand & Gravel Company should be -- should be held responsible in this case under the -- under the Oregon Act because it would hurt the enforcement of Workmen's Compensation Laws if they were not held. So for the first time it was brought up in this Court and they want this Court to understand that they have a private policy of so-called workmen's compensation insurance. Now, as I say there's nothing in the record on it whatsoever. There's nothing in the record on it that Mr. Hahn even knew about it or there was never offered to him. And they set out in their brief a policy of workmen's -- a private policy of insurance, and I think the inference is or they want this Court to understand that that is their policy. Now, this is completely outside the record. Normally, I wouldn't mention it except the Court here seemed to be interested in it and I did point out in the brief, in our reply brief starting at page 10, to the end of the brief, how this private so-called policy of insurance is nothing like workmen's compensation at all. To begin with, it has no standing under the law whatsoever. And if the employer rejects the Compensation Act, they are held responsible under the law of negligence whether they have one of these policies or not. It's a voluntary act on their part. Now, the quality of this insurance, this so-called compensation insurance is well illustrated by paragraph 16 of that insurance which provides that a simple agreement between the insurer and the employer will cut the injured employee off without one cent. In other words, all the -- all that has to be done is the insurer and the employer agrees that this fellow gets nothing and he gets nothing. Now, what a -- what a whip to require an employee to take a smaller inadequate award in a situation like that, all they have to do is agree he'll get nothing and he has no rights. I think that answers the questions of one of the justices asked as to whether an action of law can be maintained against the insurer or the employer under one of these policies. Furthermore, in order for the employee to get any rights at all, he must give a full release. In other words, he has to sign a release to the insurance company before he's paid anything, that's Provision Number 14 (e) of this policy. Now, if he asked to sign a release before he gets any benefits or before he is in entitled to anything, how can he bring an action under the policy? Obviously, he can't. The policy provides that it can be canceled by the insurer or the employer anytime on 10 days notice. Of course, in Workmen's Compensation, under the Workmen's Compensation Law, he's entitled to it at all times and even if the employer has not complied with the Act by putting -- paying the premiums. Speaker: (Inaudible) Robert Y. Thornton: He cannot sue under the policy unless he first executes a release. Speaker: (Inaudible) Robert Y. Thornton: Oh, yes, if he executes a full release to the -- to the insurer, then he can bring an action -- no he can't even then, Your Honor, no he can't even then. He doesn't get any workmen's compensation benefits unless he executes the release and no action can be brought under the policy at all. Does the policy provides that if there's any dispute, there should be arbitration and he has to pay half the cost of the arbitration and the policy provides nothing for aggravation. And under the Oregon law, he has two years if there's aggravation to bring an action for aggravation to get a jury trial. This type of a policy was discussed in the case of Whitehead versus Montgomery Ward, 194 Or. 106 at page 130. In which the Oregon court unfavorably compared with the provisions of one of these policies with the Oregon Compensation Act. That case significantly was not cited by the respondent. Hugo L. Black: 194 Or. 130? Robert Y. Thornton: 194 Or. 130, Your Honor, it's cited at page 14 of our reply brief. Another example is case of Pease versus Roseburg Lumber Company which is 206 Oregon, cited in our brief here, 206 Or. 56 -- 658, which there was a policy for only $5000. Now, Mr. Lafky here is telling about some of these cases that was for one accident. It's -- I mean for one entire incident. Mr. Lafky was talking about cases where they incurred liability of $100,000 on one accident. This policy in the Roseburg Lumber Company case would be totally inadequate in a situation like that. The policy they set out here in the brief is $50,000 and $100,000. In other words, 50 for one person, 100 for one accident. You have a -- you have a catastrophe. It wouldn't begin to cover the injuries and liability. Now, respondent's attorney states in argument here that Hahn can get longshore benefits. I think this Court recognized when it set up the “twilight zone” doctrine that which ever way one of these employees went that is the way that he was part. If there's -- there's no assurance in this case, Mr. Denecke says he hasn't give the personal assurance now that this will be paid. But whichever way this employee had -- had done, there's no assurance that they wouldn't have said, “He should have gone the other way.” That's the reason for the “twilight zone”. Now, the question isn't -- isn't in this case which would be the best remedy for Mr. Hahn to have. The question in this case is, can the State of Oregon constitutionally apply its laws in the “twilight zone” in this situation? That's the question for this Court to decide. And unless it's unconstitutional, under the United States Constitution for Oregon to apply its laws, then Mr. Hahn is entitled to recover. Potter Stewart: Do you understand that the “twilight zone” doctrine applies and applies only in the -- in an -- where are the facts of the accident make it doubtful? Whether or not the -- the -- this was an event over which the State constitutionally had jurisdiction or whether on the other hand, this was something covered by the federal longshoreman? Robert Y. Thornton: As I understand it, yes. This Court was -- took notice of all of the cases that -- Potter Stewart: There are -- Robert Y. Thornton: -- were being -- Potter Stewart: -- many such cases. Robert Y. Thornton: -- that were being fought, that's right. Potter Stewart: Yes. Robert Y. Thornton: And this Court finally said, “This has got to stop, just trying to draw a sharp line of distinction between every case. It's not necessarily under the Constitution. So, we're going to set up the “twilight zone” where there is an area of doubt as to which law this man could come under.” Potter Stewart: Because of the -- the ambiguous facts of the accident, isn't that right? Robert Y. Thornton: Because if the -- Potter Stewart: If -- if the injury occurred under such circumstance. Robert Y. Thornton: Because of the ambiguous facts of the accident also because of the ambiguous questions to whether or not it would be constitutional, whether it would interfere with the uniformity of maritime to apply state law in this particular case. Potter Stewart: Well, then, that's the result, but do I understand you to say or agree that -- that this “twilight zone” doctrine applies only in cases where there is some doubt as to -- as to whether state or federal jurisdiction attaches? Robert Y. Thornton: Yes, in the area of doubt where -- where its questions, as to which -- which remedy a -- a man should have where the -- where the man could go conceivably either way. Potter Stewart: Based on the facts under which he was injured or killed? Robert Y. Thornton: Based on the facts of the case under which he was injured. And that it doesn't matter whether it -- it's a question of whether federal law or state law will apply in that situation rather than to try to draw a sharp line of distinction. You allow the -- if a man chooses federal law, that's fine. If he chooses state law, that's fine. As Justice Frankfurter said, it may be illogical as a constitutional doctrine but that is -- that is the only sensual way to solve this thing unless the Court should decide to -- to put the Jensen case out which this Court -- the Court decided not to do. Hugo L. Black: And that would make no difference under our holding, would it, unless we overruled the Davis case (Inaudible) Well, if the Jensen case should later be overruled or not, because those cases held that the Congress had adopted the rule of the Jensen case, it had said -- left some considerable state of uncertainties, the boundary between the two. Potter Stewart: That's right. That's correct, Your Honor. Potter Stewart: In other words, overruling the Jensen case at this late day in this area or even at the time that Davis was decided, overruling the Jensen case wouldn't -- wouldn't have solve the problem, this particular problem, is that right? Robert Y. Thornton: Well, I think that's what Mr. Chief Justice Stone want to do in that Davis case. He -- he wanted to just get rid of the Jensen case altogether, but this Court, I believe -- Potter Stewart: But Congress had acted in reliance on it and -- Robert Y. Thornton: And acted in reliance on it. And so rather than take such drastic action, it was better to set up this “twilight zone” where there was some doubt as to -- as to Mr. Justice Black points out as to -- as to just what Congress meant or just which remedy was proper. Thank you.

William H. Rehnquist: We'll hear argument first this morning in Number 97-371, National Endowment for the Arts v. Karen Finley. General Waxman. Seth P. Waxman: Mr. Chief Justice, and may it please the Court: Since 1965, the National Endowment for the Arts has selectively provided funding, public funding to arts projects on the basis of aesthetic judgments in order to enrich the lives of all Americans and to expand public appreciation of art. The question presented in this case is whether, although it thus expands the opportunities for artistic expression, Congress violated the First Amendment... that is, made a law abridging the freedom of speech... by directing that the NEA ensure, quote, that artistic excellence and artistic merit are the standards by which applications are judged, taking into consideration general standards of decency and respect for the diverse beliefs and values of the American public. Anthony M. Kennedy: I'm sure the Court is as anxious as I am to get to the merits. Do you think this case is justiciable? You took the position in the district court that it was not. What's the best case that makes it justiciable, if you think it is? It seems remote. Seth P. Waxman: Justice Kennedy-- Anthony M. Kennedy: It seems not concrete. The plaintiff originally sued because he didn't get a grant. Then he sued because he did. I don't know what he wants to produce. I don't know if he's been denied any specific rights. Seth P. Waxman: --Justice-- Anthony M. Kennedy: I'm dealing with the question in the abstract, it seems. Seth P. Waxman: --Justice Kennedy, I think that the question of Article III justiciability, which of course must be measured at the time the suit was commenced or, really, in this case at the time that the pre-1990 claims were settled and all that was left in the case was the facial challenge to the 1990 act, is a close one. In the district court we challenged Article III, the Article III justiciability issue both on the question that these plaintiffs lacked standing and also because, since the agency had adopted an interpretation that basically concluded that the 1990 language was satisfied merely by the creation of extremely diverse panels and that decency and respect were not expressly to be considered as independent factors at the grant-making stage, the agency was in the process. Process was in effect no different than it had been before, other than the fact that the diversity of the panels was greater, and therefore our view was that the agency was not doing anything significantly different after the district court ruled than before it ruled, and conversely, if this Court were to agree with our statutory interpretation, the agency would be permitted, although not compelled, to continue to operate the program precisely the way it's operating now. Now, this was not an issue that we raised on appeal or we raised in our petition in this Court, and I wish I could tell you exactly why that's the case, because I wasn't there, but I suspect that we concluded that there was some marginal concreteness, or some marginal justiciability here by the fact that before... between the time that the 1990 amendment was passed in November of '90 and the time that the district court issues, issued its injunction in June of 1992, we actually read to the panel members the language of the statute. We then told them that they were to judge applications on the basis of artistic merit and artistic excellence, and that the other words, the words that follow taking into consideration, had been taken into consideration by the creation of extremely diverse panels in which each person from a diverse walk of life would bring his or her own individual sensibilities to that question, and we argued to the district court that, in fact, the case was not justiciability. There was no injury and there was no redressability possible. In fact, during the period between the time that the 1990 amendments were passed and the district court ruled, three of the five plaintiffs in this case received grants under the standard that they had concluded was unconstitutional and a fourth had benefited indirectly from a grant given to an organization. Antonin Scalia: General Waxman, let me see if I understand you. I gather that you have no doubts on the Article III question if your interpretation of the statute is not correct-- Seth P. Waxman: That is correct. Antonin Scalia: --in this facial challenge. The statute which says, taking into account, requires that in passing upon the applications the panels, diverse though they may be, must take into account decency and the-- Seth P. Waxman: Respect for the diverse beliefs and values of the American people. Antonin Scalia: --beliefs and values, right, okay. Seth P. Waxman: Yes. If, in fact our-- Antonin Scalia: Do they, indeed, ensure that they have decent panels? I mean, how do they go about ensuring that? [Laughter] Seth P. Waxman: --They ensure... Justice Scalia, they ensure that they have diverse panels, and-- Antonin Scalia: But that's just half of it. I mean, it says decency, standards of decency and respect for diverse beliefs and values. I... it's... I guess it's easy to get diverse... maybe it's easy to get diverse, but how do they ensure decency? Seth P. Waxman: --Well, the chairperson has the discretion to create the pro... the selection procedures any way she or he wants, so long as he is satisfied or ensured that general standards of decency will be taken into account in the process. The NEA thus far has considered that, since... for most people-- Antonin Scalia: What do you mean, in the process? Seth P. Waxman: --In the process of-- Antonin Scalia: In the process of selecting the panel? Seth P. Waxman: --In the process-- Antonin Scalia: How do you take into account standards of decency in selecting the panel? Seth P. Waxman: --In... no. Antonin Scalia: I don't understand how you do that. Seth P. Waxman: In the process of deciding which proposals will be granted on the basis of merit and excellence, and here's how the NEA has construed the statute to work. The NEA Chair thus far has concluded that whatever factors an individual takes into consideration in deciding whether something is art, nonethe... not to mention artistically excellent and artistically merit, meritorious, may be considerations of the mode and form of expression in the case. It's not dispositive, but if it includes a mode or form of communication, the kind of thing that this Court distinguished from viewpoint in Denver Area, and Pacifica, and Pico, and Bethel, that it... the NEA concluded that many, if not most, if not all, certainly at least some people in deciding whether something is really artistically excellent or meritorious or how much it is, will at least think about the mode or form of the presentation that the artist is using, and that's-- William H. Rehnquist: Well, quite apart from the... what the NEA has done, I've got some difficulties about the standing question akin to those that Justice Kennedy mentioned. I mean, certainly people can't just walk in off the street and make a facial challenge to a statute, can they? They have to have some connection with what's being done under the statute. Seth P. Waxman: --Absolutely, and what's so... I don't want to use a pejorative adjective. What's so unusual about this case is that the plaintiffs in the case, who were very successful in forcing Congress to reject what was the alternative to this amendment, the Rohrabacher provision that would have prohibited the NEA from funding any art that manifested certain viewpoints, and Congress instead passed a compromise provision along the lines of the recommendations of the independent commission that it had appointed, the same organizations, the same plaintiffs who were successful in the legislature in defeating a viewpoint-discriminatory prohibition, have challenged this provision on the grounds that our interpretation, the way that the NEA has chosen to interpret the statute is wrong, although it's wrong in a way that benefits them. Anthony M. Kennedy: Well, I think you can take one position in the legislature and another in the courts. The question is, what does the statute say, is there any injury, and I-- Seth P. Waxman: What's... right. What's unusual in this case is that the courts have... are being asked to reject an interpretation, an application of the statute that the agency has reasonably made and which does not, concededly does not violate the First Amendment rights. Sandra Day O'Connor: --Well, Mr. Waxman, could we talk about the statutory language? You know, just reading it, I thought it meant that the chairperson of the NEA had to ensure that its... that the regulations and procedures were to provide that artistic excellence and artistic merit are the criteria, but in considering the excellence and merit, they have to take into consideration general standards of decency and respect for diversity. That the interpretation suggested by the agency that just setting up the panels differently was enough strikes me as possibly in conflict with the language of the statute. Seth P. Waxman: Well, Justice O'Connor, both lower courts agreed with you. We still submit that there are two possibly-- Sandra Day O'Connor: Well, if that is the meaning of the statute, do we nonetheless have a justiciability question, or do you think-- Seth P. Waxman: --I-- Sandra Day O'Connor: --if that's the meaning of the statute we don't have a problem of justiciability? Seth P. Waxman: --I'm not sure. I know that the plaintiffs would claim that insofar as any decisionmaker along the line, whether it be a panel member, a council member, or the chair, takes into consideration these two factors, they believe that they are harmed in some way. We don't think that they have demonstrated in any tangible way that they have established injury, in the sense that none of them suggests that they have applied for an application and been denied it because an impermissible reading of these... a viewpoint-discriminatory reading of these words caused it. David H. Souter: Well, do they have to have suffered a denial? I mean, their claim is that the statute on its face, if read as Justice O'Connor suggested, in effect is a limitation based on viewpoint which tends to and reasonably will tend to affect both the production of art and the applications, so that even before you get to the stage of granting or denying, you in fact will have had an impermissible effect. Isn't that their argument? Seth P. Waxman: Well, I guess if we're talking now simply about justiciability and not the merits, and I'll restrict my comments accordingly, first of all, because of the way the agency has interpreted this statute before it was very shortly enjoined from doing it at all, it hasn't had the occasion to define the terms general standard of decency and respect for diverse values. But the way in which... if this Court were to conclude that the statutory interpretation that the NEA adopted was not only the best... not the best interpretation, but was an unreasonable interpretation by the agency charged with carrying it out, the appropriate course at this point would be to allow the agency to define the terms and... in order to determine whether or not they are in fact viewpoint discriminatory at all. We contend in our brief-- David H. Souter: Now, are you suggesting that we would find it nonjusticiable because they have not gone through the process of defining-- Seth P. Waxman: --Not because they haven't... not because they haven't gone through the process, and again this falls a little bit into the merits, but I think the justiciability is very much in question, because these terms, general standards of decency and respect for diverse beliefs and values, can be defined by the agency, could readily be defined by the agency in a manner that is not viewpoint discriminatory, as-- Ruth Bader Ginsburg: --Are you saying, General Waxman, that if the law is as you say it is, then nobody is being hurt because these words are largely hortatory, is that essentially your position, and that challengers can't say, agency, you've got it wrong, you have to interpret this more strictly against us than you're willing to do? Is that the essence of your justiciability-- Seth P. Waxman: --Well, that's... that's the essence of why we think, if our reading is right, there probably is not much of an Article III case or controversy. Antonin Scalia: --Even if your reading is wrong, aren't you saying-- Seth P. Waxman: Even if our reading-- Antonin Scalia: --that even if your reading is wrong? Seth P. Waxman: --Even if... right. The point, Justice Ginsburg, that I was making to Justice Souter is that even if you reject that, even if you say no, what this means is that when these-- Ruth Bader Ginsburg: But how would we even get to that? You see, if the challengers are stuck with what the agency says the law is, because that's the only thing that's being applied currently, how can a challenger then require... bring this question to us unless what they're saying is, what's on today could be off tomorrow, and that's their real concern, because you're not saying that the only construction of these words is the one that you're putting on it. Seth P. Waxman: --No, that's... we're absolutely not, but I think the appropriate course for this Court to take if it rejects... if it concluded that our statutory interpretation was unreasonable would be to permit the agency... after all, none of these people have grants that have... this is not an as-applied challenge. The appropriate course would be to permit the agency to define and apply general standards of decency and respect and see whether it's done in a way that could be said to violate the First Amendment at all. David H. Souter: Hasn't it had 8 years, hasn't it had 8 years to do that? Seth P. Waxman: Precisely to the contrary. During the year-and-a-half period in which the language was passed and the district court enjoined the agency from applying it, it said, we think that this provision can be satisfied... that is, that the chairperson can ensure that these things will be taken into account... when you have a diverse... when you have a diverse group of people who bring their own sensibilities to bear in making aesthetic judgments. Since then, the agency has been precluded from doing anything. We have been under an injunction since June of 1992 from implementing this statute in any way. David H. Souter: Even issuing a reg? Seth P. Waxman: Of course. We can't even read to panelists what the statute says. William H. Rehnquist: Why didn't the Government seek a stay from a single-judge injunction? Seth P. Waxman: I think the answer... I don't know the answer to that question. Antonin Scalia: You weren't around then, either, right? Seth P. Waxman: I was around-- [Laughter] I was around in the physical... in the existential sense I was-- I was in the process of a private citizen, indeed a private lawyer very much enjoying the arts in all of their manifest expressions. Ruth Bader Ginsburg: But that's in the-- Seth P. Waxman: But let me just say this, we-- Ruth Bader Ginsburg: --General Waxman, that's been affirmed on... that view that the law is unconstitutional been affirmed on appeal, and there was a denial of rehearing en banc. Seth P. Waxman: --That's true, and I think that-- William H. Rehnquist: Nobody sought a stay from this Court. Seth P. Waxman: --And I... if... Mr. Chief Justice, if I can just get to what I thought my... the pitch was going to be after my wind-up, the point is-- [Laughter] --that the agency has never see its... the agency views what the district court did as essentially enjoining it from doing something that it wasn't doing, and didn't particularly think had to be done, and so the only tangible way in which the agency's operation of this program has been affected by the district court order and the court of appeals order is that when it talks to new panel members it can't read them the statute, read them the words of the statute. It just tells them it's artistic excellence and artistic-- John Paul Stevens: General Waxman, are you trying to persuade us that, even after the statute was passed, Andres Serrano would have the same chance of getting a grant as he did before? Seth P. Waxman: --Well, I don't know whether... I don't think we have to-- John Paul Stevens: Yes, but that's what you're arguing. Seth P. Waxman: --decide whether he would have the same chance, but what I'm suggesting is-- John Paul Stevens: Well, if he has a lesser chance, doesn't the... hasn't the statute had some impact? Seth P. Waxman: --Well, I... we don't think actually that he would have a lesser chance. Congress rejected... and the legislative debate which we've reprinted in our brief, in our reply brief, is very instructive. Congress rejected a provision that would have denied funding to the Merchant of Venice or Rigoletto, or D. W. Griffiths' Birth of a Nation. It wanted those provisions to be funded. It just wanted to make sure that in the process of deciding what is the most excellent art in a program which is designed to benefit the American people and expose people, including young people and people in rural areas, to the benefits of artistic expression, that those things were taken into account. The agency's view, Justice Stevens, is that many people... I know it would be true of me... who go into an evaluative process as to whether something is art, or excellent art, or meritorious art, or art that's... that the Congress can spend taxpayer's money to fund, one of the things you think about is the mode of expression. It can either add to or detract from the merit of the proposal, but it's not irrelevant. John Paul Stevens: It seems to me you're going to have a hard time persuading me the statute's essentially meaningless, which is basically what you're arguing. Seth P. Waxman: Well, we... I feel like I'm here making an argument in support of a... we didn't-- Anthony M. Kennedy: I have the same problem. Suppose the statute said that each and every grant must meet the following standard, and then it set forth the statutory standard, and that each panel member will certify that as to each particular artist whose work has been approved, that this statute has been met, is your position the same? Seth P. Waxman: --In other words, if, instead of having two criteria with considerations, there were four criteria that had... and each thing had to be judged? Anthony M. Kennedy: Yes. Seth P. Waxman: Our position would be twofold. One, because we think that standards of decency, or general standards of decency and respect for diverse values can be defined in a manner that does not take account of viewpoint, that is not viewpoint discriminatory, for that reason the provision would be constitutional. As a fallback, if you didn't... if you thought that it was absolutely unreasonable for the agency to conclude that those provisions couldn't be defined without reference to viewpoint, you would have to then address... we would have to then address the very difficult question that Congress thought in passing this compromise you wouldn't have to address. That is, do we have a statute that establishes independent funding prohibitions that can't be viewed other than as viewpoint discriminatory, and we do acknowledge that that would pose additional First Amendment concerns, but they were concerns that this... that Congress didn't intend that this Court address. One of the reasons... the Congress was told with respect to the Rohrabacher amendment that it may very well be constitutional. There was a big argument among the First Amendment scholarly community, and they very deliberately chose a provision which they thought was going to not embroil the agency in a kind of litigation, endless litigation over its meaning, much the same as the decision that the-- Anthony M. Kennedy: Well, I would think-- Seth P. Waxman: --If I may just finish... much the same as the decision the Combined Federal Campaign made in the Cornelius case. Anthony M. Kennedy: --I would think that most artists would say that they're interested primarily in mode of expression. Did Picasso have a viewpoint? I think he was more, much more interested in mode of expression. Seth P. Waxman: I-- Anthony M. Kennedy: It seems to me ultimately that's an unstable line you're drawing. Seth P. Waxman: --Well, I do respectfully disagree to this extent, Justice Kennedy. There is no doubt that in considering the content of a work of art, you consider the subject matter, the medium, the mode of expression, and the viewpoint expressed if it's a kind of art that is expressing a viewpoint, or could be interpreted as expressing a viewpoint. This Court has recognized on several occasions that decency, in the term that it was used in Pacifica, and Denver Area, and Pico, and Bethel, and Kohlmeier is distinct from viewpoint. Yes, use of indecent speech or controversial speech may very, very well add to or subtract from the force of the message, but it's not the same as viewpoint, and similarly-- Sandra Day O'Connor: Well, will you help me with some just basic inquiry? If the Federal Government wants to buy artwork to put in the Capitol, I assume it can go out and select works of art that its committee thinks are decent and represent diversity, and can spend the Federal money for that kind of art, and it isn't open to challenge, is that right? Seth P. Waxman: --Assuredly right. Sandra Day O'Connor: Now, if the Government wants to educate children, or people, and chooses to speak by way of paying for certain kind of artistic expression as a means of the Government speaking and educating, and insists on decency and diversity, it can do that. Seth P. Waxman: We believe that it can. Sandra Day O'Connor: All right. Here, it has a limited amount of money to give away. Now, what is it that makes it impossible for the Government to give a limited amount of money away on the same standards? Is the Government not speaking? I mean, what do we have here? Seth P. Waxman: I will state the obvious and suggest that the question probably would be better answered then my friend Professor Cole, because we don't think that there is any constitutional problem here with this provision. I mean, the argument on the other side boils down to the fact that 3 years ago this Court decided, in a context that is wholly different than the one we have here, a case called Rosenberger v. The Rectors and Visitors of the University of Virginia. Ruth Bader Ginsburg: General Waxman, may I suggest that maybe there is something different? Maybe if a faithful executive is trying to carry out the legislative will, the message that comes from the whole history of this is, don't fund Serrano or Mapplethorpe. I think that that's the concern, and not the Rosenberger v. Rust, or... that, if I am an executive who is trying to be faithful to the legislative will, I know what prompted this, so why don't I say, well, that's my marching orders. I know what the legislature didn't want. Seth P. Waxman: Well, I guess I have a couple of answers: 1) a chairperson could have done that. Chairpersons, as the other side points out, were highly cognizant of political concerns without the enactment of this rather innocuous amendment. That's number 1. Number 2, what the 1990 legislative debate shows is exactly the opposite. The point of view expressed in the Rohrabacher amendment and previously challenged by Representative Biaggi that certain art that is viewpoint discriminatory or denigrates religion or races won't be funded was rejected. And the legislative history is shot through and through with the fact that what Congress wanted was what the independent commission it had appointed was... had suggested, which is that you change the procedures, you not employ specific content or viewpoint prohibitions, and to the extent you want things like decency to be considered, it be embedded in the subjective, aesthetic judgments about what's meritorious and excellent. Antonin Scalia: General Waxman, I thought your first response to Justice Ginsburg's question was going to be, so what? I thought that what you responded to Justice O'Connor was, the Government doesn't have to buy Mapplethorpe pictures to hang up itself, and so also when it funds the arts, it doesn't have to fund Mapplethorpe, and it can say we don't like Mapplethorpe. Seth P. Waxman: I knew that that would... I knew you would support-- [Laughter] Antonin Scalia: You knew I was going to say that. Seth P. Waxman: May I reserve the balance of my time for rebuttal? Stephen G. Breyer: But why isn't he right? Why isn't he right? Seth P. Waxman: Well-- Stephen G. Breyer: I mean, does the Government have to or not? Seth P. Waxman: --Well, if you're talking about... if we're talking about whether Congress can say, okay, the NEA is going to apply the following standards but it's not going to fund Robert Mapplethorpe, that raises many different constitutional concerns that don't have... in other words, going to single out one particular person, at that point may violate... it would have to be scrutinized under, for example, the Due Process Clause as to whether there is a rational basis-- Anthony M. Kennedy: Well, is it constitutionally principled for the Government to do this by a wink-wink, nudge-nudge-- [Laughter] --approach, which is what you're suggesting, that they pass a statute which is really meaningless, but everybody knows what it means? Seth P. Waxman: --That's... that is not... that's not, Justice Kennedy, what we're suggesting was done here. What was done... this is... almost a year ago to the day I was up here arguing the constitutionality of the Communications Decency Act, which was an act that Congress passed without any hearings and without any debate, and without hearing anybody's views, and was just stuck in on the floor in a rather quick attempt to deal with a serious problem. In this case, Congress did just the opposite, and it rejected the kind of provision for... whether it had to or didn't have to, it rejected as more First-Amendment controversial the Rohrabacher provision that had been urged. It-- Antonin Scalia: But you assume that that's unconstitutional. What if Congress doesn't name names? It just says, no crucifixes in urine. Can it say that? Seth P. Waxman: --I... Justice Scalia, I-- Antonin Scalia: Can it say that? It doesn't name any names. Seth P. Waxman: --Justice Scalia, I am not assuming... I'm not standing up here arguing that it would be unconstitutional. I think it may well be that in the unique circumstances of public arts funding, unlike the very different context in Rosenberger, viewpoint distinctions may be constitutionally defensible. David H. Souter: So you in effect are saying, I'm not going to rest my argument on the claim that the Government is hiring anyone to speak here, or that what it's doing bears an analogy to that, or that in fact the Government is buying art, or that it bears an analogy to that. You're really saying there's a third rule, the Government... the Government as distributor of largesse to the arts, and that, that's a third rule, but you're not saying that the Government is either the speaker or the buyer, is that correct? Seth P. Waxman: Well, I think the Government is the buyer. The-- David H. Souter: What's it buying? Seth P. Waxman: --It's buying-- David H. Souter: What does it own, when it... after the grant? Seth P. Waxman: --This... I think this is a distinction without a difference to our argument, but it is... in fact it's behaving as Governments and sovereigns as arts patrons always have. When the Medicis-- David H. Souter: Yes, but the King ended up with the picture. The Government is not ending up with the picture. Seth P. Waxman: --The King did not necessarily end up with the picture. The Medicis, for example, funded art that was placed in... all over their realm. The same people who funded and allowed to flourish the great university, that forum, that community where free and uninhibited expression of debate and views occurred, were also arts patrons, and they bought and funded what they liked. David H. Souter: Okay, then you are saying there is an art patrons rule. I take it you're not hitching your argument either to the claim that the Government is buying, or the claim that the Government... what is my-- --Is speaking. Is itself the speaker. Seth P. Waxman: Well, I think-- David H. Souter: Is hiring its speaker. Seth P. Waxman: --Yes. To the... if you're asking whether we're suggesting that there is something unique, particularly unique about the Government funding of the arts for First Amendment purposes, the answer is yes, and for a variety of reasons. For one thing, and most critically, this is an area in which Government decisionmakers are expected and required to make precisely the kind of aesthetic judgments which are subjective and may take content and viewpoint into account, and which the Government is ordinarily prohibited from doing. It's-- David H. Souter: Why are they required, when they're not required to do this at all? Why is the Government required, when the Government is not required, in fact, to fund the arts at all? Where does the requirement come from? Seth P. Waxman: --Unless you have a program, Justice Souter, in which the NEA is simply disestablished because of a belief that the First Amendment wouldn't permit funding of the arts, or unless you can set up a program where, you know, the proposals that were on the thickest paper, or the ones that came in, you know, first, were granted, inevitably the decisionmaker is going to be making the kind of aesthetic judgments that, for example, were not permitted in Ward v. Rock Against Racism. Thank you. William H. Rehnquist: Thank you, General Waxman. Mr. Cole, we'll hear from you. David D. Cole: Mr. Chief Justice, and may it please the Court: As the Government concedes, this is not a case about Government speech. It's not a case about the Government hiring artists to express a Government message. Rather, it's a case about the Government selectively subsidizing private speakers speaking for themselves, and in that setting two fundamental First Amendment principles apply, and the decency and respect clause violates both. First, the Government subsidies must be viewpoint neutral. This Court has held that in Lamb's Chapel, in Rosenberger, in Cornelius. Second-- William H. Rehnquist: Rosenberger was quite different from this, Mr. Cole. There were just a number of... everybody was going to get something in Rosenberger except the people who wanted to do something religious. Here, the Government doesn't purport to say we're going to give grants to everybody that wants it. There's a definite degree of selectivity involved. David D. Cole: --There is a degree of selectivity involved here but there was also, Chief Justice Rehnquist, a degree of selectivity in Rosenberger. Approximately 9 of 10 applicants were funded in Rosenberger. Approximately 2 of 7 applicants to the NEA are granted. William H. Rehnquist: Well, that's quite different, I think. David D. Cole: Well, I don't think it makes a constitutional difference, and I think when you look at Rosenberger what Rosenberger... what the University of Virginia did was, they said we will fund not any student activity that comes to us, but any student activity that is related to the educational purposes of the university, so they were selective. They were making a content-- Anthony M. Kennedy: Yes, but I think the Chief Justice is correct in making the distinction. There were no aesthetic judgments to be made. There were no subjective judgments to be made. If you were a student newspaper you fell within the program. That was it. And I think your statistical analysis is misleading, because NEA statistics are that they have only so many funds and they base it on aesthetics. The only reason there were rejections in Rosenberger was, they just didn't... they weren't the kind of newspapers that were under the program. So I think the Chief Justice is correct in the distinction he makes. David D. Cole: --Well, I'm not sure, Justice Kennedy, whether there's a distinction between a Government agency which makes judgments about educational purpose and allocates funds selectively on that basis, or academic merit, which is what public universities do in hiring, and the NEA, which makes judgments base on artistic merit. All of those programs are selective. They take into account consent. But what this Court has said is that you cannot, when subsidizing private speakers, when the Government is not speaking itself you cannot engage in viewpoint bias, and the decency-- Ruth Bader Ginsburg: Mr. Cole, may I suggest that one is a prize or an award, and there really is a difference between a student activity fund that if you're not social and you're engaged in some respectable student activity you get it, and an award, a prize, a grant that is highly selective, and so I quite agree, and I don't think that you can maintain that this is just like Rosenberger, just like a bulletin board, anybody can put up their names or draw from that pot except certain people. David D. Cole: --Okay. Well, Justice Ginsburg, I don't think that the Rosenberger case would have come out differently if the University of Virginia had a limited pot of funds and it said, based on that limited pot of funds we're going to give funding to those groups which best further the educational purpose of the university, and they... it turned out they gave them out to 2 of 7 applicants, but they excluded religious groups, groups with religious perspectives. That would still be an exclusion based upon viewpoint, which would be impermissible, and I don't think the case would have come out differently if it 2 of 7. The Court in Rosenberger said scarcity is not a justification for viewpoint discrimination. Antonin Scalia: You're a better predictor than I am. I'm not at all sure it wouldn't have come out differently. David D. Cole: Well, you were in the majority, so you're a better predictor than I am, I'm sure. [Laughter] But I don't think it should come-- Antonin Scalia: My record's not too good. I wouldn't-- [Laughter] I wouldn't give up too easily. David D. Cole: --I guess... I think what's important is that it shouldn't come out differently, and here's why. What Rosenberger recognized is that there's a very big difference between the Government speaking for itself, where it can make viewpoint decisions, as in Rust, and where the Government is facilitating private expression. Why is that an important distinction? I think that's an important distinction because there's a very big difference between the Government participating in the marketplace with the power of its ideas on the one hand and the Government engaging in a kind of deceptive ventriloquism in which it says it's funding a broad range of private expression, but then it uses viewpoint-based criteria to exclude-- Sandra Day O'Connor: Well, I'm not sure that decency or indecency is viewpoint-based. I'm not sure it is. David D. Cole: --Well, I think-- Sandra Day O'Connor: I'm not sure that respect is a viewpoint-based thing, or diversity. I don't even know what this is, and you've got some kind of a facial challenge here, I gather. David D. Cole: --Right. Well, I-- Sandra Day O'Connor: And I'd be interested for you to also pursue whether we have an Article III case at all here. David D. Cole: --Okay. All right. Well, I'll answer your questions in turn, Justice O'Connor. First, decency and respect are inherently, as they are used in this statute, viewpoint-based. It's common definition of decency is conformity to accepted standards of morality. That's what this Court said in Pacifica, conformity to accepted standards of morality. Whether something conforms or not is a viewpoint distinction. The same subject matter, if it's treated in a way that conforms to accepted standards of morality, is permitted. If it's treated through a viewpoint that does not, it is not. The same with respect. The respect clause requires respect of American beliefs and values. If you are disrespectful of American beliefs and values, you are disadvantaged. If you are respectful, you are advantaged. That... the Court in Rosenberger said the way you distinguish viewpoint-- Sandra Day O'Connor: All right. You don't argue here that somehow the Government has created some kind of a public forum, do you? David D. Cole: --Well, in essence that's what the NEA says. The NEA says that the arts funding-- Sandra Day O'Connor: I didn't hear that. David D. Cole: --Well, they say in their mission statement, and it's cited in the record, that they create a national forum for the exchange of ideas by creating, as is set forth in the statute, a-- Sandra Day O'Connor: Well, I'm talking about a public forum in the sense that this Court had used it. Do you take the position and rely on some kind of forum analysis, then? David D. Cole: --Well, I think under forum analysis we win. I think under forum analysis, as this Court has said, even if you conclude that it's a nonpublic forum-- Sandra Day O'Connor: That doesn't answer the question. Do you take the position that this funding program creates some kind of public forum? David D. Cole: --I-- Sandra Day O'Connor: Yes or no. David D. Cole: --We take the position that whether it does or not we prevail because this Court has held that even in a nonpublic forum viewpoint neutrality is required and vagueness is not permitted, and these criteria are both viewpoint-based and vague. If I could address your standing question and Justice Kennedy's standing question for a moment, I think City of Lakewood v. Plain Dealer Publishing clearly establishes that there is standing here. In Plain Dealer... in that case, the Court held that there was standing to bring a facial challenge by a newspaper who sought access to a benefit for speech, access to news boxes. There was no requirement that the city give out news boxes, but they had given a Government official unbridled discretion in how to give them out, and the Court held in that case that the chill from unbridled discretion statutes and the allocation of benefits to speech... no entitlement, benefits to speech... can be alleviated only through a facial challenge. Antonin Scalia: I think I would agree with you if the agency here were applying the law the way you interpret it and the way the lower courts interpret it, but I do find it strange that where you have a law which, however unrealistic the interpretation may be, the agency says, we're interpreting it in such a way that we will fund Mapplethorpe and everything else. David D. Cole: Well-- Antonin Scalia: Now, that may be wrong. I don't know how anybody on the other side of this issue could compel the agency to do it right, but-- David D. Cole: --Well, it certainly-- Antonin Scalia: --But why did that hurt you? David D. Cole: --Well, it hurts us for the following reason, Justice Scalia. The Government has been quite ambiguous about its statutory construction, and what it has said is that the statutory construction it is advancing to this Court today is the same statutory construction that they applied for the year-and-a-half before the statute was declared unconstitutional, so let's look at what they did for the year-and-a-half before the Court struck it down. They instructed each panelist to bring their own standards of decency to the table in making these decisions. They went to each panel, they read them the statute, they said the statute says that you must consider artistic excellence and artistic merit, taking into consideration general standards of decency-- Ruth Bader Ginsburg: Mr. Cole, may I stop you just for a moment, because it sounds like you are veering away from a case that would be fit for summary judgment, which is what this was. I take it there would be some dispute about what went on. David D. Cole: --I think-- Ruth Bader Ginsburg: There was no hearing about that, to develop that. David D. Cole: --I don't think there's-- Ruth Bader Ginsburg: The Government... you're making assertions today. I would certainly be interested to find out what the Government's position is on it, but I thought we're dealing with a ruling as a matter of law and that we take the Government's position of what they say this statute means. That's what they say the statute means, and that's what they're enforcing. That's what they represented to this Court, and to say no, they're not telling you the truth about what standard they're applying is quite a charge to make. David D. Cole: --Well, Your Honor, all I can say is the record is very clear. The reason that it was a summary judgment is that there was no dispute about this. The... Chairman Frohnmayer testified before Congress, was asked, how do you take into consideration general standards of decency? He said, well, I can't... I'm going to read. He said, no one individual is wise enough to be able to consider general standards of decency and the diverse beliefs and values of the American public all by his or herself. These are group decisions. They are made by the National Council on the Arts as well as the panelists. Now, if the chair was making decisions about decency in selecting panels, he wouldn't say these are group decisions made by the Council on the Arts as well as the panelists. He was then asked, what happens if you get-- William H. Rehnquist: He was the chairman of the NEA at the time? David D. Cole: --He was the Chair... yes, Chief Justice Rehnquist, he was the Chair at the time that the statute was being enforced. He as then asked, well, what would you do... are you advocating your responsibility in applying this statute? What would you do if something came up to you and it was indecent or disrespectful? He said, I would send it back to the panels and the council if I thought they made a mistake. So he's saying, I'll look at decency to make sure that they've not made a mistake. The next Chair, who was also enforcing the statute before it was struck down, Ms. Radice, testified in Congress that she would be happy to and would apply decency to the grant-making process. So I think you have to look... at this Court said in Forsyth County, in a facial challenge you have to look at how the agency has in fact applied the statute. There's no dispute about it. And they're quite vague, actually, in this Court in what they say. Stephen G. Breyer: They're quite vague about how they apply it, I agree with that, but I also found right in the record what the Solicitor General just quoted was there, on page 33, the instructions that they give, so if you have an... I assume you don't object to that as a correct... my basic question is, given the uncertainty that you... you started with a premise, and if I accept that premise a lot flows. You said, all they're doing is subsidizing private views here, but in looking at the endowment charter it sounds as if they have a lot they do. It talks about education. It talks about grants to schools. It talks about workshops. It talks about teaching children. It talks about a whole host of things that aren't simply that that could include giving money to somebody to teach art in the public school grade 4, that could include having a television program on Sesame Street... dozens of things, all right. Is... am I accurate? David D. Cole: Yes. Stephen G. Breyer: All right. Well, if I'm accurate, how can you have a facial challenge no matter how you interpret indecency, because after all there are some important uses where the most tough definition would apply. David D. Cole: Well, Justice Breyer, two points with respect to that. First of all, I think you have to look at the breadth of the statute. This statute does not say, take into consideration decency where children are involved. It requires the agency to take into consideration standards of decency and American beliefs and values in every application decision. Secondly-- William H. Rehnquist: Well, we've said you can't bring a facial challenge if any part of the statute can be constitutionally applied. David D. Cole: --And our position is that this statute is unconstitutional because it is viewpoint-based, it uses a viewpoint-based criteria... it would... it would be-- William H. Rehnquist: If you say it could be... the language could be applied where children were involved, you lose your facial challenge there. David D. Cole: --I don't think it could be applied where children... but what the Court could do in a... what the agency could do is decide whether a particular application was suitable for children, but an application could be suitable or unsuitable for children for all sorts of ways that don't have to do with viewpoint. What's problematic about this statute is, it singles out art precisely because it has a nonconforming or disrespectful viewpoint and, as this Court has said, even when the Government is allocating subsidies, if it's doing it to private speakers it can't skew the marketplace by attempting to impost that kind of ideological screen. I think-- Stephen G. Breyer: No, that wasn't my question. My question was basically, you're making a facial challenge. I don't see it says all, not in my version it doesn't say all, and as long as there... the problem in my mind, for you, is I can easily think of some... some instances of importance in the life of the NEA where it would be obviously appropriate or lawful to take into account even tough standards of decency, and the other problem for you is, I don't know what the word decency means. It... there's certainly a sense of decency, a sense of it, in which no work of art that is good could be indecent. It's very hard for me to think, if I think of that sense, that a great work of art is also an indecent work. I can't think of one. So since we don't know either the... let's call it the horizontal meaning, or the vertical application, how can we now strike the statute down on its face? David D. Cole: --Well, Your Honor, in the Lakewood case the Government came forward and said certainly there would be appropriate considerations that the mayor could use in deciding how to allocate these benefits to speech. The Court said that is not permissible to defeat a statute which is vague and gives the agency-- Stephen G. Breyer: Well then, should we also strike down the entire NEA, because at the very beginning of it, after all, there is at the very beginning all kinds of language about how this has to be done with general regard for taxpayer sensibilities, and do we have to strike down the FCC statute because the FCC says award licenses in the public interest, which has been plainly interpreted to give the FCC power to do all kinds of restrictions in the area of indecency. I mean, there are lots of statutes on the statute books that have general language that might be interpreted by an agency to censor in accordance with viewpoints, but the agency doesn't do it. Correctly so. Do you see my point? David D. Cole: --Well-- Stephen G. Breyer: My question is, why should we not give them the same presumption we give to every other agency? They'll do it properly, we assume, until they don't. David D. Cole: --Well, first of all they did it, and you can see how they did it-- Stephen G. Breyer: The client got the grant. David D. Cole: --The client... the way that this statute... the way that this statute was enforced, they never issue a decision saying, you're denied because of indecency. We... I represent the National Association of Artists' Organizations, which represents 500 arts institutions and individuals who have regularly applied for, are denied funding by the NEA. What the... the claim is that the application of such open-ended criteria to an applicant creates a chill which, as this Court held in Lakewood, requires a facial challenge, and you can't sit back and let that chill affect artists' speech in the meantime. Antonin Scalia: And that would be so no matter how the agency itself is interpreting the statute, because you claim that the possibility of interpreting it to mean what it says is substantial enough that artists who are developing projects are not likely to develop projects that would offend-- David D. Cole: Well-- Antonin Scalia: --the statute as it's written? David D. Cole: --Well, I think certainly it applies here, where the agency did apply it in a way that was chilling. The language does not permit an-- Antonin Scalia: Let's assume the agency didn't, because I think that's going to be a very controverted proposition that wouldn't justify a summary judgment. Let's assume that the agency has not interpreted it in such a way that there's any constitutional violation of the sort you allege, but let's also assume that you claim that in doing it that way, they are not complying with the proper interpretation of the statute, all right. Would you not still make the argument that since the statute says something different from what they're doing, our First Amendment cases, which allow challenges of a much broader scope than in other fields, would enable your clients to say that they are being deterred from developing indecent artistic programs by the statute that's staring them in the face, even though today the agency has said, well, we're going to ignore it? Isn't that your argument? David D. Cole: --Well, that is... that is... we would make that claim, but we would also make the claim, Justice Scalia, that the Government itself took... has taken the position in this litigation that the statute is indeterminate, and no one can guess how the chairperson might implement the statute. William H. Rehnquist: If you take Justice... if you answer yes to Justice Scalia, then you're just sticking pins into yourself, basically. You're saying that things are all right now, but if they really opened up on this thing, they might be worse later. David D. Cole: No, I'm not saying that, Chief Justice Rehnquist. I'm saying if that were the case, but that is not the case, as the record makes absolutely clear, and secondly, I'm saying that even... even if the agency were somehow able to read a statute which says, decency and respect must be considered, to say decency and respect will not be considered, the agency can't do that. The statute simply cannot be read in that way. Antonin Scalia: Now, I don't know why you've run away from this. Suppose you had a municipal office that issues parade permits, and it sets forth criteria that are plainly discriminatory. It says, we won't allow parades by this group, that group and the other group, and plainly unconstitutional, but the agency in fact says, well, that's what it says, but we don't really apply these regulations that way, you'd have a First Amendment claim to-- David D. Cole: That's right. Antonin Scalia: --to challenge the regulation as written, wouldn't you? David D. Cole: That's right. All I'm suggesting in response to Chief Justice Rehnquist is that is not the facts of this case, but yes, we would have a claim, and I think-- Stephen G. Breyer: Now, is it the case, just to go to the merits for a second, and I'm only asking these questions in order to get your response, say, if, in fact the NEA wants to give a grant for somebody to produce something that's public work, and suppose what they do is a white supremacist group, and they want to have racial epithets all over the picture, and the NEA says we think that's an inappropriate use of this money, in your opinion is that... and we can imagine the most... imagine the most horrible ones you can possibly think of, all right, and they say, the person gets up there and he says, I'm a member of the Ku Klux Klan, or whatever, and this is my point of view, and is it your view that the Constitution requires the NEA to fund that, that particular applicant? David D. Cole: --Well, Justice Breyer, the Constitution doesn't require the NEA to fund anybody. Stephen G. Breyer: No, no... no, I'm sorry. Everything else being equal, what the person says, I'm taking you at your... you know-- David D. Cole: Right. Stephen G. Breyer: --Tough, for... take... everything you say is correct, and then we get to this point, and the panel's sitting there and saying, you know, I grant you it's as good a work of art as anything else, purely artistically, but I don't think that this particular work of art is appropriate for a school, for a public place, for a television program. And then the hardest case, you know, which you're most likely to say yes, that's... I agree with you, but it's unconstitutional, just because what this person wants to do is go and exhibit it at a lot workshops. Now, what's your view on that, on the merits of that constitutional question? David D. Cole: Our position, Justice Breyer, is that it is unconstitutional for the Government to set up the funding program to fund private speech broadly and then to exclude recipients based on their viewpoint. Now, a... the examples you gave might be denied funding for all sorts of reasons, but if it is denied because of disapproval of the viewpoint, that is what this Court has said the paradigmatic First Amendment-- Stephen G. Breyer: So do we have to distribute, or exhibit it in the courthouse? David D. Cole: --No, because then you're engaged in Government speech. Of course, the Government in making decisions about its own aesthetic spaces-- Stephen G. Breyer: If it's a program... I have that. If it's a program for a school. David D. Cole: --If it's a program for a school, I think it's appropriate to consider what is suitable for children. I don't think it's appropriate to use viewpoint as a proxy for suitability for children. Suitability for children could take into account all sorts of... all sorts of-- Stephen G. Breyer: So they have to exhibit my example in the school. David D. Cole: --No. If... if the reason that they have... well, let me step back for one moment. First, if the reason is that they disapprove of the viewpoint that's problematic generally. In the school setting... in the school setting this court has recognized that there's a legitimate inculcative role that the school board plays, and can therefore make all kinds of viewpoint... it is engaged in Government speech, but the NEA... this is not... this is a... the breadth of this statute I think distinguishes it from anything like that, and this is kind of like Romer. You could imagine a situation in which it would be appropriate or not unconstitutional to deny civil rights protections to gays and lesbians, but the breadth of the statute, the application of it across the board-- Anthony M. Kennedy: Well then... then... I take it then that you would say that if general standards of decency were left out of the statute so the statute read, NEA must take into consideration respect for the diverse beliefs and values of the American people, same problem, unconstitutional viewpoint? David D. Cole: --Well, I think they have to bread together, Your Honor, in-- Anthony M. Kennedy: No. My hypothetical is-- David D. Cole: --Okay. I'm-- [Laughter] On your hypothetical... on your hypothetical, Justice Kennedy, if what it means is that it is favoring those artistic expressions which are-- Ruth Bader Ginsburg: --But that's the problem, what it means, that... and that's... the Government tells us, this is what it means, and you say no, it can't mean that, and two courts have said it can't mean that. And yet the Government is saying, here were words, decent, respect. They can be interpreted different ways, and usually I thought it was the obligation of a Government officer to give words a meaning that renders them consistent, not inconsistent with constitutional limitations, and yet you're insisting that Government officers take the position with respect to these two words that they interpret them in the way that would be most offensive to the Constitution. David D. Cole: --Well, I'm just saying what they did, and I'm saying that the suggestion that decency and respect might be considered simply through picking diverse panels and no more, and not taking decency and respect even into account in choosing the panels is completely inconsistent with the statute. It would render the... 954(d)(1) redundant of 959(c). Congress in the statute said, decency and respect are the criteria by which applications are to be judged, in 954(d)(1). In 959(c) it said, panels shall be chosen in a diverse way. You can't... they must have meant something when they put the decency and respect clause in the criteria subsection of the statute, and not in the panel selection. John Paul Stevens: Mr. Cole, may I ask you a question about your constitutional position? We've talked a lot about what the statute means. Assume your meaning... your reading of the statute is entirely correct. As I understand your brief, you draw this distinction between the Government as a speaker and the Government subsidizing private speech, and I have two questions. First, if the Government has a list of topics such as say no to drugs, guns are dangerous, preserve the environment, one, I think you would agree they could subsidize private speech by saying we want poems, plays and so forth advocating those particular causes. David D. Cole: Right. John Paul Stevens: And maybe have a list of 20 things. Now, if they can do that by subsidizing private speakers to come up with creative ways of carrying that message, why can they not subsidize all other speech and say, you may not contravene any of the messages we want to finance? David D. Cole: Well, the reason, I think, is the distinction this Court drew in Rosenberger between Government speech and facilitating private expression, and when the Government comes out and says, we're engaging in a Government speech program, we know, as the citizens of the United States, it is the Government speaking. When they hire artists to do a Say No to Drugs campaign throughout the schools, et cetera, we know it's the Government speaking. We can take that into account. When they, by contrast, set up a program which is purportedly a program to fund-- John Paul Stevens: No, it isn't, because they say very clearly, it's general... for all kinds of speech you can think of except topics 1 through 20. We will finance those, and we will also refuse to finance those who oppose those topics. Now, what... there's no mystery about what they're saying. You're saying that it's kind of a misleading thing because they tell everybody we're subsidizing everything, but I'm saying the statute is perfectly clear that there are 20 topics that may not be controverted. Now, there's no misleading aspect to it. David D. Cole: --Well-- John Paul Stevens: Why can't they do that? David D. Cole: --that was Rosenberger. In Rosenberger they said, we're not funding religious viewpoints. John Paul Stevens: Your whole point... your whole case rests on Rosenberger? David D. Cole: Oh, I don't think so, Your Honor, because in Lamb's Chapel this Court held that viewpoint discrimination is not permitted in nonpublic forums. In Cornelius it held the same. I think what this Court has said repeatedly is that when the Government is facilitating private expression it cannot engage in viewpoint discrimination. John Paul Stevens: But you've just agreed it can if you give a list of 20 topics that you will finance, and finance private speakers to speak any way they want to on those topics. It is doing it on a purely viewpoint-based ground. David D. Cole: Oh, well, I'm... if you're saying-- John Paul Stevens: They're financing private speech on the 20 topics they want to-- David D. Cole: --If they're... Justice Stevens, if they're funding topics, that's subject matter. That's permissible. John Paul Stevens: --No, they're funding artists, but artists who just portray these particular 20 topics that they've designated. David D. Cole: Right. Topics... there's no problem with topics. The Court has held that repeatedly. It's viewpoint discrimination which is impermissible, and it's when you take one side or another on a given subject matter. Under this statute, if you... if an artists has a... presents a nude which is disrespectful or indecent, that viewpoint is disadvantaged. If it's respectful or decent, it's advantaged. That is viewpoint discrimination. And finally, I'd like to say the Court has consistently required-- John Paul Stevens: Well, it's surely viewpoint discrimination if you say, I'll finance a program that says don't... say no to drugs, but I won't finance one that says say yes to drugs. That's viewpoint discrimination. David D. Cole: --That is, and then that would be the Government speaking and we would know that. But the Government... if you think about private expression in this country, virtually every form of important private expression is funded by the Government. The print press gets mailing privileges. The broadcast press gets licenses. The public broadcasting gets taxpayer dollars. The public-- Stephen G. Breyer: I see where you're going there. Can I give you... just 30 seconds on the subject of the Ninth Circuit opinion. Why is it that the word decency or respect is somehow more vague than the words, artistic excellence? David D. Cole: --Well, for two reasons, Justice Breyer. First, artistic merit has been applied by a profession so that there is a set of people, the people who are-- Stephen G. Breyer: You mean, people who are professionals know more about what's artistically good than the average person? I would have thought there's a strong view, isn't there, that what is good and beautiful is accessible to everyone? David D. Cole: --Well, I think there's a strong view, Your Honor, that artistic merit, like academic merit, and like character and fitness-- Stephen G. Breyer: Oh, my good... but if the Government says what we want is that which ordinary people believe is beautiful, doesn't the Government have a right to fund that kind of program? David D. Cole: --I think what the Government does not have the right to do is to exclude viewpoints which it-- Stephen G. Breyer: We're talking only about... I'm talking about the... sorry. You're-- William H. Rehnquist: Thank you, Mr. Cole. The case is submitted.

John G. Roberts, Jr.: We will hear argument this morning in Case No. 14-614, Hughes, Chairman of the Maryland Public Service Commission, v. Talen Energy Marketing and the consolidated case. Mr. Strauss. Scott H. Strauss: Mr. Chief Justice, and may it please the Court: Maryland determined that new generation was needed for local reliability, so it directed its retail utilities to sign 20-year contracts with a competitively selected project developer. Maryland's action did not intrude on Federal authority, primarily for two reasons. The first reason is that Maryland's new resource did not distort the wholesale capacity auction. FERC revised its auction bidding rules to require the Maryland resource to bid on the basis of its cost, backing out any State contract revenue. The developer bid in accordance with the rules and cleared the auction. FERC says that means that the resource is economic, needed, competitive, and does not suppress prices, any State revenue notwithstanding. The second reason is -- John G. Roberts, Jr.: Well, if it doesn't suppress prices, why did Maryland do it? Scott H. Strauss: Maryland did it, Your Honor, because they saw a need for generation going forward. As is clear in the generation order, Maryland perceived a problem. It had large coal units that it believed were going to retire in the coming years, and it needed to have resources in place to be able to meet that need. So it undertook to have those resources built pursuant to the contract mechanism before you. Anthony M. Kennedy: But if that hadn't happened, prices would have been higher. So it was to suppress prices. Scott H. Strauss: No, it was not to suppress prices, and, frankly, Your Honor, could not have suppressed prices. FERC revised the rules in 2011 to be clear that the resource had to bid on the basis of its costs without regard to the State revenue. So there was no way for it to suppress prices. If the costs had been too high for the resource, it would never have cleared. It wouldn't have been in the market at all. It was only in the market because it was able to clear on the basis of its cost, which showed it was efficient. And FERC made that finding. FERC found it needed, competitive, and not suppressive of prices notwithstanding the subsidy. Ruth Bader Ginsburg: Well, why was this done through stepping on FERC's turf at all? I mean, could it have been done by requiring long-term contracts with the new generator? Scott H. Strauss: It was done through long-term contracts, Your Honor, but the question of getting involved with FERC's turf is as follows: FERC has -- has set up the capacity auction in PJM, and when under that auction, PJM procures three years in advance for a one-year period all the capacity the region needs, and then it allocates the cost of that capacity among all the utilities. But it tells the utilities that you have a way to hedge against those costs. If you have long-term resources, resources that you bought or procured through contract, you can bid them in, and if they clear, they will offset the cost. Maryland's concern was this: It wanted and needed the resource, but it was concerned that the resource clear so that it hedge against the cost and customers not pay twice for the same resource. So in order to do that, it entered into the contract for differences. And the way it did that was it did a competitive procurement and found a developer who was willing to undertake the risk of nonclearance. And that was the issue. The contract for differences assigns and allocates that risk to the developer, not the State, and that enabled the resource to go forward in a way that would not result in any possibility of a double charge. The contract developer -- the developer receives the contract price. The utilities paid the contract price and no more than that, received the market price. That is exactly the way this would have worked if we had simply done it as a bilateral, with one key difference. The difference is that the risk of nonclearance is with the developer, not the -- Samuel A. Alito, Jr.: Well, there's another key difference. If you had done it directly with -- if CPV had contracted directly with the distribution utilities, that would have been subject to regulation by FERC, would it not? Scott H. Strauss: Yes. This contract was as well. Samuel A. Alito, Jr.: Only after you lost in the Fourth Circuit did you concede that, isn't that correct, on the very day of the Fourth Circuit's decision? Scott H. Strauss: No, Your Honor. Samuel A. Alito, Jr.: No. Scott H. Strauss: In the district -- let me explain why. In the district court, during the district court litigation, CPV obtained market-based rate authority from the FERC and filed a motion with the court telling the court that the case should be dismissed because the contract was being entered into pursuant to that authority. And that made it a FERC contract that could be reviewed at FERC. So any party could have filed the complaint. Samuel A. Alito, Jr.: But your initial position was that it did not have to be reviewed by FERC; wasn't that -- isn't that right? Scott H. Strauss: That's -- that's correct. The position below was that it was either of two things, Your Honor. Either it was a non-jurisdictional financing arrangement or it was a FERC-jurisdictional contract. But either way it was not preempted, and that was the question. It was either subject to FERC's jurisdiction or outside it. But the question of whether it was preempted would not have been -- the answer would have been the same regardless. The district court decided that it would deal with that motion in its order, and decided in its opinion that while it probably was a FERC-jurisdictional contract, the judge went ahead and found what Maryland had done unconstitutional. Elena Kagan: I'm not sure why it is that when you say it was subject to FERC's jurisdiction, that doesn't end the case right there against you, because if it's subject to FERC's jurisdiction, that means it's a wholesale sale. And that's for FERC to do is to set the rates and other terms of wholesale sales, and that's not for the States to do. So that means you're preempted. Scott H. Strauss: No, that's -- no, no. No, it does not. You're exactly right, Your Honor. Wholesale sale is for FERC to review. But the way the statute works, sellers under the statute are permitted to set rates as an initial matter by contract or tariff. FERC superintends that process, as this Court decided in the NRG case a number of years ago. In this case, the developer, the seller set the rate through a contract entered into with the State utility. That contract would be subjected to FERC review. That's just another day on -- Elena Kagan: Are you saying that Maryland didn't set the rates just because they use an auction? Is that what you're saying? Scott H. Strauss: Maryland did not set the rate because Maryland did not select the price. The price was selected by the seller. Elena Kagan: That's true of FERC itself. FERC doesn't set rates anymore, either. It allows an auction to set rates, but we would never say that that doesn't mean that they are FERC rates, that they are FERC-approved rates. And so here, the fact that Maryland decided not to set rates directly but to allow an auction to do it, I mean, that's just a mechanism that Maryland chose. They are still Maryland's rates. Scott H. Strauss: The -- the auction -- the auction that FERC designed, the wholesale auction, permits, if not incentivizes, exactly what was done here. FERC has made that very clear. The purpose of the auction is to -- in part, to provide information to the market about what kinds of long-term contracting is -- are needed, what is needed. Anthony M. Kennedy: But you used the auction dynamic, the auction mechanism to go outside of the -- of that dynamic. Scott H. Strauss: What we did was perfect -- yes, Your Honor, but that's perfectly permissible. Remember, the -- Anthony M. Kennedy: That -- that's -- I -- Scott H. Strauss: Let me explain. Anthony M. Kennedy: I'm -- I'm sure that that's one of the issues in the case. Scott H. Strauss: Yes, Your Honor. The auction dynamic allows for parties, and indeed encourages parties, to enter into long-term contracts for capacity resources and bid them into the auction. But they can't clear the auction. They don't become auction resources unless they are able to do so. And in this case, FERC had in front of it exactly what Maryland and a related program in New Jersey were about at the time they revised the rules. What FERC sought to do was to reconcile the issue of the State programs and how they would interact with the auction, and FERC did that. It set a different bidding process, and Maryland followed that bidding process. The CPV resource bid in accordance with it and cleared on that basis. Samuel A. Alito, Jr.: But the -- as originally set up, CPV had no incentive to -- to bid anything other than zero; isn't that right? All it was interested in was clearing the market. Scott H. Strauss: That is -- that is correct. Samuel A. Alito, Jr.: And that affects the dynamic of the -- of the PJM auction, does it not? Scott H. Strauss: Yes. Yes, Justice Alito, it does. And that's why in 2011, FERC, when it became aware that this has happened, changed the rules. Remember, originally, when FERC approved the auction in 2006, it said that State resources that were being built for reliability, which is exactly what this resource is, could bid in at zero, a zero price, and clear automatically in order to ensure the States could meet their responsibilities to ensure of a liability. In 2011, when FERC became aware of the Maryland and New Jersey programs, it revised the rules. But it didn't prohibit those resources; it didn't preclude them. It changed the rules so that they could continue to bid, but they had to bid on a cost basis. Sonia Sotomayor: But -- but I have to say that they also looked at a long-term contract -- FERC did, and PJM -- in the PJM Interconnection order, and it determined that a seven-year lock-in period for a new generator was unfair, unjust and unreasonable. It's something it can do. Why didn't that end what you're doing? You're arguing that you're not affecting price. FERC disagrees, because you have no incentive to bid anything other than zero. I don't understand why this case is not ended by FERC's determination that locked-in contracts are unjust and unreasonable. Scott H. Strauss: FERC determined that under the auction it would not allow a guarantee of more than three years. But FERC did not at that time say that long-term contracts outside the auction were prohibited. Long-term contracts are a staple of this industry, as this Court knows, and FERC was not trying to prohibit them. What FERC was doing there was, the three-year lock-in, which I think you're alluding to, Justice Sotomayor -- Sonia Sotomayor: How is it different than your contract? Scott H. Strauss: It's different in that this is a 20-year agreement. Sonia Sotomayor: I know the years are different, but I'm talking about the mechanics. Scott H. Strauss: The mechanics of it are that it operates outside the auction, but bids into the auction. The -- the new entry price adjustment to which you refer functions within the auction and for a very specific purpose. It's designed to address the situation in which you have a relatively small geographic zone and a relatively large plant that's built. The concern is that when you build that resource and put it in the market, it creates a glut, and prices will crater. And the concern was because of that, no one will ever build such a resource. So the auction allows you to lock those prices in for three years, but that's simply in that particular circumstance. What FERC said when asked to make it longer was that's not the purpose of the auction. The auction is not intended to ensure revenue certainty. It's intended to provide information, information that the market can use in making contracting decisions. And that is exactly what happened here. Maryland looked at the -- at the auction results, came up with a program to have a resource built outside the auction, which would then bid into the auction, but it had to do it in accordance with FERC rules. FERC is the gatekeeper of the auction. Maryland couldn't insert itself into the auction in a way that FERC didn't allow, even if it wanted to. Elena Kagan: Mr. Strauss -- Stephen G. Breyer: I didn't -- I -- I didn't -- I have to admit for myself, in this kind of brief, it would have been much, much easier if people had used simplified examples with real numbers. I have a hard time thinking in terms of simply abstract words. But as far as I understand it, my law clerk says that this cost-based system of FERC is that the minimum-offer price has to be set, that is, they have to set a price at 90 percent of the cost of new entry for a combustion turbine generator or a combined cycle generator. That's as they calculated -- PJM, or if it's neither of those two kinds of generators, it's at 70 percent; is that correct? Scott H. Strauss: I believe that is, Your Honor. Stephen G. Breyer: If that's correct, then if I have a generator up somewhere in the hills of -- of surrounding their hills in Maryland, and it's more expensive to get coal up into those hills or oil or natural gas, and so I have a generator that I can -- that's 500 megawatts, and it allows me, based on cost, to charge, if I were to charge the full cost, and that depends on the banks and loans and so forth, it allows me to charge $220 a megawatt-day. Okay? Scott H. Strauss: Okay. Stephen G. Breyer: Does that? I can go to FERC, and I can say 70 percent of that is what I am going to put into the pool, because I know that Maryland will give me the rest. And this is not one of those two kinds. And 70 percent of 220 is around -- I don't know, my math isn't too good -- 180. So they get awarded the contract because it's 180, but there's some other firms that are more expensive over here, and those other firms don't get into it at all because we used up all the generating capacity that we needed for the next five years with your firm and a few others. And that changes rather dramatically who supplies the contract, and it also changes the price at which retailers across PJM will pay for the electricity they are getting from the pool. Now, is that right? That's either right or wrong. Scott H. Strauss: Well, Your Honor -- Stephen G. Breyer: If it's right, it seems like the end of the matter. If it's wrong, then you explain to me why. Scott H. Strauss: Here's what's going on, Your Honor. If the cost of the generator is below the default price, that 90 or 70 percent price that you described, the generator is -- that is its offer floor, and the generator is permitted -- Stephen G. Breyer: Now, I'm assuming that the cost is higher than the 70 percent. Scott H. Strauss: That -- that might -- that might be a problem, but I have two answers to that, Your Honor. First of all, that was not this case. In this case, the -- the resource bid on the basis of its cost, and its cost base number was below the default price. So there was no issue of a -- of what you described as a resource with a cost above the default price that gets to bid the default. Stephen G. Breyer: So you're asking only for the case where it's below. You're not interested in the case where it's above. And this whole case has been argued only in the case where it's below. Scott H. Strauss: Well, that is actually what happens, Your Honor. Stephen G. Breyer: I'm not saying what happens. I'm saying we have to decide a legal issue. Is my legal issue to include my example or is it not? Scott H. Strauss: I think it does not include your example, Your Honor. That is a different kind of distortion. The Solicitor General mentions it in its brief. And if FERC -- FERC, in 2011, when they revised the minimum-offer rule, did not find reason to adjust the offer level higher, which might have limited that -- that problem. If FERC now believes that that distortion exists -- Stephen G. Breyer: I don't want to use up all your time. Scott H. Strauss: I'd like to reserve the balance for rebuttal. Thank you. John G. Roberts, Jr.: Thank you, counsel. Mr. Elgarten. Clifton S. Elgarten: Mr. Chief Justice, and may it please the Court: Let me respond first to Justice Kagan's comment. The way the Federal Power Act works is States have the power and the authority, recognized by FERC, on the purchasing end of any contract to direct their local utilities to enter into any contract they want. When they direct a purchaser to do so, that gives rise to a contract that is certainly within FERC's jurisdiction to review. They review the rates charged on the other side of the contract, the seller side of the contract, and they review the ultimate contract itself. But the notion that you are setting the rate by engaging in a contract with a seller is completely inconsistent with what has always been -- and I can only say always been the rule -- and that's how the Federal Power Act is written as set forth in our reply brief. The Federal Power Act supplies jurisdiction on the seller side of those rates. Elena Kagan: If I understand what you just said, you're not relying on Mr. Strauss's argument. Mr. Strauss said that this wasn't a -- setting a wholesale rate because Maryland did it by auction. But you're saying that's irrelevant; that Maryland could have just picked a price, and -- and that that would have been fine so long as at some point FERC had the power to review and veto it. Is that what you're saying? Clifton S. Elgarten: No. It's -- it's a fair point, but no, Maryland could not have picked a price. It could not impose that price on the seller. Elena Kagan: Well -- Clifton S. Elgarten: The -- the long-standing rule of FERC has been if it's competitively set by the seller, leaving the seller free to respond to the -- to the bid of the purchaser, then it is subject to FERC, and that review process is there. And it is not inconsistent with Mr. Strauss's position. In the specific circumstance of an auction, what we had here -- Elena Kagan: I guess I -- Clifton S. Elgarten: Yes. Elena Kagan: -- I don't understand that. I mean, just take a hypothetical case where -- where Maryland said to all its utilities, this is the price and this is the only price that you will pay for electricity. Clifton S. Elgarten: Crosses the line. Elena Kagan: Are you -- are you saying that -- Clifton S. Elgarten: I belive that would -- Elena Kagan: -- Maryland could do that? Clifton S. Elgarten: I believe -- there's a case from -- from the Commission, says that would cross the line. I am imposing a price that all my utilities would sell. That crosses the line. Elena Kagan: Okay. Then you are saying that everything's dependent on the difference between picking a price and letting an auction pick a price. But I guess I -- I'll repeat the question that I made to -- to Mr. Strauss. I mean, we know that one of the ways that you pick a price is by letting an auction determine that price. That's exactly what FERC does. Clifton S. Elgarten: We -- we had a competitive bid to bid -- build a power plant. That's what was set up here. We were talking -- in answering your first question, I was answering the conceptual question of what it is FERC regulates. FERC regulates the seller side of -- of every transaction. In the auction context, things get a little more complicated, as you just discussed in the -- in the EPSA case. This case, however, was a procurement to build a power plant. CPV bid to build this power plant. It looked at the costs it would take to build a power plant in this locale, how much turbines cost, how much it would cost to run the plant and to bid into the market and make it available to the market. Of course, it then divided the price over the 20 years. You have 240 monthly payments. That's exactly what we bid. We understood that for Maryland to pay for us to build a power plant and to keep all the profits from our sales in -- in the markets, both the energy sales and capacity sales, both were involved -- that would be unfair. They didn't want the ratepayers to both finance our power plant construction, which is what Maryland was after, and keep all the revenues. So the contract reads -- and this is on page 17 of the reply brief -- the contract reads: "We turn over all the revenues for 20 years, and we build the power plant." They pay us to build the power plant. We turn over the revenues. It is correct enough that the net of that is the difference between the revenues and the price. But the purchase here was to build the power plant. Now, how did it impact the auction? How does it impact the auction? The auction was always set up by FERC on the understanding that States have the inherent power, and I mean the reserve power under the Federal Power Act itself to direct these kinds of long-term contracts, to direct capacity purchases outside because they control the purchasing decisions of their local utilities every single day. They review them and they control them. And they understood that States would be using long-term contracts to support new generation. So FERC didn't, just as an act of grace, allow constant sales of capacity outside the auction. They constructed the auction against the existing authority of the States to do exactly what was done here. Anthony M. Kennedy: Would it be correct or incorrect to say that under Maryland law, you entered -- you entered the auction, and as a result, you altered the consequences of that auction in a way that was inconsistent with FERC's policy. Is that a fair and statement? Clifton S. Elgarten: No, it is not fair, because FERC's policy, it was expressed. They said when States do exactly what was done here, before they even set up the auction -- and then in -- in fact they said, if States do what we do here, we have a mechanism in our auction not to correct it, to adjust the auction so the auction still functions. And that was the point Mr. Strauss was making. The minimum-offer price rule, which has two formats, is acceptable to FERC because FERC says if you comply with that rule, it does not artificially suppress prices. That was FERC's judgment, whether it was a 70 percent or 80 percent situation of how you bid. FERC has determined that is competitive, economic -- these are quotes -- does not -- does not artificially suppress prices because FERC wants those bids in. You're a competitive resource. In our case, however, we didn't even use that default price. We used a pure cost-based price. So the concern the government expresses that there's a possibility of an exception which they say they haven't corrected -- I think FERC did it on purpose and said it doesn't suppress prices -- the possibility of that exception is eliminated. We were -- we, in our case, because we bid a pure cost-based bid. And when you bid a pure cost-based bid, does it affect the market? Of course. The addition of supply affects the market. FERC doesn't think that's a bad thing. FERC thinks that's a wonderful thing. Stephen G. Breyer: Why? That's another problem I have here. I -- don't spend more than a minute on this, but I don't understand the procedural posture of this case. That is, it seemed to me it started out by saying that there was a -- a Supremacy Clause private right of action or something, which I think there isn't, in my opinion. Clifton S. Elgarten: Uh-huh. Stephen G. Breyer: And then -- and then it seemed to go we don't have FERC's opinion. We only have it through the SG. I thought there was a doctrine called primary jurisdiction where if the agency really -- their views is really relevant on that, you got their views directly, what happened to all that? Clifton S. Elgarten: We want to be in front of -- of the Commission. We believe the Commission should decide these issues. We think the Commission would decide these issues favorably to us because they have done so in connection with this very case. When the issue arose of this offer -- Samuel A. Alito, Jr.: Of course. Clifton S. Elgarten: -- being presented -- Samuel A. Alito, Jr.: Well, I don't understand your position. You're -- you're arguing that FERC does not think that this adversely affects the auction? Is that what you're saying? Clifton S. Elgarten: Adversely affects the auction. In fact -- Samuel A. Alito, Jr.: Why -- Clifton S. Elgarten: -- the auction -- Samuel A. Alito, Jr.: Why has FERC filed a brief arguing the opposite? I -- Clifton S. Elgarten: I -- if you read -- Samuel A. Alito, Jr.: You're arguing as if they're not even here. Clifton S. Elgarten: If you -- if you read the FERC's decisions that we've cited, the 135 and 137 FERC -- that's how it's numbered in the briefs -- if you read that and you read the quotes that are included in the Joint Appendix, you will see that FERC has determined that these bids are competitive if they are submitted in this way. Why -- Anthony M. Kennedy: So you're saying that FERC -- FERC doesn't understand its own order? Clifton S. Elgarten: I'm saying FERC's -- as happened in the Morgan Stanley case, there is a little bit of changing of -- of tunes that's at issue here. If this issue was presented to the Commission -- which is exactly who should decide these issues of energy policy, not this Court, whether something artificially suppresses. These kinds of issues of energy policy and how the auctions should work should be decided by FERC. Under this Court's case, Northwest Central, it says if the issue between the State's authority and the Federal authority can be reconciled -- and they were reconciled with these specific contracts in front of us. FERC modified the rules to allow exactly this bid and determined that it did not artificially suppress prices. Does it affect prices? Of course. New supply affects prices. Sonia Sotomayor: I'm sorry. How would this -- Clifton S. Elgarten: Does it artificially do that? Sonia Sotomayor: How would this work normally? Meaning forget that a lawsuit was started. You enter into this contract. Do you have to submit the contract to FERC? Clifton S. Elgarten: No. Because we have what's called market-based rate authority. It's been discussed in your cases. So we notify them. Anyone can protest to FERC, yes. Anyone -- Sonia Sotomayor: But a protest here? Clifton S. Elgarten: They didn't. They -- well, they -- we thought they did. They raised an objection. They said this is adversely affecting the auction. FERC resolved their objection. FERC had in front of it the very complaints we have here. The complaints about -- excuse me -- the RFPs and the solicitations from New Jersey and Maryland, and they presented this to FERC. FERC said, ah, we take care of this in our auction -- we've always known how -- with the minimum-offer price rule. They said the minimum-offer price rule, when it is applied, will result in not artificially suppressing prices. That is how this was presented to FERC. With these specific contracts, they are in -- they are in Volume III of the Fourth -- Fourth Circuit appendix. These specific contracts. Now, if they want to protest it again and say these have rates, or the rates that affect the jurisdiction, they are free to protest it yet again. And I am -- I believe FERC would come up with the same conclusion again and say this is perfectly appropriate to bid into the auction in this way. Now, if somebody wants to petition, let's close this what they are calling the "loophole," the one that Justice Breyer suggested, because it doesn't require a bid at exactly a cost-based price. They can go to FERC and close that loophole. It wouldn't have affected our case at all because we bid a cost-based, but they can go to FERC on every one. All of the conflict preemption issues should be addressed to FERC. They are not really for this Court, which is obviously having some trouble conceptualizing how this all works, to resolve. Those conflict preemption on the Northwest Central issues go to FERC. Ruth Bader Ginsburg: You wouldn't -- Clifton S. Elgarten: They should not -- Ruth Bader Ginsburg: -- get to conflict preemption if field preemption applies. Clifton S. Elgarten: That's absolutely correct. And so on the issue of field preemption, have we exercised an authority that belongs to FERC? No. By setting -- by directing a contract or competitively soliciting, we are not setting the rate. If we did, the hypothetical from Justice Alito, we -- if we said everybody in the State must pay that rate, FERC has dealt with that issue. That crosses the line. Competitive solicitations do not. When -- the purpose -- Ruth Bader Ginsburg: What is your explanation for why FERC is on the other side now, when you're saying it was in your corner earlier? Clifton S. Elgarten: FERC -- FERC, as the Commission through its rulings and orders based on evidence and appeal, as reflected in the New Jersey appeal, the NJPBU, appeal of that order, they were on our side. When they were asked to join this case, the Third Circuit said get in; they had two weeks. I think they took an ill-advised position, but it's certainly not a position that was done on the record subject to an order. And that's what's decisive here. If the -- John G. Roberts, Jr.: Thank you, counsel. Mr. Clement. Paul D. Clement: Mr. Chief Justice, and may it please the Court: Maryland's effort to dictate what CPV receives in connection with its wholesale sales to the wholesale market operator is plainly preempted. Maryland's targeting of the Federal market was direct in this case. CPV gets nothing unless it bids and clears the PJM auction. Once it does, it must sell all of its output, all of its energy and capacity to PJM. If those things happen, then CPV receives, thanks to the State of Maryland and its State action, payment streams in conjunction -- in connection with those sales to PJM that are different from and far more stable than the prevailing price on the PJM auction. And -- Stephen G. Breyer: Why? The -- the way that they've described it to me -- I'll try this once more. Because truer words were never spoke, than I am not quite on top of how this thing works. But the -- the -- the way he described is, what are they bidding into the PJM is their real cost. And when they are bidding their real cost, Maryland isn't going to pay them a dime. If they are an inframarginal unit, which I assume they would be, the cost for PJM is going to be higher, not lower. And there will be extra money. So what they are going to do is they are going to be paying Maryland. Now, what they said is, we're going to be paying you. Oh, he's shaking his head. So I haven't got that right, either. (Laughter.) Stephen G. Breyer: No? No, I have got it right? I don't know. I'm guessing at getting it right. Maybe not. Anyway, I -- well, you see my problem -- Paul D. Clement: Well, I -- Stephen G. Breyer: -- which is understanding this. Paul D. Clement: Well, there's a difference to your problem, which is, I think, first, there's a factual premise there -- Stephen G. Breyer: Yes. Paul D. Clement: -- which is -- I think it's pretty much conceded that, at least in the first couple of years of this, the expectation is that CPV is going to be receiving an additional payment, a forced payment, from the LSC, the loading serving entity, to PJM. So that's just a factual premise for you. Stephen G. Breyer: But are they bidding their true cost into PJM? Paul D. Clement: Well, they sure didn't start that way. And let me start here. I mean, they had, as I think Justice Alito alluded to, a completely different incentive in bidding their costs into PJM than would a private generator with new capacity. A private generator with new capacity is going to build its actual -- bid in its actual costs because they don't want to clear at the expense of having an unprofitable generator. It's a completely different dynamic for somebody like CPV, because the bidding clear requirement for them is just an obstacle to get to the pot of gold at the end of the rainbow, which is all these guaranteed payments for 20 years. So they have every incentive to understate their cost. That incentive was realized here. They talked about bidding in their costs. When they first bid in their costs, they bid in their costs at less than $14 a megawatt-day. Okay? Now, when PJM took a look at that, they ended up upping the figure sevenfold to about $96. So that's a great measure of their incentive to distort their costs for FERC. Now, what they will say is, ah, but Mr. Clement, the $96 bid cleared, and that's all that matters. Well, with all due respect, that's wrong. FERC says it's wrong. A bid like this can still have a price effect -- suppressive effect. And you can see that in a couple of ways. I want to say one thing, though, is FERC is here on our side in part because they are on its record as saying this MOPR -- the minimum-offer price rule. The MOPR is not some sort of cure-all that is designed to ward off any price-suppressive bid. It is a default rule. It is a coarse screen to deal with the most egregious cost-reducing bids. It also depends on an estimate of cost. And here's why it doesn't really work for a bid like this. One of the most important costs is your cost of capital. Well, what was CPV's cost of capital without this program? They told you. They told Maryland, without the 20-year guarantee, we can't get any financing for this project. We can't do it. At the bench trial, they told the district court, our ability to bid this project depends entirely on the -- Stephen G. Breyer: Well, that's another way of saying that the bid that -- that -- that FERC says that they have to make is not their actual costs -- Paul D. Clement: What -- Stephen G. Breyer: -- because if in fact it's based on a cost of capital that is lower than what the cost of capital really is, that is a misstatement of their cost or a -- an -- a lower-than-actual cost, just as much as if the steel were in fact less expensive than what they actually have to pay. Paul D. Clement: Absolutely. And of course, another component of cost is going to be future fuel costs. And anybody who's been to the pump lately knows that we can all have a lot of variance as to what we think are going to be future fuel costs, but if I could return to the capital cost and just finish this point, it's even worse that it's misstated, because ultimately, because they are getting a 20-year guarantee and no one else is, everybody else is calculating their cost of a new generation financing based on the three-year price signal that the -- that the -- that the capacity market is settling, it destroys the ability to do an apples-to-apples comparison. And then the one thing we know for certain here is that this project ended up displacing a project that actually could be built based on the three-year forward price and without a 20-year contract. John G. Roberts, Jr.: But you'd have -- you'd have no objection if Maryland just decided to subsidize the construction of the plant, would you? Paul D. Clement: We would, Your Honor. I think it might be a harder case, but particularly if the subsidy was conditioned on a bid-and-clear requirement, I would be here making a preemption argument. You might not think it's as good of a preemption argument, and I think that the only difference is because the statutory text of the Federal Power Act, it seems to me to make our position clearly correct, is the provision that says that FERC has the authority to dictate what a seller receives in connection with a wholesale sale. Anthony M. Kennedy: How do you define the field that's preempted? Paul D. Clement: Well, I think the field that is preempted is the ability of a government actor to set wholesale rates for wholesale sales. And so if you have State action that sets rates for wholesale sales -- and "rates" in this context is defined by the statute as including what a seller receives for wholesale sales -- we think that's preempted. Anthony M. Kennedy: Are they -- are they setting rates by having ended the auction? Paul D. Clement: We certainly think so, and more importantly, I think, for purposes of this case, so did the district court. I mean, it's kind of odd for me to hear my friends on the other side, as I heard them in the colloquy with Justice Kagan, they essentially conceded they lose if Maryland sets the rates, and that would be an odd concession in any case, but particularly where at footnote 48 at the district court's opinion, the district court finds -- as a matter of fact, I'll concede it's a mixed question of fact and law and all, but still there it is. The district court -- Anthony M. Kennedy: In a sense, I guess all of the bidders in the conventional auction in effect set their rates by their bid. Paul D. Clement: Sure. And I think what Justice Kagan alluded to if Maryland -- Anthony M. Kennedy: So why is this -- why is this different? Paul D. Clement: Well, it's -- it's not, because I -- I think the point is, if Maryland is not setting the rates here, than FERC's not setting any wholesale rates, and that's not right. And so just because you use an auction mechanism to set the rate, that doesn't mean that it's not the State setting the rate. And if you look at footnote 48, it's -- it goes beyond that because, based on particular findings, based on the testimony of the chairman of the Maryland PSC, the district court said that actually because there was back and forth between Maryland and CPV, this was Maryland setting the rate. John G. Roberts, Jr.: So is Maryland setting the rates when it subsidizes the construction of a power plant? Paul D. Clement: Well, if -- Mr. Chief Justice, suppose they decided to -- I mean, potentially they could. Not all subsidies are created equal. If they had a subsidy that was measured, a dollar-for-dollar subsidy based on sales to PJM, I would think that would be actually setting the rate. Again, you might disagree with me, but I would say that in that case, you would have a very similar situation. I think this case is that much clearer because these payments from the LSC is directly conditioned on selling to PJM. Sonia Sotomayor: Mr. Clement, can you tell me how I write this opinion? And I'll ask you why. Paul D. Clement: Okay. Sonia Sotomayor: As I look at the relevant statutory provisions, what it says is that FERC has the power to ensure that rates that are set are fair, are just and reasonable. So it doesn't say it gets to set the rates. It says it can do rules and regulation that control how the rates are set so that I'm not sure how this is field preemption. At best, I think it might be conflict preemption. And so if I think it's conflict preemption, that something about Maryland's plan conflicts with the system that FERC has set in place, how do I articulate the rule in this case? What is it that conflicts with FERC's rules and regulations with respect to setting -- participating in the market -- in the auction? Paul D. Clement: Sure. Sonia Sotomayor: Because as I understand it, and I don't think you -- you've told me any differently, that the people who are auctioning in the market can and do enter into contracts with States on a regular basis. Paul D. Clement: Oh, not with contracts with the States. That's not what my friends on the other side were saying. They enter into voluntary bilateral contracts off of the market. Sonia Sotomayor: Exactly. Paul D. Clement: And that is not what's happened here. Sonia Sotomayor: All right. Voluntary contracts outside the market. Paul D. Clement: Right. Sonia Sotomayor: Why is this involuntary? Because of the State -- Paul D. Clement: Because the State told the load-serving entities that they had to make these payments to CPV. Sonia Sotomayor: All right. So is that what conflicts? I'm -- I'm trying to articulate the preemption rule in some simplified way. I'm a little bit like Justice Breyer on this. I'm not quite sure how everything is working, but I don't think it can be field preemption, because you have to explain what field we're talking about and what rule we're setting in the future. I think it's conflict preemption. Paul D. Clement: I think it's both, Your Honor. I think part of the reason this is difficult is because it's like an overdetermined equation. There is both field preemption here, but there's also conflict preemption, and there are multiple evidences of conflict preemption, because nobody's tried to do anything like this before -- Sonia Sotomayor: So give me a simple -- sir, when I write this opinion -- Paul D. Clement: Right. Sonia Sotomayor: -- give me -- give me the first paragraph. This conflicts with what? Paul D. Clement: This conflicts with FERC's determination that the PJM rates for the PJM auctions are just and reasonable. As you said, the starting premise here is that the statute gives FERC the authority to determine whether wholesale rates are just and reasonable. FERC has done that effectively ex ante with respect to the PJM markets by its regulations of PJM. FERC has said that the auction clearing rate for sales to PJM is just and reasonable. Now, the authority of FERC extends not just to what the nominal rate is in the auction but to what the supplier receives in connection with that sale. So if a State, through State action, says, it's all very well CPV that you've sold that to PJM and PJM has given you a hundred, this is your lucky day, we're going to give you another 50, that is clearly preempted because a State is having the supplier receive something in connection with a wholesale sale to PJM that is different from the rate that FERC has determined is reasonable. Stephen G. Breyer: Let me try that with the example. Five thousand new megawatts of capacity is needed. Existing suppliers can't supply more than four. So FERC is trying to get an extra thousand. The people whom it will choose to give it and will allow to bid are those who are the new people who have the lowest cost. All of those people in a rising market will have higher costs than the existing people. So if in fact FERC looks to the existing people and says, which can bid? And says, you have to use your real costs. And if they really implement that, what you just said is going to have no effect on the market, because they will be in the market whether they are given a subsidy or whether they are not given a subsidy. And indeed, it won't affect the price because the price is affected only by the marginal units, who, by definition, have higher costs than anything that FERC will look to to see what these people's costs are. Therefore, it is without impact, and they add to that. We would like to make this argument to FERC where they have to focus on it and not just say in general to the SG, this is how we think, because by the time we're finished, we'll be able to modify present rules so that they will see that they are not hurt at all in the actual world by our costs. I did get something like that out of what they said. Maybe I'm wrong in what they think. Maybe they'll just agree because they think I'm agreeing with them at the moment, but I would like to know some response to that. Paul D. Clement: Here's your response, Justice Breyer, and it comes in two parts, because there's at least two parts to that question. First, I take issue with the premise because it may be that some new generation will come in, in your hypothetical, but it won't necessarily be this one. And in fact here we know, as a matter of fact, that it wouldn't be this one, except for the 20-year guarantee, and so they displaced somebody. But please don't just shrug your shoulders -- Stephen G. Breyer: No, no, I am agreeing with you. I am. (Laughter.) Paul D. Clement: That is a huge -- Stephen G. Breyer: I'm not shrugging my shoulders. Paul D. Clement: This is a huge difference, because this -- the message this all sends to my clients is don't take FERC's direction that you should be competing based on market forces and efficiency. We should stop competing efficiently on the PJM and try to put the best bid together based on the three-year advanced auction. We should start competing for subsidies, and we should start competing for guarantees. The second part of your question, what about FERC primary jurisdiction. This is all a bit rich coming from my friends on the other side because, as Justice Alito alluded to, when this all started, their position was this has nothing to do with FERC at all. This is a financial arrangement that FERC can't even look at. Then my friend talks about how, well, they eventually got market-based rate authority from FERC in a submission. Well, I -- I'd ask you to take a look at what they said on Joint Appendix page 142 of that submission. What they said about the contract is they said, quote, "CPV Maryland also notes that it included the CFD in this application solely for informational purposes and is not requesting that the Commission address or discuss Commission jurisdiction over the CFD in its decision on CPV's Maryland's request for market-based rate." Don't look what's behind that curtain, Mr. FERC. We don't want you to do anything with that. We're just here to try to get market-based rate authority. For them now to come in, not having raised any objection to the Supremacy Clause cause of action -- and by the way, there was a Commerce Clause cause of action there as well, which is maybe why the parties overlooked it, and I do think that's not jurisdictional, so I think we're past that. So for them to come in now and say, oh, this has to go to FERC, I'm sorry; it's a bit rich. And I understood why they were making the MOPR argument at the early stages of this litigation before FERC filed the brief. But I am a little mystified why, at this late stage of the game, after FERC has filed three briefs saying that the MOPR is not sufficient to eliminate price-suppressive bids, that they're still saying we win because FERC's on our side. I mean, that is a bit mystifying. And I think FERC is absolutely right on this for the reasons that we've already talked about. I mean, you can't really even apply the MOPR in an apples-to-apples way if you have this kind of 20-year guarantee, because the cost of capitals are completely out of whack. And of course, they do have the problem that their own testimony is they wouldn't be on the market at all if they didn't have this 20-year guarantee. So in the first capacity auction that we had to deal with, the price was suppressed. In every energy auction since then, the price was suppressed. And that's why I think FERC -- you know, they never tried to design the MOPR as this perfect thing. You talked about the 90 percent and the 70 percent? Way back in one of those proceedings, my client said, FERC, why isn't it a hundred percent? If you think about the economics of this, it should be a hundred percent. And FERC's response was, eh, close counts, this isn't perfect, we don't pretend it's perfect so we think 90 perfect is a rough compromise. Fair enough. Probably not arbitrary and capricious, but it doesn't mean that this is something that the MOPR is some perfect solution. I also don't think there's anything terribly anomalous about the procedural posture of this case. I think it's exact procedural posture you had in front of you in the Schneidewind case. That was a district court action, declaratory judgment for preemption. What I think makes this a preemption case, and what completely distinguishes voluntary bilateral contracts, is State action. It's the State action forcing the LSCs to make these payments, and essentially conditioning CPV's participation on the PJM market on the bid-and-clear requirement. That's State action that's preempted. In the typical voluntary bilateral contract, you don't have State action. The parties make their agreement. They eventually submit it to FERC, or if it's a market-based rate, somebody can object. And the only time you really get State action at that point is at the very end of the process when the State's doing retail rate regulation, and that's the point where Mississippi Power & Light and Nantahala come in and say it's at that late stage when there's finally State action that the State has to take FERC's wholesale rate determinations as a given; they can't second guess them at late stage. But here you got the State action right up front, and the State action is preempted. Elena Kagan: Mr. Clement, it -- it does seem to me important what the kind of State action is. And this goes back to the question that the Chief Justice raised with you. If the State had just said we need another power plant and had delivered a load of money to CPV and said go build a power plant, you're not saying that that would be preempted, are you? If it's not at all, it -- it -- you know, that's going to have an effect on the kind of bids that CPV is going to make. But the State is not itself changing the outcomes of the auction process. You wouldn't say that's preempted, would you? Paul D. Clement: It would depend. I mean, the way you just described it, I would say -- especially because I think it's a helpful answer -- of course not, not preempted. (Laughter.) Paul D. Clement: But if they conditioned all of that money on a bid-and-clear requirement, I would be saying that that was preempted. I think it's a harder case, but I'd hate to lose that case here because there are cases like that that are being litigated in the lower court. Thank you, Your Honor. John G. Roberts, Jr.: Thank you, counsel. Ms. O'Connell. Ann O'Connell: Mr. Chief Justice, and may it please the Court: In the government's view, the Maryland Generation Order is preempted because by requiring the State-selected generator to bid into and clear the PJM capacity auction in order to receive the guaranteed payments provided in the contract, the Maryland program directly intrudes on the Federal auction, and it also interferes with the free market mechanism that FERC has approved for setting capacity prices in that auction. John G. Roberts, Jr.: Do you have a position on the question that Mr. Clement avoided, about what if the State -- what if the State subsidized the power plant? Is that good or bad? Ann O'Connell: I -- I agree with Mr. Clement's answer. If the State just -- John G. Roberts, Jr.: What -- what was Mr. Clement's answer? (Laughter.) Ann O'Connell: If the State -- if the State just paid to build a power plant, that's not directly targeting what's happening in the PJM auction. Sure, it's adding supply to the market. But as long as the State is staying within its sphere under the Federal Power Act, that's fine. But I also agree with the second part of his answer, which is that if there was some kind of a bid-and-clear requirement in the auction attached to it; for example, if the State paid to build the power plant and turned it over to CPV, but then they said, okay, we want to get some money back for this power plant that we built, so you're going to bid the capacity of this plant into the auction. And unless you clear, we're taking the plant away from you, or something like that. That changes the incentives of the participants in FERC's auction. And that's what -- what is the key -- Sonia Sotomayor: So that's the conflict? Ann O'Connell: Yes. Yes. Sonia Sotomayor: That's -- that's because -- you're articulating it as -- and correct me if I'm wrong -- that the conflict is in affecting the bid price in any way. Requiring it, affecting it, or -- Ann O'Connell: Yes. It's -- Sonia Sotomayor: -- determining it. Ann O'Connell: It's in creating a conflict, changing the incentives of the people in the market in a way that conflicts with the market mechanism that FERC has set up. We think that shows both field and conflict preemption. Elena Kagan: Ms. O'Connell, you -- you have both arguments field and conflict. If -- if you were to win this case, would you rather win it on field or conflict? (Laughter.) Elena Kagan: And why? Ann O'Connell: I mean, I think that field preemption is probably a better way to decide the case, and it would -- it would be a broader ruling. In such a -- in such a ruling, I think the -- the Court would say that when the State does something that alters the incentives of the people that are participating in FERC's market, that is intruding on the Federal field. Sonia Sotomayor: But for -- that -- that answers the earlier question: No, they can't give money to build a generator because that changes the incentives. The generator's cost by definition change if it's receiving subsidies for free. Ann O'Connell: If -- if the State is just acting completely outside of the auction with no requirement to bid into and clear in the auction, then that is not something that changes the incentives of the folks that are participating in the auction, which is what happened here. The -- the cost -- Elena Kagan: Well, why do you even need the sort of change-in-incentives language? Why isn't the field preemption argument more that this -- this -- this scheme essentially takes the rate that the auction produces and changes that rate for CPV and for all the utilities in Maryland? Ann O'Connell: I think -- Justice Kagan, the -- the reason why we don't agree with that broader interpretation is because we -- FERC does not think that just receiving extra money in -- in connection with capacity that's being sold into the auction is necessarily preempted, and let me explain why. There's something that happens in this industry, a widespread practice called contracts for differences. The contracts in this case are sometimes referred to as contracts for differences, but because of the bid-and-clear requirement they don't operate in the same way. Parties can enter into a hedge agreement. For -- Elena Kagan: No, but that's -- but that's -- when Mr. Clement said that there's a real difference here between voluntary agreements -- you know, if there's a contract for differences, fine, but that this is Maryland coming in and effectively forcing the LSCs to enter into such a contract, and by doing so, changing the wholesale rate. Ann O'Connell: Well, I think the -- the problem that -- that FERC sees with this is the effect that it has on the auction. If this was just a bilateral contract occurring outside of the auction where Maryland was accepting the results of a competitive procurement and then submitting that bilateral contract to FERC for review, that's where FERC would review that contract. The field that we're talking about here is the auction. And what FERC is concerned about here is the effects on the auction of a State program like the one here that ties a subsidy or -- or extra payments under the contract to a requirement that the -- the person receiving it bid into and clear the capacity in the auction. Elena Kagan: See, when we -- John G. Roberts, Jr.: How far does your -- how far do you think your authority reaches with respect to indirect effects on the auction? I guess that was the point of my question on the subsidies. I mean, a lot of things are going to have an effect on the auction. Is it only because of the legal mandate in this case? Ann O'Connell: Yes. It's -- it's because the -- the -- the program in this case, by requiring the capacity to be bid into the auction and clear, it directly targets the auction. It has a direct effect on the auction. We -- we recognize that, in the context of the Federal Power Act, the State has its sphere too. The State regulates retail rates. The State has control over generation. And it can do things within that sphere that have indirect effects on -- on FERC's field. But in this case the problem is that, because of the bidding-and-clearing requirement, it's directly altering the incentives of the people in that market. Samuel A. Alito, Jr.: Well, why doesn't the -- the MOPR correct the problem? Ann O'Connell: The MOPR corrects it to some extent because the MOPR is choosing what -- what FERC thinks is a fair price for a new generator to bid in at. The MOPR isn't a complete solution because, as we've described in our brief, if somebody bids in at the minimum-offer price rule but its costs are actually higher, it is necessarily going to knock somebody out of the auction that would have cleared otherwise, and the price of the auction will go down. But -- and I -- I think, as Mr. Clement correctly pointed out, the MOPR is not a -- a perfect solution to this. In -- in this particular case, I think the incentives of what -- what were -- was happening under the State program is demonstrated by the fact that CPV tried to bid in so low even when it tried to cost-justify their bids. And the market monitor in PJM, when trying to actually reconstruct CPV's costs, came to different numbers on what those costs would be. So it's not a perfect way to try to screen out offers that are not actually based on cost or that should not be coming in. And -- and, additionally, just the fact that FERC had to expand the MOPR to cover this program I think shows that there's been an intrusion onto FERC's field. FERC has tried to correct what's happening in these programs through extending the minimum-price offer rule to these bids, but I think that -- that just shows that's what's happening here is that the State programs are changing the incentives of the -- the people in the field. Elena Kagan: Well, but I don't see how that could be true. If FERC could, in fact, get rid of the problem, then it leaves you with no conflict. Ann O'Connell: I don't think that's right. I think the conflict is still with the -- the market mechanism that FERC set up in order to determine wholesale capacity rates in the auction. When you have a program that has this bid-and-clear requirement, it alters those incentives. Even if there's not an actual price-suppressive effect, the -- the -- the possibility for a conflict or the imminent possibility of a conflict still calls for field preemption. The -- the Court of appeals cited Schneidewind and Northern Natural Gas on page 21a of the -- of the Petition Appendix showing that -- that's still field preemption. It's -- what -- what FERC is concerned about is the effects of the -- of the State program on the participants in its auction. In this particular -- the way that these contracts are constructed, CPV is going to get the contract price regardless of whether the clearing price is lower or higher. Stephen G. Breyer: I can see it. But what are the words of the field preemption thing that puts outside the preemption the thing that's worrying the Chief Justice? See, I -- I -- I mean, you -- you want to say the field is so defined -- Ann O'Connell: Well -- Stephen G. Breyer: -- as, and -- and now, look, billions of actions of States affect the cost of the generator and thereby affect the bid price into the PJM auction. Now, 99.99999 percent we want the State to do. They're perfectly free to do. But you want this 1 percent no. And -- and -- and I want the words that are going to define that field. That's what Justice Sotomayor was asking for before. It's something to do with the rule here in Maryland that forces them not just to have these artificial costs but to put it on the -- the auction. Ann O'Connell: Right. Stephen G. Breyer: What are the words? Ann O'Connell: I think directly targeting the auction to take some words from ONEOK would be a fine way to do it. Stephen G. Breyer: I see targeting. Ann O'Connell: The -- the -- the field that we're talking about is the PJM auction. And any -- a State program that directly targets the auction and the incentives of the participants in that auction by the bid-and-clear requirement is -- would be preempted under a field-preemption theory. We think also under a conflict-preemption theory. I -- I could distinguish just a -- just a little bit the contracts for differences that are not tied to a bid-and-clear requirement in the auction. States -- or the parties in this context will sometimes enter into a hedge agreement where they agree on a price. Like a hundred dollars, if the auction clearing price is below that, say it's 80, then the person that the generator has contracted with, like Merrill Lynch or something, owes the generator $20 regardless of what -- what else happens. That transaction will always take place. The generator then has to make a separate decision of whether it wants to bid into the auction. If it's -- if the auction price is 80 and its costs are 90, it's not going to. If its costs are 70, it will bid in. That sort of a contract for differences is not preempted here. It's just when there's a bidding-and-clearing requirement that the subsidy is tied to. John G. Roberts, Jr.: Thank you, counsel. Mr. Strauss, you have three minutes remaining. Scott H. Strauss: Thank you, Your Honor. We did not -- Maryland did not require CPV to bid into the auction. CPV agreed to do so in response to a competitive procurement. FERC has no issue with competitive procurements, and that can be found in the Joint Appendix. At page 909, there is a regulation in which FERC essentially says so. That's all that happened here. The question of whether we targeted the auction: We did not regulate the auction. We could not regulate the auction. We could not regulate CPV, either. They're a wholesale generator. They make their own choices, and they made their own agreement here to enter into this contract. We couldn't regulate the outcome of the auction because FERC regulates the outcome of the auction. They control every aspect of it. And in this case, what FERC found was a rule change was needed to address this very contract. The change was made. The resource bid in accordance with the rule change and cleared. FERC said its rule change would reconcile the tensions between State policy and auction integrity. FERC said that this resource was economic, needed, competitive, and did not suppress prices. There was no undue price suppression or no artificial price suppression from this resource. FERC said that and -- and said it more than once. Even with the State subsidy. And the reason is very clear: Because the bid was a cost-based bid without regard to the contract revenue. And keep in mind, there's been a lot of talk about a subsidy here. Maryland concluded that, over the life of this contract, this was going to be a better deal for ratepayers than for the generator. And that is in the generation order. The only other point I would make, Your Honor, is that the rule that should be articulated here is one that allows each of the parties to fulfill their responsibilities under the statute. Sellers get to set rates as an initial matter. FERC gets to review those rates, and States get to direct the procurement decisions of their retail utilities. Been a lot of talk here about what the retail utilities were forced to do. The subject is State regulation. State courts have affirmed what Maryland did here with respect to retail utilities. There should be no question about that. States can take actions where necessary to develop new power plants. And as we move forward into an era of a new generation portfolio in this country, the last thing the Court should be considering is trying to limit State options. It's very important to keep them open, especially in a case here, where FERC has reviewed this precise contract. If you look on page 6 of our reply brief, there is a quote from the FERC rehearing order in November of 2011 in which FERC describes an acceptable arrangement and describes this arrangement: one in which local utilities contract with a generator and the generator bids the unit into the market. That is exactly what happened under this contract. FERC speaks approvingly of it. Thank you, Your Honor. John G. Roberts, Jr.: Thank you, counsel. Case is submitted.

William H. Rehnquist: We'll hear argument first this morning in No. 99-224, Charles Miller v. Richard French, consolidated with 99-582, United States v. Richard French. Mr. Laramore. Jon Laramore: Mr. Chief Justice, and may it please the Court: The case addresses the automatic stay provision of the Prison Litigation Reform Act. The full text of the United States Code section may be found at page 1 of the appendix to our certiorari petition. The automatic stay is designed to effectuate other provisions of the PLRA-- William H. Rehnquist: Mr. Laramore, let me ask you one procedural question. The State's motion to terminate this injunction was filed in 1997? Jon Laramore: --Yes, Your Honor. William H. Rehnquist: And in your brief you say it's set for hearing on the merits in June of 2000. Is there any explanation for the 3-year delay in that? Jon Laramore: The case... there was no action on the motion to vacate during the entire time the appeal pended in the Seventh Circuit, and once the appeal was concluded in the Seventh Circuit, the district court judge-- William H. Rehnquist: But it would seem the appeal would have nothing to do with going ahead with the motion itself. Jon Laramore: --Well, we don't disagree with that. The district court, though, did not set a hearing on the motion-- William H. Rehnquist: For 3 years. Jon Laramore: --until after the appeal was... was completed. That hearing date was then... the initial hearing was set... the hearing was initially set for last December, and it's now been extended until June of this year. Ruth Bader Ginsburg: Did you request-- Stephen G. Breyer: --Why didn't you ask for mandamus? Jon Laramore: Our... our appeal was pending at that point in... on the merits of the automatic stay issue, and we chose not to go the mandamus route given how procedurally complex that would have made the case at that point. Ruth Bader Ginsburg: Mr. Laramore, did you ask the district court to proceed during the pendency of the appeal to the Seventh Circuit? Jon Laramore: We did not formally make that request of the district court. Ruth Bader Ginsburg: You didn't ask the district court. You truly have no basis for going to mandamus a court to do something that you didn't ask it to do. Jon Laramore: Well, that's right, and we... it was our understanding that the district court... without it having made a formal request, that the district court wanted to wait until the appeal was concluded. Antonin Scalia: Well, I suppose you had no interest in having the case mooted, did you? Jon Laramore: Well, we are interested in-- Antonin Scalia: Which would have been the situation I suppose if the district court had proceeded-- Jon Laramore: --That would have perhaps mooted this case-- Antonin Scalia: --and... and had given you what you wanted. Jon Laramore: --That would have perhaps mooted this automatic stay issue, although perhaps not under the doctrine of capability of repetition but evading review. At any rate, the automatic stay is designed to give district courts incentives to move quickly on motions to terminate injunctions in prison cases. The Seventh Circuit invalidated the automatic stay, found it violating... found it to violate separation of powers concepts. But the automatic stay is constitutional for several reasons. First, the automatic stay does not affect the underlying judgment. It merely addresses in a temporary way district courts' prospective equitable power, and it only does so after the district court already has had 90 days to act on the motion to vacate or the motion to terminate. Ruth Bader Ginsburg: Mr. Laramore, I didn't... I know that's your argument, but I didn't follow it entirely because it seems to me if you suspend the decree and it doesn't become operative again until all the findings that have been made... all the findings required by the new act had been made, how is that different from just starting fresh and making those findings? It seems to me to say suspended is kind of a euphemism for terminated because you don't get it back again unless you establish what you would have to establish to get a decree under the new law in the first place. Jon Laramore: It is correct that the injunction only continues if the district court finds that it's necessary to correct an ongoing constitutional violation. So, you're correct in that sense. And... and the point I'm making is a... a formalistic point in a sense that it's... that the judgment is not... that the automatic stay does not act directly on the judgment, but acts only on the district court's prospective equitable powers. It does mean that the prisoners are not able to take advantage of the injunctive portion of any existing order during the period of the suspension. Antonin Scalia: What does the judgment say? The judgment says that the State was in violation. Right? And the rest is remediation. Jon Laramore: Yes. Antonin Scalia: What it prescribes to remedy that violation is... is not... is not part of the judgment. It's part of the remedy I assume. Jon Laramore: It is part of the remedy, yes. John Paul Stevens: But it's part of the judgment too. That's what the judgment is. It includes the injunction, doesn't it? Jon Laramore: Well, it certainly-- John Paul Stevens: I never heard of this suggested distinction between remedy and judgment if the remedy is part of the judgment. Jon Laramore: --And certainly this statute is aimed at dealing with the remedial portions of... of-- Antonin Scalia: Yes, but... but you say... you say-- Jon Laramore: --however we describe it. Antonin Scalia: --that the... you say that the... if you agree with that, then... then you must retract your assertion that... that Congress can, in fact, change the remedies that are available for the future. In the case of... of an injunction that operates prospectively, your position is that Congress has the power to change the ability of the court to impose certain remedies in the future, so long as Congress does not violate the Constitution. Jon Laramore: Yes. Antonin Scalia: Well, if that's the case, then it can't be part of the judgment. Jon Laramore: I'm not sure that I precisely agree with what you said. Congress can direct the judicial branch to reexamine the judgment itself and... and impose upon it new standards such as the standards that are in part (b) of this... of this portion of the Prison Litigation Reform Act. What the automatic stay does doesn't direct the judicial branch to do anything. It has... it causes the motion to vacate itself to act automatically as a stay of the injunctive portions of the judgment prospectively. William H. Rehnquist: I'm not... I'm not sure the term judgment is quite accurate here. A judgment traditionally... it's... you get a money judgment from... from a common law court. I think traditionally you get a decree from a court of equity, which... you know, that's more like the Rufo case-- Jon Laramore: Yes. William H. Rehnquist: --which came up from the First Circuit, rather than like the Plaut case which I think was a... a judgment. Jon Laramore: Yes, I think that's exactly right. And... and-- Sandra Day O'Connor: But just to explore this a little further, let's suppose the lawsuit was brought by the prisoners and it was determined by the court that the prison was putting six people in a single cell room that would properly hold only two and that it was a violation of the Constitution, making it cruel and unusual punishment, and further, that the prison was providing only 1,000 calories of food a day, whereas to sustain normal weight and life, 2,000 calories a day were required. Now, let's just take that as an example. Finding a constitutional violation and entering a decree that that must be remedied by reducing it to two people to a cell and increasing the food. Now, you say that Congress can come in and automatically end that order for relief based on the motion by the State, that that's okay, that that does not invoke the concerns that the Court expressed in Plaut with interference with the judgment of a court in a decided case. Jon Laramore: --Justice O'Connor, I... I think I would describe our position somewhat differently than that. We say that it's appropriate for Congress to... to change the remedial law as it has done here and to require the courts to apply the changed remedial law to existing decrees. And how that would apply in... in the case that you describe is that the State would make a motion and it would say, we no longer need to have this injunction that says we can only have two people in a cell and... and 2,000 calories-- Sandra Day O'Connor: Well, you don't have to say anything. You... all you have to do is file a motion under this PLRA and say, we file a motion to terminate the ongoing relief. Right? Jon Laramore: --Right. Sandra Day O'Connor: Okay. Jon Laramore: And that shifts the burden. That's where the substantive change has occurred in this case. Anthony M. Kennedy: Well, in... in your answer to Justice O'Connor that... that you just gave explaining the authority of the Congress to, for want of a better term, modify the terms of the decree, I kept waiting for you to use the term prospective. And you seemed almost careful not to do that. I... I thought you were going to say that this is-- Jon Laramore: No. I certainly didn't avoid that on purpose. Anthony M. Kennedy: --this is a prospective-- Jon Laramore: Yes. Anthony M. Kennedy: --operation of... of a statute. It does not undo previously adjudicated rights in the sense that a money judgment would be-- Jon Laramore: That's exactly right, Justice Kennedy. And... and, of course, this is a prospective statute in that it applies to any decrees entered in the future as... and... and Congress has also set up the mechanism to apply the same standards to decrees that are already in existence-- Antonin Scalia: --But, Mr. Laramore, it seems to me that in order for you to prevail, you have to establish the initial proposition that constitutional issues aside, which Congress lets the court resolve during that 90-day period... constitutional issues aside, Congress has the power to eliminate a remedy that has been prospectively imposed by a court. Let me pose a simple example that doesn't contain a constitutional problem. Suppose Congress passes a law that says that Federal courts will not have authority to impose injunctions against competition in any cases under Federal statutes alleging violation of some... some business... business rights, that in the future, Federal courts will not have the power to enjoin competition. All right? Jon Laramore: --Yes. Antonin Scalia: And the statute specifically says, any injunctions already in effect, enjoining competition for the future, will be dissolved. Is that law valid? Jon Laramore: Plainly I think the prospective portion of it applying to injunctions not yet issued is valid. Antonin Scalia: Oh, sure. Jon Laramore: And then the question I think becomes-- Antonin Scalia: Come on. Answer the hard question. Jon Laramore: --a formalistic one whether... whether Congress may pass a law that says those injunctions are no longer valid as... as it did in the Telecommunications Act as to some of the existing injunctions, or whether it must do what it did in this case, which is to say, courts must evaluate those injunctions and apply the new standards to those injunctions but-- Antonin Scalia: Well, I don't think it has the power to give the courts 90 days and say, if you don't do it in 90 days, they're no longer invalid unless it has the power to invalidate them. Period. That's... that's my... that's my point. Jon Laramore: --Well-- Antonin Scalia: And you're not willing to say that it has the power to invalidate them. Jon Laramore: --It has the power to tell the... and again, this is... is perhaps too technical a way to express it. But it has the power to tell the district courts that they can no longer enforce those injunctions, which may be the same as invalidating the injunctions. Ruth Bader Ginsburg: You answered my question to say that it was, once it's suspended, apart from the label. It's like starting the case all over again. But to... to continue Justice Scalia's line of questioning, does the 30 days, extendable to 90 days, mean anything? On your theory of the case, couldn't Congress have simply said, as of the day this new law goes into effect, all bets are off, any prison litigation has to start anew with a fresh complaint and meet the standards that we set in this new law? Jon Laramore: Yes, as a matter of separation of powers. Ruth Bader Ginsburg: So, is there anything on... anything that's constitutionally required by giving the district court any time at all in your judgment? Jon Laramore: Well, Judge Easterbrook says in... in his dissent that there may be a due process element involved here, although I suggest that that is not such an issue here as long as there are other methods that prisoners can use outside of this injunctive-- Ruth Bader Ginsburg: Well, I-- Jon Laramore: --to vindicate their rights. Ruth Bader Ginsburg: --prison litigation where the finding has been made not just that there is a violation of the Eighth Amendment, but that there is a violation of the Eighth Amendment in this and that and the other particular-- Jon Laramore: Yes. Ruth Bader Ginsburg: --as Justice O'Connor spelled out. And a court has made that finding, that it violates the Eighth Amendment in these particulars and then Congress can say, never mind that. During the interim, the decree is out of... out of force entirely. That... there has been a finding of a constitutional violation-- Jon Laramore: Yes. Ruth Bader Ginsburg: --specific ways. I don't think that anyone has questioned, at least in this litigation, the (e)(1) of the statute that says, district courts, act promptly and if you don't act promptly, you can be mandamused by the court of appeals. Jon Laramore: Yes. Ruth Bader Ginsburg: But to say no matter how complex the case is, you have 30 days or 90 days, I don't know of any legislation like that, do you? Is there anything... any other statute like that that says-- Jon Laramore: There's no other statute that we've found that acts in that way on an existing judgment. Ruth Bader Ginsburg: --Yes. Jon Laramore: There are, of course, other provisions with time limits that have consequences such as the Speedy Trial Act and pre-trial detention-- Ruth Bader Ginsburg: Yes, but the result of the Speedy Trial Act-- Jon Laramore: --Yes. Ruth Bader Ginsburg: --is the defendant can't be tried. And here it's the prisoners get their judgment taken away from them. Jon Laramore: But I do want to highlight two portions of the statute that seem to be missing from the example that... that you've given and that Justice O'Connor maybe began. Two things. One is that this statute only applies at this point to injunctions that are quite old. All of them must be now at least 4 years old because that's how old the act is. So, we're talking about situations where there has already been a judgment in place for a lengthy period of time. We would expect that either the prison has conformed its conduct to the Constitution at this point or the prisoners would be back in court seeking enforcement, seeking contempt and that sort of thing. John Paul Stevens: Yes, but that doesn't really answer Justice O'Connor's problem because if your reading is correct, after 30 days, they could put six people in each cell, even though they only had two during the 4-year period. Jon Laramore: Well, they could. John Paul Stevens: Isn't that right? Jon Laramore: There would be no injunction prohibiting it, but-- John Paul Stevens: Well, that's my point. So, they could do it. Jon Laramore: --They could do it. But, of course, then the prisoners at that point can use the provisions of 3626(b)(3) and get their permanent injunction back at that point. They could also use the temporary injunction provisions of the statute. John Paul Stevens: Yes, but until they get that provision back, the State could legally say, we'll put the six people back in the shell... in the... in the cell until we get the litigation resolved. Jon Laramore: Yes, but let me point out one other-- John Paul Stevens: They might not do it, but I'm just trying to think of the-- Jon Laramore: --But one... one other thing about that, Justice Stevens, is that the standard of conduct is set in that judgment and that standard of conduct remains because the automatic stay doesn't erase the judgment. So, if... if the State went ahead and put six people in the cell, that... there would... there could be a damages action by those prisoners against prison officials in their individual capacities and qualified immunity would certainly not apply because the State has already said that six people in the cell is unconstitutional. So... so, there's that incentive on the State as well. Ruth Bader Ginsburg: --But it hasn't... Mr. Laramore, under the new standard, they have... they said it's unconstitutional, but they haven't said it's the least... that the... the order is the least intrusive way to do... to take care of it. Jon Laramore: That's-- Ruth Bader Ginsburg: Maybe it's unconstitutional but attrition or something like that. Jon Laramore: --Well, I... I understand the question, Justice Ginsburg, but I don't think that that... that those requirements for narrowness and least intrusiveness go to the substantive constitutional finding that six people in a cell is unconstitutional. John Paul Stevens: No, but the point would be that six people may... say they put three in. Jon Laramore: Yes. John Paul Stevens: And they would argue two was a broader remedy than necessary. Three would have done it. So, they go ahead and put three in, and then they... they... but they surely do that. Jon Laramore: Yes, they could do that. John Paul Stevens: And then fight about whether-- Jon Laramore: And that could be the subject of later litigation, but... but that's-- Antonin Scalia: --Well, they couldn't do that. I mean, they couldn't do that. That would... if that was unconstitutional. Jon Laramore: --Well, that's... that's right. Antonin Scalia: If it was unconstitutional, it would be unlawful, just as it would be unlawful if the injunction remained in effect to disobey the injunction. You're really just talking about whether you're going to have two laws prohibiting this unlawful action or just one law prohibiting this unlawful action. Jon Laramore: Yes, and I answered Justice Stevens' question the way I did with the understanding that three in a cell had not been adjudicated-- John Paul Stevens: Well, but there's an argument about it. My point is the guards would have a... a good faith defense. They thought three was okay. Do you... you would have to litigate out whether or not it was unconstitutional before you'd know the answer. Jon Laramore: --That's correct. John Paul Stevens: Yes. David H. Souter: May I go back to your... your proposition that started this discussion, that somehow it's relevant that these decrees are at least 4 years old? And for constitutional purposes, I don't know... 4 years old I guess. For constitutional purposes, I don't know why that is relevant. Don't we make the... don't we have to operate on the presumption that an order in equity, which is outstanding, is in fact an appropriate order until a contrary adjudication has been determined? And isn't that presumption just as good for a 4-year order as a 4-month order? Jon Laramore: In passing these portions of the Prison Litigation Reform Act, Congress was addressing a problem that it perceived which was-- David H. Souter: Well, I... I don't want to be picky about your form. I recognize that. But what about the answer to my question? Don't... don't we have a presumption of validity which is just as good for 4-year as for 4-month or 4-day orders? Jon Laramore: --I think that the answer to that is that that's a question of substantive law that Congress could alter. Congress could, for example-- David H. Souter: Congress could pass a statute, for example, saying all decrees of... of a court of otherwise competent jurisdiction are presumed to be invalid? Jon Laramore: --Well-- David H. Souter: Unnecessary? Could Congress do that? Jon Laramore: --Congress I think could go so far as to say in a prospective manner that injunctions in prison cases, for example, would expire after a particular period of time-- William H. Rehnquist: Thank you, Mr.-- Jon Laramore: --unless the contrary showing was made. William H. Rehnquist: --Thank you, Mr. Laramore. Ms. Underwood, we'll hear from you. Barbara D. Underwood: Thank you, Mr. Chief Justice, and may it please the Court: In light of the rule that it takes a clear statement to deprive a court of its traditional equitable powers, the PLRA's automatic stay, 3626(e)(2), does not remove a court's traditional equitable power to prevent irreparable harm while an action is pending. When prison officials move under the PLRA to terminate prospective relief, the (e)(2) stay comes into effect in the ordinary case if the termination motion can't be resolved in 30 or, on extension, 90 days. But nothing in the statute purports to strip a court of its power to grant extraordinary interim relief to either party if it finds the party is likely to succeed on the merits and will otherwise suffer irreparable harm, but it will take more than 90 days to decide the motion. And construing the statute to take away that power, of course, would raise the serious constitutional question about the power of Congress to suspend a final judgment of an Article III court without giving the court any role in the process. Several features of the statute support this interpretation. First, the words, automatic stay and the motion shall operate as a stay, are commonly used to describe a default rule for the normal case, the rule that governs unless a court decides otherwise, not a rule that courts can't change. There are other automatic stays in the law. The bankruptcy stay was apparently the model for this. Federal Rules of Civil Procedure establish an automatic 10-day stay of judgment in many cases, and as one Senator noticed in discussing this provision, it's common under State law for the State to get an automatic stay pending a government appeal. Antonin Scalia: But none of... none of these other examples that you allude to were enacted for the very purpose of inducing the court to which the stay applied to act quickly. None of those examples had that purpose in mind, did they? Barbara D. Underwood: That's-- Antonin Scalia: I mean, the bankruptcy stay, for example. The purpose of it isn't to hustle the... the courts that have litigation pending to... to get the litigation out of the way quickly. Barbara D. Underwood: --No. I think that's right. I'm simply pointing that the... to the fact that the use of the language, automatic stay, or the term, a motion shall operate a stay, is conventional legislative usage. Sandra Day O'Connor: Well, but I read the language in 3626(e)(2), any motion to modify or terminate prospective relief shall operate as a stay, as unambiguous. And I read this whole thing as a clear indication by Congress that it wanted to do exactly what the State was arguing ought to be done. Barbara D. Underwood: Well, to-- Sandra Day O'Connor: And that's automatic. Now, let's say we read it that way. Is there a constitutional violation? Barbara D. Underwood: --Well, I think there is a... a serious constitutional question. Sandra Day O'Connor: You said that, but is there a violation if we read it as a clear intent by Congress to have it operate just the way the State says? Barbara D. Underwood: Well, while we think it's difficult, on balance, as we've said in our... in our brief, we think that it can be constitutionally defended because it operates only on prospective relief and this Court's precedents permit a change in law to affect prospective relief even in what is otherwise a final decree, an injunctive decree, and because it doesn't-- Sandra Day O'Connor: --examples of... a congressional interference that would be upheld. Barbara D. Underwood: --Well, Wheeling Bridge is an... is the sort of the classic example of a case in which there was a final decree prohibiting... initially requiring the taking down of the bridge, and then it would have been... would... prohibited its... its rebuilding. Anthony M. Kennedy: Of course, there... there it was almost like a property right, a navigation servitude that the United States had the... could surrender at its will anyway. Do you have another one? Speaker: [Laughter] Anthony M. Kennedy: I... I looked and I thought Wheeling was the closest, but I think it's quite distinguishable. Antonin Scalia: It was a navigational servitude? Barbara D. Underwood: I'm not sure I would call it a navigational servitude. There... there had been a determination that the bridge obstructed commerce, interfered with interstate commerce, and Congress decided in fact it advanced commerce rather than interfering with it. I'm not sure that it was a right of the United States. I mean, I don't think this is like the... the Sioux Nation situation, for instance, in which the Government is actually giving up its own right. It changed the regulatory regime about the relationship of bridges to navigation and-- William H. Rehnquist: On behalf of private parties or nongovernment-- Barbara D. Underwood: --The way it operated in... in that case on behalf of private parties. And it was then appropriate for the injunction... for the... for the prospective relief to take account of the change in the law. It's also the case, although this wouldn't be legislative, that... that the modification of the decree in Rufo was... meant to take... was appropriate to take account of... of changes in law and... and this Court's decision in Agostini reflected the appropriateness of modifying prospective relief to take account of changes in law. Ruth Bader Ginsburg: --Ms. Underwood, those were all cases where the court made the adjustment required by the new law, and that's what (e)(1) of this statute does. It says, court, act promptly and if you don't, the court of appeals can look over your shoulder. I... I asked Mr. Laramore was there any statute that says, court, no matter how complex the decision is, if you don't meet the 30 days, extendable to 90 days, then the winner becomes a loser. I don't know any statute that operates that way, rather than saying to the court, act promptly but we're not going to turn the winner into a loser if you don't. Barbara D. Underwood: Well, I don't know any statute that operates that way either, and that's why we think this is a difficult constitutional question. There is no statute just like this. Antonin Scalia: Do you know... do you know... do you know any... any judicial injunctions just like this, that permanently control the operation of an entire agency of State government indefinitely? Barbara D. Underwood: Well, they don't-- Antonin Scalia: I mean, extraordinary... extraordinary problems may... may require extraordinary solutions. I'm unfamiliar with any other injunction by courts that... that manage an entire department of State government. Barbara D. Underwood: --Well, I don't know that this manages an entire department of State government, and-- Antonin Scalia: How many prisoners in the cell, how many... you know, what food they're to eat-- Barbara D. Underwood: --And-- Antonin Scalia: --what access to libraries and so forth. Barbara D. Underwood: --And even before the PLRA, there was available a motion to modify under... under the Federal Rules of Civil Procedure. This prescribes new standards and a new procedure for dealing with it, but the court... but... but it's not a new problem that injunctions may require modification to deal with changing circumstances. William H. Rehnquist: I... I would think Congress also could find here that many State agencies really were quite happy under... under these injunctions. They could go to the judge and get their appropriation, rather than go to the legislature. Speaker: [Laughter] William H. Rehnquist: So that Congress could treat it as a special case. Barbara D. Underwood: Congress did treat it as a special case. And the question is whether in doing so and taking the court out of the process, not only modifying the rules and modifying the... the remedy, but doing so without the intervention of a court, Congress has crossed a constitutional line. There... there is no precedent that I know of for it, and that's... and we urge that the statute be construed not to do that not only because of the constitutional principle but also because this Court's precedents consistently say that courts should not be... that Congress should not be read to have taken away a court's equitable-- William H. Rehnquist: What are those precedents-- Barbara D. Underwood: --powers. Well-- William H. Rehnquist: --I mean, just a couple of them perhaps. Barbara D. Underwood: --In Scripps-Howard, the Court... there was a statute that provided for stays pending appeal of certain FCC orders and not for others, and this Court held that the appellate court still had its traditional power to grant stays in the second class of cases, the class that the statute didn't authorize stays for. And in Honig, a statute provided that during the dispute over the placement of a disabled child, the child shall remain in the then current placement during the proceedings. This Court called it an automatic injunction, rather like the automatic stay in this statute. And yet, the Court held that the district court still had its traditional equitable power to lift that automatic injunction and make its own determination about the equitable needs for interim relief while the matter was pending. Antonin Scalia: But those laws again, like the other stays you mentioned earlier... the purpose of them was... was... it was not directed against the anticipated lassitude of the... of the district judge, to whom you want to give this power to... to suspend the stay. Barbara D. Underwood: Well, the Court has... the Congress has provided another mechanism for expediting review that was discussed earlier; that is to say, it specifically directed the district court to decide promptly and authorize mandamus for a failure to decide promptly. I don't think that it follows from that that it also intended during what might be a short time or it might be a long time, but would be a time beyond the 90 days provided by the statute, that if it took longer than that to resolve the matter, that constitutionally... relief that had been ordered by a court for a constitutional violation and whose termination might cause irreparable injury... and we're talking now... if we're talking about standard equitable powers, we're also taking about a determination that at least the prisoners have a probability of success on the merits. The court might not be prepared to find that there should be no termination, that the motion should continue, but it would have to find, for injunctive relief, that they had a probability of success on the merits and that lifting the... the existing decree would threaten irreparable harm. It would make a judgment about the balance of harms, that in that case Congress intended essentially to cause irreparable injury. Antonin Scalia: Ms.... Ms. Laramore, may I ask you the question I... I asked... Ms. Underwood, may I ask you the question that I asked Mr. Laramore? What if Congress passes a law saying that a particular category of injunctions, some of which are out there already, is no longer permissible and all outstanding injunctions which... which violate that provision are dissolved? The example I gave was no injunctions against competition. Barbara D. Underwood: Well, if you... and if you take out the question whether the Constitution-- Antonin Scalia: Yes. Barbara D. Underwood: --might independently require that-- Antonin Scalia: Yes. Barbara D. Underwood: --that injunction, I think Congress has the power to alter the law of remedies that is applicable. Whether it has the power to simply declare those injunctions void, as distinguished from sending the matter back to a court for a court to determine whether its standard is met, is another question. And-- Antonin Scalia: Well, my question is it simply says, those injunctions shall no longer be effective. It's not a matter of any standard being met. This is no longer one of the powers we give courts for the future in this kind of case, and therefore, for the future in... in these cases, those injunctions are no longer effective. Period. Is there anything wrong with that? Barbara D. Underwood: --I think Congress could do that. Antonin Scalia: I think it could too. Stephen G. Breyer: Is... to go back a minute to your statutory argument. Barbara D. Underwood: Yes. Stephen G. Breyer: I... I really wanted to hear the other side on this, but I might... I mean, the... the... you... you point out, I think correctly, that the operating language... it's the words, shall operate as a stay. Those are identical to the words in the bankruptcy statute. It says, operates as a stay. And there's nothing in the statute, as you point out, that suggests it shouldn't operate like any other stay. And there's lots that suggest it should. But there is the problem of purpose, and in terms of purpose, I'd like to know the following. I'm familiar with one prison decree in Puerto Rico. That was 20 judicial opinions, 20 years, 10 institutions, health, mental health, overcrowding four or five times the... the proper number in a cell, et cetera, 70 million dollars in fines, special masters, complicated beyond belief. I don't believe it's conceivable that you could deal with something like that in 90 days. Now, at the other extreme, there are ones you probably could. You've looked into them. Is my characterization of Puerto Rico correct, and if so, are there others that just couldn't be done in 90 days? I mean, is... if that's a big problem, then I would think probably Congress didn't want to clear them up in 90 days, but just wanted to speed things up. If it's not a big problem, it becomes more plausible that what they wanted to do was end everything in 90 days. So, empirically what are we dealing with? Are we dealing with a world where it's very unlikely Congress, which is not... which we assume... and it does normally do things that are reasonable... doesn't want to ask district judges to do the impossible? Barbara D. Underwood: Well, I'd like to say two things in answer to that question. One is that the... there are injunctions that are enormously complicated that could not possibly be totally resolved in 90 days, although it might be that parts of them could be. There's... there's nothing to prevent courts from addressing a termination motion piecemeal or, indeed, from... to prevent the State from seeking to terminate a piece of the injunction, an aspect of it, the medical care part of it, or some other part of it. But, yes, there is a... there are... there are numerous injunctions that have the kind of complexity that would make a 90-day resolution difficult. The other thing I want to say about this notion that Congress... the statute might be interpreted as simply cutting everything off and requiring the prisoners to start again is that that's what Congress rejected. An earlier draft of this statute would have done exactly that and... and there have been bills since then to do that, to say all injunctions will terminate in 2 years. In fact-- Ruth Bader Ginsburg: Ms. Underwood, is... one... one part of your argument you say if for the interim you can meet the preliminary injunction type standards, irreparable harm, probability of success on the merits, then you can keep the stay in effect. But one of the amici-- Barbara D. Underwood: --Keep the decree in-- Ruth Bader Ginsburg: --Yes. One of the amici in this case said that this new legislation provides for a preliminary injunction. And as I see that provision, the standards are identical to what you're urging is necessary to keep the decree in force, irreparable harm, probability of success on the merits. And yet, in the new act that comes with a time limit. A preliminary injunction can remain in force only 90 days. So, tops you could have 180 days. Barbara D. Underwood: --Well, we think it's implausible that the (a)(2) preliminary injunction applies to termination motions for just the reasons that I was starting to say. That is, originally this... this statute was in the form of a bill that said all injunctions terminate in 2 years. There was not only an automatic stay, but there was an automatic termination, and everyone did have to start all over again with an application for new relief. And that... there was serious criticism in hearings and so forth of that bill, and Congress amended it. And the statute they enacted distinguished sharply between termination motions... between the termination process and the initial relief process. And the termination process is now no longer just termination. It's a decision whether to terminate or continue the injunction. And that's in (v) and so forth of the statute. And the (a) provision, which contains the preliminary injunction, applies to applications for new relief. So-- Antonin Scalia: Ms. Underwood, are we talking here about serious... serious problems? I mean, don't you think that even when the injunction is dissolved after 90 days, the State would be very loathe to change anything set forth in the earlier injunction that it was not absolutely sure would comport with the new... with the new standard set forth in the new legislation? It would still be unconstitutional and therefore unlawful to do anything that would violate the constitutional rights of the prisoners, wouldn't it? Barbara D. Underwood: --Yes, but there are differences of opinion about what is unconstitutional. Antonin Scalia: Exactly, but it will be... the State will be at risk with respect to that difference of opinion when there... when there is... there had been an injunction which is now dissolved. Barbara D. Underwood: Well, I'm not sure it would be at risk with respect to liability. But in any event, predicting what the State is likely to do in the interim I suppose is a part of ordinary equitable considerations. I suppose if the State made some representations about what it was likely to do, that might make interim-- Stephen G. Breyer: And if the Commonwealth has paid 68 million dollars rather than comply, you think they suddenly will comply when there's no... when there's no decree in effect? Barbara D. Underwood: --I'm not suggesting any particular prediction about what various State officials would or would not do and suggesting, rather, that courts' traditional equitable powers, precisely designed to deal with the likelihood of irreparable injury in a particular case to a particular set of prisoners under a particular decree in a case with a particular history-- Ruth Bader Ginsburg: Ms. Underwood, on your Bankruptcy Code analogy, there are provisions that Congress made for modification of the stay. And that seems to me is... is conspicuously absent here. Automatic stay is used in both, but the Bankruptcy Act says the court can modify it, it can place conditions on it. Barbara D. Underwood: --Every other automatic stay can be lifted by a court. This automatic stay contains, sometimes under expressed conditions, sometimes under just... just general equitable authority... this automatic stay does not contain a provision authorizing a court to lift it and it does not contain a provision prohibiting a Court from lifting it, and that's why we think-- William H. Rehnquist: Thank you, Ms. Underwood. Mr. Falk, we'll hear from you. Kenneth J. Falk: Mr. Chief Justice, and may it please the Court: In section 3626(e), as interpreted by the Seventh Circuit, Congress imposes an automatic stay on a final judgment which cannot in any way be modified. This is a legislative suspension of a final judgment. This does-- Ruth Bader Ginsburg: But you will... it's not a judgment at law. It's an equity decree that is ongoing. And surely, one characteristic of an equity decree of this kind is it is modifiable. Kenneth J. Falk: --Of course, that is correct. And... and Wheeling Bridge is, at least the initial case, that talked about that. And in Wheeling Bridge, this Court's holding was that if Congress produces new substantive law which modifies the substantive law upon which the prospective relief is modified... is based, then the prospective relief can be modified. But in this case, there is no new substantive law. It is merely Congress saying at a point certain we are requiring that this stay be entered. And really-- David H. Souter: May... may I interrupt you here? Kenneth J. Falk: --Yes. David H. Souter: What if the... the point that you referred to were not, we'll say, 90 days? Let's assume it was 2 years. Everything else is... is the same in the statute except there's a 2-year grace period following a... a request for termination. Would you find a constitutional question here? Kenneth J. Falk: I think there would still be a question under Plaut because you would still be taking a final judgment at some point and saying... Congress stepping in and saying, we are modifying it. However-- David H. Souter: You would also be giving what I think most of us would assume would be an adequate opportunity-- Kenneth J. Falk: --Exactly. David H. Souter: --to review the continuing necessity for even a very complicated decree. Kenneth J. Falk: Exactly. David H. Souter: So, you could say in... in the 2-year example, that... that it was in fact operating simply as a rule for default of... of a perfectly appropriate judicial process. Kenneth J. Falk: Yes, and if you... and we view... we view the separation of powers as a functional test, is Congress invading the central prerogative of the courts. If Congress gives a court an unreasonably short deadline, a deadline which in some cases cannot be met, then obviously that is an invasion because after that-- David H. Souter: No. I was going to say, so it boils down to a question of time then. Kenneth J. Falk: --Well, yes, it does, but it also boils down-- David H. Souter: It's a fact question. And... and I think we all... I mean, Justice Breyer suggested I think a moment ago and we would... I imagine you would agree that there are going to be some decrees covered by the statute in which 90 days will be entirely adequate for the kind of review, and probably they're going to be some in... in which it would not be. But it... it comes... it boils down to a question of time in each case, doesn't it? Kenneth J. Falk: --Well, that's correct. However, what the passage of time affects, what happens after the end of that period is Congress stepping in, without having any new law, without-- David H. Souter: True. But in the 2-year example, assuming the court just fools around, we would not find it a... a... I take it you would not find it a separation of powers violation-- Kenneth J. Falk: --I think-- David H. Souter: --if the court is simply inactive. Kenneth J. Falk: --I think it will be much more problematic. On the other hand, I also-- Antonin Scalia: Why do you say more... you're talking about due process then, not separation of powers. If... if the change in time is... is the crux for you, all you're talking about is whether... whether Congress has provided enough time for these people to have the court make the proper decision. Kenneth J. Falk: --No, I don't think so. And I don't think the change of time is relevant, as I said, under Plaut. If Congress today-- Antonin Scalia: Exactly, but that's not just what you told Justice Souter. It seems to me you have to take the position... if you don't want us to treat this as a... as a due process, you have to take the position that even if it was 10 years, Congress simply has no power to terminate a judicial decree without a change, as you say, in the substantive law. Kenneth J. Falk: --And I think... I think obviously the more time Congress gives, the less chance there is there are going to be problems and the more we're going to want to give Congress that limited ability to enter into-- Antonin Scalia: You're going back again. The less chance there will be due process problems, but the chance that there will be a... a separation of powers problem is still 100 percent-- Kenneth J. Falk: --There is-- Antonin Scalia: --assuming the situation arises. Kenneth J. Falk: --That's correct. There's a Plaut problem with the statute no matter how much time is given, but... but from a general-- David H. Souter: Well, if... if Congress... if... take the 2-year example again. I think we would probably read the statute as... as including the following mandate from Congress to the judicial system. It is now the law of remedies for a court sitting... Federal court sitting in equity, remedying constitutional violations, that there must be some kind of a current review mechanism so that decrees do not run on unnecessarily. Anything unconstitutional about that per se? Kenneth J. Falk: --No. David H. Souter: Okay. We're also assuming in the 2-year example that... that Congress, in... in changing the law of remedies, gives a court an adequate time to engage in the review. We... we assume 2 years would give them time to review any decree. Kenneth J. Falk: Yes. David H. Souter: So, I take it it would follow on... on your own argument that there would not be a separation of powers problem in that case. Kenneth J. Falk: Well, it depends what happens after the 2 years. David H. Souter: At... at the end of the 2 years, Congress, in effect, is saying, if you, court, do not engage in a review for current necessity, which we're giving you plenty of time, 2 years, to do, then there will be a default rule. It will be suspended until you get busy. And do you... do you take the position that under those circumstances, 2 years, adequate time, change in law of remedies, the default rule would be a violation of separation of powers? Kenneth J. Falk: If it is applied retroactively to existing judgments, yes. And I think we're back to Plaut. The question there is can Congress reach in to a final judgment in the prospective equity sense without providing new law. William H. Rehnquist: But to simply carry over from Plaut, which was not an equitable decree, as I... to equitable decrees which have been traditionally revisable-- Kenneth J. Falk: Yes. William H. Rehnquist: --it seems to me is not an automatic step. Kenneth J. Falk: Well, they are revisable with new law. And in fact, if... if we look at the historical-- William H. Rehnquist: Well, I don't know that Wheeling Bridge is as clear as you say about the Congress having enacted a new law. I... I think one can read it differently. Kenneth J. Falk: --But... but still, if we look at Plaut, there was a concern of this Court's opinion in Plaut of what was happening at the time, both before and after the passage of the Constitution, with State legislatures sitting as super courts either directly reviewing judgments or passing legislation. Some of those cases, at least as pointed out by the amicus in the... the Taylor amicus at page 5 of their brief, concerned cases in equity. If there is an injunction-- Antonin Scalia: Yes, but... but they didn't make distinctions between... between new legislation... new legislative action that involve what you call substantive law and new legislative action that alters the remedies available for courts. Surely, those... that prohibition applied to both. If you're dealing non-prospectively, certainly it's just as... just as bad to... to change the law, the substantive law, as it is to change the remedial law. You have to let what... what's over the dam be over the dam. But once you're into the prospective area, why should there be a distinction between a change in substantive law and a change in the remedies that the court is allowed to impose in the future? I don't see the-- Kenneth J. Falk: --Because if Congress says to a court, you must suspend or even terminate this order, period, I don't think Congress is functioning as Congress. Congress is functioning from a separation of powers standpoint in a judicial capacity. Antonin Scalia: --But it can change the substantive law and say, you... you may not enforce this decree in the future because we're changing... we've decided we're going to change the law on you, that... that you... that was the basis for the decree? Kenneth J. Falk: Of course, it can and that's the function of Congress. Antonin Scalia: I don't see why you say of course for the one and not of course for... it's also the function of Congress... just as it is to enact substantive law, it is a function of Congress to enact laws prescribing the remedial powers of the courts within constitutional limits. And that's... that's not... not the issue here, whether this is within the constitutional limits. Kenneth J. Falk: But-- Antonin Scalia: Isn't that a fully legitimate legislative power of Congress? Kenneth J. Falk: --But (e)(2) does not do anything. It does not prescribe the remedial power of the court. Stephen G. Breyer: I thought it did. I thought that the... my understanding of this... and I'd like you to clarify-- Kenneth J. Falk: Sure. Stephen G. Breyer: --is that Congress introduced a new standard for all cases, and... or they thought it was new. The standard would be that you can't go... you have to be narrowly tailored-- Kenneth J. Falk: That's correct. Stephen G. Breyer: --and you can't go beyond the... and it say that... you can't go beyond the Federal right that's infringed. And... and it said, that applies to every new case that's ever going to be brought. Kenneth J. Falk: That's correct. Stephen G. Breyer: And it also applies to those in the old cases, but only in the future. And now what we do is we have a 2-year period or a 10-month period or a 90-day period where, as we look at the prospective relief and bring it into conformity with the standard that's going to apply in the future for everybody. Now, is that... is that how it works? Kenneth J. Falk: Well, that's how (b)(2) works, but that's not how (e)(2) works. (e)(2) doesn't look to future standards. (e)(2) says nothing about standards. (e)(2) says no matter what you found, no matter what the court did, no matter how egregious-- Stephen G. Breyer: Oh, yes. Kenneth J. Falk: --the situation was-- Stephen G. Breyer: So, but now... that's... that's the automatic stay, of course, which is the substance here, the issue. But I was speaking in generally and in terms of the substance of the... in terms of the substance of the thing, how quickly you have to decide. Is there any constitutional objection, do you think, if you were to interpret those words, shall operate as an automatic stay, like any other automatic stay and say that's subject to termination for good cause and with the burden shifted the other way, et cetera? Kenneth J. Falk: --I'm sorry. Is the question whether-- Stephen G. Breyer: In other words, if you adopt the SG's interpretation of the words, shall operate as an automatic stay, then in your opinion is there still a constitutional problem? Kenneth J. Falk: --No, but we do not feel that the statute is that pliable. We think the intent of Congress is clear-- Stephen G. Breyer: Why isn't it that pliable? What they said... they used the same words as any other statute. They have a set of appeals provisions that... that really don't make much sense unless you interpret it their way, and in addition, you have to assume an intent of Congress that they were asking at least some district judges to perform the impossible. So... so, why... why wouldn't that be a perfectly reasonable interpretation of words that don't demand a contrary interpretation? Kenneth J. Falk: --The purpose of the statute is to circumscribe the district court's discretion as greatly as possible. Stephen G. Breyer: Well, it's... well, is there anything in the legislative history that suggests that the SG's interpretation, which is consistent with the language, is not what Congress intended? Kenneth J. Falk: Well, the 1995 conference report discusses the fact that this was designed to make judges rule more promptly. Now, that-- Stephen G. Breyer: Well, more... absolutely. This shifts the burden. You have mandamus. You couldn't delay 3 years. You'd have to get this thing decided quickly, but you wouldn't be asking them to do what is impossible. Kenneth J. Falk: --But the legislative history I believe... and there's not a... there's not a lot of legislative history, but the legislative history is replete with examples brought by prison officials and by representatives themselves of what they deem to be improper interference by courts. Stephen G. Breyer: Exactly. And... and where that would be taking place, you would have an automatic stay. It could be set aside only for cause. You would have mandamus if the judge doesn't decide quickly, and you would have an immediate appeal. All right. So, we would cure that. Kenneth J. Falk: But again, given that... given that legislative history and given that the purpose of the statute in the larger sense is to circumscribe the discretion of these courts, which Congress clearly from the legislative history felt was running amuck in some sense, it would-- Ruth Bader Ginsburg: Mr. Falk, do you know in... in this connection whether there is an automatic stay provision like this one? Justice Breyer said it's like any other provision for an automatic stay. I... I brought out before that the Bankruptcy Code is quite explicit that Congress... that the... the court can modify on condition that automatic stay. Is there another piece of legislation, just as automatic stay, where the court can say, yes, but we don't think so in this case? Kenneth J. Falk: --I'm not aware of that, Your Honor. And... and from a substantive standpoint, this is a unique situation, which I believe you pointed out, which is that the result of this automatic stay is to let the moving party basically win their case. After... after 30 or 90 days, the State will get everything it is ultimately going to be asking for. It's going to be getting a suspension which is, in effect, a termination of all that really... and that... that's the uniqueness. Antonin Scalia: What's wrong with that? I mean, don't you think Congress could pass a statute... let's take an extreme one... saying no injunction shall issue for more than a year? After a year, if... if the situation is... is not totally resolved, you go back to square one and have to bring another lawsuit and establish a violation all over again. Kenneth J. Falk: I do not think Congress could pass that law with regard to judgments that have already been entered. I think that would be purely retroactive in the Plaut sense. You'd be imposing a new ground of reopening that did not exist when the judgment went into effect. Antonin Scalia: Yes. That... that would be your position. Well, I... I don't agree with that. Kenneth J. Falk: And in light of that, we think this is a violation of the separation of powers under Plaut because Congress has commanded the reopening of a judgment in violation of the separation of powers. Also from a separation of powers standpoint, as I indicated, this statute does invade the central prerogative of the court, the ability to rule and decide upon cases subject only to review by superior courts. Sandra Day O'Connor: Well, it really doesn't affect the determination of the violation, does it? I mean, the determination-- Kenneth J. Falk: No. Sandra Day O'Connor: --by a court that there's been a constitutional violation is not affected. Kenneth J. Falk: No, but the court-- Sandra Day O'Connor: What is affected if its upheld is the remedial power of the court, not the substantive holding of the violation. It would place substantive limits on the remedies that can be employed. Isn't that correct? Kenneth J. Falk: --It would wipe out the remedy that had been ordered. I mean, (e)(2) takes the judgment... and I believe the judgment includes the remedy... and it wipes out all... everything according to the definition of prospective relief. Everything with the exception of damages is prospective relief. So, all declarations as to past violations, all injunctions, any collateral matters... that is stayed. Sandra Day O'Connor: Unless the court determines that the relief meets the remedial standard adopted by Congress, that it is narrowly tailored and no greater than necessary, and so forth. Kenneth J. Falk: That's correct. And then we're back to the fact that 90 days is admittedly inadequate time in some situations to do that. So-- William H. Rehnquist: Well, you're not suggesting, are you, Mr. Falk, that Congress can't make rules regarding the injunctive authority of... of courts? Look at the Norris-LaGuardia Act. Kenneth J. Falk: --No, we are not saying that at all, but if you look at Norris-LaGuardia and if you look at TROs, what you're dealing with there is Congress saying we're giving you 5 days, 10 days, whatever, after which you, court... the temporary order, the ex parte order, whatever goes away, but you, court, you can still function as a court. You can enter a preliminary injunction. You can do something. Here not only is Congress saying to the courts, after 90 days, you... we... we step in. We're going to make the decision, but-- William H. Rehnquist: I... I thought you had said a moment earlier that Congress was just very, very limited in dealing with what you referred to as the central authority of... of the courts. And I don't think that... that's correct. I think you have to qualify that statement a good deal. Kenneth J. Falk: --Well, but even in the context of Norris-LaGuardia or temporary restraining orders, Congress still gives the court the power to act as a court. There are deadlines. If they are-- Ruth Bader Ginsburg: Mr. Falk, I don't understand the analogy between the TRO and Norris-LaGuardia, these short-life orders. I thought that those time limits were imposed by Congress not to squelch the courts, but to respect the rights of a defendant who has been slapped with an injunction and told to stop and in many cases on an ex parte basis. So, I think it... it would be arguably a... more than arguably... a violation of due process if a court were given the power to stop a defendant from acting cold until the court gets around to adjudicating the merits. Kenneth J. Falk: --Of course. And the... the unique thing about (e)(2), if you look at the 10-day limit, for instance, a... on a TRO, under (e)(2) the analogy would be after 10 days the plaintiff would win and would not... and the court would not be able to stop that. That's exactly what happens here. After 90 days-- Stephen G. Breyer: Yes. Kenneth J. Falk: --I'm sorry. Stephen G. Breyer: Finish it. Kenneth J. Falk: I'm sorry. After 90 days, the State wins and the court then cannot do anything to alter that fact until they have their final hearing. Antonin Scalia: Mr. Falk, I come back to your... your objection. The telecommunications policy of the United States was largely directed by the... by the United States District Court for the District of Columbia for about 25 or 30 years under a consent decree entered into by AT&T. Do you really think that Congress did not have the power to simply say, we do not want our national telecommunications policy directed by judicial... by judicial injunction for the future, and henceforward, this... this decree shall have no force and effect? Kenneth J. Falk: I think that would be a problem-- Antonin Scalia: The only thing Congress could do in that situation was to amend the substantive telecommunications law? Kenneth J. Falk: --To the extent... yes, to the extent that they were acting retroactively. Antonin Scalia: I think that's extraordinary. Stephen G. Breyer: Is... what do you say about the canon of... avoid a difficult constitutional question, interpret the statute? Isn't it made for your argument? That is to say, wouldn't you if you were a Congressman prefer an interpretation that gave you 98 percent of what you wanted rather than one that gave you 0 percent because it was perfect? I mean, in other words, the 100 percent is struck down and they get nothing. So, isn't that what that canon is there for? Kenneth J. Falk: I still think we have to operate within the intent of Congress, and the question is whether the language is explicit, which it's not, or whether there's inescapable inference that Congress intended to preclude this... the court having this power. And I believe there is, as did the Seventh Circuit. Stephen G. Breyer: The one thing I should read to make sure there's that inescapable inference is the horror stories about judges out of control? Is that the one that I should-- Kenneth J. Falk: I believe if we put that in context, yes. I think that would be-- Stephen G. Breyer: --Well, then we control them and that's the mandamus and so forth. Kenneth J. Falk: --But again, Congress clearly felt that the courts were not... any of the courts, whether the district courts or the courts of appeals, were not controlling themselves, which is why we have such extreme limitations in the PLRA. And for these reasons, we think the Seventh Circuit should be affirmed. William H. Rehnquist: Thank you, Mr. Falk. The case is submitted.

William H. Rehnquist: We'll hear argument next in Number 88-1281, Alex Ngiraingas v. Francisco Sanchez. Mr. Siegel. Jeffrey R. Siegel: Mr. Chief Justice, and may it please the Court: The issue before the Court today is whether the territory of Guam is liable for deprivations of civil rights. To answer that question the Court must address one, possibly two other questions. The first of these is whether the territory is a person for the purpose of the Civil Rights Act, and if it is, whether there is some other form of sovereign immunity which may protect the territory from liability. Any analysis of the word person in the Dictionary Act must begin with the Dictionary Act. The Dictionary Act, passed only months before the Civil Rights Act in 1871, defined persons to include bodies politic and corporate. This Court has ruled in Puerto Rico v. Shell that the territory of Puerto Rico was indeed a body politic, and the Third Circuit has held that the territory of the Virgin Islands was a body politic as well. Indeed, if we examine the nature of the territory and the self-government invested in the territory by the Organic Act we will find, I think, that... that it makes sense to conclude that territory is indeed a body politic. There are free elections in the territory. The citizens of the territory elect their local representatives and congressmen and a non-voting delegate to Congress. Indeed, there are also local courts, and a quite vibrant and active democracy exists in Guam. There has been some suggestion, however, that the Dictionary Act is not applicable in defining, or at least has been somewhat diminished in defining the word person. The first basis on which this has been suggested is the fact that the 1871 act was taken from the 1866 Civil Rights Act, specifically Section 2. However, Congress, in the intervening period, did pass the Civil Rights Act, and that is persuasive evidence that Congress intended to apply that definition to the word person in Section 1983. Respondents have argued that the 1874 revision and recodification of laws, and the repeal and reenactment of the Dictionary Act, somehow overrides this Court's finding in Monell that indeed the Dictionary Act is applicable to this term. I would also suggest that the 1874 Congress could not have effected the intentions of the 1871 Congress when it passed Section 1983. The second factor this Court relied upon in Monell and finding municipalities to be persons were the broad construction and remedial nature of Section 1983. I would suggest that these same principles apply to include the territory within the meaning of the word person. Section 1983 is to be given as broad a construction as possible, and technical definitions should not be used to exclude any body politic from the term person in Section 1983. William H. Rehnquist: Did the Court literally say in Monell that Section 1983 was to give... to be given the broadest possible construction? Jeffrey R. Siegel: Well, maybe that is overstating it just a bit. William H. Rehnquist: It's a strange view, certainly. Why on earth would you give anything the broadest possible construction? Jeffrey R. Siegel: Well, the broadest construction consistent with the terms used. I think the Court's intention was to not hang the liability or applicability of Section 1983 upon some technical reading of the statute. William H. Rehnquist: Well, the broadest possible construction, I suppose, would include states. Jeffrey R. Siegel: I think there is an argument to be made for that. However, in Will, and I think the substance of Will is that the interest of federalism in the Eleventh Amendment override that broad construction. Indeed, it makes sense that Congress would not intend, given the context of the act, that states would be liable under... states would be persons for the purpose of Section 1983 given their Eleventh Amendment immunity. And the petitioners would submit that that is indeed the overriding considerations this Court employed in Will, in holding that states were not persons, that they are given a special respect and special sovereignty by the Constitution and the federalist system. Byron R. White: Well,... sort of a standard rule of construction that if you, if you intend to include a sovereign or a state you ought to say so. Jeffrey R. Siegel: The rule of construction I think Justice White is referring to is that person does not ordinarily include the sovereign. However, that is not a hard-and-fast rule, as this Court ruled in Omaha, in Wilson v. The Omaha Tribes. The Court must examine the purpose and context, as well as the legislative history of the act. Congress would never, and has never indeed, considered any territory to be a sovereign. Congress is the plenary sovereign over any territory, and certainly over Guam. I suggest then, that given that context and given that understanding of Congress,-- Byron R. White: You mean territories are just subject to tort suits despite the territorial legislature saying they are immune? They have sovereign immunity, or what? Jeffrey R. Siegel: --They have sovereign immunity from territorial... from acts arising on the territorial law in territorial courts. Byron R. White: Why do they have that? Jeffrey R. Siegel: Based on this Court's decision in Polyblank that the logical and practical-- Byron R. White: Well, that's a long-standing tradition, isn't it? Jeffrey R. Siegel: --Yes, it is, Your Honor. Byron R. White: But you say 1983 wasn't... didn't have to respect that kind of immunity. Jeffrey R. Siegel: I'm saying that it is illogical to consider that Congress would have intended to immunize a territory, which is a creature of Federal law, from an act of Federal law. The logic of Polyblank is that the territory itself creates the rights which flow to the citizens of the territory. Therefore, it is immune. That's the explicit language. I would suggest that there, that any immunity from the Federal law must be a matter of congressional intent. And there is no tradition of immunity from Federal law in territories, because they are indeed creations of Federal law. It's internally inconsistent. William H. Rehnquist: What about our decision in District of Columbia v. Carter? You know, certainly the District of Columbia was a creature of Federal law, too, but we said that 1983 as enacted didn't cover it, didn't we? Jeffrey R. Siegel: Because this acts on the color of... District of Columbia law were not included in... in the... in 1983 at that time, and this Court held that District... properly so, that the District of Columbia is neither a state or a territory. William H. Rehnquist: Whereas you say that Guam would be a territory. Jeffrey R. Siegel: Yes. Anthony M. Kennedy: And you think Carter would come out differently now? Jeffrey R. Siegel: Yes. Anthony M. Kennedy: Because 1983 now says territory? Jeffrey R. Siegel: I think that's some evidence, although the cases obviously are not consistent in that regard. States are included in Section 1983, yet they are not persons. The District of Columbia circuit has held the District of Columbia liable under the Civil Rights Act, and I think that is appropriate. I think the distinguishing factor is the Eleventh Amendment and Federalism. I think it is the sovereignty of the states which set states apart from territories or municipalities. And I think that can be drawn also from the conclusion in Monell that Section 1983 applies to all entities which are not parts of the state for Eleventh Amendment purposes. And the history of this Court's decisions imply that distinction, imply the Eleventh Amendment as being an important factor in the interpretation of Section 1983 and governmental liability. Sandra Day O'Connor: And why aren't we bound by the Dictionary Act definition of persons? Jeffrey R. Siegel: No, I believe this Court should be bound by that act. Sandra Day O'Connor: Doesn't that suggest to us that territories are not persons? Jeffrey R. Siegel: No, territories are bodies politic, as this Court has held in Puerto Rico v. Shell. Byron R. White: That's the original form of the Dictionary Act. Jeffrey R. Siegel: The 1871 version, yes. Byron R. White: And, as amended, what did it say? Jeffrey R. Siegel: It said corporations and partnerships were substituted for-- Byron R. White: And you say that we shouldn't even look at that? Jeffrey R. Siegel: --No, that was passed later. The Court also has relied in making determinations of governmental liability under Section 1983 on the legislative history of the act. But I would suggest that this Court did not base any of its decisions on the specific legislative history of Section 1983. Indeed, there was only one, one mention of specific instance of the understanding that a city would be liable under Section 1983 in the specific legislative history of that act. I think that the Court has taken the term person and found the legislative intent within the definition of that term. It would seem to me that, given the historical context of the Civil Rights Act, that Congress would have intended it to ply... apply in territories as well, and to territories. This is a reconstructionary act. Indeed slavery in the territories had been something that was heatedly debated both prior to the Civil War and after it. Witness the Missouri Compromise. Antonin Scalia: On that line of reasoning they probably would have wanted it to apply to the states as well, in fact especially. Jeffrey R. Siegel: Well, given the... given the constitutional immunity which this Court relied on... on... in Will, I think there is ample basis for the Court's decision in Will. Antonin Scalia: That was a decision not based on immunity, but based on the... the perceived intent of the Congress at the time. Jeffrey R. Siegel: Right. And I think in perceiving that intent this Court applied two standards that apply only to Eleventh Amendment suits, specifically that indeed the Eleventh Amendment applies only to states, and that Congress would have made... would have clearly expressed its intention to alter the constitutional balance. Now, that balance is not at issue here. Antonin Scalia: Don't you think it is much more likely that the Reconstruction Congress would have been, would have been more concerned about states than it would have been... about constitutional violations by states than it would have been about constitutional violations by territories that are subject to the complete control of the Federal Government? Jeffrey R. Siegel: There is no question that states were the main focus of the debates on Reconstruction. But I would also note that Congress would not intend to apply a remedy such as the Civil Rights Act in states, and provide a haven for bigots and Ku Klux Klan and what have you in territories by failing to apply the act there. Byron R. White: The people who were doing the violating wouldn't be immune in their individual capacity. Jeffrey R. Siegel: No. Byron R. White: So it's not really a haven, is it? Jeffrey R. Siegel: Well, if... if Section 1983 were not construed to apply in territories, and I suggest-- William H. Rehnquist: Well, they would have to flee to the territory and then be elected to some office, wouldn't they? [Laughter] Jeffrey R. Siegel: --Which might not be too hard. [Laughter] The second issue that this Court must face if it determines that territories are persons is the issue of sovereign immunity, and I think we have touched on that already. This Court has never held any governmental entity to be immune from the Federal Civil Rights Act, other than states under the Eleventh Amendment. And indeed, when it has held such an immunity existed with respect to individuals, it has found only immunities which were well grounded in reason and history. There is no immunity for Federal action in a territory... against a territory. The territories, as I stated before, are acts of Congress, given the powers... given their powers by Congress, and there has not been one case cited to this Court or in any brief which would demonstrate an immunity to a claim brought under Federal law with respect to a territory. I think the Third Circuit's reasoning in Frett, in Ocasio is also appropriate for consideration. Congress would not have applied a bill of rights, and specifically extended the Fourteenth and Fifth Amendments to the territory, and at the same time intended to keep the territories immune from actions brought pursuant to Section 1983, if indeed the territories are persons. By way of conclusion I would just like to add perhaps a practical point, that the territory needs this remedy. The people of the territory need to have a sense that their civil rights are secure. There is no effective remedy under Section 1983 when the only person you can sue is an $8.00 an hour police officer. William H. Rehnquist: But the territorial legislature could give the people everything that Section 1983 can give them, can't it? Jeffrey R. Siegel: Yes. William H. Rehnquist: And yet the... the legislature doesn't realize that the people need this remedy? Jeffrey R. Siegel: No. Byron R. White: What about... what about the people of the states? Jeffrey R. Siegel: I think they are in the same position, frankly. Byron R. White: So we should give the people in the territory favored position as compared to the people of the states? Jeffrey R. Siegel: The states are the entities that have the favored position. John Paul Stevens: May I ask this question just to get it straightened out in my... in states of course you have a lot of cities you can sue, municipal corporations. Do we have separate municipal corporations in the territory of Guam that are subject-- Jeffrey R. Siegel: There are local villages, but the only village officer is what... is a mayor, and he essentially has no power. They don't run any of the police force [inaudible]. John Paul Stevens: --The local villages or towns have police forces, you say? Jeffrey R. Siegel: No, they don't. John Paul Stevens: So the only governmental entity that has a police force that can engage in the kind of conduct we are talking about is the territory itself? Jeffrey R. Siegel: That's correct. John Paul Stevens: Which is somewhat different from the situation in most states. Jeffrey R. Siegel: That is correct. And that is another important point. The government of Guam is almost an overwhelming power. They license cars, license businesses, run the only police force, run the only hospital, provide telephone service, provide electrical service, provide water. And without an effective remedy against an entity of such great magnitude, I suggest that it is going to be a difficult task to instill American traditions of democracy and liberty in the territories. I'd like to reserve the remaining time, please. William H. Rehnquist: Very well, Mr. Siegel. Mr. Mason. John Patrick Mason: Mr. Chief Justice, and may it please the Court: Whether the government of Guam is liable under Section 1983 is a question of congressional intent. What did Congress intend concerning the territories in 1874, not 1871, but 1874, when territories were added to the 1871 Civil Rights Act, and what did Congress intend in Guam's Organic Act? Now, Petitioners would disregard Guam's mandate for self-government in its Organic Act, and Petitioners would avoid the intent of Congress to allow the people of Guam, through their duly elected legislators, to balance the interests of private litigants and the goals of public government. One of the first things you can look at is the purpose of the Civil Rights Act of 1874. A major purpose was to provide a Federal forum to enforce Fourteenth Amendment rights. Local officials in the states either would not or could not grant the citizens the equal protection, due processes and privileges and immunities guaranteed by the Fourteenth Amendment. However, in territories the situation is different. And I think there is some confusion here about the courts of the territories, because the territories had Congress... Congress established the courts in the territories, and Congress... or the President appointed the judges that presided over those courts in the territories. In... you can see in the 1874 revision and consolidation of the Federal laws, the provisions common to all territories, it indicates that under Federal law the Congress had a Supreme Court in each territory with three judges who were appointed by the President. And then the territories were divided into three judicial districts. And one of those judges, then, would preside in that judicial district. And then the courts in those districts would... the judges in those districts would hold court "for the purpose of hearing and determining all matters and cases, except those which United States is a party. " So these were courts appointed by Congress, or created by Congress, and these were judges appointed by the President. And if a 1983 action was to be brought in the territories, it would be brought in those courts. So, we didn't have the same situation as we had in the states, where they needed to provide a Federal forum. In fact, the courts of the territories were, in the sense that they were created for the territories by the Federal Government with judges appointed by the President, a Federal forum. So that purpose really doesn't apply in the territories as it did in the states. Speaker: Let me... let me just stop you there for a minute. John Patrick Mason: Yes. John Paul Stevens: Were there other courts besides the courts that you have just described in the territories on the continental... on the North American continent? John Patrick Mason: There were justice of the peace courts and probate courts, but if you look at the provisions-- John Paul Stevens: What courts, in your view, were supposed to enforce 1983 in the territories? John Patrick Mason: --That would be brought in the district court of the territory in 1874. John Paul Stevens: The ones that you have just described? John Patrick Mason: Yes. John Paul Stevens: Then why wouldn't they also be brought in the similar courts in Guam? John Patrick Mason: Well, on Guam... okay, the situation was on Guam, in 1950 when Congress gave Guam self-government under the Organic Act, they created the District Court of Guam, and it was the same. That district court had all jurisdiction, but then they allowed the legislature of Guam to create such other courts as it decided. Speaker: Right. John Patrick Mason: And so, one year later the legislature created well, basically the island court. But it... at that point it left jurisdiction in the district court for most felony cases and for cases... civil cases above $2,000. So, there again, if you had a civil rights action at that time brought in a court of Guam it would be brought in the district court unless it was less than $2,000. But, so... but in 18... in 1974 then the legislature went ahead and created the Superior Court of Guam, which at that time then actions under Federal law were brought in the district court and actions under local law were brought in the Superior Court of Guam. But the appeals from this superior court still go to the District Court of Guam before, and then to the Ninth Circuit. So District Court of Guam still has that jurisdiction. But in 1874, if we look at the intent of the Congress when it added territories, you can see that at that time... what they were trying to get at that a Federal forum did exist in the territories at that time. The situation on Guam that happened in 1974 didn't apply to the territories at that time. Another important thing, of course, in deciding what the intent of Congress was is the common law sovereign immunity that existed in the territories. And this Court has held that Congress did not intend to override established common law defenses and immunities without specific language to the contrary. In 1874 the territories had an established tradition of immunity from suit without its consent, and this Court so held in the Kawananakoa case. And in fact in that case this Court specifically rejected the argument that was made that territories are like municipal corporations. And the Court held that the territories had immunity by the nature of the type of government that was created in their Organic Act. And then in the Rosaly case in 1913, this Court then applied that reasoning to the unincorporated territories. There were, of course, only incorporated territories in 1874, but the reasoning was applied to the unincorporated territories, which Guam is, in 1913 by this Court. Now, Petitioners argue that Kawananakoa and Rosaly don't apply, because that means there is only sovereign immunity in the local courts under local law. Well, what that overlooks, of course, as I talked about a minute ago, is the nature of the court system in the territories. And in fact these congressionally created courts were the local courts, although they were created by Congress. And they were to hear all matters and cases, and that would include 19... Section 1983 actions. And also, Kawananakoa was a... the action where immunity was held... was upheld was actually brought in one of those congressionally created courts, and the immunity was upheld. And also, Kawananakoa cites with approval three prior territory cases, which are Wisconsin v. Doty, Langford v. King, and Fisk v. Cuthbert. And there again, those were cases in which immunity was upheld and the courts in which the cases were brought were these congressionally created territorial courts. John Paul Stevens: What was the source of the cause of action where immunity was upheld in that case? I don't remember it. John Patrick Mason: What were the courts? John Paul Stevens: No, no. What was the cause of action which was defeated by the-- John Patrick Mason: Okay, the cause of action... or causes of action... the Langford case was a writ of mandate to enforce... force the county treasurer to accept a writ in payment of taxes. John Paul Stevens: --So that was a claim based on the territorial law that was sought to be enforced? John Patrick Mason: Yes. I think all three... all three of those cases were based on territorial law. John Paul Stevens: Would you claim that there would be immunity in Guam from a suit, say, by a resident of Hawaii for negligence committed by an agent of Guam in Hawaii? John Patrick Mason: No, I don't think there would be. John Paul Stevens: It would not be sovereign immunity there. I'm asking the-- John Patrick Mason: Well, the-- John Paul Stevens: --Then they had Nevada against Hall. You don't question the continuing validity of Nevada against Hall, do you? John Patrick Mason: --Well, no, if the action-- John Paul Stevens: Or you don't claim that Guam has a greater immunity than Nevada claimed in that case? John Patrick Mason: --No, I don't think that is necessarily true, no. Not at all. But as to laws, again, the jurisdiction of these courts was for all cases that were brought in the territory. And so when local... when Federal laws are created and made specifically applicable to the territory, then they are basically a law of the territory, if Congress makes them applicable. John Paul Stevens: Well, if your emphasis is so much on the courts, I don't know if it will be possible or not, but if the Plaintiff could get jurisdiction over Guam by some form of process and sue them in the Federal court in Hawaii... would the Hawaiian... the Federal district court in Hawaii have jurisdiction over such a claim? John Patrick Mason: Well, it would depend on Guam's immunity. I think, so it would depend-- John Paul Stevens: Well, then your... it doesn't seem to me your immunity has much to do with the court in which the action is brought. That is what I... I am puzzled about so much reliance on the nature of the tribunal. John Patrick Mason: --The reason I am bringing up the courts is that they claim because... that these are... that these courts are somehow courts of a separate sovereign, and therefore the common law immunity doesn't apply, the common law immunity which was incorporated in the 1871 Civil Rights Act, it doesn't apply. But what we're saying is it does apply in those very courts. And those very courts were the ones in which the Kawananakoa case was brought. The other thing we can look at, and this is... this is... specifically is the definition of the word person. We can look at the act itself. And I think again there was some confusion because territories were not in the act in 1871. It was only prohibitions for persons acting under color of state law. It wasn't until 1874 that territories were added. And in 1874, when territories were added, that was, in that same act, was when the Dictionary Act was changed. And it was changed from bodies corporate, or politic and corporate to partnerships and corporations. Therefore, in that same act... and the reason for the change was stated by the committee, was so that the... a drafter of a Federal statute would not have to take care to exclude states, territories, foreign governments and the like from the definition. So here, when territories are specifically added, the definition under Federal law does not include territories. Another indication of congressional intent in both 1874, and this has to do with Guam also, is... and an indication that the Federal... the Congress is really treating territories like states, was the provision that was in the Organic Acts of the territories at the time. And this is in the provisions common to all territories, it is stated that the Constitution and all laws of the United States which are not locally inapplicable, of course 18... Section 1983 had been made locally applicable in 1874, those which are not locally inapplicable shall have the same force and effect in the organized territories as elsewhere in the United States. So those laws were to have the same force and effect. Then on Guam in 1968 the Fourteenth Amendment was specifically added to the Organic Act and those rights that were in the Fourteenth Amendment. And when the Congress added that provision it specifically stated in that same amendment the provisions, and that would include those provisions of the Fourteenth Amendment, shall have the same force and effect as in the United States or in any state of the United States. It went on to say in that same amendment all laws of Congress in the Guam legislature inconsistent with this are repealed to the extent of their inconsistency. So I think that this indicates that the residents of Guam, like the residents of the states, in Section 1983 action were to have the same rights. They were to have rights against individuals who violated their constitutional rights. But it did not provide for damages against the territory governments, just like it didn't in the states. Now, if we... another indication, of course, is the role in 1874 that the Federal Government played in financing this... the territories. At that time there were, under the provisions common to all territories, there were direct appropriations by Congress to the territories. And they paid the expenses of the legislature and government appointed officials, and there was even a direct appropriation, a contingency expense for the Territory of Washington of $1,500 and of $1,000 for the other territories then existing. And because of the direct financial role that Congress played, it's doubtful that they would intend to incur liability for the territories without specifically saying so. Now, the other indication of intent, we go to the Organic Act of Guam. And when Congress exercised its plenary control and created the government of Guam in 1950, it created one of those entities it had under Kawananakoa: common law sovereign immunity. We have to remember, before 1950, if you brought a suit against the administering body of the territory of Guam, you brought it against the Navy. So it was a suit against the Department of the Navy. It wasn't until 1950 that the government of Guam was created. And they created one of those bodies in the tradition of the territories that had common law sovereign immunity with separate branches of government with separate powers. But there was a question then even whether you could sue the government of Guam, even if they consented. So in 1959 the Congress corrected that. And in corrected that, they gave... stated clearly in the situations in which immunity would be waived. They said that the government of Guam could be sued with the consent of the legislature evidenced by enacted law in contract and in tort. And the Assistant Secretary of the Interior submitted a letter with the bill when it went before the Congress, and he indicated in there the purpose was to allow the officials, or the elected officials of the territory to determine when the best interests of the territory would be served, you know, by balancing private litigants against public goals of government. Now, the Guam legislature has struck the balance under which authority they were given by Congress, and they have allowed negligence actions against the government with a maximum of $100,000 for wrongful death and $300,000 for personal injury. The petitioners' claim would allow unlimited damages for intentional torts under Section 1983. Now, this would negate the intent of Congress and negate the intent of Guam's duly elected officials. Therefore, we feel that since the intent of Congress, at least in 1959, it is explicitly clear with respect to torts, and it says we are going to let the Guam legislature balance the interests in this, in cases of tort. And the Guam legislature has done that-- Byron R. White: xxx use that to interpret 1983 as amended in 1874? John Patrick Mason: --Well, it... what it does, it gives an intent of Congress in creating this entity called the government of Guam. I don't think it amends everything... anything. It just... it says how... how this would apply. Byron R. White: But you say we should use... we should refer to this action in 1959 to interpret the 1974 as amended 1983... the 1874. John Patrick Mason: Well, I think there is two indications of congressional intent. There is what happened with the territories in 1874, you can look at that, and then as to Guam specifically as to congressional intent, you have to look at the... because Guam didn't exist of course then. You have to-- Antonin Scalia: That isn't congressional intent as to what this statute means. You could, you can consider the 20th century action to be indication of what Congress believed 1983 meant. Right? John Patrick Mason: --Well, I think-- Antonin Scalia: But Congress might have believed wrong. John Patrick Mason: --Well, I think it is an indication of how... what liability Congress intended to create for the government of Guam, where they had not specifically stated there was liability. Antonin Scalia: What liability it thought it was creating. John Patrick Mason: Well, since this is-- Antonin Scalia: You're not saying that the act that created Guam amends 1983 insofar as Guam is concerned, are you? John Patrick Mason: --No. Antonin Scalia: Okay. So then all you are saying is that that shows what Congress thought the law was in 19... in the 1950s. John Patrick Mason: Well, as to Guam it shows what Congress... the law that Congress made, and that it's... the 1874 act's applicability, you have to look at the two to determine congressional... Congress could have said in 18... in 1959, the territory of Guam shall be liable for Section 1983 suits. And, you know, you can say did that amend the law or not. It just made them specifically liable. But what they did say is, in tort, we are going to let the Guam legislature say whether there is liability. William H. Rehnquist: When did the United States acquire dominion over Guam? John Patrick Mason: That was in 1890... 1898, in the Treaty of Paris. It was Guam, Puerto Rico-- William H. Rehnquist: The end of the Spanish-American War. John Patrick Mason: --Yes. Yes. And at that time Guam was placed under the jurisdiction of the Navy, and it continued that way until 1950. And basically the naval governor had total authority on Guam, administrative authority. It wasn't until 1950 that Guam was able to obtain self-government, in 1950. Antonin Scalia: xxx the years, wasn't it, too? John Patrick Mason: Well, there wasn't... Puerto Rico obtained self-government a lot sooner than that. Antonin Scalia: Sooner, but for quite a time there was a naval governor there. John Patrick Mason: Yes. Guam waited 50 years. I don't think Puerto Rico waited nearly that long. And so we would ask this Court then to uphold the decision of the Ninth Circuit, that Guam is not subject to liability under Section 1983. Thank you. William H. Rehnquist: Thank you, Mr. Mason. Mr. Feldman, we'll hear now from you. James A. Feldman: Thank you, Mr. Chief Justice, and may it please the Court: The position of the United States is that, for the reasons given in our brief, first, Guam is not a person for purposes of Section 1983, and second, Guam is entitled to assert sovereign immunity as a defense to this suit. In other words, because Guam is a self-governing entity much like states, it is entitled to be treated as a state would be treated for purposes of 1983. I would like to make three major points this afternoon, other... among those that are made in our brief. First, with respect to the question of whether Guam is to be considered a person, there is direct and rather conclusive evidence that the Congress that added the words 1874 did not intend to include territories within the scope of the word person. And, in addition, that that Congress did intend that states and territories be treated alike for purposes of Section 1983. Second, this Court has repeatedly stated that 19... that Section 1983 was not intended to override well accepted common law notions of immunities and defenses. In 1874, in fact both in 1874 and before and after that date, the idea of territorial sovereign immunity was well accepted in our law. Congress would therefore not have expected that a territory would be liable under Section 1983, and under this Court's reasoning in Will and a whole line of other cases, did not intend to make a territory liable under Section 1983. Sandra Day O'Connor: Mr. Feldman, is there any significant difference between incorporated territories and unincorporated territories? James A. Feldman: No, I don't believe there is. For one thing, in 1874 when this Congress acted, there was no such distinction in the law. But, in any event, when that distinction came into the law just after the turn of the century, it was primarily for purposes of determining which constitutional rights apply to a territory. It was not for purposes of determining whether sovereign immunity applied to a territory. And, indeed, when... as has already been pointed out, when the Court reached those issues in the Hawaii case, Hawaii was an incorporated territory, I believe at the time, and the Court held that it was entitled to the sovereign immunity. And when the Court reached it in Puerto Rico, which was not an incorporated territory, the Court held the same thing. Sandra Day O'Connor: Would your position on whether the territory is a person be the same in the case of the Northern Marianas? James A. Feldman: I think, as a general matter, the arguments that we have advanced in support of Guam's immunity in this case would apply to the other territories, if it is a self-governing entity. Sandra Day O'Connor: How about the District of Columbia? James A. Feldman: The District of Columbia is a bit more difficult a case for a number of reasons. First, the District... the statute, as it reads now, includes states, territories and the District of Columbia. Now, states and territories are categories of entities, but the District of Columbia is an individual unit. There is only one of them. And that possibly may indicate that the District of Columbia after all does have a sui generis quality. But in any event, the relevant congressional intent with respect to the District of Columbia was that of the 1979 Congress that added the District of Columbia to the statute. And that Congress was acting in a rather different legal environment than were the Reconstruction Congresses in the 1870s. Therefore, in short, I don't... I think you would have to look specifically at that action to determine the status of the District of Columbia. But insofar as the District of Columbia is a fully self-governing entity, and Congress intended to make it such, I think many of our arguments would apply to the District of Columbia. It... my third point... well, my third point I wanted to make today was that with respect to sovereign immunity issues, there is no substantial dispute that Guam is, as a general matter, entitled to assert sovereign immunity, both as a result of the Organic Acts and as a result of the long-established tradition of territorial common law sovereign immunity. Petitioner asserts, however, that Guam is not entitled to assert its sovereign immunity in the courts of a separate sovereign or in cases arising under the laws of a separate sovereign. Now, in fact, Guam is not an entirely separate sovereign from the United States. But even if it were seen as a separate sovereign, the law has been fairly clear since the very early years of this country, and you could look at Judge... at Chief Justice Marshall's decision in The Schooner Exchange case, that a sovereign that is entitled to assert immunity is entitled to do so both in its own courts and in the courts of the United States, and both with respect to causes of action arising under its own laws and under those arising under the laws of the United States. Sandra Day O'Connor: Well, Mr. Feldman, if the... if Guam is not a person under the meaning of Section 1983, do we have to go further and deal with sovereign immunity? James A. Feldman: No, I would... you don't... I would suggest you don't. It really... the sovereign immunity issue arises... was not passed on by the court of appeals, and arises only if the Court were to determine, contrary to our argument, that Guam were a person. Then it... you... it... the issue of sovereign immunity would have to be confronted by someone. It could be remanded to the court of appeals, but it has been fully briefed here and this Court could choose to decide it also. With respect to the Dictionary Act, I think most of the important points have been made. It was the 18... the very same Congress, in fact in the very same piece of legislation that added the word "or territory" to the statute. It was that very same Congress at the same time that changed the Dictionary Act. Now, although we don't have any specific commentary relating to the addition of the word "or territory", we do have specific commentary cited in the brief of Respondent for the meaning of the word person at that time. And the Revision Commission indicated both, that the word person should not ordinarily apply to states, territories or foreign governments, and that that why... that was why it was recommending the change in the Dictionary Act. I would suggest that this is relevant both because it establishes that that Congress did not intend to include territories within the scope of the word person, and because that Congress intended that states and territories be treated alike for purposes of Section 1983. There is no indication of any contrary congressional intent about this issue, and indeed, this Revision Commission note is in full accord with the statement in Will that the word person does not ordinarily include the sovereign. In fact, it applies... it supplies conclusive evidence that that Congress felt that those entities entitled to sovereign immunity, states, territories and foreign governments, were not... were not generally intended to be encompassed within the word person. With respect to the... with respect to the sovereign... a second basis for holding that that Congress did not intend to include territories within the scope of the word person, is the long history of sovereign immunity that is cited in the briefs and that has been discussed. I would point out, in addition to that, that having decided... made... having decided the Will case the way the Court did, the evidence that Congress intended states and territories to be treated the same for this statute, and in fact that the Court had in the past and has in the past treated territories and states as a general matter of common law sovereign immunity in identical fashion, would suggest that the same result should be reached here as was reached in the Will state... Will case. It would be odd to say that the Congress that was interested in protecting civil rights in the southern states in the 1870s intended that Section 1983 apply with greater force to territories than to states, when the addition of territories to the statute was, after all, just an afterthought on Congress' part, made three years later, and was not... the focus of Congress's intention, of course, at that time was on enforcement of constitutional rights in the states. With respect to the sovereign immunity issue, if the Court were to reach it, the... I don't think, in response to Justice Stevens' question before, that Nevada v. Hall establishes that Guam could not... that Guam sovereign immunity should not be recognized. Nevada v. Hall recognized the long tradition of comity, and recognized that the general rule is that sovereign immunity would be recognized in the courts of a different sovereign. Of course, in the case of Nevada v. Hall, California had specific reasons of policy relating to California's own lack of sovereign immunity that it asserts itself, and also the fact that Nevada... what was at issue in the case was a car driven by someone from Nevada in California, not to apply sovereign immunity. I don't think in this case there is any overriding policy concerning the application of sovereign immunity. In fact, all of the considerations are that this Court and Congress-- John Paul Stevens: Well, if we thought Congress had meant to include Guam as a person, that would be a fairly strong overriding policy, wouldn't it? If we... because your argument is making that assumption now, I think. James A. Feldman: --If-- John Paul Stevens: If Congress had specifically intended Guam to be treated as a person, you would still say there is a sovereign immunity defense? James A. Feldman: --Well, Congress may have intended that Guam be treated as a person. First of all, I think the two issues of sovereign immunity and as treatment as a person are independent. The Court said that, I think both the majority and the dissent in the Will case, and it said that a number of other times. In fact, in the pre-Will cases where the Court held, for instance in Alabama v. Pugh, that a state could be sued only with its consent, it must have been assuming at that point that even if a state were a person it would still be entitled to a sovereign immunity defense. And therefore it could waive it. So I think that they are two independent issues. In addition, that would have some bite. Guam has waived its sovereign immunity for some purposes, as was pointed out, and Guam could waive its... might waive sovereign immunity in such a way as to bring it within Section 1983, even though it might assert sovereign immunity in other cases. William H. Rehnquist: Thank you, Mr. Feldman. Mr. Siegel, you have 14 minutes remaining. Jeffrey R. Siegel: Thank you, Your Honor. This Court stated in Polyblank that the sovereign is exempt from suit not because of any formal conception or obsolete theory, but on the logical and practical ground that there can be no legal right as against the authority that makes the law on which the right depends. I think it's clear that it was the intention of the Court, and the only tradition of immunity with respect to territories is for acts arising under territorial law. I think amicus has a problem. It says on one hand that Guam is sovereign enough, has enough self-government to be treated for a state... as a state for Section 1983 purposes. However, when this argument is raised, that it is not an immunity which extends to acts under Federal law, amicus says well, it is not really a separate sovereign. And I think that points up the reasoning of this Court's prior decisions concerning Section 1983 in the Eleventh Amendment, specifically that it is... the Eleventh Amendment had always... has always played an enormous role in determining governmental liability under Section 1983. Indeed, the Court did not hold in Monell that simply cities are liable. It said that arms of the state, arms... entities which are not arms of the state for Eleventh Amendment purposes, is liable. I will suggest that there will be no finding, if we review the legislative history, of any comment in that regard. But that is the conclusion that the Court drew from the use of the word person and the legislative context of the act. I think it's appropriate to maintain that as a... as at least a guide or a consideration, as the Court said in Will, in determining the scope of Section 1983. With respect to Respondent's point that initially the only courts existing in territories were Federal courts, I will suggest that in 1871 or 1874 Congress was well aware that the territories were going to become states, and at some point state courts would be established in what would become states, formerly territories. I'd suggest, then, that that in no way diminishes the Court's point in Will that the purpose... one of the purposes of Section 1983 was to provide a Federal forum for vindication of civil rights. Much has also been made of the 1874 revision of the Dictionary Act. But the more specific and applicable revision was to Section 1983, declaring that acts under color of territoriel law were now subject to liability. Speaker: At the suit of a person. Jeffrey R. Siegel: Correct. But there is some intention demonstrated-- Speaker: At the suit of a person. Jeffrey R. Siegel: --Right. William H. Rehnquist: Against a person. Jeffrey R. Siegel: Against a person. But it was... there was a clear intention to apply whatever the original scope of the word person was in 1871, because that is the Congress that passed the law, to territories. Thank you very much. William H. Rehnquist: Thank you, Mr. Siegel. The case is submitted. Speaker: The honorable court is now adjourned until tomorrow at ten o'clock.

William H. Rehnquist: We will hear argument next in No. 86-877, United States v. James Joseph Owens. Mr. Bryson, you may proceed whenever you are ready. William C. Bryson: Mr. Chief Justice, and may it please the Court, the issue in this case is whether the confrontation clause of the Sixth Amendment or the Federal Rules of Evidence bar the admission of a witness's prior identification of his assailant on the ground that at the time of the trial the witness had suffered a loss of memory concerning the facts of the assault. Now, the facts of this case are as follows. The case arose from a prosecution of the respondent Owens, who is a federal prisoner, for assault against a federal correctional officer, John Foster, at the Lompoc Penitentiary in California. The assault occurred on the morning of April 12th, 1982, and it consisted of a series of blows to the head and arms of Foster that left him with very severe head injuries. Foster was immediately taken to the hospital and spent about a month in the hospital, during which time he suffered periods of grogginess and virtual incoherence, but during some period of which he was relatively lucid and coherent, particularly towards the end of the period, in fact, on May 5th, 1982, Foster was visited by an FBI agent, who interviewed him to determine as much as he could about the events of the assault. At that time, according to both Foster's testimony at trial and according to the FBI agent's testimony, Foster gave a statement that described in great detail all the events leading up to the assault and the facts of the assault, including identifying the respondent Owens as his assailant. He identified Owens and then he also picked Owens out of a photo lineup as his assailant. Now, at trial, by the time trial came around about a year and a half later, Foster had suffered a memory loss to some degree about the events of the assault. He was able to remember much of the background of what had happened that day. He was able to remember some of the facts of what had happened when he went into the TV room where he was assaulted. But the critical fact that he couldn't remember was the identity of his assailant. He could not remember in trial, he could not identify Owens as his assailant. However, he could remember, and indeed he said he remembered vividly the statement that he made to Agent Mansfield, the FBI agent who had interviewed him at the hospital. He remembered that statement, and in particular he remembered both that he had identified Owens as his assailant at that time, that he had identified Owens from the photo ID and that he was confident at that time that his identification was correct. Speaker: Did he remember what Owens looked like at the time he was testifying? But he remembered identifying him in the hospital, did he remember what the picture looked like that he identified as-- William C. Bryson: He remembered picking out that particular picture, yes. He was familiar-- Speaker: --Yes, but would he have been able to pick it out in the courtroom? William C. Bryson: --He would have been able to pick that picture out as Owens, but what he would not have been able to do in the courtroom was to pick that picture out as his assailant based on his memory at the time of trial. In other words-- Speaker: He remembered that he picked that picture out in the hospital? William C. Bryson: --Yes, that's correct, and he knew that he picked out Owens, he knew what Owens looked like. What he was unable to say, and this is a mark in a sense of the precision of his testimony, was that he was able to say, no, that I said it was Owens at the time, but he said, I honestly cannot tell you now that based on my current recollection that I have a picture in my mind of the assailant being Owens. He remembered a great deal about the assault, but-- Speaker: But he has got a picture in his mind of what the picture was that he picked out. William C. Bryson: --That's right. That's right. Speaker: And he remembers that he... at that time thought that that picture was his assailant. William C. Bryson: Precisely, and he was confident that he was right at that time, but of course, because he has no current recollection of the identity of the assailant, that is to say, the person who actually assaulted him at the time, because he has no recollection of that, he can't honestly say, yes, the person who assaulted me was Owens, except to the extent he can say that the statement that I made I believed at the time to be accurate and I was confident-- Speaker: Mr. Bryson, is that recollection that the man had sufficient to qualify him under the rule of evidence 602 that the witness may not testify as to a matter unless the evidence is sufficient to show he has personal knowledge of it? William C. Bryson: --Well, we believe that Rule 602 is satisfied here for several reasons, including the testimony that Foster gave on the stand. Of course, Rule 602 allows personal knowledge to be established by means other than the testimony of the declarant, but I would have to point out that the Court of Appeals, and this includes both the majority and the dissent, felt that Rule 602 had not been satisfied, the majority didn't find it necessary to dispose of the case on that ground because of the harmless error rule. Speaker: Well, the District Court never ruled on that did it? William C. Bryson: Well, the District Court did conclude that there was a basis for personal knowledge. The Court of Appeals disagreed with that conclusion-- Speaker: I see. Okay, right. William C. Bryson: --on the ground that they felt that there was a disparity between the offer of proof that was made at the beginning of the case and the actual proof that came in, but we feel that-- Speaker: What do you think we need to do with regard to Rule 602? William C. Bryson: --Well, I don't think it is necessary for this Court to rule on Rule 602. It would seem to me if the Court reverses on the confrontation clause and the Rule 801(d)(1)(C) issues that are before the Court, the Court is going to have to send the case back in any event to the Court of Appeals, which can then decide whether a further remand is necessary. They may not think it necessary on the harmless error ground, but-- Speaker: Well, I guess typically you don't get to the constitutional question if you can go off on some other ground. William C. Bryson: --That's right. In this case, however, we would be content... we think it is possible for this Court to decide, if the Court wants to, that Rule 605 is satisfied. On the other hand, since Judge Boochever in dissent felt, as did the majority, that Rule 602 was not satisfied, it may be necessary in this case... the Court may prefer to send the case back to the Court of Appeals for further development of the Rule 602 issue, which in Judge Boochever's view would have required a further remand to the District Court, and we wouldn't have any objection to that, although I would like to point out a few facts that would support a finding and indeed do support a finding of the District Court that Rule 602 was satisfied, one of which is that the testimony that Owens gave from the stand and testimony that was in his statement that he jammed his finger into the chest of his assailant, which suggests that he was facing his assailant. Number 2, the location of his injuries. His injuries were on the front of his body, and they were injuries to the side of his head and injuries to his arms, which were obviously in a defensive posture, indicating he was facing his assailant. He commented that he knew that... or believed that the instrument that had been used to injure him was a pipe because of its size, and that indicates that he must have seen the pipe. Also, there was an eye witness. I think it was inmate Jeffery who testified that the two were facing one another. Now, that is not a statement by the witness from the stand that, yes, I saw my assailant, but it is circumstantial evidence from which the District Court's finding on Rule 602 could be supported. I don't think that it is necessary for this Court to reach that question because it was left up in the air by the Court of Appeals. However, I do think there is an ample basis on which the Court either could reach that question or the Court of Appeals could dispose of it either on their own or the issue could be disposed of by the District Court on further remand, which is what Judge Boochever would have suggested. Now, the District Court admitted the evidence that was offered, which is the out of court statement made by Mr. Foster on May 5th on the ground that Foster was there, available for cross examination, and therefore the confrontation clause and Rule 801(b)(1)(C), which is the rule that is designed to permit prior identification testimony in over hearsay objection, that both were satisfied by Foster's availability for cross examination. The Court of Appeals disagreed. The Court of Appeals disagreed both on the confrontation clause issue and on the Rule 801(d)(1)(C) question because in their view the cross examination that was available in this case of Foster due to his memory loss was just constitutionally and under the rules insufficient, was insufficiently effective to satisfy the confrontation clause, and it was insufficient to satisfy the rule. Our view is that, turning first to the confrontation clause, that memory loss on the subject of an out of court statement should not be a bar to the admission of that out of court statement. Now, the purposes of confrontation clause are, the Court has said on numerous occasions, both to allow the witness to confront, physically confront... excuse me, the defendant to physically confront the witnesses against him in court, and, of course, part and parcel of that is, have an opportunity for cross examination of the witnesses. Now, the fact of memory loss does not in our view interfere with those basic principles of the confrontation clause. Memory loss is a fact of life in criminal and civil cases. There is typically some memory loss in virtually every case, particularly if a case comes on for trial a year, a year and a half after the fact, even if there has been no trauma, as there was in this case, and even if there is no intentional effort to dissemble on the part of the witness, as there has been in some other Courts of Appeals' cases, still there is going to be memory loss on the part of a witness. That memory loss does not render the cross examination ineffective. In some respects it may render cross examination more difficult. On the other hand, in some respects it makes cross examination more fruitful, because obviously if you can demonstrate that a witness has a shaky memory about the events, it can often be very useful in persuading the jury that in fact this witness is not very observant, doesn't hold facts in his mind very well, that this is not a careful person, and that this is a person who is apt to have made either a mistake or be now guilty of a failure of recollection. Now, in our view, based on these principles, we would say that the confrontation clause is satisfied if, Number One, the scope of the cross examination is not improperly restricted by the District Court or by statute or rule. This is a principle that comes from this Court's decisions in cases like Davis against Alaska. Number Two, if the witness is competent, that is to say, if the witness is able to engage in a question and answer dialogue, if the witness is mentally and physically able to engage in cross examination. And Number Three, if the witness does in fact engage in this cross examination process by answering questions as opposed to simply refusing to answer questions altogether. Now, the respondent contends that in this case the problem with the... the confrontational problem is much worse than it is when you are talking about a witness who is testifying about matters that he observed that he is testifying in court but has suffered loss of memory with respect to those matters. He concedes for the most part, I think, that there is no violation of the confrontation clause if, as in a case such as this Court's decision in Delaware against Fensterer, the witness simply has a shaky memory as to some events as to which he is testifying. Even if there is a substantial loss of memory on the part of the witness so that the witness as, again, in Delaware against Fensterer, says, well, I know what my opinion is but I can't remember any of the reasons why I reached that opinion, because he is testifying about his current opinion in Court, the respondent says, that is different from this case, where the witness is not testifying about his in court observations, or is testifying about his observations, while he is standing there is present recollection of his observations while he is in court, but is testifying about an out of court statement. In our view, there is no such clearcut line to be drawn between an out of court statement and in court testimony about one's current recollection, and I think the example that perhaps can best make this point-- Speaker: May I ask, Mr. Bryson, didn't Fensterer as screened leave open this question? William C. Bryson: --It certainly did, Your Honor. This case is here-- Speaker: And yet you rely on Fensterer. William C. Bryson: --We rely on it, Your Honor, because we think the analysis, while the question was clearly left open, we think that the analysis of Fensterer is helpful in indicating the way that that question should be answered. We certainly concede that that question has been left open and this Court has never answered the question, but we do think that features of Fensterer suggest the answer that this Court should reach. The difference, the absence of any significant difference between the two kinds of statements it seems to me is perhaps best pointed out by the following example. Suppose I am walking down the street and someone comes out of a bank wearing a mask. Enough of the face is showing so that I can recognize the person, and I say to myself, well, that is Jones coming out of the bank. There is a person standing with me as I say that. Now, trial time comes, and by the time of trial I have forgotten a lot about what happened. Two different events can occur. Either I can get into trial and the prosecutor can ask me, who came out of the bank, and I will say to myself, I don't remember much about the incident, I don't remember much about that day, but I remember saying to myself and thinking, that's Jones, my recollection is now, in court testimony of the Fensterer sort. A second thing that could happen is, I could say, well, I remember saying to my associate, that's Jones coming out of the bank. Now, if I have forgotten the basis, in large part or in whole, of either of those two statements, either the one I made to myself, in effect, or the one I made to my associate, if I have forgotten why it was that I made those statements, Fensterer would still allow the admission of the first statement. We submit that there is no real difference between that and the admission of the second statement, that the degree of the effectiveness of cross examination, the way the cross examination would go would not be in any significant degree different in those two cases. We don't see a reason to draw a line between those two cases. Now, the case is harder, of course, if in fact the witness himself has no recollection of the prior statements other than the prior statement has to come in through a third party. But even in that case, which is not this case, in this case there was a prior recollection by the witness of the statement, even in that case there is fruitful line of cross examination that can be engaged in. For example, the witness could be probed for bias. The witness's general credibility can be probed under cross examination. Speaker: Mr. Bryson, can I interrupt you to ask you a question about your hypothetical? You do agree, I take it, that the associate who heard you say "That's Jones" could not testify to that fact? William C. Bryson: No, we would think that the associate could testify, Your Honor, under 801(d)(1)(C). The Court of Appeals cases do establish that as long as I am available for cross examination, even if my memory is not good, as long as I am available for cross examination, it would be our contention that that associate could testify as to the out of court statement. Now, there is some disagreement, to be sure, among the Courts of Appeals as to exactly how much recollection I have to have concerning the statement in order for the statement of the third party to be introduced, but I don't-- Speaker: In this case did the FBI agent testify? William C. Bryson: --He did, but he testified merely to corroborate the fact that the statement was made. The testimony of Foster was, as to the contents of the statement was as complete as anything the FBI agent-- Speaker: Well, Mr. Bryson, I gather if Owens had died after the FBI interview and before the trial, the agent could not have testified. William C. Bryson: --I think that is probably right, at least not under 801(d)(1)(C). Probably no-- Speaker: Well, in this case didn't Owens finally die? William C. Bryson: --Well, Your Honor, Owens-- Speaker: Didn't he? William C. Bryson: --Owens' memory died in part in this case in only a small, admittedly critical but nonetheless narrow part of the recollection of the-- Speaker: Well, to the extent admittedly critical, then why is this any different than had Owens died? William C. Bryson: --Because there is so much more that can be done with Foster on the stand, available for cross examination, than if Foster were not there. You can probe such matters as his bias. Suppose, for example... it wasn't true in this case, but suppose he had been trying to get Owens for months, and Owens knew this, and he passed this on to his attorney, that this was... that his attorney could try to make use of that fact to impeach Foster's testimony on the grounds of bias, something that would have been much harder to do if Foster were not present. Similarly, the question of Foster's credibility can be probed, whether his demeanor suggested that he was a careful person or a person who was quite careless, the inconsistency, for that matter, between features of the statement that he made and Mansfield's testimony about his statement would have been a fruitful line of cross examination. It is true, to be sure, that none of these lines of cross examination were pursued in this case, but that is only because Foster did such a good job and was such a believable witness. This was somebody who was not easily impeached, not because there was any impairment... the hospital. Foster had not been able to identify his assailant, or had suggested, asked a question, was it Leo who hit me... there was another inmate in the penitentiary whose name was Leo, as established by defense counsel, and that was made the basis of the suggestion that in fact the Owens idea came up late in the day and wasn't the product of his observation at all. So there was a lot that could be done and there was some fair amount that actually was done by virtue of having Foster there, even though his memory had, as you say, died with respect to the question of identity. But, Your Honor, memory dies like that a lot in these kinds of cases, not just cases of trauma where the person's memory may be thought to have died because he was hit on the head, but in cases that come up every day where a bank teller, let's say-- Speaker: Yes, but it is... the most crucial fact here was the identification. William C. Bryson: --Absolutely, Your Honor, but if we take this case, which does come up every day, the bank teller has a robber come in, put a gun in his or her face, and the bank teller gives over the money, and then later that afternoon a suspect is captured. The bank teller goes down to the police station, and there is an ID. The bank teller selects, without any doubt, selects Number 3 as the person who put the gun in her face. A year and a half later, trial comes on and the bank teller cannot make an identification in court, just can't pick the defendant out. Well, that is exactly the case for which 801(d)(1)(C) was devised, cases where memory at trial has in your words died. There is no recollection as to identification Certainly it is a critical fact. It is the most critical fact in the case. Nonetheless, we submit that the rule is satisfied, and we submit that because the bank teller is available for cross examination, particularly if she can remember making the statement and the details of the statement, that in that case the confrontation clause is satisfied as well. Speaker: Mr. Bryson, if Rule 804 says a witness is unavailable when he doesn't recall the substance of his prior statements, then how can the same witness be subject to cross examination for purposes of Rule 801? Do you plan to-- William C. Bryson: Well, Rule 801 has very different language, Your Honor. They could have... Congress could have said that the witness has to be subject to cross examination about the statement... subject to cross examination about the subject matter of the statement. Instead, it didn't say that, and it, and it is interesting and to us probative that in fact Congress in sections that were so close together used very different language. He clearly was in this case by any fair construction of the terms subject to cross examination about or concerning the statement. He remembered the statement. He was subject to cross examination. He was cross examined about the statement. The only thing he was not subject... well, he was subject to cross examination, but the only thing he could not fruitfully be cross examined on was the underlying basis for the statement, to wit: the... how it was that he observed Owens. That in our view does not make Rule 801(d)(1)(C)-- Speaker: --Well, he could also be asked whether or not he remembers the defendant who is sitting there in the courtroom, does he remember him as the one who-- William C. Bryson: --He could be asked that, and he was, and he denied it. He said, I don't remember now the defendant; however, what he did say was-- Speaker: --He is the same one as in the picture. William C. Bryson: --he is the one in the picture. He is the one I picked out, he is the one I identified, and of course another line of cross examination could have been fruitful on this score, but wasn't because of the circumstances of the case. Suppose Foster had not known Owens for very long, Owens had just arrived in the cell area. The question whether he would recognize Owens could be raised, but in fact, of course, because he knew Owens very well, it was difficult to make that point on cross examination. Again, cross examination was not rendered ineffective for constitutional purposes simply because it didn't work. Now, as I have indicated, the effectiveness test that respondent has suggested is one that has a lot of problems. To try to make the confrontation clause turn on the extent to which confrontation of cross examination may be effective in a particular case runs into what this Court said in Roberts is an inevitably nebulous threshold of effectiveness Respondent has offered no real standard for determining in any class of cases when cross examination is effective and when it is not effective. And in fact, as we have suggested, memory loss may not render cross examination less effective. It may render it more effective. It just depends on the particular circumstances of the cases, and what really has more effect on effectiveness than simple fact memory loss is what vulnerability the witness may have in other spheres of attack on its bias, credibility, powers of observation, and so forth. To try to assess effectiveness in every given case, to say that the constitutional principle of confrontation turns on whether or not the cross examination was effective in a particular case would, we submit, be chaotic as an approach to try to give the lower courts and the state courts in applying the confrontation clause any guidance at all as to how the admissibility of statements should be judged. That is a principle that ought to be reserved for the rules of evidence as this Court, Congress, and the states work them out. It should not be a constitutionally binding principle for all time that turns on a court's impression as to how effective the opportunity for cross examination was on a particular fact situation. And I would point out finally that the... to the extent that effectiveness is a question, as I have suggested in this case, the cross examination was effective. There were things that were brought out about prior statements Foster had made in the hospital, and-- Speaker: What it says under the rule is that the cross examination contemplated must be sufficient to provide the jury with an adequate basis for assessing the reliability and truthfulness of the statement. Is that satisfied here? William C. Bryson: --We think so, and we don't think that that's... we think that the language of the rule doesn't require that the jury be satisfied to any degree. All that the language of the rule requires is that the declarant be subject to cross examination concerning the statement. Even if he has a virtually total lack of recollection as to the statement, that is a fact that the jury can assess in determining his credibility or determining the likely reliability of the statement. We don't think that he has to have any specific degree of recollection with respect to the contents of the statement, or certainly not with respect to the basis of the statement, that is, why he reached the conclusion that he did. Thank you. William H. Rehnquist: Thank you, Mr. Bryson. We will hear now from you, Mr. Ides. Allan Ides: Mr. Chief Justice, and may it please the Court, I would like to immediately address some of the points that were raised during Mr. Bryson's argument. First, Justice O'Connor, on the question of personal knowledge, the government is mistaken. The District Court made absolutely no finding on the question of personal knowledge. The District Court stated that personal knowledge merely goes to the weight of the evidence. No finding was made and the Court of Appeals recognized that no finding was made by the District Court on that issue. We agree completely that if at all possible, this case ought to be resolved on the statutory questions, and in fact before the Ninth Circuit our argument was based largely on Rule 602 and Rule 801(d)(1)(C). As to the evidence of personal knowledge that the government for the first time brings up today-- Speaker: Do you argue that as an alternate basis for affirmance in your brief here, Mr. Ides, the 601 point? Allan Ides: --602 point? Speaker: 602 point. Allan Ides: The alternate basis for affirmance we have relied on is 801(d)(1)(C), although we have mentioned the 602 point in the brief and discussed it. Speaker: But you haven't really relied on it as an alternate basis for affirmance? Allan Ides: We did not because the Court of Appeals didn't resolve that issue. I would like to just mention a couple of points on the factual statements the government made, the fact that it was a pipe, that he saw that it was a pipe somehow indicates that he saw what was going on. Well, the testimony was that "I heard something hit my head and it sounded like a pipe." that doesn't indicate that he saw anybody. His testimony also indicated that he was attacked from behind. In the eyewitness testimony that someone saw him facing, Foster facing his assailant, that is not what the testimony was. The testimony was that the assailant was hovering over Mr. Foster. We don't know which direction Mr. Foster's face was pointing in. Of course, no findings have been made on these points. The other point that I think is very important, Mr. Justice White, you mentioned the photograph, and the photographic spread that Foster recalls having identified Owens in. It is irrelevant, and it is irrelevant for this reason. Foster knew Owens intimately. They worked together every day. When he identified him in the photo spread, he merely said, yes, that's Owens. So the fact that he could say, yes, Owens struck me, and that's a picture of this person who I have known for the past year or so doesn't indicate a circumstance where he has made an identification of an anonymous person and then in court says, yes, that's the person I identified. It is merely affirming the fact that he knows Owens, so the photographic spread really adds no weight to the government's case whatsoever. At issue in this case is a right of trial procedure that goes to the integrity of the factfinding process. We are not talking about an exclusionary rule. We are not talking about Miranda. We are not talking about a rule designed to protect or to allow police an adequate amount of discretion in the field. We are talking about a very important rule of trial procedure that goes to the fairness of the trial and the ultimate integrity of the factfinding process. This Court has stated on numerous occasions, the most recently Kentucky v. Stincer, that the confrontation clause and the right of cross examination are functional rights designed to protect the integrity of the factfinding process and to create a basis upon which the reliability of testimonial evidence can be assessed by the trier of fact. The question in this case is not whether a memory loss precludes confrontation. The question is what is the impact on cross examination, regardless of whether it is a memory loss or, as the government concedes, an assertion of the Fifth Amendment a refusal to testify on other grounds, incapacity of the witness, or some trial court restriction on the scope of cross examination. In all this Court's cases the focus is not on the particular intrusion, but on the impact of that intrusion, and that is what the issue is in this case. According to the government, the confrontation clause is satisfied essentially by presence at trial, a physical presence model, and I think it is fair to say that there is neither judicial nor scholarly support for that position, with the possible exception of Justice Harland who, as I will discuss, if I can get to it, has a very similar model for assessing reliability under the due process clause. The government is really staking out radically new grounds for this Court, and it is an illogical ground. For example, the government tells us that clearly if a witness refuses to testify based on the Fifth Amendment, as in Douglas versus Alabama, that would violate the confrontation clause. Clearly, if a court, as in Davis versus Alaska, restricts the ability to cross examine a witness with respect to impeachment, that would be a violation of the confrontation clause. Yet what is the difference between those cases and our case? Suppose, for example, instead of saying I don't remember, Mr. Foster said, I take the Fifth Amendment. Or suppose Mr. Foster said, or suppose the Court said, I am not going to permit you to inquire into the basis, or suppose Mr. Foster merely said, I don't understand these questions, they are just too confusing for me to answer. In all of those cases the government would say there was a violation of the confrontation clause. It must be because the defendant's ability to assess the reliability of the testimony and to provide a basis for reliability testing is lacking in all of those cases. A memory loss has the same effect. If, as in this case, and it is a narrow case, it is a small case, if there is a total memory loss, and in this case a medically certifiable memory loss. We are not talking about circumstances which it is a partial memory loss or which the witness can't remember a few cursory details. We are talking about a case in-- Speaker: That will be the next case, though, if we decide this case the way you want us to. Allan Ides: --I disagree respectfully, Justice Rehnquist. I think this opinion can be written very narrowly, and I think this Court has created a basis for a very narrow opinion here. In a number of cases the Court has said, in only the most extraordinary case where there has been questioning of the witness will we inquire into effectiveness, and by the way, effectiveness is not our standard. It is a standard derived from this Court's cases, beginning with California versus Green, so there must be some substance to it, and I think this Court can establish that this is an extraordinary case by first indicating its close relationship to cases such as Douglas versus Alabama and Davis versus Alaska. You appear to want to ask a question. Speaker: How do you distinguish this from the bank teller example that government counsel gave? Allan Ides: The bank teller-- Speaker: Or would that be covered as well? Allan Ides: --It would depend again on the circumstances of the bank teller example. If the bank teller could not remember... if there were no facts, including a lack of memory indicating that the bank teller even looked at the robber in the face, then there would be substantial problems in that case. The typical case of the bank teller, though, is the circumstance where, when it comes three years later and you come to trial, the bank teller can say, I was working at the bank, a person walked up to me, put a gun in my face. I looked at that person, they told me to turn over the money, I turned over the money, on that day the bank was well lit, it took about 35 or 40 seconds, to tell you the truth, I can't remember exactly what the person looked like today, though one week after that I did identify that person in a photograph spread, that is very different. We now have an opportunity to cross examine that bank teller as to the basis for the identification. He or she may not remember now who the exact person was, but they are available to be tested as to the basis for making that identification, and that is the key to identification evidence. And the government has pointed out, and Justice Brennan has pointed out, it was the critical evidence in this case. Speaker: What if you asked the bank teller, was the lighting bright or dim, and he says, gee, I can't remember that. Did you see him for 30 seconds or a minute? Gee, I really can't remember. Did you see him head on or profile? Gee, I really can't remember that. All she really remembers is that she saw him well enough to identify him and did identify him at a later time. Would that come within your rule here or not? Allan Ides: No, I don't think it would, and the reason it wouldn't is because we have now established a basis for the trier of fact to sit down and look at what the teller actually saw. Speaker: No, she doesn't remember. She doesn't remember whether it was bright or dim. She hasn't given any information on these subjects. What I am saying is that the Chief Justice's concern is a real one. How much does the teller have to remember about the actual identification day in order not to fall within the rule you are espousing? Allan Ides: She has to remember at least this, that she saw the person and had an opportunity to observe the person. That is critical, and I think Louisell and Mueller point out in their text that in 801(d)(1)(C) as with the confrontation clause there is a critical relationship between personal knowledge and the identification. Speaker: But how does that make cross examination effective? All she says is, I remember I saw him. Did you see him profile or head on? Was he close or far? I don't remember any of that. All I remember is that I saw him. Allan Ides: But she did say that I remember that I saw him, and Foster in this case could not remember whether he had ever seen his assailant. He never testified that I saw him but I now can't remember what he looked like. What he testified to was, I don't remember if I ever saw him. Speaker: I understand that that distinguishes this case. What I am asking is, why that should make a difference between one teller who remembers no more than that and the next one who remembers one additional factor. Allan Ides: Well, again, that is going to depend on a case by case analysis. There is no question about this. But it seems to me what we are going to have to look at is first, is the loss of memory directed toward a critical part of the case; second, is the loss of memory such that you cannot assess the credibility of the person based on that loss of memory; and third, is the loss of memory complete? And in this case, as to the only critical evidence that Foster could give, it was complete. There was no way to cross examine him on that point. No way to establish his personal knowledge or lack of personal knowledge. No way to establish his opportunity to observe. Speaker: May I ask, confining it to the confrontation clause and putting these rules to one side for a moment-- Allan Ides: Yes. Speaker: --supposing that immediately or even during the interview with the FBI agent, right after saying, identifying his assailant, supposing he had died, so you have a dying declaration, and they tried to put in the... through the FBI agent what he had said. A, would you think that would violate the confrontation clause, and if not, how do you distinguish the case? Allan Ides: I do think it would violate the confrontation clause for exactly the same reasons. Speaker: So all dying declarations violate the confrontation clause? Allan Ides: Under those circumstances it seems to me they would unless you could establish that there were independent indicia of reliability, and it may be, in fact, this Court has held that a dying declaration is firmly rooted in our jurisprudence, and therefore under those circumstances it would be reliable. This exception to the hearsay rule is not firmly routed. Speaker: I am hypothesizing a dying declaration where you have no reason to believe there was any motive to lie, which I think is this case. I don't think there is any claim that this man was not credible to the extent-- Allan Ides: That is true. Speaker: --But you do have total absence of ability to find out why the declarant concluded that the person he or she identified was the assailant. Allan Ides: Well, I think the first argument in that case would be personal knowledge, and again we come back to that because it is really... it is the essence of this evidence. We come back to that because it is really the essence of this evidence, if Foster doesn't have personal knowledge of who his assailant was, then the evidence shouldn't be admissible, and we have that problem in that same circumstance. Because of the nature of what Foster told Mansfield, he didn't tell Mansfield the details of the crime. The question was, who did it, Owens did it. I jammed my finger into the chest of the person who assaulted me. Period. That's all we got. So it seems to me it would present the same problems of confrontation. Let's assume, in fact, Foster never testified. I think that is... it may not have been a dying declaration, but then he may have died six months later or a year later. Assume he hadn't testified, and the only evidence we had was Mansfield on the stand saying he made that statement to me. There is no way that that would satisfy the confrontation clause under this Court's rulings, and in essence the defendant is in no better position having Foster take the stand. In fact, he is in a worse position because he has a man take the stand and say, one day I vividly remember identifying this person, and it seems that even the government would agree if only Mansfield was testifying as to this evidence it would violate the confrontation clause. The cases are on the same footing. Speaker: Well, there is some fact that indicates the grounds for his identification through the photograph, I suppose. Didn't he know Owens? Allan Ides: Yes. I don't know if that would... that indicates to me that he knew Owens. He knew him personally. And there is also another grounds indicated in the record for his identification. Speaker: Well, he not only looked at the photograph and says, that's the man who assaulted me, but his name is Owens. Allan Ides: Well, he did it in reverse order. He said, Owens, who I personally know, assaulted me, and here's his picture. Speaker: Yes. Allan Ides: And I think that... again, a photo spread doesn't add anything. Speaker: Well, I know, but you say there is a fatal absence here of... how did you know it was Owens? At the time, in the hospital. Allan Ides: Yes. Speaker: You think that there should be some basis for asking him, how did you know it was Owens? Allan Ides: Exactly, and one of the answers that was suggested, and again he had no memory of this, and he couldn't remember anyone who visited him prior to the FBI agent nor could he remember anyone who visited him after the FBI agent, yet the evidence was that he was visited by prison personnel and by his wife every day. He couldn't remember those visits, and it is quite possible that one of them said, Owens is under investigation. He is the guy who hit you. Speaker: So he didn't... he couldn't answer any reason, give any reason for identifying Owens in that picture? Allan Ides: Absolutely none. Speaker: He said, I may not have seen him. Allan Ides: He wasn't asked. Speaker: I may not have seen him. I may just have smelled him, or listened to his voice. Allan Ides: Or I may be guessing. Speaker: You put all the weight on he wasn't asked. Whose duty was it to ask? Allan Ides: When I say he wasn't asked at the time he was interviewed by the FBI agent, he was not asked. During cross examination-- Speaker: Was that necessary? Allan Ides: --It wasn't necessary. It again is-- Speaker: Well, why do you emphasize it if it wasn't necessary? Allan Ides: --Well, I emphasize it only in answer to Justice White's question. The point is, he was asked on cross examination, do you remember anything about the person who struck you? Speaker: Well, suppose after he said this is Joe Dokes, he wrote it down in a note to his brother. Would that help him? Allan Ides: The fact that he just wrote it down is just merely another out of court identification. Again, the crucial evidence in this case is, I saw the person who struck me, and that is what we want to explore in this case. It is locked in a little box which you never know. Speaker: How do you do that? Allan Ides: We can only explore it if Foster has some independent recollection of having seen his assailant or if the-- Speaker: Well, why couldn't you have asked the question without anybody saying anything? Allan Ides: --Asked-- Speaker: Yes. Allan Ides: --He was asked whether he recalled at the time of trial seeing his assailant. His answer was, no, I can't remember. Speaker: So, what is wrong with that? Allan Ides: Well, the problem with that... I think the best way to answer that is contrasting this case with the Fensterer case. In the Fensterer case, this Court was confronted with a situation in which an expert couldn't remember the basis for which three hairs had been forcibly pulled... his conclusion that three hairs had been forcibly pulled from the victim's head. And this Court held that there was no violation of the confrontation clause, but I think as Justice Blackmun pointed out in his concurring opinion in Pennsylvania versus Ritche, the essence of Fensterer was that in failing to remember the expert undermined his credibility, and that was the key to the Fensterer case, The credibility assessment could be made. Speaker: This witness could just as easily say, yes, I identified him, and told a lie, and then everything would be all right. Allan Ides: But he didn't. It seems to me this case is different from Fensterer, and the reason it is different from Fensterer is because, and again, this goes to Justice Rehnquist's point about a narrow decision, the memory loss in this case is independent of credibility, completely independent of credibility, just as the Fifth Amendment assertion-- Speaker: Yes, but your distinction, if I understand you, with Fensterer, is that that testimony is more... it is easier to admit that because it is less credible. Allan Ides: --No, it is easier to admit that because the basis for judging credibility has been established. It isn't... the purpose of the confrontation-- Speaker: Well, the basis for questioning the reliability has been established, namely, he didn't remember the basis for the conclusion. That is exactly what you have here. Allan Ides: --No, I respectfully disagree. We have a very different situation here. In Fensterer, the lack of memory went to the expert's ability as an expert. In this case the lack of memory-- Speaker: This goes to the ability of the victim as a witness. Allan Ides: --But it has no bearing on-- Speaker: It is the ability of the witness to testify to the truth of the ultimate proposition. In both cases they are unable to do so because they can't explain the basis for their conclusion. Allan Ides: --But in the one, Fensterer, a basis is created through the questioning and through the admission of a lack of memory for the trier of fact to assess whether this is a credible witness. In our case, you don't have that. It is the same as if it had been a Fifth Amendment assertion. If a declarant says, I'm not going to testify based on the Fifth Amendment, that has nothing to do with the credibility of an out of court confession that perhaps is being introduced. Similarly in this case the fact that the man has suffered a memory loss has no relationship whatsoever to whether he ever observed his assailant. That is the credibility question in this case. The credibility question in Fensterer is, is this expert truly an expert if he cannot recall the basis for his testimony? Speaker: Well, that is only part of it. The ultimate question is, is his opinion one we should accept? Allan Ides: And in Fensterer the trier of fact was given an opportunity to-- Speaker: And one of the arguments for not accepting him is, he is not a good expert if he doesn't keep records and keep track of why he reaches his conclusion. He is not a very good witness for that proposition. You can make the same argument-- Allan Ides: --But you can't say that about a man who has suffered a memory loss. You can't say-- Speaker: --Why not? He certainly is. He is a much less reliable witness than one who could say, I saw him. Allan Ides: --I think we have to look at it... from the point of view of lawyers and judges and justices, yes, we can look at that in a very sophisticated way, but from the point of view of jurors I don't think it is looked at in that way. The jurors see a very sympathetic witness get on the stand and say one day it was vivid, I vividly remember saying that this man did it to me, you know, I was injured, and maybe even by this man, this may be the man who did it, and now I can't remember whether I actually saw him do it. I think that kind of weight the jury is going to put on that under circumstances where-- Speaker: You are certainly free to make all the arguments to the jury about the unreliability of that kind of evidence as to, you know... all the arguments you are making to us you could also make to the jury, and they are not unable to understand the nuances of this sort of thing. Allan Ides: --But it seems to me the courts have a threshold responsibility to determine whether evidence has been subjected to effective cross examination, and I agree with Justice Blackmun that in the typical case, a simple case, simple questioning will resolve that question, but in some cases, unless the confrontation clause is just a formality once you put the witness on the stand, in some cases we have to inquire whether there was any possibility of establishing a basis under which the trier of fact could assess credibility. Speaker: Well, Mr. Ides-- Allan Ides: Yes. Speaker: --what if at the time he made the photo identification the officer had asked him, did you see him, how long did you see him, et cetera, and he answered fully, and at trial he remembered that very conversation, and said, yes, I did say that, but I don't remember now whether I saw him or not, would your case be any different? Allan Ides: The case would be different, and I think it would be analyzed differently. Speaker: Why would it be different? Allan Ides: All right, it would be analyzed differently. First, there's two parts to the confrontation clause. One is entitlement to confrontation, to cross examination, and I think in both cases, the hypothetical you have just described and in this case, there was not an opportunity for effective cross examination. Then we go to the next step. Despite this lack of an opportunity for effective cross examination, are there indicia of reliability that indicate that this evidence ought to be admitted anyway? In your hypothetical, there may be indicia of reliability that would permit it. In this case there aren't, and the government doesn't agree with that. The government has never challenged the Court of Appeals' ruling that this was unreliable under the factors articulated in Dutton versus Evans and Ohio versus Roberts. So I think the hypotheticals are different although they would be analyzed under the same structure. Speaker: Could this have been cured by instruction? Allan Ides: No, I don't believe it could be cured by instruction. Speaker: Why not? Allan Ides: Because, again, it is the type of evidence that the Court must make an initial assessment whether this evidence is the kind of evidence that the jury can now at this point assess for its reliability. That is a threshold question for the Court. Speaker: It should have been excluded? Allan Ides: It should have been excluded. Speaker: Well, I thought your argument was that he couldn't cross examine on it. Allan Ides: Could not cross examine on it. Speaker: Well, if it is excluded you couldn't cross examine. Allan Ides: Well, if it were excluded we probably wouldn't be here today. If it were excluded, it was the crucial element in the government's case. The government admits that. This critical evidence, Owens was my assailant, and then we have this black box, why, and the box is locked, and it is just as effectively locked with a memory loss as it is with the Fifth Amendment or as it is with a trial court ruling that you can't ask that question. Speaker: xxx identification? Allan Ides: The only point. Speaker: What have we got to do with the box? Allan Ides: The box. I am sorry, Your Honor. I am using an analogy. I am essentially saying the information that is crucial to this case, namely, the basis for the identification, is not accessible to the trier of fact in the same way that it wouldn't be accessible if Foster had taken the Fifth Amendment or if the trial court had said you can't ask questions on those grounds. Speaker: Mr. Ides, let me get back to the bank teller again. You say it makes the difference if the bank teller just says, I don't remember anything about it. All I remember is that I saw him. That would be enough to get that out of the rule that you are urging on us. Allan Ides: It may be enough. I think I would want more facts. I am certain that in your bank teller-- Speaker: Oh, I see. So it is going to come to a case by case, we really can't-- Allan Ides: --Well, Ohio versus Roberts said that it is a case by case analysis. I believe that if we are going to look into the indicia of reliability component of the case it is a case by case analysis. That is the rule articulated by this Court. Speaker: --Take the effective cross examination on a case by case analysis, just not for 600 district judges in the federal system that are conducting trials, but for thousands and thousands of state court judges that are conducting trials. Allan Ides: I have two responses to that, and I will go backwards. One is, we can avoid making this a rule for thousands and thousands of state court judges by focusing on 801(d)(1)(C) and concluding that this evidence should not have been admitted under that rule. Speaker: xxx for 600 federal judges. Allan Ides: So we have narrowed it down to 600 federal judges, and I think federal judges are competent to assess this kind of a question. Again, the court opinion, it seemed to me, would say this is the extraordinary case we referred to in Ohio versus Roberts. It is California-Green revisited in a sense, and I read California versus Green a little differently than the government. It seems to me the question wasn't reserved in California versus Green. The Court said there was a constitutional issue lurking in this case, but the facts in this record aren't sufficient for us to answer it. The facts in this record are sufficient. It was remanded to the California Supreme Court and they concluded that the evidence in California versus Green was reliable. Speaker: May I ask one other question, following up on Justice Scalia's thought? If one of the other witnesses, not the victim himself, has testified that they were facing one another when the assault occurred, then would you agree that his testimony would be admissible? Allan Ides: Again, I would... that is very similar to Justice White's hypothetical. I think then we would have to assess it under the second component of confrontation clause analysis, whether there are sufficient indicia of reliability of this out of court statement, and I think we would have to look at that, but the same conclusion would be arrived at with respect to was there effective cross examination, and the answer, it seems to me, has to be no. Speaker: But if you say the other witness meets the indicia of reliability, no bias, and so forth, I am not sure... then you would say it would still be inadmissible, the victim's testimony would still be inadmissible? Allan Ides: No. Again, the two components of the confrontation clause are, was there an opportunity for effective cross examination... that is the Douglas, Davis line of cases... and then the second line is, assuming there was no opportunity for effective cross examination, is the evidence still admissible because independently we say that it is reliable as judges, and I am saying under the hypothetical you have suggested we would get to the question of whether it is reliable despite the lack of cross examination, are there adequate indicia of reliability, and in this case the Ninth Circuit said there weren't. Speaker: I don't understand that. I just don't understand what you have said. If another witness... you were in some doubt when the witness who forgets the whole thing says, I really can't say whether I saw it. I asked you, suppose that witness remembers only that I saw the individual, I don't remember how, I don't remember what the light was, I don't remember anything else, I saw him. You are not sure whether that would satisfy the rule, right? Allan Ides: Well, again, there's two parts to the confrontation clause. The first part is whether the defendant had an opportunity for effective cross examination. That is the part that we have been talking about mostly now, whether the memory loss undermined that ability. Speaker: And you say there never is when there is a memory loss. Allan Ides: No, I absolutely don't say that at all. I think there are circumstances when the memory loss may bear on credibility. When memory loss is independent of the question of the credibility, the underlying credibility of the statement, then I think we have this question of whether the memory loss, if it is both critical and complete and independent of credibility, actually does undermine cross examination. Then we get to the second question. The evidence still may be admissible if it is otherwise reliable, either because it is based on a firmly rooted hearsay exception or because in this particular case based on your facts there are sufficient indicia of reliability, and that is Ohio versus Roberts. It seems to me that this Court... this case is a very straightforward application of that, and we have focused largely on whether there was an opportunity to effectively cross examine. I think from a practical lawyer's point of view, whether you are talking about a prosecutor or a defense attorney, if you took this case aside, they would say, you know, I really couldn't effectively cross examine someone who had so complete a memory loss as to the most critical evidence in the case, and the confrontation clause is supposed to be a practical rule for advancing the integrity of the trial process, and I think we have to look at it like that. I would like to finally answer the second part of my answer to your question, Justice Rehnquist, on a narrow construction to this ruling, and it is a narrow one. First, I think we have to recognize that there is a certain illogic between saying a memory loss will not constitute a confrontation clause violation, whereas an assertion of the Fifth Amendment would, even though the same evidence is being excluded from the trier of fact, the same opportunity to cross examine is being eliminated in both cases. I think we have to recognize that. So then it seems to me the court's ruling should be modeled on cases such as Douglas versus Alabama, Davis versus Alaska, Smith versus Illinois, in which the Court found that some trial court imposed restriction undermined defendant's ability to cross examine. So, first we would have to make that finding. Second, I think we have to talk about the fact that it is a critical part of evidence, as this Court recognized as important in Dutton versus Evans. And third, the fact that in this case we have a complete memory loss, a complete memory loss, and it's medically certifiable, and just like the Fifth Amendment, it is independent from the underlying credibility of the statement, I saw Owens do it. The fact that he has a memory loss doesn't undermine in any way that he may well have seen Owens do it. It doesn't add anything to it. It remains untouchable. If there are no further questions, thank you. William H. Rehnquist: Thank you, Mr. Ides. Mr. Bryson, you have two minutes remaining. William C. Bryson: Thank you. Mr. Ides pointed out the line of questioning, line of argument that was followed by defense counsel in this case that was the most effective form of cross examination and exploitation of that cross examination, which was the suggestion that because there had been a number of visits of other people to Foster before Foster made his identification of Owens, perhaps Owens's name had been suggested to him by these other people. That is precisely the kind of effective cross examination and exploitation of cross examination which was made possible in this case by the very fact that Foster was unable to say that I identified Owens as my assailant. He was unable to remember the reason for his identification, and therefore that opened up the arena for this precise kind of argument that Mr. Ides has pointed out that was made at trial, and it was made effectively by counsel. Now, there is a further question which-- Speaker: That is pretty effective itself, you are saying, to be able to point out that he doesn't remember the basis for his identification. William C. Bryson: --Therefore it may have come from somewhere else. That is... if the test is whether the cross examination has to be effective, that opened up an avenue of effective cross examination for the defense. Now, the focus has also been put on this whole question of whether there was actual opportunity to make the observation, whether for 602 reasons or for cross examination reasons. I would like to point out just two factual matters quickly. First of all, with respect to the pipe, he made two comments about the pipe. One was the sound of the pipe that Mr. Ides referred to. He also said at Page 27 of the appendix, thinking back, it did have to be a pipe, that is about the right size, which suggests that he actually saw the pipe. Second, there were two witnesses, three, actually, who testified as to seeing Owens beating or hovering over Foster, one of whom was the person... this was witness Bowers, who was hovering over Foster after the beating. There was another witness, however, Jeffery, who testified that-- William H. Rehnquist: Mr. Bryson, your time has expired. The case is submitted.

Earl Warren: Number 446, Michael Glus, Petitioner, versus Brooklyn Eastern District Terminal. Mr. Schwartz, you may proceed. Seymour Schwartz: Thank you. Mr. Chief Justice, may it please the Court. This is an appeal in forma pauperis from a judgment of the District Court in the Southern District of New York dismissing the complaint of petitioner, Glus. Petitioner Glus brought his action under the Federal Employers' Liability Act. In his complaint, he alleged that because of the fraud or misrepresentation of his employer, the respondent, Brooklyn Eastern District Terminal, he was in effect kept from bringing his action within the three-year statutory period of limitation. And that for that reason should be permitted to bring this action nevertheless. The respondent moved by motion to dismiss plaintiff's complaint and an order dismissing that complaint was entered. No answer by respondent was entered, no testimony was taken, and the petitioner had no opportunity to have any pretrial procedure such as interrogatories or depositions. The facts in the matter are as follows. In July 1946, the petitioner, Glus, began employment with the Brooklyn Eastern District Terminal as a freight handler. His job predominantly was to unload bags of flour from freight cars which came into the terminal. Those bags of flour in various sizes were covered with paper, sometimes with some material. In any event, there was a good deal of flour dust in and about the area of work where Glus was employed. There were no safety devices or masks issued to those employees working with the flour, and after being subject to these working conditions for a number of years, in 1951, Glus discovered that he was having a good deal of difficulty breathing. He brought this to the attention of his employers and he was seen by the company doctor at their request and his.The company doctor, after examination, suggested that Glus be assigned to light duty instead of being assigned to unloading the flour. However, his foreman did not permit this new assignment and he was continued with the job that he had performed up to that time as a freight handler working on flour. In the years 1951 and 1952, Glus made various complaints to his foreman, the General Superintendent of the Brooklyn Eastern District Terminal, and the claim agent of Brooklyn Eastern District Terminal asserting his condition and stating that he desire other work. He was told by these three people that his condition was not as serious as he would make out and that if in fact it was serious at all, he still had seven years within which to bring his action against his employer. I might parenthetically add that the Brooklyn Eastern District Terminal employs men who are under the Federal Employers' Liability Act, under the Jones Act, under the Longshoreman's Act and under the State Workmen's Compensation Act. And it's quite possible that even attorneys at times might have difficulty in ascertaining exactly what Act covers a particular employee at a particular time. In any event, in July 1952, Glus had a serious attack of asthmatic bronchitis and he received welfare assistance from the City of New York. He went to the Greenpoint Hospital as a charity patient in Brooklyn and there, he was told for the first time that he was suffering from asthmatic bronchitis and that this condition was permanent and progressive. He was last able to work for the Brooklyn Eastern District Terminal in January 1953. And since March 1953, he has been employed by the Norcross Corporation in New York, which is a card firm, in their warehouse doing light work in decent working conditions which do not debilitate him too much. Speaker: Did you (Inaudible) when does the -- the statute of limitations begin to run? Seymour Schwartz: The statute of limitations begins to run from the time of the discovery of the disease and the petitioner acknowledges that the -- the statute would begin to run in this case, fraud side or misrepresentation side, in July 1952. Speaker: When did the -- when did the action brought? Seymour Schwartz: The action was instituted in May 1957. Speaker: Thank you. Seymour Schwartz: From January -- from March 1953 until January 1957, Glus had these intermittent persistent attacks of asthmatic bronchitis. Finally, in January 1957, he had a near fatal attack and spent nine or 10 days in the hospital. Since that time, he has been making regular visits to the hospital for treatment and injections in an attempt to keep the asthmatic bronchitis limited. Potter Stewart: One other question, if I may, on the fact. Had he permanently let the employer or the defendant when he first discovered his condition? Seymour Schwartz: No, sir. He discovered his condition in July 1952 and the last time he worked for the defendant was in January 1953. Potter Stewart: Thank you. Seymour Schwartz: His work record of course during this period was intermittent. In April 1957, Glus sought counsel for the first time. Nine days later, suit was instituted in the Southern District in New York under the Federal Employers' Liability Act alleging fraud or misrepresentation on behalf of the respondent in this action. It is the petitioner's position -- William J. Brennan, Jr.: I suppose that he submitted the representation that they have seven years within which to bring action. Seymour Schwartz: Three separate people, sir. One is foreman, two, the General Superintendent of the Brooklyn Eastern District Terminal, and three, the claim agent of Brooklyn Eastern District Terminal. William J. Brennan, Jr.: When -- all three made this representation? Seymour Schwartz: At various times and at various places. William J. Brennan, Jr.: Over what period? Seymour Schwartz: Over a period, I believe, of months or a year. William J. Brennan, Jr.: Beginning when? Seymour Schwartz: In approximately 1951. William J. Brennan, Jr.: The last one was when? Seymour Schwartz: I could not pinpoint that, sir. William J. Brennan, Jr.: Well, was that in 1951 or -- Seymour Schwartz: It was in 1952. Felix Frankfurter: Is the -- the case, is it relevant to the -- to the determination of this case to decide whether every misstatement is a misrepresentation? Seymour Schwartz: I do not believe so, sir. Felix Frankfurter: Well, there's -- there were claim in these statements as to what the law is but -- Seymour Schwartz: Well, as for -- as for misstatements as to what the law is, sir -- Felix Frankfurter: Isn't that -- what you said, I know no more than what you just said. Seymour Schwartz: Yes. As to misstatements as to what the law is, I would say depending on the circumstances and depending on the responsibilities of the parties, there would be an obligation to tell the truth or not to speak at all. And in this particular case, there is the relationship of employer and employee. The claim agent who probably knows as much about the Federal Employers' Liability Act and its statute of limitations as 98% of practicing counsel in the State was certainly one of those -- one of that class that the law intended not to misrepresent any statement of law to a potential plaintiff. Felix Frankfurter: I'm not suggesting that there might not be a ground of what normally is called estoppel but misrepresentation means consciously telling something that you know isn't so. Is that this case? Seymour Schwartz: Well, sir, that -- I couch the -- I couch the wording in my complaint as fraud or misrepresentation. I did that because I did not know whether those statements were the result of fraud deliberately made or whether they were misrepresentations based upon an erroneous set of facts and erroneous analysis of what might well be a difficult factual determination as to what law this employee came under. Felix Frankfurter: You're -- you are suggesting that I am wrong in my assumption that when we talk about misrepresentation in the law, would mean something more than an error. Seymour Schwartz: Well, my understanding, sir, is that sometimes it might and sometimes it might not. I know that the term constructive fraud is often used when there's no intentional fraud, but the negligence is so great that the Court chooses to use the term constructive fraud. Felix Frankfurter: I'm against misusing words at misrepresenting the language. Speaker: Suppose that issue was really here now, what you're asking where I take it is to let this case go to trial and then judge the sufficiency of the fraud or whatever -- Seymour Schwartz: Exactly, sir. Speaker: (Voice Overlap) after the evidence was in. Seymour Schwartz: Exactly. Speaker: The District Court, as I understand it, denied your -- denied a motion to amend the complaint. There is no amendment to cure the defect. Seymour Schwartz: Yes, sir. Technically, sir, no motion was made to amend the complaint but as part of the judgment of the District Court, they said that an amendment could not cure the defect, so none would be permitted. Felix Frankfurter: What's the basis for the Court of Appeals' feeling or expressed feeling that the allegation of -- of -- that would take it out of the statute, assume you could take it out of the statute of limitations, could be slim or meek or inadequate? Seymour Schwartz: Well, I found that rather difficult to analyze myself, sir. I think that very likely the question of draftsmanship was involved. This -- from the time that the petitioner sought counsel for the first time and the time that a complaint was instituted, only nine days passed, and that was done because it was felt that time was of the essence. And it may well be that the Circuit Court felt that the mere complaint by itself did not set forth sufficient allegations clearly to show the fraud or misrepresentation. Felix Frankfurter: Anyhow, they didn't go on that ground. Seymour Schwartz: No, it was not on that ground, however, sir. I think that even the Circuit Court would acknowledge that if fraud or misrepresentation would toll the statute of limitations, then Glus should be given his day in court. Potter Stewart: Mr. Schwartz, since your argument has already been interrupted, let me ask you one more question before you resume. Is -- you answered -- you answered Mr. Justice Brennan's question as to some of the details of this fraud, who made the representations and when and so on, you very properly answered his questions, but am I correct in -- in understanding that so far as the record that we have before us now goes that all we have on this is, at the top of page 1 of the -- of the transcript, this allegation in paragraph 9 of the complaint. Seymour Schwartz: That's quite correct, sir. Potter Stewart: That's all the record shows. Seymour Schwartz: That -- Potter Stewart: That's all the -- Seymour Schwartz: That's quite -- Potter Stewart: -- District Court or the Court of Appeals have. Seymour Schwartz: That's quite correct, sir, and that was my -- in part, that was my reply to the previous -- Potter Stewart: Yes. Seymour Schwartz: -- question. It is the petitioner's position that the matter at hand should determine -- should be determined by the principle set forth in Holmberg against Armbrecht. And I should like to read a brief portion of that case which we think is particularly pertinent here so far as the principle involved is concerned, "Where a plaintiff has been injured by fraud and remains in ignorance of it without any fault or want of diligence or care on his part, the bar of the statute does not begin to run until the fraud is discovered, though there'd be no special circumstances or efforts on the part of the party committing the fraud to conceal it from the knowledge of the other party.” This equitable doctrine is read into every federal statute of limitations. Speaker: Does that -- does that case involve the so-called built-in statute of limitations? Seymour Schwartz: Sir, that case in fact did not involve the usual sort of statute of limitations question. In that case, the federal statute did not have a specific statute of limitations and as a result, the Court had to resort to the state statute of limitations. The state statute of limitations was, as I recall, can be -- that was the factual situation there. We feel that the principle just enunciated, covers the facts in the present action. Charles E. Whittaker: May I ask (Inaudible) principle upon which you derive was the answer you gave to Mr. Justice Harlan (Inaudible) cause of action was deemed to have construed upon the discovery of the disease? Seymour Schwartz: No, sir. That -- that's completely different. I cite -- I cite this principle merely to say that wherever fraud can be shown notwithstanding a specific so-called built-in statute of limitations within the federal statute, that statute of limitations, nevertheless, may be tolled. Potter Stewart: Now, you -- there's a doctrine -- at least in some States, there's the doctrine of fraudulent concealment which, as I understand it, arises out of a situation when the defendant knows or has good reason to know that the plaintiff has a cause of action and the plaintiff does it. That would arise in this kind of a case, for example, if the defendant-employer had -- had made an X-ray of the -- of the defendant's lungs or something and it found a deterioration and damage and had not disclosed this to the plaintiff. That's fraudulent concealment of a cause of action and that, at least on many jurisdictions, will toll any kind of a statute of limitations until the plaintiff learns in fact that he has a cause of action but that doctrine isn't -- isn't relevant here, is it? Seymour Schwartz: Well, sir, we -- we run into one of the difficulties that a practicing lawyer has in this case. Such a doctrine might well become relevant, but it could only be ascertained after depositions were taken or after interrogatories were sent. So far as I know now, I know only the information which was given to me by petitioner and I can only rely on that. It's conceivable that an opportunity to examine all interrogatories may well bring further facts into light which would strengthen the petitioner's position and conceivably might even give him another cause of action. Potter Stewart: Well, he -- this action was under the Federal Employers' Liability Act. Seymour Schwartz: Yes, sir. Potter Stewart: Any action he brought would be under that statute, wouldn't it? (Inaudible) Seymour Schwartz: Yes, it would, sir. May I accept and say this that it would be perhaps conceivable that some action in deceit could be brought even if the Federal Employers' Liability Act were held here to be no longer applicable because the statute of limitations could expire. I don't set that forth with the law and for me to say it's a conceivable possibility. The petitioner feels that the cases of Scarborough and Toran should be the cases which rule uniformly in this sort of matter. When the Federal Employers' Liability Act was passed, the original statute of limitations of two years had as its predominant purpose making uniform causes of action brought throughout the United States. Up to that time, employees had their common law rights and depending on the various States and the various law in those States, causes of action could be brought in one, two, three or more years. When the Federal Employers' Liability Act was passed granting these protections to railroad employees, the purpose of that statute of limitations was to make uniform throughout the country, that period of two years, now three years since 1939. Certainly, permitting the exception of fraud or misrepresentation to carve out an estoppel to a statute of limitations in nowise, diminishes the effect or the strength of asserting a uniform statute of limitations because the petitioner still would be put to his proof as to whether in fact there were fraud or misrepresentation in the case, nor is it particularly helpful to analyze these cases and the situation in terms of a substantive or remedial statute of limitations, that is a substantive statute of limitations cannot be tolled but a remedial statute of limitations can be tolled. Generally, where those analyses are made in various cases, fraud is not involved. Furthermore, a noble cause of action is usually set up to assert a substantive statute of limitations. I think that in our argument, equally strong can be made that the Federal Employers' Liability Act inherently is not a noble cause of action because the Federal Employers' Liability Act still permits the employee to sue his employer on the basis of negligence and while they there certainly are strong procedural safeguards given to the employee, it nevertheless is not as yet a Workmen's Compensation act. Felix Frankfurter: How fruitful really is this mode of argument? I know it's in the case. Where do we really get in using this kind of an argument? Federal employers' liability claim is certainly a noble -- certainly noble in the sense that that's the first time the Congress of the United States gave this kind of a cause of action. I don't know anything more noble than -- than the statute passed by the Congress of the United States for the first time in 120 years. Seymour Schwartz: Well, I -- sir -- Felix Frankfurter: What you say is that there's been common aid of comparable causes of action at common law and in the State for this kind of thing, but how much help do I get in finding out whether the statute is -- is conclusive, not subject to any kind of qualifications or it isn't by being told it isn't noble because while Uncle Sam never gave this cause of action (Inaudible) Seymour Schwartz: Well, very little, sir, and I agree with that and that was the reason I made that point. I nevertheless did not want to be in the position of skipping. Felix Frankfurter: Well, I'm -- I'm not -- I get my observation by saying you're quite within the talk of the cases. I'm suggesting it isn't a very fruitful mode of reaching this, whatever answer should be reached. Seymour Schwartz: I -- I certainly agree with that, sir. I think the essence of this is whether fraud or misrepresentation in any way would diminish the standard statute of limitations, the uniform statute of limitations throughout the United States. And since equity historically has recognized this for a very long time as one of the exceptions to a statute of limitations, no harm would be done here. And the respondent certainly ought not to be permitted to benefit from his own fraud or misrepresentation in an action of this type. Felix Frankfurter: I will get much more help if you marshaled all the instances in which statutes of limitations with reference to all sorts of claims or rights created by the Congress of the United States will impliedly qualify by fraud on the part of the defendant in leading you astray, leading the plaintiff astray in not bringing suit. That was really -- show me that there's some basis for generalization such as -- such as the one you just made. Is there such a body of -- I don't know anything about it, I'm asking you because you worked (Voice Overlap) -- Seymour Schwartz: Well, sir, I -- I have -- I have cited Scarborough and Toran which are within the field of the Federal Employers' Liability Act. Felix Frankfurter: (Voice Overlap) -- Seymour Schwartz: I've also cited the Holmberg case which I think is -- is relevant, although certainly not in the Federal Employers' Liability Act. Felix Frankfurter: Well, I don't care about the Federal [Laughs] -- of all other statutes you bring to bear to -- to make your point, the more convincing it is. If there is a thread running through all sorts of statutes of limitations dealing with all sorts of claim in which such an implication has been made by the Court, that seems to me would be a powerful argument. Now, is there such a body of decisions? Seymour Schwartz: I think there very well -- there very well are particular cases but there is no very large body of decisions -- Felix Frankfurter: But what kind -- Seymour Schwartz: -- that I'm aware of, and perhaps that's one of the reasons that this case is unique and I think important, sir. Felix Frankfurter: But it isn't so unique because there had been fruitful many cases in the lower courts. In the Second Circuit, there have been plenty of cases, plenty of meeting, half a dozen. Seymour Schwartz: Well, but the other Circuits have gone otherwise. Felix Frankfurter: Well, I'm not -- I'm not binding myself. I'm trying to get light. I'm not trying to -- I'm not trying to fortify conclusion I've reached because I haven't reached any. Seymour Schwartz: I think that petitioner's argument is further fortified by the fact that the Federal Employers' Liability Act contains under Section 56 a built-in shield which protects the petitioner, and that Section reads as follows, and, Mr. Justice Frankfurter, perhaps to some extent, this is an answer to the very pertinent question which you just put to. Sorry, that's Section 55. "Any contract, rule, regulation, or device, whatsoever, the purpose or intent of which shall be to enable any common carrier to exempt itself from any liability created by this chapter, shall to that extent be void.". Now, certainly, this section has been held to cover those situations where a general release has been taken, sometimes in advance, other times, after an accident, from a railroad employee. The purpose of that release being to exempt the responsibility of the railroad. If Congress intended that such a thing not act as a bar to a suit under the Federal Employers' Liability Act, it seems to me that they also intended, or the language also permits, that an oral misrepresentation or fraud would similarly be covered by this. In that respect, the Federal Employers' Liability Act is unique since it does have this protection which can be set against the three-year statute of limitations. Felix Frankfurter: I think that might take care of your -- of a purposeful misleading by a claims agent. It wouldn't take care of a stupid or an officious employee telling his buddy, "Oh, don't worry, you've got seven years." Seymour Schwartz: It might not, sir, but nevertheless, I think we would be permitted to -- to have a trial or -- Felix Frankfurter: Well, I -- I -- Seymour Schwartz: -- at least some preliminary -- Felix Frankfurter: That's a different point. Seymour Schwartz: -- proceedings in this matter. Felix Frankfurter: I understand that. Seymour Schwartz: And that I -- that is the point that I'm trying to make. We would like to have the opportunity of taking depositions, securing interrogatories, having a trial, and certainly, if there is any overriding question of law to be decided only by the Court, at that time and at that time alone, the Court would be in the best position to decide what the proven facts had been and what the circumstances had been. Felix Frankfurter: My remark is an intonation that if you are to prevail, it must be important for this Court to indicate to the lower court just what it is that does or doesn't take it out of the statute. I don't mean a comprehensive enumerations of all possibilities, but it's one thing to rest a false representation by a claims agent and to interpret that as coming within device in the liberal sense in which should be -- it should be construed. And quite another thing, as I say, to have some -- some busy body or some -- any employee as you say in -- in paragraph 9 unintentionally give a -- give a wrong stir. Seymour Schwartz: Well, in the Scarborough case, the Circuit Court held that the mere -- the mere misrepresentation without more was sufficient to have the question go to the jury. And we would certainly prefer to see that rule announced by this Court in its decision. Hugo L. Black: Why -- is that crucial to the decision on your side here? Seymour Schwartz: No, sir. It's not. Potter Stewart: Is the Scarborough case the one that went to the Fourth Circuit Court of Appeals three times? Seymour Schwartz: Yes, sir. There were three Scarborough cases. Potter Stewart: Three times? Seymour Schwartz: Yes. Potter Stewart: Three opinions (Inaudible) Seymour Schwartz: Yes, sir. Potter Stewart: Yes. Seymour Schwartz: I refer specifically to the third appeal where that is particularly set forth. I believe that's mentioned -- the exact language is in my brief on page 12. Potter Stewart: Each time the Court of Appeals went a little further. Seymour Schwartz: Yes, it seems that they were edging and edging a little further each time. And certainly, I'm happiest with the third opinion. Felix Frankfurter: Judge Wyzanski's case didn't go up, did it? Seymour Schwartz: No, sir. It never did. I think on the basis of the facts, sir, that the plaintiff at the very least is entitled to his day in court. And we respectfully petition this Court to permit the petitioner to have that day in court. Potter Stewart: You would -- you concede, Mr. Schwartz, when the other -- under the -- if -- if the Court agree with you on -- on -- that under the federal rule as you would -- to inform with the federal rules, you -- your complaint ought to be amended. Seymour Schwartz: Very likely yes. I'm -- Potter Stewart: The rules -- Seymour Schwartz: It was -- it was a difficult position. Potter Stewart: The rules -- the rules expressly relate allegations of fraud (Voice Overlap) -- Seymour Schwartz: Yes, they do. Potter Stewart: -- require that the -- Seymour Schwartz: They do. Potter Stewart: -- facts be set up and (Voice Overlap) -- Seymour Schwartz: Yes. I certainly think that would be justified. Earl Warren: Mr. Mattison, you may proceed. William C. Mattison: May it -- Mr. Chief Justice, may it please the Court, and Mr. Schwartz. On his appeal, the respondent takes the precise issue which has been delineated by him and by the plaintiff in respect of briefs, namely, whether the period of limitations contained in Section 6 of the Federal Employers' Liability Act can be extended by fraud or misrepresentation by the defendant inducing a prejudicial delay by the plaintiff. And then if the answer to that question is affirmative, then on the pleadings before this Court, the precise transcript which comes here as one of the Justices pointed out in paragraph 9 of the plaintiff's complaint at the top of the transcript, whether the representations alleged there by this plaintiff in his pleadings was sufficient to extend the statute or to put it in the traditional idiom where these representations sufficient to create as another of the Justices' commented an estoppel barring the plaintiff, the defendant from pleading the statute of limitations. Felix Frankfurter: But it takes as a little -- it's more complicated in -- that Judge Byers refused to allow amendment. William C. Mattison: He didn't refuse to -- Felix Frankfurter: So that -- that means that no set of circumstances could take care of the arithmetic thing, the three years that elapsed. William C. Mattison: In his view, no. I'm not so sure that that was the correct view but I'm going -- Felix Frankfurter: No, but that's -- but that's -- William C. Mattison: That -- that's -- Felix Frankfurter: -- the case that comes here, isn't it? William C. Mattison: That's the case that comes here. Now -- Speaker: Tell me as a matter of interest (Voice Overlap) -- William C. Mattison: Yes, sir. Speaker: -- your plan to quasi public organization. William C. Mattison: No, sir. It's -- it's individually and -- but non-publicly held stock corporation -- Speaker: (Voice Overlap) -- William C. Mattison: -- doing business in Brooklyn, New York. Before I address myself to point one, in here, I might, with the Court's permission, take up two questions which were asked by Mr. Justice Frankfurter on the previous argument and allude to them briefly. One, is there a body of law? There is a body of law. The body of law goes back before FELA on the nature of the statutes of limitations. It goes through FELA. It goes through the text writers right after FELA. It goes into the 1920s and into the 1930s. It surrounds the amendment of FELA in 1939 where material for this appeal, Congress did only one thing, it added an extra year. Then in about nine more cases, the body of law continues up until 1949 in Scarborough, holding as far as our research has indicated, categorically and without exception and with complete unanimity that in this type of situation, fraud does not toll the statute of limitations. The body of law which now comes before the Court in our brief and in our adversary's brief is confined at this moment to three cases which are cited in the briefs, the Scarborough case which went four years through three spins in the Fourth Circuit, and as Mr. Justice -- one of the Justices again commented that it -- it changed each time but that's not material here. And then one more opinion by the Massachusetts court by Judge Wyzanski, and that is where we stand on the body of law. If I may again address myself -- Felix Frankfurter: I'm not -- I'm not sure I understand. You said there is a -- there are -- are questions, the body of law pre-FELA -- William C. Mattison: Yes. Felix Frankfurter: -- is that -- are those cases in your brief? William C. Mattison: Most of them. Most of -- when I say most of them, no, because there are innumerable cases we took to the convenience of the Court, the cases that we thought were best in many of the -- for instance, we have Bement which I -- I can't remember where it's cited, maybe page 6 or so. It's a state court, I think, in Michigan. But all through the States, Mr. Justice Frankfurter, even for instance a recent case in New York which involved an analysis of the decisions of this Court and the lower federal courts. The law is stated to be categorically that fraud will not toll the statute of limitations when it is practiced by a defendant. Felix Frankfurter: Let me put a specific question to you. Is there no -- has no case -- is there no -- has this problem not originally with reference to some statements made by a revenue agent or a taxpayer as to what time he has assumed for protested facts. That's -- that's what I'm looking for, whether on the other statute, having nothing to do with the -- with the FELA but having to do with the kind of implication that the Court do or do not read in by in the statute with fixed limitation, apart I suppose as there's so many things that federal statutes don't have no statute of limitations. William C. Mattison: Your case did not. Felix Frankfurter: I know (Inaudible) but that's -- that's more difficult than (Inaudible) William C. Mattison: My answer is that I know of none, but in all honesty to the Court, I wasn't looking for them. And if I did, I would report it to you. I know of none. The singularity here is complete. Secondly, if I may again address myself to a question that was asked, how does it help -- help us if we find that this FELA is a -- is not a new statute? Well, Judge Wyzanski, as far as I know, and to some extent, (Inaudible) in the first of the three Scarboroughs, but Judge Wyzanski very specifically said, “Why, this is not new, this is old.” But we have cited not only text writers but the Supreme Courts of many of the States and Justice Holmes in a -- on oblique reference to the newness of FELA in a 1916 case in our brief. What Judge Wyzanski was trying to do, I think, and what Scarborough was trying to do on this issue, was to refute or to disclaim an ancient theory which is bound up with a litigation on these cases, namely, this is brand new at the law, this never existed at the common law, and when Congress gives this legislation, which is beneficial and beneficent, it prescribes the rules of the game, and because the argument was that it wasn't new and in only those two cases have I seen that statement made. If I can proceed to state in just capsule form the theme of my argument from which I voluntarily distracted myself, long before FELA in 1908, the traditional distinction was made. We cited the texts between general and special statutes. General statutes are the ordinary ones. They relate to rights already existing at common law. Special statutes are considered to be those which are contained in such a statute, as FELA, which create the right in the first place. Now, from the outset, the courts construed FELA as containing a special statute of limitations only and one which was subject to no exception. There have been exceptions, I didn't mean to imply that there aren't, but not Justice Frankfurter in -- in cases of fraud. The -- the classic exceptions are those which come out of a Civil War case in this Court where the Supreme Court of the United States took an ancient maxim of one of the European writers who said that if -- if the -- the prescription shouldn't bind someone when he doesn't have a form available to him. And so, in cases where -- there are cases we cite into on our brief where the plaintiff was interned one day after Pearl Harbour and comes back and the statute has run. In that type of case, there have been breaks, chinks in the armor, one of the judges called in the so-called impregnability of the doctrine for which we speak here today. Felix Frankfurter: You said that you draw on -- the word, I think, was the things or the circumstances or the material that surround the amendment of 1946, didn't you say that? William C. Mattison: 1939, Your Honor? The amendment of 1939? Felix Frankfurter: 1939, yes. William C. Mattison: Well, what I meant to -- Felix Frankfurter: Just surrounds the -- William C. Mattison: What I meant to say -- Felix Frankfurter: Certainly didn't make a change by exerting the year but the circumstance that surround. Now, does that mean that this question was brought to the attention of Congress? William C. Mattison: Well, I spent a long time in the library, as I think Judge Wyzenski did, and the truthful answer to it is that in the debates in 1939, there isn't a solitary word about this doctrine for which I'm now contending, one way or the other. Not a word. And incidentally, and parenthetically, Judge Wyzenski says that's -- that's living proof of the fact that the Congress didn't know the body of law that grows around FELA since 1908 because he said, unlike the Internal Revenue Bureau, they have no counselors at hand to -- to advise their -- their labor people. Felix Frankfurter: And he could also tell that the particular few people who dealt with the subject in committee didn't know? William C. Mattison: Well, he -- that's the plain -- that's the plain statement. But it isn't true because the -- the cases abound in the state courts and in the Circuits and there just isn't any question about that aspect of it. We argue, of course, and we cite Sutherland for hornbook, “Principles of Statutory Construction”, and we cite cases that where the Congress had this precise situation in front of them, namely, the legislative history of this Act for so many years and the decisions they must have known. They must have known these decisions and they must have considered that the decisions met with their satisfaction else they could have created an exception. Felix Frankfurter: Is there any -- anything that indicates why they embarked in the statute of theory that's before you? William C. Mattison: In the debates, I -- I do not recall. I do not recall. There was only a very brief page in the multitude of pages on the problem dealing with the enlargement. Now, our alternative argument is that in of any -- in any event, if this Court feels that there should be an extension of the statute available here to the plaintiff, that on these pleadings, as the Court finds them, there should be no extension because as the Court of Appeals for the Second Circuit held in its opinion, this mistake or this misrepresentation, to use the language of the pleading, could have been a perfectly innocent one by an undoctrinated man who was speaking on a matter of law about which he knew nothing. Now, addressing myself briefly to point one, I remake the point that before 1908, this distinction was exceptionally well-known. The courts use all kinds of language to refer to these statutes, built-in, substantive. But without exception, the courts held that the statutes, not this type before 1908, but debt actions and will contests which we cite in our brief, that those statutes were not extendable. In a case in this Court in 1886, the Harrisburg which we've cited, this sentence appears. It is the -- this Court's characterization of two debt statutes, one in Massachusetts and one in Pennsylvania, and here it is, “The time within which the suit must be brought operates as a limitation of the liability as created and not of the remedy alone. It is a condition attached to the right to sue at all.” I cite this only for its general usage in the approach to this problem. Now, in the mid-1880's, when statutes of limitations generally were growing in the 48 States, at first, the courts showed a marked diversity to them. But later, as we point out in the brief, with cases and with text citations, the courts began to enforce them literally and where exceptions were not found in the statutes the courts putting on in. In 1908, this body of law was extensive and so we argue that the Congress knew it or is presumed to have known it. We point out that in Central Vermont against White, which we cite and which was decided in this Court in 1915, on another question, namely, “Where is the burden of proof under this Act when there is a debt?” This Court said that in enacting FELA, the Congress, knowing the decisional law on the question of burden of proof, must have intended that FELA be construed in the light of that decisional law. Now, immediately after -- Speaker: Is the Fourth Circuit the only one that has gone the other way? William C. Mattison: And Judge Wyzenski in Massachusetts. Speaker: (Inaudible) William C. Mattison: The only circuit. Immediately after the adoption of FELA, and we cite these cases on pages 6 and 7 of our brief, there were a host, a legion of cases dealing with FELA at the District Court level, one right here in the District of Columbia, the Morrison case, which we cite on page 6, I think it is, cases at the state Supreme Court level and -- and in the Circuits. We quote, at length Bement on page 6 of our brief, and it is a fairly typical characterization of FELA by a Supreme Court. Potter Stewart: Mr. Mattison, in -- in your reading of these cases, did you run in anywhere to the -- to the distinction that my question a few minutes ago suggested between fraud of the kind alleged or suggested in this complaint or misinformation as to the length of the statute of limitations to -- in that kind and -- and fraud that went right to the cause of action, fraudulent concealment of the fact of the plaintiff's cause of action, is there any (Voice Overlap) -- William C. Mattison: Judge -- in -- I think 32 States in the United States, there are statutes of limitations. There's a -- an excellent article on this which I should have cited but it's in 11 -- 34 Michigan at page 1 -- Potter Stewart: 34 Michigan Law Review. William C. Mattison: -- an extremely scholarly article on this question of statute of limitations. Here, I think he points out that there are 32 States in which there are statutes on this question of fraud. But they are the types of fraud that go right to the cause of action such as we had in the case of Mr. Justice Frankfurter wrote which is cited in their brief, and on the concealment questions. It is -- it's 31 Michigan Law Review, page -- Potter Stewart: 3. William C. Mattison: 1. 1 as it's found but -- page 591 at Sect. Felix Frankfurter: Do you happen to have (Inaudible) at hand the terms of the provision making the cause of action not -- or dealing with -- with the effect of fraud? Do you -- do you have a sample form? What do they say? William C. Mattison: You are now referring to statutes in the States dealing with fraud? Felix Frankfurter: Yes. William C. Mattison: Yes. I -- I -- if you just give me one second. Felix Frankfurter: What you've just said. William C. Mattison: Yes. He cites -- Professor Dawson of Michigan cites as a typical statute, the Alabama Code of 1928. This is Footnote 1 on the article. It reads, "In actions seeking relief on the ground of fraud where the statute has created a bar, the cause of action must not be considered as having accrued until the discovery by the aggrieved party of the fact constituting the fraud." Now, that statute -- Felix Frankfurter: That makes the distinction Justice Brennan made -- William C. Mattison: Yes. Felix Frankfurter: -- namely, there's one thing to -- as in this case, to conceive the cause of action arose on (Inaudible) certain, and is there a reason for not extending it or extending it beyond the three calendar years and say the cause of action doesn't arise until there's consciousness on the part of the plaintiff that he has one. William C. Mattison: But you see as -- Mr. Justice Frankfurter, as you find these pleadings, it's ineluctably clear that this plaintiff knew that he had a cause of action. Felix Frankfurter: Well, that's -- that's not in dispute. It isn't -- William C. Mattison: He doesn't -- Felix Frankfurter: No. The suggestion and answer through an earlier question by Justice Harlan that the -- the answer was explicit that if the statute of limitations, three years (Inaudible) and he's out, so I understood Mr. Schwartz's answer. Is that right? William C. Mattison: Yes, sir. It's right. Felix Frankfurter: So this is not a problem of where the cause of action arose. That is not in controversy. William C. Mattison: It is not in controversy at all. It is an issue. It is -- it is admitted here by the pleadings in an argument that the cause of action arose in 1951 or 1952. And it's -- this has long since bought as the time goes. Now, Scarborough came along and I guess I should not, at this hour, discuss Scarborough, Fravel and Toran. They've taken a part pretty well in the brief to the extent that we could. There is no -- there is no doubt. There is no doubt that on the facts, the cases are markedly dissimilar, but I must concede that the language of Scarborough is so sweeping that it presents a precise issue in this -- to this Court. It started out as a palpable and deliberate fraud of the worst type. And finally, through three jury trials and the exhaustion of the Fourth Circuit, it stands -- and I must confess that I find it -- and I -- we cite cases all through the United States in opposition, it stands for the proposition that all you need is a statement, mens rea, nothing matters, just a statement that is in fact incorrect and reliant. That's -- that's the way Scarborough worked out the -- on the third spin. I would like to conclude my argument by addressing myself to point two of my brief, which is, as I've indicated to the Court, assuming that you find that fraud or misrepresentation on this transcript should toll the statute, then this is not a -- appropriate place for the statute to be tolled. Subsequent, this is the -- the pleading in issue, subsequent the plaintiff's pleading, subsequent thereto the defendant's agents, servants and employees fraudulently or unintentionally misstated to the plaintiff, but he had seven years within which to bring his action. The Court has already started out from this appeal the fact that these misrepresentations of successive claim agents and so forth and statements which are contained in the petitioner's brief that examinations by doctors and so on that that, while it may certainly be true, is not before the Court. The sole and exclusive pleading is the one which the Court has already latched onto on the argument, namely, paragraph 9 of the complaint. William J. Brennan, Jr.: Aren't you up against what Mr. Justice Frankfurter said earlier, Mr. Mattison, that Judge Byers did tell him you wouldn't allow him to amend and perhaps on the premise that you're making this argument, namely, that fraud does toll? William C. Mattison: Well, he might -- William J. Brennan, Jr.: He might be able to amend if he had the opportunity to bring himself within it, is it not? William C. Mattison: Mr. Justice Brennan, there is not even the remotest implication of criticism as the case comes here. I am -- I mean, it -- it's unfortunate that he was told that he couldn't amend. And so, I mean, I'm certainly not taking any issue with any of these statements that have been made because I will concede, for argument's sake, that they might -- you know, they might be true. It's just unfortunate that as the transcript themselves, we are dealing with a naked allegation in the prolix language that we lawyers have to use when we draw these pleadings. The District Judge referred to Hilliard against Pennsylvania Railroad Company There, the claim agent told the plaintiff's father that when the boy gets to be 21, he can determine for himself. That's the typical situation in which the courts, in a number of cases which we've cited throughout the United States, have held that however unfortunate the issue as it was formulated, however unfortunate the issue be, that it is a misrepresentation of law. Now, in Scarborough, of course, you had something more than that. You had a -- a -- an inducement to a -- an unfortunate plaintiff not to sue in exchange for a promise that he would be paid when he was 21. Toran has no facts, as I recall it. That's right, so I don't know what the facts were there. Here, as I said, we have no inducement and we have no exchanges of promise. We have no promissory estoppel, as the New York court sometimes call it. We have simply a statement albeit made by a -- a non-informed and perhaps, an unfortunate claims agent or whoever it was, I don't know from the pleadings, it could be one of three people, or more, who said to this unfortunate plaintiff it is alleged that he had seven years within which to sue. In conclusion, I think that what the Court here is faced with, if it gets beyond the pleadings, and if it satisfied that argument point two of our brief has no merit, if it's -- if it's faced with the decision of -- of extending or making a statute extendable, it's faced with a -- a monument of tradition, which perhaps it is not easy to -- to defend and sound logic to get to the juridical basis of this distinction as an extraordinarily difficult matter which I'm glad the Court didn't ask me to embark on. But there it is, and we are, and I think the Court is and Congress is stuck with it. Potter Stewart: Well, the monument you're talking about is the -- is the distinction between the -- the built-in statute and the general statute? William C. Mattison: And the non -- and the non-extensibility of the latter because traditionally, the courts considered that it is the creation of the right within the statute and it marks the rules of the game Potter Stewart: If the built-in statute was part of the right, which was a -- William C. Mattison: Cause of -- Potter Stewart: -- legislative -- William C. Mattison: -- we gave you a lot of good things and -- Potter Stewart: Yes. William C. Mattison: -- maybe some of them are bad but this is -- Potter Stewart: Yes, conditioned upon the statute of limitations. William J. Brennan, Jr.: May I ask, Mr. Mattison, not to pressure. William C. Mattison: (Voice Overlap) --- William J. Brennan, Jr.: Now, that you said you were glad we had not, in that article, for example, which you referred us to, is there any attempted offense of this? William C. Mattison: Fortunately [Laughs] -- fortunately, he doesn't. Felix Frankfurter: What -- what does he do? Mr. Dawson is, to my mind, one of the curious minds -- William C. Mattison: It's an -- Felix Frankfurter: (Inaudible) What does he do? William C. Mattison: In this article, which unfortunately is not addressed to FELA and its problem, and for -- for which reason I didn't cite it, Judge Frankfurter, he talks about the ancient origins of statutes of limitations coming down from Edward III, James I and into the States here, and what the equity courts did, which incidentally was pointed out by you in your opinion because they felt they weren't bound by James I, and what our equity courts did and how finally in the middle of the 18th Century, we avow of these statutes, and he addressed himself exclusively to this question of fraud as in the Alabama statute, he left for a later issue concealment which U.S. about in -- I haven't read the article. Felix Frankfurter: But it is conclusion -- it is as much as so many States, a good many States have dealt with the problem (Inaudible) statutorily implication is that it ought not be implied. If that is new, I can understand that mode of reason. William C. Mattison: Well, he merely takes a -- he merely takes a historical treatment of statutes of limitations which we lawyers know about usually dealing with actions in fraud, and he traces their historical development. Unfortunately, he doesn't talk about the distinction between built-in or substantive and remedial statutes. William J. Brennan, Jr.: Have you run into -- in any source, any defense of that distinction -- William C. Mattison: No.No. William J. Brennan, Jr.: -- other than the -- other than the words that once related the right and the other the remedy? William C. Mattison: No. Well, there -- there is this -- there is this. It's perhaps not too appealing. You didn't have a right X at the common law and now, we're giving you one. And we are a literate Congress, we know all about these decisions so we know something about them. And these statutes up and down in the United States and in England have been construed as substantive. If this -- if the legislature doesn't give you an exception, you don't get one and now, we adopt this legislation. We're giving you something you didn't have and we are following the rules of the game. It is, I think, one, that you are getting something you didn't have before. That's why this emphasis aren't unique to the common law. It is that. It is also the ease with which Congress could have done otherwise here. For instance, and I think it was -- pardon my pointing -- an 1870 statute, which I cite in the footnote and I found another one, which I didn't cite, a 1930 Tariff Act, Congress went right out of its way, our Congress, to put in the statute of limitations an expressed statement that fraud would toll the running of the statutes. William J. Brennan, Jr.: But there are other federal statutes in which Congress has said two years and no longer. William C. Mattison: Yes. Well, I don't know whether that argument appeals to you. To me, it is just atrocious writing to say in a nice statute that you have two years or three or four to sue, comma, and not after. To me, it -- it offends my sense of -- of precision if I have any left in -- in English and I simply can understand it, and that's the best that I can do with that argument in my brief. Incidentally, it did appeal to Judge Wyzanski. Felix Frankfurter: Now, Mr. Mattison, since you've opened up freely, going about this (Inaudible) one should, trying to find underlying reasons, not just words. If the distinction is, as I get it, the distinction is this that if you deal with common law right as to which there are statutes of limitations, you may imply a qualification, namely, conduct by the defendant -- the -- the plaintiff -- conduct by the defendant leading the plaintiff astray and not of saving his right, that is the common law right. But as to new, newly created right, that doesn't apply. Now, that means to me that as to old stuff, you implied fairness. As to new things, you don't, which isn't very satisfactory, is it? William C. Mattison: Intellectually, it isn't and it isn't intellectually satisfactory and I -- Felix Frankfurter: (Voice Overlap) you -- you said something a minute ago which as a lawyer does carry weight would be, namely, namely, that after all, as we know, most of the members of the Congress are lawyers and I don't know why Justice -- Judge Wyzanski gets the confidence. They don't know anything because they didn't tell him, that there were too much of an assumption (Inaudible) But in any event, if this is drafted by lawyers in the Interstate Commerce Commission, for years and years and years is that lawyer (Inaudible) leading members. You tell me -- you just told me, there's been (Inaudible) that Congress in a number of instances did specifically deal with this problem by writing in the -- the qualification. Now, that's lawyer's argument and you ask for a lawyer. William C. Mattison: To -- in Footnote 8 of my -- my brief -- page 8, Footnote 1, I have only one footnote at the brief. Felix Frankfurter: Which is it, Mr. -- William C. Mattison: Page 8 of my brief, Your Honor, Footnote 1. And if -- Mr. Justice Frankfurter, if you would like a citation in which you will find an annotation covering the States dealing with a problem and writing in fraud, I didn't feel it appropriate to put it in. It is 15 A. L. R. 2d, 15 A. L. R. 2d 500 at Sect. And in that article, I think you will find mention of the Tariff Act of 1930, which I mentioned briefly, 15 A. L. R. 2d 500 at Sect. You will mention -- you will find mention of the Tariff Act of 1930 in that article. It was a five-year statute. And there, the Congress -- the Congress put in the words "concealment or absence of the property will not toll the statutes". So I have at least two. Felix Frankfurter: Now, that goes “concealment or absence of the property”. William C. Mattison: It's a tariff. Felix Frankfurter: Yes, but I mean that -- that is in Justice Stewart's corner of -- of knowing when the cause of action arises. William C. Mattison: Well, I have difficulty -- may I talk? My light is on, shall I? Earl Warren: You may answer that, yes. William C. Mattison: Thank you sir. I have difficulty with that argument because I -- here, there is no question that he knew he had a cause of action. These cases, Mr. Justice Frankfurter, thousands of them in this Michigan Law Review, deal with actions for deceit. And in each one of them, I'm certain the plaintiff didn't know that he had a cause of action until something happened. Here, of course, the contrary obtains. He knew it but he was told that he had more time than he does.

Warren E. Burger: We’ll hear arguments next in 75-1453, Wooley against Maynard. Mr. Johnson, you may proceed whenever you’re ready. Robert V. Johnson, II: Mr. Chief Justice and may it please the Court. I appear on behalf of the Chief of Police of Lebanon, New Hampshire, the Director of the New Hampshire State Police and the Commissioner of the New Hampshire Department of Motor Vehicles, all three of whom are the appellants herein. This case presents to this Court two general issues. The first, dealing with symbolic speech. The issue being whether consistent with the First and Fourteenth Amendments, the State of New Hampshire may prohibit by criminal sanction the knowing obscuration of the State motto, “Live Free or Die” on the license plates of registrants of motor vehicles in New Hampshire. The second issue is whether or not the appellees herein prior to the utilization of the United States District Court for the Federal District of New Hampshire were obligated or should have exhausted their State appellate remedies. In 1809, General John Stark of New Hampshire wrote a letter to his Vermont comrades declining for reasons of health to attend the 32nd reunion of the 1777 Battle of Bennington, Vermont in which General Stark had commanded the Continental troops against a decisive victory against the British and Germans. At the conclusion of his letter, General Stark wrote to his comrades a proposed toast for the reunion. The proposed toast was “Live Free or Die, death is not the worst of evils.” The toast obviously was reminiscent of the words of Patrick Henry back in 1775, “But as for me, give me liberty, or give me death.” 168 years after the Battle of Bennington, Vermont, the New Hampshire General Court or legislature adapted the words, “Life Free or Die” as the official State motto of the State of New Hampshire, 168 years after those words were said. In 1969, our legislature directed the Director of the Division of Motor Vehicles to place on all passenger vehicles registered in New Hampshire the State motto, “Live Free or Die.” William H. Rehnquist: If you had kept it just seen at New Hampshire, you would have avoided this litigation, wouldn’t you? Robert V. Johnson, II: I’m not so sure Justice Rehnquist. Those environmental purists may be here sitting on my right saying that since New Hampshire is no longer pure, we’re evading their First Amendment Rights. Warren E. Burger: You might also have some copyright problems with the words of Patrick Henry on Virginia on -- Robert V. Johnson, II: I’m not sure [Laughter]. Harry A. Blackmun: General Johnson, why did it take the General Court 160 and some years to arrive at this conclusion? Usually, they’re more traditional than that of New Hampshire, aren’t they? Robert V. Johnson, II: [Laughter] We adapted in New Hampshire a State song, a State seal, a State flower and a State tree as well as a State motto in accordance with the format of most states. And while New Hampshire was one of the original signatories of the decoration of independence, I don’t know the reason for the delay in the adoption of these State symbols but I think that they were adopted at a simultaneous period of time with the adoption by other states of State symbols. Whether our conservative nature had anything to do with it or not, I don’t know. Warren E. Burger: Does your case depend upon this having been declared the motto of the State officially by the legislature? Robert V. Johnson, II: I think, Mr. Chief Justice, that it does have some bearing because by the legislatures having so declared this to be the official State motto, the legislature has in effect said that the motto is of importance to the State of New Hampshire, which brings me to the interests of the State of New Hampshire in having the motto on its license plates. The motto not only symbolizes the heritage of New Hampshire, it fosters an appreciation of -- John Paul Stevens: General Johnson, could I interrupt before you get to the State interest? Do you challenge the District Court’s finding that the appellees’ motivation was based on a fundamental religious belief? Robert V. Johnson, II: Yes, Mr. Justice. John Paul Stevens: You challenge that it is clearly erroneous and you ask us to set this aside to you? Robert V. Johnson, II: Yes, Mr. Justice. John Paul Stevens: Did you write that in your brief? Robert V. Johnson, II: We, in our brief questioned the sincerity of the appellees and you will find in the transcript of the hearing evidence that Mr. Maynard, while he purports to be a Jehovah’s Witness has been dis-fellowshipped from the Jehovah ’s Witnesses And in fact, one of the Jehovah’s Witnesses’ churches had at one time one or more criminal prosecutions against him. So, (a) we question Mr. Maynard’s sincerity and -- Thurgood Marshall: On a sincerity, he went jailed, didn’t he? Robert V. Johnson, II: That is correct. Thurgood Marshall: Well, do you -- usually, non-sincere people, they go up to closing of the door but they usually change, don’t they? Robert V. Johnson, II: Well, the matter of sincerity, I think is two-barreled. The first is the question which a moment ago was placed to me, we have some doubts as to his sincerity. But even accepting his sincerity, we then get to the next issue which was what he communicated. A particularized statement capable of being understood as this Court held it must be in Spence versus Washington. Thurgood Marshall: That’s a different question.(Inaudible) John Paul Stevens: I would think so. I just want to be sure you’d disagree and there is evidence which you point out that may cast doubt on the District Court’s finding. But, is there not some evidence in the record which would require us to accept the finding as not being clearly erroneous? Didn’t he testify that it was a religious belief and so forth that’s illegal behind the District Court’s findings? Robert V. Johnson, II: There is evidence both ways. The State -- John Paul Stevens: Well, if you concede that, don’t we have to accept the finding? Robert V. Johnson, II: I do not concede the matter of sincerity. In Spence versus -- well again, I think the two questions are intertwined. The sincerity of Mr. Maynard at the time he undertook this act, I think there is evidence both ways as to whether or not he was undertaking this act on a religious, conscientious basis or whether it was a mere act of whimsy or bizarre activity. And I think there’s evidence in both ways. Warren E. Burger: As Justice Marshall suggested in one of his questions, do people ordinarily go along and spend five days at a time in jail just to pamper a whimsy? That’s some evidence of a sincere belief, however, a misguided one might think it is and do you rest on the fact that he is departed from a particular faith that as a dissident as undermining his sincerity? Robert V. Johnson, II: No, I don’t believe and I don’t want to make this particular issue greater than it is necessary to the appellant’s case. While we question the sincerity of Mr. Maynard, I would submit that his sincerity is not going to resolve the issues before this Court. And while I say that there is evidence both ways, assuming arguendo the sincerity of Mr. Maynard, I would then argue that his conduct is not in fact symbolic speech. Warren E. Burger: Do you think the State of New Hampshire could require citizens to carry signs, picket signs, to support the United Nations in a sincere belief by the legislature of the State that it was very important to support the efforts and work of the United Nations? Robert V. Johnson, II: My answer to that is no and for a variety of reasons. The first is that your hypothetical is a more poignant message in my mind than the motto, “Live Free or Die.” Secondly, the motto “Live Free or Die” and its requirement that it’d be placed upon motor vehicle license plates has to do with the registration of motor vehicles, the use of the highways, and efficient registration system of motor vehicles and other recognizable interests of the State of New Hampshire which I think are more important than those that I could enunciate to support your question, Mr. Chief Justice. Warren E. Burger: Could the State just as well offer its citizens, its automobile owners, an option, but if they did not want that motto on the license, they could be omitted? Robert V. Johnson, II: This matter was raised at the District Court and the Commissioner of the Department of Motor Vehicles testified in effect that it would raise havoc with the printing of the motor vehicle registration plates, which is one of the -- Potter Stewart: Where are these plates made, in the State prisons? Robert V. Johnson, II: That is correct, Mr. Justice. Potter Stewart: Kind of an IRA, isn’t it?[Laughter] Robert V. Johnson, II: It is.[Laughter] On the other hand, if the death penalty for violation of our statute relative to the obscuration of the motor vehicle license plates were to be the death penalty perhaps sincerity of persons would be more questionable. Thurgood Marshall: Do you mean that if we rule in favor of the appellees, then everybody would take it over and (Inaudible)? Robert V. Johnson, II: This is another matter, Mr. Justice Marshall. Thurgood Marshall: If everybody’s in favor of getting rid of it, you ought to get rid of it. Robert V. Johnson, II: This is not a burning issue within the State of New Hampshire and this is one of the basis on which I would distinguish this case from the flag cases. Mr. Chief Justice Burger has remarked this past summer, I believe, at the commencement address at one of our national universities -- Warren E. Burger: I was speaking all alone there. I didn’t have a college talking about my decision?[Laughter] John Paul Stevens: And it was burning enough for you to appeal, I think, wasn’t it?(Inaudible) Robert V. Johnson, II: I believe that that was at the University of Pennsylvania in which you drew the distinction between the strong dissent of the 1960’s and the World Peace of Today. This is not a burning issue, Mr. Justice Marshall, in New Hampshire. Prior to this particular case, there were two combined cases before the New Hampshire Supreme Court cited in the State’s brief, the State versus Hoskin and Eli in which the defendants therein had taped over the State motto. This -- Thurgood Marshall: Then I understand that the Attorney General’s offer doesn’t have anything else to do that’s why they brought it up here? Robert V. Johnson, II: We have sufficient work in New Hampshire -- Thurgood Marshall: Well, is it important in the State of New Hampshire or not? Robert V. Johnson, II: It is very important, Mr. Justice Marshall. Thurgood Marshall: But it’s not a burning issue? Robert V. Johnson, II: It’s not a burning issue from the standpoint that when one goes to New Hampshire, one sees the motto taped over. If I may introduce a piece of evidence not before the Court in my travels around the State of New Hampshire since this case first was instituted, I personally have yet to see within the State of New Hampshire a license plate with the State motto either cut out or taped over. Thurgood Marshall: Since you speak as an individual, the first time I noticed the motto was after this case was filed. I have never paid any attention to it. I mean, New Hampshire license, (Inaudible) New Hampshire, but I didn’t live or die about it.[Laughter] Robert V. Johnson, II: Well, most people in New Hampshire don’t either. They accept it as the fact that it is required to be placed on their license plates by the legislature in New Hampshire which is one of the fundamental basis upon which the State, the appellants herein say that by no stretch of the imagination can the appellees be said to agree with the State motto merely because it’s required to be placed on their license plates. Every -- Warren E. Burger: Well, what if the legislature had required them to take a choice or to put on the license plate on van or bussing, do you regard that as somewhat controversial, wouldn’t you? Robert V. Johnson, II: Certainly. Warren E. Burger: Suppose on the other hand, it was -- bussing is beautiful. Would you think that was controversial? Robert V. Johnson, II: There certainly would be people who would be here before this Court holding that it was controversial. It’s a -- Warren E. Burger: What difference does it make if the particular person finds that obnoxious and objectionable or whether it’s approved by a majority and disapproved by only a small minority? Robert V. Johnson, II: Well, I think then, we get down to a balancing issue, balancing the interest of the State versus the eccentric feelings of a very small minority. William H. Rehnquist: Do you think it’s likely that either the hypotheticals put to you by the Chief Justice would be adopted by the New Hampshire legislature of the State motto or -- Robert V. Johnson, II: No, Mr. Justice Rehnquist. We have adopted our motto and I don’t believe it would be changed. Thurgood Marshall: Mr. Attorney General, a minute ago, you said that it would be very troublesome to issue license plates without the sign. I saw a license plate in New Hampshire a week ago that had letters “ER” on it, or “AB” or something, with two letters, that was pretty special, wasn’t it? Robert V. Johnson, II: Our motor vehicle registration -- Thurgood Marshall: Doesn’t that stand special? Robert V. Johnson, II: Each plate has its own numbers and each plate has its own letters. Thurgood Marshall: What I mean, they go from 1 to 9000, that’s a machine job, but the letters “ER” is not a machine job? Robert V. Johnson, II: I believe -- Thurgood Marshall: And no computer runs on ER? Robert V. Johnson, II: In a sense -- I believe that it does because the letters in New Hampshire stand generally for our nine counties, and so the counties do have significance. Thurgood Marshall: Well, this didn't have any numbers behind it, it just had letters. Robert V. Johnson, II: Well then, that is what is called in New Hampshire a Vanity Plate. Thurgood Marshall: Yes. Robert V. Johnson, II: And that -- Thurgood Marshall: Well, couldn't you make a vanity plate for this man, if he’d pay for it and leave -- Robert V. Johnson, II: Unfortunately, all vanity plates in New Hampshire have the State motto on it, but your question is, could we -- Thurgood Marshall: Yes, but couldn’t you make a vanity plate without the motto? Robert V. Johnson, II: Well then, we come to the issue of whether the State of New Hampshire is obligated to do so, the legislature having authorized the motto to appear on all passenger vehicles. Thurgood Marshall: All I’m saying is it wouldn’t be any harder than just set the vanity plates. I’m not arguing the law about it. I’m arguing the (Voice Overlap). Robert V. Johnson, II: The State has conceded, Mr. Justice Marshall, in its brief that the State of New Hampshire can undertake a workable system of motor vehicle registration without having the motto on its plates. We concede that, but we are here on the more fundamental constitutional issue as to whether or not in day and age, in the 1970’s, the State motto may not be required to be placed on motor vehicle license plates. On the front of this particular building is a slogan, is a motto “Equal Justice Under Law” and I would submit to this Court with my utmost respect that the work of this Court may go on without that motto being on the front of this building. In the same way as I concur with Mr. Justice Marshall that the State of New Hampshire may undertake a workable motor vehicle registration system without having the motto on our license plates. John Paul Stevens: General Johnson, just to give you a question somewhat like the one that the Chief Justice asked. Supposing the State of Utah adopted a motto, “The Mormon State” and then tried to put that on its license plates, would that be permissible? And if not, why not? Robert V. Johnson, II: I think that it would be a closer issue. The reason being that I would submit the words “Live Free or Die” do not have the significant meaning that the words “The Mormon State” has. John Paul Stevens: Well, I suppose, if one was a Christian scientist and didn’t believe in death, it might have (Voice Overlap). Robert V. Johnson, II: That is correct and I would point out that almost every State in the union has mottos or slogans on its license plates and -- John Paul Stevens: Are there any other states that have mottos that profess the belief in death? And why a belief in death any different from a belief in the Mormon religion? Robert V. Johnson, II: With respect to the first portion of your question, no. There is no other license plate professing a belief in death. With respect to the second aspect of your question, I think that the more particularized the message becomes then perhaps the more weight has to be given to the State interests. Thurgood Marshall: Well, what if you do it like we do it in Virginia? We don’t have it on our license plates, but we have stickers I see a lot of people paste it on the bumper “Virginia is for Lovers”. Robert V. Johnson, II: [Laughters] Thurgood Marshall: But, they didn’t put it on the license plate? Robert V. Johnson, II: Well, this -- Thurgood Marshall: You could buy the sticker and say what you want. Robert V. Johnson, II: This is exactly another fundamental case. Thurgood Marshall: And in that case, the appellee here wouldn’t have any trouble, would he? Robert V. Johnson, II: Well, the appellate herein is a printer by trade and one of the arguments of the State of New Hampshire herein is that the statute under which he is being prosecuted does not penalize him for any disparagement of the motto of the State of New Hampshire other than a physical act upon a license plate which is in a sense still a property of the State of New Hampshire. There is nothing in our statute which precludes Mr. Maynard from verbalizing either by the spoken or written word his objections and dissent to the State motto. There is nothing whatsoever to prohibit him from doing anything other than merely taping over or cutting out the State motto on our license plates. And with respect to other statements on license plates, I could run through the variety of them as up here on the license plates of various states. Nebraska, “The Cornhusker State,” does everyone seen a vehicle from Nebraska reasonably believe that the registrant of that vehicle necessarily himself believes that Nebraska is a cornhusker state or that everyone in Nebraska is a cornhusker? William J. Brennan, Jr.: What about the New Jersey license “The Garden State”? Do you think any resident of New Jersey believes it is?[Laughter] Robert V. Johnson, II: I certainly would be hesitant having driven through New Jersey with all due respect to New Jersey. A license plate hangs out at the end of the vehicle and nobody can reasonably say that this is an affirmation of faith, a required affirmation of belief on the part of the registrant of a motor vehicle. It’s different than a flag burning case. It’s different than other symbols and mottos. It doesn’t have the emotional charge of a flag or even the emotional charge of a draft card and the appellants herein would ask this Court to draw an analogy between the burning of a draft card in the O’Brien case and the destruction of a duly issued motor vehicle registration by the State of New Hampshire in the instant case. William H. Rehnquist: The flags and the flag burning cases were all the property of the person who burned them, were they not? Robert V. Johnson, II: That is correct, Mr. Justice Rehnquist. Harry A. Blackmun: General Johnson, there are some New Hampshire plates that don’t carry the motto, aren’t there? Robert V. Johnson, II: There are. Harry A. Blackmun: And what is the explanation for that? Robert V. Johnson, II: By supplementary statement in -- Harry A. Blackmun: There are sets (Voice Overlap) exhibit eight on the page 66 of the record. Robert V. Johnson, II: That is correct. Harry A. Blackmun: Is it because they have to designate commercial or tractor or junk or whatever it is they want? Robert V. Johnson, II: There are general rules, motor vehicle regulations relating to different types of vehicles, and that is one of the basic reasons why some plates are designated commercial or some plates are designated tractor. A commercial vehicle or an agricultural vehicle for instance may travel only 15 miles from its usual place of resting. Harry A. Blackmun: Yes, but a commercial vehicle, a big truck van might go to California? Robert V. Johnson, II: That is correct, but it’s designated as commercial and has to pay highway usage taxes and so forth which a passenger vehicle does not. In other words, the various designations are in response to various motor vehicle laws relative to those particular types of vehicles. Lewis F. Powell, Jr.: Mr. Johnson, you’ve devoted your argument up to this time to the constitutional issue. Are you going to address the Younger-Huffman issue that you raise in your brief? Robert V. Johnson, II: Thank you, Mr. Justice Powell. The State relies primarily on Younger versus Harris and Huffman versus Pursue. In this particular case, we do not believe that there is any necessity for the Federal District Court having become involved. The appellee, Mr. Maynard, in each of the three cases in which he appeared before the lowest of our courts in New Hampshire, had the alternative of having an appeal by trial de novo before jury in the Superior Court of asking that questions of law be transferred to the New Hampshire Supreme Court and he undertook none of those available remedies. In Huffman versus Pursue, this Court held that even where a criminal action has been commenced and has terminated, federal intervention carries with it all those disadvantages that it would if a criminal proceeding were still ongoing. Federal intervention in this particular case, for example, is an aspersion upon the abilities of the Courts of New Hampshire to resolve constitutional issues and Mr. Justice Brennan in May before the New Jersey Bar Association pointed out that in this day and age, the State Courts are protecting the rights of citizens to even a greater State extent than the Federal Courts. And I would submit to Your Honors that these Courts of the State of New Hampshire are just as capable of interpreting the Federal Constitution and our own constitution as the United States District Court for the District of New Hampshire. William H. Rehnquist: You would have to -- Warren E. Burger: Jurisdictional issue, are not the husband and the wife here in somewhat different positions? The husband has already been prosecuted and that case is closed. All appeals are no longer available, but the wife has never been prosecuted, has she? Robert V. Johnson, II: The wife has never been prosecuted. I would point out that -- Warren E. Burger: Would it not be reasonable for her to assume that she may be subject to the same kind of prosecution as her husband? Robert V. Johnson, II: I would submit that under Doran versus Salem Inn, Inc., and under Ellis versus Dyson that there is no controversy pending and that the parties are so closely related that they should be treated as one entity. I would respectfully request that my remaining minute or two be reserved. Warren E. Burger: Very well. Mr. Kohn. Richard S. Kohn: Mr. Chief Justice and may it please the Court. I would like to address the Younger abstention issue first. The purpose behind the Younger v. Harris and the other cases that the Court has decided, expanding Younger, has been to permit the State Courts to try cases free from the interference of the Federal Courts. In this case, there was no interference with any state litigation. At the time the suit was filed in Federal Court, there were no pending prosecutions. This was not a collateral attack on any of Mr. Maynard’s prior convictions and it was not an attempt to use the Federal Courts -- Byron R. White: Although the latest proceeding hadn’t terminated yet, had it? Richard S. Kohn: That’s correct, Your Honor and I should say -- Byron R. White: Was the suit to aimed that latest proceeding or not? Richard S. Kohn: No, sir. As a matter of fact, at the time I filed the federal suit, I did not know about the third conviction for which Mr. Maynard had received a disposition of continued first sentence. I didn’t find out about that and so -- Byron R. White: And that still stands now? Richard S. Kohn: Yes, sir. But at the hearing before the three-judge court, the State stipulated that under New Hampshire practice, that is a final disposition. Byron R. White: So your assertion is that this suit was wholly prospective. It wasn’t aimed at any criminal proceeding and didn’t attempt to upset any possible acts. Richard S. Kohn: That’s absolutely correct, Your Honor. Potter Stewart: It certainly didn’t purport to try to enjoin any State proceeding? Richard S. Kohn: No, only we asked for prospect of injunctive relief. Potter Stewart: Yes, but is there’s a joint injunctive relief? Richard S. Kohn: That’s correct, Your Honor. Potter Stewart: Why was this a case of controversy in the Federal Court under the -- what was under companion case of Younger from the Seventh Circuit? Richard S. Kohn: Samuels v. Mackell, Your Honor. Potter Stewart: Yes, Samuels against Mackell. Richard S. Kohn: Well, Samuels v. Mackell, Your Honor, was a case where the Federal plaintiffs were seeking a declaratory judgment that the statute was unconstitutional at the same time that there was an ongoing State prosecution. Potter Stewart: I’m thinking of the case where there was no prosecution ongoing? William H. Rehnquist: Boyle against Landry. Potter Stewart: Boyle against Landry, was that it? Richard S. Kohn: I believe so, Your Honor. And the Court -- Potter Stewart: (Voice Overlap) Richard S. Kohn: Yes, Your Honor. The Court did address the question of standing in that case. But in Boyle, the Court characterized the plaintiff’s standing as a search through the statute books to try to find the statute to attack, if I remember the case correctly. In this case, Mr. Maynard had been prosecuted. At the time I filed the federal action, I knew at least two times that there was no question that he was not going to alter his religious beliefs and that unless we filed the suit and got an injunction, he would either not be able to use his car or be subject to more criminal prosecutions. Mr. Maynard was in a situation where because of his religious beliefs, he was going to be subject to a series of repeated prosecutions unless the Court intervened and stopped it. Potter Stewart: You alleged that in your complaint, didn’t you? Richard S. Kohn: Yes, Your Honor. I believe I did. Lewis F. Powell, Jr.: Mr. Kohn, in Dyson, there was an attempt in the prayer as I recall to expunge a prior conviction? Richard S. Kohn: Yes, sir. Lewis F. Powell, Jr.: You didn’t seek that relief in this case? Richard S. Kohn: No, Your Honor. Dyson in effect looked backwards. They were seeking an expungement of arrest records. They asked for an injunction to accomplish that. They also asked for declaratory judgment which looked to the future. Our case looked only to the future and that’s the distinction between ours and Dyson v. Ellis. The exhaustion requirement that the state would have the Court engraft onto 1983 action under these circumstances in effect would bring the exhaustion requirement that’s presently applied in habeas corpus actions into the 1983 area. Our response to that is to say that in the habeas corpus area, it makes sense to require a litigant to exhaust his state remedies because he’s seeking release from confinement and this Court has recognized that the State Court should have the first crack at resolving any constitutional difficulties along the way. But again, that is not the situation in our case. We are no way attacking or impugning the ability of the State Courts to resolve these issues and we are not seeking any relief with respect to prior convictions. Thurgood Marshall: But, why didn’t you take the first case out? Richard S. Kohn: Well, Your Honor, I did not represent Mr. Maynard in the State Court proceedings since he had a lawyer. Thurgood Marshall: But why didn’t Maynard take it out? Richard S. Kohn: After his first conviction on December 6, the sentence was suspended. There was no reason to appeal that. His second conviction occurred on January 31 and he was again ordered to pay a fine. The Judge then walked out of the Courtroom. Mr. Maynard explained that -- and at that point, the Judge advised Mr. Maynard that he had a right to appeal. The Judge then left the Courtroom. Mr. Maynard explained to the clerk that he could not pay the fines out of conscience. Thurgood Marshall: No, he did not intend to pay it. Richard S. Kohn: That’s correct, Your Honor, and at that point, the Judge returned and sentenced him to 15 days in prison and he was immediately taken to jail, so even if -- Thurgood Marshall: Couldn’t he appeal that? Richard S. Kohn: Your Honor, under New Hampshire law, notice of an appeal to the Superior Court for trial de novo must be filed at the time sentence is declared. There is a provision for a late appeal which may be filed within three days after sentence is declared, and there is a further provision that you can petition the Superior Court for permission within 30 days after sentence is declared. Thurgood Marshall: Well, the answer is they could have gone through all of the Courts -- Richard S. Kohn: He didn’t have a lawyer -- he could’ve, Your Honor. But for one thing, he didn’t have a lawyer and he -- Thurgood Marshall: Well, because he couldn’t afford a lawyer with two automobiles? Richard S. Kohn: Well, Mr. Maynard told the Judge that he wanted to represent himself. He did not say he could not pay for a lawyer. Thurgood Marshall: Well, he still had them all available to him and eventually, when he decided to abandon the New Hampshire Courts, he found a lawyer to get him into the Federal Court. Richard S. Kohn: I don’t think that’s accurate at all, Your Honor. The fact of the matter is that when Mr. Maynard got out of jail, he made attempts to contact the American Civil Liberties Union. I think up until that point, he believed -- Thurgood Marshall: What’s that got to do with this case? The point was when he needed a lawyer, he got one. Richard S. Kohn: Well, he had made attempts to contact the Civil Liberty Union (Voice Overlap) Thurgood Marshall: Well, I couldn’t see how we could take all of these into effect. What I’m merely asking you, he had remedies available in the State Courts. Rather than to use those, he used the Federal Court and I’m not asking you a question. I’m telling you that’s what he did. Richard S. Kohn: I think that I would agree with, Your Honor, that once I was retained, we chose the Federal Courts as our forum. Thurgood Marshall: I don’t care on anything about you being retained. I’m talking about what the records show. Richard S. Kohn: Well, there’s nothing in the record that suggest that Mr. Maynard with his ninth grade education would’ve known how to take an appeal up through the New Hampshire State Court. Thurgood Marshall: There is something in the record that the Judge did advise him and that statutes do provide for it. Richard S. Kohn: That is correct, Your Honor. Thurgood Marshall: So, he had available to him a direct appeal in the machinery of the State. Richard S. Kohn: Well, that may be true. The statutes are on the books. Thurgood Marshall: Maybe? Is it or not true? Richard S. Kohn: The statutes that were on the books that there was an appeal mechanism. Thurgood Marshall: And the Judge advised it? Richard S. Kohn: Yes, sir. Thurgood Marshall: Now, what else was the State require to do? Richard S. Kohn: Well, Your Honor, for one thing, taking his appeal up through the State Courts would not have solved Mr. Maynard’s problem. His problem was to obtain injunctive relief so he could drive his automobile. The New Hampshire system of appeals is a two-tier system which this Court is thoroughly familiar with where after your conviction in District Court, you can appeal for trial de novo in Superior Court. From the Superior Court, then you can go to the State Supreme Court. I’ve never heard of the case where a lower court in a criminal prosecution has issued an injunction against the State to prevent them from enforcing the statute which is at issue. Potter Stewart: Was there also a transfer proceeding in New Hampshire? Richard S. Kohn: Yes, sir. There is. William H. Rehnquist: And the Supreme Court of New Hampshire said the statute was unconstitutional. Surely, the New Hampshire prosecutor wouldn’t continue to enforce it? Richard S. Kohn: That’s correct, Your Honor, but that would’ve been after a substantial period of time. But when Mr. Maynard got out of jail on February 28, 1975, he didn’t use his car until the Federal Court action was filed and he would not have used his car until the constitutional issue was resolved in some Court. That could’ve been a matter of many months. And there is testimony in the transcript on our motion for temporary restraining order that this nonsense affected his ability to earn a livelihood and that was the critical thing for Mr. Maynard.(Voice Overlap) Thurgood Marshall: When you say nonsense, what were you talking about? Richard S. Kohn: That these repeated arrests of Mr. Maynard for taping over his license plate. Thurgood Marshall: Well, how about his repeated violation of the law? Richard S. Kohn: Yes, that’s correct. Thurgood Marshall: Well, that could be nonsense too, couldn’t it? Richard S. Kohn: Yes, Your Honor. I’d like to respond to Mr. Justice Stewart’s question about the transfer. There is a transfer procedure in New Hampshire and if the Justice of the District Court so permits, you can transfer a case direct to the State Supreme Court. Potter Stewart: To determine a constitutional issue? Richard S. Kohn: That’s correct, Your Honor. But District Courts in New Hampshire are not courts of record. You would have to go to the State Supreme Court without a record which in view of the State’s consistent attacks on Mr. Maynard’s sincerity in the Federal Courts I think would’ve been a very poor mistake. And this Court many times, has stated in its opinions that constitutional issues take on color from the factual surroundings in which they arise. Lewis F. Powell, Jr.: Mr. Kohn. Richard S. Kohn: Yes, sir. Lewis F. Powell, Jr.: The Attorney General’s brief states that the constitutional issue was raised at the initial trial and was resolved in favor of the validity of the statute against this appellant, is that correct? Richard S. Kohn: I believe it’s incorrect, Your Honor, and the Three-judge Court said that it was incorrect. Lewis F. Powell, Jr.: If it were correct, would you be out in Court here? Richard S. Kohn: Not on Younger principles, Your Honor. I think then the -- Lewis F. Powell, Jr.: Then on res judicata -- Richard S. Kohn: Res judicata which is what I think the State is really arguing in this case. Their whole Younger argument is really addressed at this res judicata. But our answer to that is that it was waived. Res judicata and collateral estoppel are affirmative defenses that have to be raised by the State and they did not do so in this case. William H. Rehnquist: What if the State doesn’t raise them, but the District Court nonetheless passes on it as the District Court did here? Richard S. Kohn: Well, the rules provide that -- first of all, Your Honor, the District Court did not pass on them. The District Court -- William H. Rehnquist: I would have read its opinion to pass on it. Richard S. Kohn: I read its opinion as being strictly over the dictum that if the State had raised that argument, they would’ve rejected it, but I think that the burden is on the State or the defending party to raise its affirmative defenses in conformity to the Federal rules. So -- William H. Rehnquist: But we have lots of cases that under our rules, you must have raised a point, at the earliest possible point in State proceedings, but nonetheless, we’ve also held that if a State’s Supreme Court passes on the point even though it didn’t have to then the issue is open for -- Richard S. Kohn: Yes, sir. Well, not in my position but I would ask that if the Court feels that you want that the issue of whether res judicata and collateral estoppel apply to 1983 actions, then you direct the parties to brief that because the State hasn’t briefed it and we haven’t responded to it and it’s a question of infinite complexity that should receive full briefing. John Paul Stevens: I’m a little puzzled about the res judicata argument because I don’t understand you to be attacking the judgments or any of those judgments that have been entering? Richard S. Kohn: That’s correct, Your Honor. Res judicata wouldn’t apply in any event and they did waive that. They did raise collaterals -- John Paul Stevens: They didn’t waive it. You’re not attacking those judgments. Richard S. Kohn: That’s correct. They did raise the collateral estoppel argument in a motion to dismiss in the District Court when we began the case and Judge Bownes -- John Paul Stevens: Well, does collateral estoppel apply to issues of law? Richard S. Kohn: Well, I have assumed that in my brief, Your Honor. Although, I know that some Courts say it only applies to issues of fact. There are Federal Courts that have applied it to questions of law. But in any event, the State has not pursued that issue. They raised that before Judge Bownes. He decided against them. They did not raise it again before the three-judge court. As I note in my brief, there’s a question as to whether Judge Bownes should have denied that particular motion the way he did, but the fact of the matter is that the State abandoned it and the only time they’ve mentioned it since is in its brief and not as jurisdictional statement that was filed to this Court. And I would again ask that if the Court feels that that issue should be reached in this case that we should be able to brief it. There’s an additional question which the State sort of combined with its Younger argument, but which we feel is a separate question and that goes to the permanent injunctive relief that the District Court entered. Again, this is an issue we feel the State has waived and the District Court said that the State did not dispute it, that the Federal Court could issue an injunctive relief against threatened arrest and prosecutions and that’s what they did in this case. I would want to point out that there were no prosecutors or judges as defendants in this case. The reason we asked for an injunction against arrest and prosecution is in New Hampshire, frequently, police officers initiate prosecutions in District Court and the injunction that the Court issued only runs to those individuals. This was an extremely narrow injunction. It was nothing like the injunction that was issued in Rickshaw v. Good which involved the internal workings of a police department. All this injunction directed was that Maynards not to be arrested or prosecuted for the offense of taping over the motto on their license plates. The State has briefed another issue with respect to Mrs. Maynard and they’ve argued that her action be dismissed based on some language in Doran v. Salem Inn that she and her husband were so closely intertwined that if he is barred by Younger then she must be. The common law, a husband and wife are one and the husband was the one, but that is no longer the case. Mrs. Maynard’s action was not a subterfuge to circumvent Younger considerations. She had standing on her own. She was threatened with prosecution. She shares her husband’s religious beliefs and there’s no question but that she had Article 3 standing and we would argue that irrespective of whether Younger governs Mr. Maynard’s case, Mrs. Maynard must proceed to the merits. Central question in this case is whether the action of the Maynards in placing reflective tape over the State motto on their license plates is protected by the First Amendment as symbolic expression and whether the State’s interests are substantial enough to override that expression. Speaker: Are there two rather separate First Amendment issues here? First, the one that you summarized, whether or not this was affirmative symbolic expression on the part of your clients? Richard S. Kohn: Yes sir. Speaker: And isn’t the second issue, whether the person can be compelled to advertise a relief in which she does not believe. Richard S. Kohn: That’s correct, Your Honor. As a matter of fact, -- Speaker: Are they not rather separable? Richard S. Kohn: Definitely and I would argue that there is a third separate issue which involves the free exercise clause because Mr. Maynard’s belief and Mrs. Maynard’s belief is religiously-based. And I would see those as three separate arguments. Speaker: What’s the third? I want to be sure about it. Richard S. Kohn: The free exercise clause, Your Honor. Speaker: And why? Richard S. Kohn: Because Mr. Maynard’s beliefs are religiously-based and that the imposition by the State of this motto upon him which is offensive to those beliefs violates his freedom of exercise. Potter Stewart: Well, that’s really the same as the second except one is involved on the free expression and the other free exercise clause. Richard S. Kohn: That’s correct, Your Honor. Potter Stewart: It’s compelling somebody to advertise a belief in which he doesn’t believe either because -- to which he doesn’t subscribe either because of religious reasons or political or philosophical reasons? Richard S. Kohn: That’s correct. Yes, sir. Warren E. Burger: Could the State compel a person to advertise a neutral concept that did not offend the religion clauses? Richard S. Kohn: Well, I think that would fall within -- most of the mottos that appear on State license plates. If a State wants to advertise it -- Warren E. Burger: You’re not conceding that they’re all valid, are you? Richard S. Kohn: No. Absolutely not. North Carolina is first in freedom and I know there had been problems with respect to that. But nevertheless, most of the slogans that appear on license plates advertise a State as a vacation land or a sportsman’s paradise or it’s a tourist attraction or something that is neutral and -- William H. Rehnquist: What if Nevada said “Gambler’s Paradise” and Nevada citizen said, “I am just that I’m very fundamentally opposed to gambling.” Richard S. Kohn: I think that’s right. I think that if he taped over the gambling, that would be an exercise of symbolic expression and I think before the issue of the environmentalist came up, if a State advertises itself as a “Garden State” or a scenic state and someone is deeply offended by that, I think that is symbolic expression. Our case is much stronger because Mr. Maynard’s beliefs are religiously-based. Thurgood Marshall: Mr. Kohn, then you don’t agree that the license plates belong to the State? Richard S. Kohn: That is correct, Your Honor. Thurgood Marshall: I assumed so. Richard S. Kohn: That is correct. As a matter of fact, seven States; North Dakota, South Dakota, Vermont, Delaware, Puerto Rico and North Carolina specifically say in their statutes that the State retains title to a license plate while it’s in the possession of the individual. In New Hampshire it does not. Warren E. Burger: That still wouldn’t avoid the problem under the power of the State to compel a citizen to carry picket signs? Richard S. Kohn: No. And I wouldn’t want to suggest that if someone came into this Court next week with a North Carolina license plate that the case should turn on whether the State asserts title or not. Needless that -- John Paul Stevens: Mt. Kohn, do you think an atheist could cross out the words or tape over the words “In God We Trust” on an American currency? Richard S. Kohn: Well, Your Honor, I think that -- John Paul Stevens: You have constitutional right to do that as well? Richard S. Kohn: There are at least two answers to that, Your Honor. First of all, the statute which makes that a crime require a fraudulent intent, so I don’t think there would be a violation of law at least under the present statute that we’re dealing. John Paul Stevens: Let’s assume the statute is revised. Richard S. Kohn: Secondly, if someone chose to really object to the motto “In God We Trust” and put tape over it, the way Mr. Maynard does to his license plates, I do not think that he could be criminally punished for that. Thurgood Marshall: But the statute was mutilated? Richard S. Kohn: This is not mutilation, Your Honor. This is exactly what the Court was talking about in Spence. Thurgood Marshall: I’ll put cut out words with a razor blade “In God We Trust,” would that be mutilation? Richard S. Kohn: I think it might, Your Honor. Well, I know it would be mutilation and I think that the State could probably make that a criminal offense. John Paul Stevens: (Voice Overlap) prosecutions, didn’t he deface the plate? Richard S. Kohn: In the beginning, yes Your Honor. He has to tape the motto over and neighborhood children would cut out the words “or dies,” or neighborhood children would pull the tape off. So eventually, he cut out the words “or die” and then put the tape over the whole thing. But when we filed our suit, he have just been issued a new plates for 1975 and we have never suggested that he’d be able to cut out or actually physically mutilate the license plates. That is not an issue. Harry A. Blackmun: There’s one other thing that I’m little confused in the record because it seems to me that it’s inconsistent. Were the Maynards willing or unwilling to purchase a vanity plate? Richard S. Kohn: They stated that they were willing to purchase a license plate that did not contain the motto “Live Free or Die.” Harry A. Blackmun: But they did not? Richard S. Kohn: They were not offered that opportunity by the State, Your Honor. Harry A. Blackmun: Well, wasn’t anyone privileged to do that? Richard S. Kohn: Well, the vanity plates in New Hampshire is they’re currently printed up all contain the motto “Live Free or Die” and it would’ve required removing the “die” that says “Live Free or Die” and there is testimony in the transcript that that could be done without a lot of difficulty but the State never said that that could be done. As matter of fact, I think they said it couldn’t be done. I believe I’m accurately stating the State’s position. The first issue under the symbolic speech question is whether there was an intent to convey a particularized message and whether that message is likely to be understood. Contrary to what the State has represented here, this issue of “Live Free or Die” on the license plates is a very hot issue in New Hampshire. It has been to the New Hampshire Supreme Court. This very case was delayed for eight months while the legislature considered a bill that would’ve made inclusion of the State motto optional. People are well aware in New Hampshire about the controversy around the motto and there’s testimony in the record on page 29, for example, by Mr. Maynard that people would stop him when they saw the tape over his license plate and that would give him an opportunity to talk to them about his beliefs. I don’t think there’s any question but that this was a -- that he had a particularized intent and the people would understand the message. The State interests that have been advanced by New Hampshire prior to individualism, history and tourism as the District Court held are not unrelated to the suppression of expression. For the obvious reason that it’s only by conveying the message that the State gets the point across, whatever the point may be. Orthodoxy of thought can be fostered not only by penalizing those who are deviant in their expressions, but also by granting special privilege and special status to messages that meet the State’s approval and this is very much like the Schacht case where there was a statute that permitted the American uniform to be worn in theatrical productions that glorified or appraised the military but not otherwise and that is what the State has done here. They’ve selected a message which they want to project, they select a billboard as it will appear on all non-commercial license plates in State and then they make it a criminal offense to cover that over. So, it’s not unrelated to the suppression of expression and unless the State can come up with some compelling need or unless they can show a clear and present danger that their interest cannot be served otherwise then that is not a valid justification. The other interest they advanced is that it helps their system of motor vehicle registration, but the motto is nonfunctional. It does not serve any purpose on the license plate unlike the numbers or the name of the State or the date. And it’s our position that the State lacks the power to require its citizens to bear this sort of motto. And as the Chief Justice was asking before, I think that if the Court were to uphold this sort of thing, then the State could require all citizens to wear a pin or an armband or they could require you to have a plat on your door next your address saying “Live Free or Die.” I’m sorry. Do you have a question Your Honor? And beyond that, there’s evidence in the record that, at least with regard to the Maynard’s plate, there’s no duplicate plate in the State of New Hampshire, so it would not present any problem of identification. This is not an O’Brien case as my brother counsel said before. O’Brien involved the war power, one of the most pervasive powers that you could imagine under our system of government. Also, O’Brien destroyed and mutilated his draft card. That was the whole point of the exercise. Mr. Maynard is not destroying the plate. The war power is not involved here. William H. Rehnquist: You say that the State is more limited on the exercise of its residual powers than Congress is when it’s exercising the war power each one confronted by the same constitutional guarantee? Richard S. Kohn: Well, Your Honor, I just think that the interest of the State is advanced in this particular case come no where near the war power. It may be that the State has other powers under its police power or powers dealing with the welfare of its citizens that could be equatable with the war powers compared with National Government, but certainly, in terms of the interest that the State has advanced in this case, there’s no comparison. Warren E. Burger: Do you think all your arguments would apply with equal force if the motto on a license plate was “Don’t Litter” Richard S. Kohn: [Laughters] I think that would be -- Warren E. Burger: I think everyone would agree with that? Richard S. Kohn: That would be a tough one. I think everyone would agree with that.[Laughter] Warren E. Burger: Maybe some people would think the right of privacy permits any person to throw any garbage or junk anywhere he wants to? Richard S. Kohn: Yes, sir. I think that you do reach a point. I’m sure my brother counsel would argue that some people would disagree that some State is a vacation land or that Mississippi is the hospitality state. I guess I would have to say that if someone has a conscientious opposition to this, thinks that it isn’t true, that would be a case of symbolic expression if they taped it over. And unless the State can show some overriding need for that motto, then there can be no criminal penalties that attach. And, I should make another point in connection with that. It’s essential to understand this case that it is criminal penalties that are involved. William J. Brennan, Jr.: How about a license that says, “Wear your seatbelts?” Does that involve liberty? Richard S. Kohn: [Laughter Attempt] I suppose it does, Your Honor. I suppose it does. It does involve liberty and I think that it probably would be protected expression if someone covered it. In any event, I would argue that the motto in this particular case is so different from these that it almost stands sui generis. “Live Free or Die” or “The Mormon State” or “Amnesty Now” or any politically loaded message that is bound to offend sensibilities cannot withstand a First Amendment attack. With respect to the Barnette issue which Mr. Justice Stewart mentioned, the State’s response to this and they didn’t actually briefed this, but they relied on the New Hampshire Supreme Court’s decision in Hoskin was that, well, everybody knows that the State motto is required, therefore, it can’t offend the Barnett principle, but I find that totally un-understandable. Barnett itself could have been explained on those grounds. Everyone knows that children have to salute the flags, so it doesn’t matter. Well, that’s not the issue in these cases. The issue is whether it’s an affront to the particular individual’s deeply held beliefs. I think that that concludes my presentation Mr. Chief Justice. Warren E. Burger: Very well the. Thank you counsel. Richard S. Kohn: Thank you. Warren E. Burger: Mr. Johnson, do you have anything further? Robert V. Johnson, II: Very briefly Mr. Chief Justice and Justices. During my direct remarks, I was inquired as to whether the State of New Hampshire is before this Court seriously. We are here seriously. There are many mottos which we have in this country and I think this is an important case. “In God We Trust” is upon our coins and currency. “E Pluribus Unum” is upon our coins and currency. “Equal Justice under Law” is upon the edifice in which we appear today. I think there is something to be said for the preservation of certain slogans and mottos. Next, I would point out that we lawyers are required to be members of bar associations in many states and yet by that requirement, it is not implicit that we agree with what the bar association in each State says or stands for. When we place postage stamps on our envelopes, those postage stamps contain symbols and mottos. “Liberty depends on Freedom of the Press” issued November 13, 1975 by the United States Government and I’m not sure whether every member of the judiciary necessarily would believe in that particular motto. And certainly, if a member of the judiciary were to place a stamp bearing that motto, “Liberty Depends on Freedom of the Press” upon a letter, no one reasonably would believe that he necessarily concurs with the sentence. Thurgood Marshall: Usually, we don’t put stamps on letter.[Laughter] Robert V. Johnson, II: But if your secretary, Mr. Justice Marshall placed such a stamp on a letter, I don’t think that if I were to receive the letter, I would necessarily believe that you believed in that particular motto merely because it was upon your letter. I think it’s important in this case also that the defendant mutilated the license plates. He cut out the words. And I think finally, it’s important that there was no particular message enunciated by the conduct of the appellees. The District Court found that by his conduct, he expressed a particular message, a message which indicated his objections. I would submit that if you were to examine the plaintiff’s exhibit number one which is before this Court, the particular license plate, in its condition and ask yourselves what message was conveyed by this act of whimsy that you would find no message conveyed. And for these reasons, the State would ask you to reverse the judgment of the District Court of the State of New Hampshire. Thank you. Warren E. Burger: Thank you gentlemen. The case is submitted.

Warren E. Burger: Number 731, Jones against the State Board of Education of Tennessee. Mr. Boult you may precede whenever you're ready. Reber F. Boult, Jr.: Mr. Chief Justice, Mr. Associate Justices. This case concerns a college student, not a school child, a college student, who was dismissed from State University for handing out one leaflet on the campus not in or about any classroom. The issues break down into four. The regulations involved prohibit disrespect for authority and any other conduct requiring severe discipline. We contend that these are void for vagueness and over over breadth, primarily our First Amendment contention, the Fourteenth Amendment due process notice is also subsumed in the question. Next, we contend simply that they are void as applied, you cannot outlaw the distribution of literature or more specific to this case put somebody out of school for it. William O. Douglas: As I understand this record, there were six students who were dismissed or -- Reber F. Boult, Jr.: Three in this package Your Honor. William O. Douglas: Yes. What happened to the other two? Reber F. Boult, Jr.: Certiorari was denied as to the other two. William O. Douglas: So, we only have this one student in this one case? Reber F. Boult, Jr.: Yes Mr. Justice Douglas. The three -- the four issues, three of the four issues were identical to all three petitioners. The factual issue varied as to each of the three. William J. Brennan, Jr.: If we agree with you, then this distribution of leaflets [Inaudible] we have to reach the others, they don't do it. Reber F. Boult, Jr.: You do not have to Your Honor. In some cases, it's done for example Auburn v. Laurie (ph) held the Georgia statute both -- unconstitutional both on its face and as applied. There is no choice between the two issues -- between the two approaches on -- William J. Brennan, Jr.: Oh, I'm thinking particularly on the issue that you -- I say you point to the vagueness, regulations whether we have to reach that if we in any event a conduct conduct is [Inaudible]. Reber F. Boult, Jr.: That's right Your Honor. I would suggest that in the way the First Amendment litigation is going nowadays, so many Dombrowski type actions, it -- the first point of reference is more often the facial unconstitutionality rather than the applicatory. Byron R. White: Is the link that you would turn with the distributing the representation for this -- Reber F. Boult, Jr.: Yes. It's plaintiff's exhibit six which appears at page 175 of the record. And the other two issues involved are due process issues, one having to do with the composition of panel and its conduct. In fact, the advisory committee that is the University disciplinary committee, its confusion of functions being essentially everything and therefore inherently biased, presumptively biased. And I think in this case also biased as a matter of proof. And fourth, procedural due process time and type of notice and in fact that a new contention was brought in at the hearing, they found without ever bringing it up at the hearing, the hearing of the -- in fact, the advisory committee's findings said that the student had not told the truth at the hearing, of course, he never had the chance to rebut this. The facts on the leafleting issue are very brief. He handed it. He was found to have handed out, that's plaintiff's exhibit six although there is considerable doubt whether he actually did hand it out or not, hand it to the president of the university. The president was the only solid witness on this point. One other witness testified that she saw him hand it out in the cafeteria. However, she testified that she saw him do this some two, three or four months before the leaflet was prepared. So, we assumed that there is only witness against him, the president of the university and the president incidentally only testified that he received one personally. He did not see it hand it to anyone else. Jones himself mentioned that he offered one to the president of the student body, who didn't want it. Potter Stewart: This plaintiff's exhibit six it's supposed to be on page 175 of this appendix here, this pagination is a bit confusing to me at least. Reber F. Boult, Jr.: The confusion of the pagination I believe Your Honor I suppose from the inclusion in the appendix of the student handbook -- Potter Stewart: Yes. Reber F. Boult, Jr.: -- which runs from a 177 to a 178, but takes some seventy odd pages to do it. Potter Stewart: Yes, I see. I think I now have this. It's on page -- well, the 175 marked in the upper right hand corner? Reber F. Boult, Jr.: Upper right hand corner yes sir -- Potter Stewart: Getting in the earlier to the civil rights movement. Reber F. Boult, Jr.: Yes Your Honor. Potter Stewart: Thank you. Reber F. Boult, Jr.: Also at the disciplinary hearing, there was no evidence presented whatsoever of disruption of the campus, eminent disruption, proposed disruption, suspicion to disruption, possible disruption, none, it was just not coming for it. At the hearing in the District Court, there was no evidence of actual disruption. The only evidence of possible or prospective disruption was the president of the university is, you know to use the phrase vague and undifferentiated fear just been taken. He referred that as inflammatory, get students all stirred up, talking about other things. Oh, there was one other bit of testimony on that, the Dean of Students objected that the students received the leaflet as they're walking across the campus, they would stop and read it. And the case, the disciplinary action was not taken until at least one month after the leaflet was handed out, so that this is not a case where we really need to rely on forecasts. The idea of whether the -- on first issue, whether the void for vagueness doctrine should apply on the campus, I believe is aptly covered on the brief. I will only mention here that it just seemed inconceivable that it shouldn't. It seems much more reasonable to me to apply it there where you got the people thinking about things, erudite, literally, scholarly, talented, to write rules than in the small towns that are held so rigidly to First Amendment standards as specificity in drafting their ordinances. As to what the standard might be, I think the same approach as was taken in Dombrowski v. Pfister. Dombrowski referred to the loyalty oath cases as setting forth an appropriate standard for other contexts. This is really not much of a different context though because we're still on the campus, at least not that much of a different context. Warren E. Burger: But aren't these regulations in a different category? They're provided for an institution of learning, at least don't have the stature or status of the law, statute or city ordinance? Reber F. Boult, Jr.: They have considerably greater effect on those who must live by them than say it's on the conduct statute which -- Warren E. Burger: But on the other hand, the people who were doing the drafting at least at the time and in the context in which they were originally drafting were probably proceeding on the assumption that these students were coming to these institutions to study and to learn, and they didn't give them perhaps the kind of detailed attention they would give them if they were rewriting them today? Reber F. Boult, Jr.: Your Honor, they -- I would hope they would give them more detailed attention if they're rewriting them today. This hope will be one result of this case. The regulations were revised every year though. There were quite current at the time in 1967 and some of the regulations involved on the procedures followed by the disciplinary committee had been rewritten that very year. The regulations were rewritten immediately after this case was brought. I do not know what the result is; perhaps the opposing counsel can help us on that. And whether we're talking about the facial or applicatory constitutionality of this situation, I think the case does have to be considered in light of what the university is first and it is considerably more than just a group of scholars and learners and second, in light of what is happening in universities today and as obviously, there is much unrest. Various authorities have attributed this to the failure to extend constitutional rights in the universities. William O. Douglas: Is the leaflet that is in controversy on -- printed on page 175 of the appendix? Reber F. Boult, Jr.: Yes, Your Honor. And I think we should also consider that this university, Tennessee State University as is true with so many of the smaller universities, state universities around the nation, trains a lot of teachers. And as this Court has recognized for many years, in the McLaurin v. Oklahoma, the training someone to be a leader and trainer of others. I rather say that they're educating someone to be a leader and educator of others, but I think it's more accurately stated the first way. And further that those who will come under his guidance and influence must be directly effected by the education he receives. Education that the students of Tennessee State University are receiving is not one calculated to make things sensitive to the demands of the Bill of Rights. I think this statement is accurate with regard to other state universities, like these another one before the Court right now in the record of Norton versus Disciplinary Committee of East Tennessee State University, petition for certiorari filed approximately a month ago. And it's our position that the full First Amendment canopy of rights should apply, in fact, must apply to students. It has, as many student case, in this case, a college student case on his rights in this Court for many years, I think it's appropriate in this case to state that henceforth when they come, the issue will be whether or not the First Amendment has been violated and will be treated in the same terms as if it were a non-student case. The tests under the First Amendment would be quite ample, either for vagueness overbreadth or for the actual activity, ample to deal with problems on the campus and no toe-test of preparing a group for violent or lawless or destructive or disruptive action and stimulant to that action is necessary before speech can be curtailed of the Brandenburg, Whitney, (Inaudible) test eminent lawless action must be there. Warren E. Burger: Would you say that the standards which you're challenging are not adequate to give warning that language used in the exhibit six about puppet fools and racist dogs and so forth address toward the university authorities is not covered? Reber F. Boult, Jr.: In other words that they would be -- that those words would be disrespectful. Warren E. Burger: You say that that does not give notice that the university would regard that as disrespectful? Reber F. Boult, Jr.: I think a direct insult would generally be considered disrespectful. Now, the First Amendment voidness doctrines do not look to the specific conduct involved where over breadth is involved. Warren E. Burger: But if we were dealing a libel case under Times and Sullivan, I could understand your argument a little bit better that you -- under Times and Sullivan, you could call the president of the university or the Senator, almost anyone else a racist pig or what not with some considerable impunity, but this is not a libel case. This is a situation or regulations that were trying to govern conduct, so that civilized people could function in the university complex without friction, without conflict with each other. Reber F. Boult, Jr.: I have never observed a university yet in which people functioned without friction, without conflict with each other, but -- Warren E. Burger: Oh, they had existed in the past. Reber F. Boult, Jr.: Well, even when I went to and quite times 10 to 15 years ago was there, but more basically, the reason for Times v. Sullivan was the First Amendment and the reason a person under Times v. Sullivan can call one a racist pig or liar or whatever it was is the First Amendment. And that fact that it was a libel case, simply a fact of the case, as the fact that this is a student case is simply a fact of the case, we're relying on the First Amendment. Warren E. Burger: Now in this Court, when a lawyer submitted, you've heard the oath many times and you took it yourself. It's an oath to conduct oneself uprightly and according to law. Now suppose in the course of an argument, one counsel addressed another as a racist pig, do you think that would be beyond the reach of that rule because that rule is too vague, it's over broad that oath of office, the rule of conduct within the chambers of this Court? Reber F. Boult, Jr.: We do -- no and we don't contend and it is not contended generally. Warren E. Burger: Well, the First Amendment prevails in this room -- Reber F. Boult, Jr.: Certainly and we do not -- Warren E. Burger: -- and it does. Reber F. Boult, Jr.: -- but we're talking about outdoors on the campus. We're not talking about inside the classroom. We're not talking about inside the court room. The First Amendment in its prevalence, in its prevailing does take into account the circumstances. And if I should do that here, this is quite different from my writing it down and hanging out on the street. Warren E. Burger: But you couldn't write in a brief without getting into very grave trouble could you in this Court? Reber F. Boult, Jr.: I have such a difficult time conceiving myself writing it in the brief. [Attempt to Laughter] But if the standard rules against scandalous and impertinent matter in pleadings and briefs would apply, and I should think it should be stricken -- Warren E. Burger: But the university can't have a rule like that for the conduct of students on the campus and buildings. Reber F. Boult, Jr.: Not any different from say the city could have it on the streets. We're not talking about inside the classrooms in the same sense that the city when it passes ordinances is not talking about in offices. Warren E. Burger: But if we disbarred a lawyer for this kind of conduct, that would be a pretty severe penalty, wouldn't it? Reber F. Boult, Jr.: Yes. Warren E. Burger: And I take it you more or less concede that we might to take very severe action against a lawyer who engaged in this kind of utterance? Reber F. Boult, Jr.: I really don't know Your Honor. I would -- my first assumption would be if it will be written, it would be immediately stricken with a rather harsh reprimand. If it happened orally, I don't know. And on the third of the issues involved, the composition of the disciplinary committee, the issue illustrates a point that runs throughout the case. The treatment of the issue in the Court of Appeals, the same court below including one of the same judges on the panel, says several years ago, the case for the American Sinemet case cited in our brief on confusion of functions and presumptive bias, not actual bias, which would seem to apply right down the line here. It was not even mentioned in opinion, although the issue was amply raised and case cited. Here, we have a situation where the panel was just these students. The sole witness for the panel was the reviewing authority with absolutely empower what the panel did, or the only essential witness. He appointed the panel. One of the other panel members has strong personal feelings about the person involved, not about the issue, that would not be a disqualifying matter, but about the person involved. The student personnel committee overlapped with the disciplinary committee, therefore, it had done much investigation. The Dean of Students, chairman of the committee had compiled a list and investigate it. In fact, the advisory committee conducted an in-depth investigation itself of the students. They drew the charges, they counseled the students, it called the witnesses and it presented documentary evidence and did not even follow its own rules as to how the matters should have been handled. Warren E. Burger: You still have more time left counsel. Reber F. Boult, Jr.: I'll save the remaining time for the rebuttal if I may? Warren E. Burger: Alright. Robert H. Roberts: Mr. Chief Justice -- Warren E. Burger: Mr. Roberts. Robert H. Roberts: -- associate Justices. I want to first take care a little matter of the reply brief. It was made in my brief in which it alleged that I had made some erroneous statements. Only two points that I want to raise in connection to that. One is to the effect that I have left the impression at least that the leafleting activity that this petitioner has been charged with and found guilty of was connected in some way with the arrival on the campus, Mr. Carmichael when ensuing riot that occurred. I am wrong about that and I apologize to the Court and to opposing counsel. There had been a number of leaflets passed out at about this time and some of them before and that some after the riot occurred down the campus in the summer of 1967. There was one of them for instance that demanded that the administration invite Mr. Carmichael there. They later did and the riot did result. However, this particular leaflet which advocated and urged the student body to boycott registration at the school was passed out after the riot had occurred. Now, the second point that I would make in the reply brief is in regard to the charge against this petitioner of being in violation of city county or state laws. It is urged here that by the words of Dr. Payne who was the Dean of Students and who presided over these hearings that he agreed that this was not used against the student and the hearings,. The record will not bear Mr. Boult out on that. I think he has failed to read the entire record in regard to it. What actually took place, Mr. Hedgepeth on page 12 of the transcript of the proceedings of the FAC hearing made it clear that we were, or the school was relying upon any disorderly conduct or conduct unfitting a student or any that violated the rule of the handbook there at the institution. Further on and about 70 to 78, there were about eight-full pages where it was developed as to just what Mr. Jones had been convicted of and paid the fine in the Metropolitan Court IV. So, those are the two points I want to raise on that. The -- we have made two issues out of the four that the petitioner had. We feel that there only two things involved, one is the entire matter of the procedure including the due process rights of these petitioners. As stated earlier, there were five original petitioners, two of them were dismissed at the time of the hearing, I mean charges against them were dismissed. The other three were found guilty of acts that warranted their suspension. Now, that's another thing that I want to make clear to the Court and that is the fact that these students were not expelled, they were suspended. They have not -- this petitioner has not gone back to school and sought readmission since the suspension. I don't know whether the school would allow him readmittance or not. His was an out of state student and he came down there and he did things that they felt to be and found to be disruptive. This one piece of literature tried to impress his will upon the other students, for example and calls them not to register for school and thereby disrupt the entire procedure. Thurgood Marshall: Is there anything the petitioner did other than to pass out that leaflet which is in there? Robert H. Roberts: Yes sir. One thing else that he did there in connection with the leaflet, he lied about it. He said that he did not do it despite of the fact that the president of the university says he handed it me one himself right in front of the administration building and he had about 50 of them in his hands when he did it. Later down in the cafeteria testified that if there was some discrepancy about the date that she claimed that it was passed out, but she said there wasn't any question in her mind but that was the piece of literature was. She went over and picked it up and read it. Thurgood Marshall: With the exception of passing out the leaflet and lying about it, that's all? Robert H. Roberts: No sir, then the third thing is that he violated the rules of the student handbook and that he was convicted and fined in Metropolitan Court for two charges of disorderly conduct. Thurgood Marshall: Involving the same thing? Robert H. Roberts: Sir, no sir and this didn't have anything to do with -- Thurgood Marshall: For the passing out leaflets? Robert H. Roberts: No sir. Byron R. White: Well, they didn't find that, did they? The board -- Robert H. Roberts: Yes sir, they found that he was guilty of conviction or the committee found that Mr. Jones has seized upon opportunity on different occasions to promote unrest on the campus with such actions as distributing literature designed for the purpose -- and then at the hearing, he demonstrate his matter -- over the truth -- Byron R. White: Did you find anything about his conviction? That was just in the charge? Robert H. Roberts: Considering all that matters before this committee, we feel that Mr. Kenneth Jones has violated the rules of conduct, governing students at this end and in the university such an extent that he should be suspended. Byron R. White: There haven't of been any express finding on anything but the leaflet matter on any specific conduct? Robert H. Roberts: No sir, no more than one of the things, specifically in there and was that if he was found to be in violation of any state, county or city or federal law that that is one of the things that has listed as being requiring sever discipline. Byron R. White: Was the charge about lying about the leaflet? Robert H. Roberts: No sir, he hadn't been charged with that of course we insist that he -- William J. Brennan, Jr.: You don't rest the -- Robert H. Roberts: Yes sir we do. Hugo L. Black: How can you if he wasn't charged? Robert H. Roberts: For this reason, he -- of course, we think that the notice required for most things wouldn't apply to personal conduct of that kind which he did knowingly. He had the first notice of anybody that he was going to be made the resolve within himself to tell lie in that committee. William J. Brennan, Jr.: My difficultly is I would have supposed that the discipline would have -- a committee would have to rest the discipline on a charge that he had lied about it before you could support the discipline on the basis of his lying about it, wouldn't you? Robert H. Roberts: If the Court please, I think it would be somewhat comparable to this. This morning, you graciously permitted me to practice for this Court. Part of what you based that on was on the application that I filed. Suppose that I lied in that application and you brought me in here for a hearing and to determine whether I should have that privilege you gave me revoked and while in here, I openly and blatantly lied -- William J. Brennan, Jr.: I don't think we do that without making a charge to that effect? Robert H. Roberts: Well of course -- William J. Brennan, Jr.: And then if you came here in defense of that charge and lied again, I expect you have that -- Robert H. Roberts: Yes sir. Well of course, I think that it really becomes moot anyway if you'll recall that after this hearing and he certainly had notice at that time about it and was accused of lying to them, we had a full rest court hearing in the US District Court in Middle Tennessee and imagine and Judge Miller agreed of course with the university officials in connection with all of these things that they found against him. Byron R. White: But do you contend that -- I take it, it is that soliciting or hand billing students not to register, soliciting and hand billing them not to boycott registration is enough of a disruption of university affairs to warrant exclusion from the university? Robert H. Roberts: Yes sir, I certainly do. Now, Mr. Jones claimed that he only passed up some other leaflets, one of them I think was called the black thesis which was more or less philosophical piece of writing. Now, that wasn't so far as I can see anything in there that would have been disruptive. But suppose had been able to persuade even a substantial number of these students to refuse to register when the term started, certainly that would disrupt the school -- Thurgood Marshall: Was it -- how many days was it before he distributed these and then he brought up on charges? Robert H. Roberts: It was approximately a month-and-a-half. Thurgood Marshall: And has there been any disruption as a result of it -- Robert H. Roberts: No. But they stopped in course. Thurgood Marshall: That you -- Robert H. Roberts: -- they didn't permit him to go that summer. This happened during the summer and they'd already sent him notice that he had not been cleared for attendance here on the summer term of school. Thurgood Marshall: But he didn't disrupt anything, did he? Robert H. Roberts: Those were it didn't turn out that way, but I don't think that you have to wait till the horse is out of the barn before you are allowed to close the door. Thurgood Marshall: Will you show me on the record where those two convictions are you were talking about, if you don't mind? Robert H. Roberts: Yes sir. The charge itself charged in with him and they readily admitted it and they are on page 70 to 78. Hugo L. Black: Here's the charge above this -- Robert H. Roberts: Sir. Hugo L. Black: And your record where is the charge against him printed in the record? Robert H. Roberts: Well, it's in my brief on page 5, but -- Hugo L. Black: But where is it in the record, do you know? Byron R. White: It's in the lower court's opinion in the record 186 as the charge against Jones. Robert H. Roberts: Yes sir. And the entire discussion about the criminal activity that he was charged with takes place on between pages and 70 and 78 of the transcript of the FAC here as also of course in the transcript of the court hearing before the Judge Miller. Potter Stewart: Well, now it's between 70 and 78, and you don't mean apparently 70 to 78 of this printed appendix? I've looked there and found nothing. Robert H. Roberts: No sir. We had the part of the record, though here is the FAC transcript of the hearing. Potter Stewart: But the excerpts in that transcript containing the evidence we're now discussing, that is these convictions is not anywhere in this appendix, am I correct? Robert H. Roberts: -- No sir ti should be, it's on page 48 of here. Potter Stewart: Thank you, thank you. Robert H. Roberts: Of course we feel that the most serious thing that took place was the matter of this leaflet which he attempted to disrupt orderly activities of the school and even in Tinker it was stated clear that the orderly activities of the school is not subject to First Amendment rights. We think that registration certainly is an orderly and part of the record functions on school. My time is expired.

John G. Roberts, Jr.: We'll hear argument first this morning in Case 10-277, Wal-Mart Stores v. Dukes. Mr. Boutrous. Theodore J. Boutrous Jr.: Mr. Chief Justice, and may it please the Court: The mandatory nationwide class in this case was improperly certified for two fundamental reasons. First, plaintiffs failed to satisfy Rule 23(a)'s cohesion requirements as reflected in the commonality, typicality, and adequacy requirements of the rule. Second, plaintiffs' highly individualized claims for monetary relief failed to satisfy Rule 23(b)(2)'s requirements for certification of a mandatory non-opt-out class. Regarding Rule 23(a), because the plaintiffs' claims in this case hinge on the delegation of discretion to individual managers throughout the country, they cannot meet the cohesion requirements that are reflected in -- in Rule 23(a). The delegation of discretion in some ways is the opposite of cohesive claims that are common to everyone in the class. The common policies that the plaintiffs point to are either neutral and not argued to be discriminatory or they are affirmatively nondiscriminatory. The company has a very strong policy against discrimination and in favor of diversity. John G. Roberts, Jr.: I suppose if corporate headquarters had learned that the subjective decisionmaking or the delegation of decisionmaking to the field was resulting in several discriminatory practices or a pattern of discrimination -- in other words, the decentralized process was leading to discrimination -- then I suppose the company -- that that could be attributed to the policy adopted by -- at headquarters? Theodore J. Boutrous Jr.: No, Your Honor. I think that in this situation, if there was a pattern, for example, at a particular store where the decisionmaking unit-- John G. Roberts, Jr.: No, I'm talking about -- so, they've got thousands of stores, and, you know, every week they get a report from another store saying that, you know, there's an allegation of gender discrimination. At some point, can't they conclude that it is their policy of decentralizing decisionmaking that is causing or permitting that discrimination to take place? Theodore J. Boutrous Jr.: --That -- I think that would be an inquiry, Your Honor. I don't think it would rise to a pattern or practice or a common policy that affects everyone in the same way. Certainly, companies do look at the -- the situation throughout the company and seek to root out discrimination, but it would take more than some reports, especially in -- in a company that has so many stores and so many units. And here, the plaintiffs' claims simply aren't typical. If the three named plaintiffs stand before the court, they are supposed to represent 500,000 or a million or more people and stand in judgment -- that's the words the Court used in Hansberry v. Lee -- to represent all those other people. And the claim is that the individual decisionmakers in those other cases exercised their discretion in a way that was biased, and there's no proof of that. Ruth Bader Ginsburg: Did-- Anthony M. Kennedy: The Chief Justice's question reminds me somewhat of our rule in Monell under 1983: A city is not liable for a -- a constitutional violation unless it has a policy. Would you think that we could use that as an analogue to determine whether or not there is a common question here? Theodore J. Boutrous Jr.: Yes, Your Honor. I think the analogue is that if a company had a policy, a general policy, of discrimination as opposed to here, where it's a general policy against discrimination, and it was -- in the words of the Court in Feeney, saw patterns throughout the company and because of sex, because of gender, continued to allow the patterns to exist, that would raise a different question. Anthony M. Kennedy: Suppose, following the Monell analogue, there's -- it's a -- there's a showing of deliberate indifference to the violation. Would that be a policy? Theodore J. Boutrous Jr.: Your Honor, I think deliberate indifference raises a different question. Under a disparate treatment claim, again, in Feeney, the test would be, was the company allowing the discrimination to occur because of gender, because it wanted there to be discrimination? There's no evidence of that here. Ruth Bader Ginsburg: --Is there any responsibility if you -- the numbers are what has been left out so far. The company gets reports month after month showing that women are disproportionately passed over for promotion, and there is a pay gap between men and women doing the same job. It happens not once, but twice. Isn't there some responsibility on the company to say, is gender discrimination at work, and if it is, isn't there an obligation to stop it? Theodore J. Boutrous Jr.: Your Honor, yes, there is an obligation to ensure -- for a company to do its best to ensure there are not wage gaps and discrimination. But here, for example, if one looks at the aggregated statistics that the plaintiffs have pointed to, it points to a completely different issue. It does not show that there were gender gaps at the stores among comparable people. That's really the fundamental flaw in their case. Their argument is that individual decisionmakers throughout the country were making stereotyped decisions and that that had a common effect, but they just added everything together. They haven't shown a pattern across the map. They've added all the data together and pointed to disparities, some of which mirror some of the -- the statistics that-- Sonia Sotomayor: Counsel, I thought their expert didn't aggregate them together. He did it regionally, not store by store, as your expert did, number one; and, number two, that he performed, as accepted by the district court, and affirmed by the circuit court, any number of controlled variable comparisons, including job history, job ratings, and other things, and found that the disparity could not be explained on any of the normal variables that one would expect and that the disparity was significantly much higher than the 10 competitors of Wal-Mart and what they were paying their labor force. So, what is speculative about that, number one? And, two, why is that kind of statistical analysis inadequate to show that a policy of some sort exists? Theodore J. Boutrous Jr.: --Justice Sotomayor, first, plaintiffs' expert did a national regression and then simply estimated the regional results. He did not do a regional regression. But even if he had, these statistics go more to the merits. We think we have strong arguments on the merits responding to those statistical arguments-- Sonia Sotomayor: Well, that begs the legal question, which is -- you're right. Ultimately, you may win and prove to a factfinder that this analysis is fatally flawed, but what the district court concluded was that on the basis of your expert, whom he discounted because your expert was -- was basing analysis on -- on premises that the court found not acceptable, that there was enough here after a rigorous analysis. What's the standard that the court should use in upsetting that factual conclusion? Theodore J. Boutrous Jr.: --Your Honor, the district judge did not discount Wal-Mart's expert. The district court found that it wasn't the stage at which to make a determination between the two. The standard that we think would govern would be the standard that the Second Circuit adopted in the IPO case, which says there needs to be a choice. When you're talking about discretionary decision around the country by different decisionmakers, there has to be some demonstration that there's a common effect throughout the system. Our expert's report and testimony showed that at 90 percent of the stores, there was no pay disparity. And that's the kind of -- and even putting that aside, the plaintiffs needed to come forward with something that showed that there was this miraculous recurrence at every decision across every store of stereotyping, and the evidence simply doesn't show that. The -- the other problem on the -- on the cohesion analysis is that -- again, the typicality inquiry. Each of the plaintiffs have very different stories. One of them was promoted into a managerial position. One was terminated for disciplinary violations. One was promoted and then had a disciplinary problem and then was demoted. In each of these cases, if this were an individual case, they would have to show that they were treated differently than people who were situated just like them, with the same supervisor, the same department, the same situation. Samuel A. Alito, Jr.: What do you think is the difference between the standard that the district court was required to apply at the certification stage on the question whether there was a company-wide policy and the -- the standard that would be applied on the merits? Theodore J. Boutrous Jr.: At the certification stage, Justice Alito, the plaintiffs did not have to prove that there was an actual policy of discrimination and that that was the company's policy, but they at least needed to point to a policy that was common and that linked all of these disparate individuals and disparate locations and different people together. And -- and one -- their argument is that the common policy is giving tens of thousands of individuals discretion to do whatever they want. That is not commonality. It's the opposite. Elena Kagan: I don't think that's quite fair, Mr. Boutrous. I think their argument was that the common policy was one of complete subjectivity, was one of using factors that allowed gender discrimination to come into all employment decisions. And in Watson, we suggested that that was a policy, a policy of using subjective factors only, when making employment decisions. That's exactly the policy that was alleged here. Theodore J. Boutrous Jr.: Justice Kagan, they do not argue that it was an entirely subjective process. As the Court suggested in Falcon, entirely subjective would -- would be a different issue. They argue that it was excessive subjectivity and that there were general overarching company standards that exerted control. On page -- I think it's on page 13 of their brief, they say the discretion was unguided. Three pages later they say it was guided by these nondiscriminatory policies. So, it's really an incoherent theory that does not have -- pose the kind of situation you're suggesting. Elena Kagan: I -- I guess I'm just a little -- a little bit confused as to why excessive subjectivity is not a policy that can be alleged in a Title VII pattern and practice suit or in a Title VII disparate impact suit. Theodore J. Boutrous Jr.: Your Honor, in Watson, the Court did suggest -- did state and -- and hold that subjective decisionmaking could be challenged in a disparate impact case, but Justice O'Connor's opinion went on to say there needs to be the identification of a specific practice within that policy. As the Court said in Falcon, Title VII does not govern policies; it governs practices. And subjectivity is not a practice if it were a policy. And there was a -- like most companies, Wal-Mart has a combination of objective and subjective standards. Within that, the plaintiffs -- if they had pointed to some particular criteria, people with a great personality, they're going to -- they're -- they're the ones we're going -- we're going to push up, and they -- they were trying to tie that to a disparate impact or disparate treatment, that would be-- Ruth Bader Ginsburg: Mr. Boutrous, there was a case, it was in the '70s, and it was a class action against AT&T for, I think, promotion into middle management. What was at issue there was a part -- a test, part objective, but then in the end, the final step was a so-called total person test, and women disproportionately flunked at that total person. And the idea wasn't at all complicated. It was that most people prefer themselves; and so, a decisionmaker, all other things being equal, would prefer someone that looked like him. And that was found, that total -- the application of that total person concept was found to be a violation of Title VII. This sounds quite similar. I mean, it's not just -- it's not subjective. You have an expert -- I know you have some questions about that expert -- but the expert saying that gender bias can creep into a system like that simply because of the natural phenomenon that people tend to feel comfortable with people like themselves. Theodore J. Boutrous Jr.: --Your Honor, this -- this is not like the total person test, but I think that is a very good example of something that could be a -- a practice inside the -- the overarching policies, and if you had a case where a particular decisionmaking unit applied the total practice test, and you had disparate results in that particular unit, that group of people could -- could -- would have a much stronger case for a class action. But as Your Honor points out, the -- the sociologist here, who is the glue that's supposed to hold this class together, said he couldn't tell if stereotyping was occurring one-half of 1 percent or 95 percent or at all. And this is a class action. The question here is whether that we can assume that every decisionmaker acted in the same manner in a way that had in this Court's words the same injury, caused -- the plaintiffs had the same interest and the same injury, that's the way the Court put it in Amchem, by their own expert accepting all of their proof, the answer is no. That assumption is not supported by the record. That's why there's not the kind of cohesion that's necessary to protect the rights of the absent class members and the defendant. The -- the -- the other-- Elena Kagan: Mr. Boutrous, I think that that suggests that the plaintiffs would have to demonstrate discrimination in every individual case, and that's never been the law. All that the plaintiffs have to demonstrate and, especially at this stage in the proceedings, is that there is a practice, a policy of subjectivity that on the whole results in discrimination against women, not that each one of these women in the class were themselves discriminated against. Theodore J. Boutrous Jr.: --That's correct, Your Honor. At the phase one, we're not arguing that a plaintiff would have to come forward and show that every class member was discriminated at that point. Under the Teamsters' analysis, there must be proof of a standard operating procedure of discrimination. Here, it's undisputed that Wal-Mart's policy -- and it wasn't just a written policy; it was implemented and enforced rigorously -- that was antidiscrimination. But, Your Honor, you're correct, that each person doesn't have to come forward in phase one. The big -- the other big problem here is that the district judge said in phase two, under Teamsters, Wal-Mart would not be entitled to put on its individual defenses. Women who thought they had a claim would not be able to come forward if a -- in this process, the paper records suggested they didn't have a claim, and come into court and have their day in court and argue that they should be compensated. The plaintiffs are trying to cut off half of the Teamsters' framework, which is fundamental both to due process and to Title VII because Title VII's section 706(g) states very clearly that only victims of discrimination may recover. John G. Roberts, Jr.: What -- what happens to the damages claim of an individual woman who is part of this class if that class prevails? Theodore J. Boutrous Jr.: If the class prevails, then the -- the claim would be resolved in this manner under -- it's very unclear what the District Court had in mind. John G. Roberts, Jr.: Would -- would she be eligible for only back pay or compensatory damages as well? Theodore J. Boutrous Jr.: Yes, Your Honor, she would only be eligible for back pay. The plaintiffs retained their compensatory-- John G. Roberts, Jr.: I'm sorry. Go ahead. Theodore J. Boutrous Jr.: --their compensatory damage claims for themselves but waived those for the class members in order to get a class certified, which I think is a fundamental, crucial violation. John G. Roberts, Jr.: All right. But would -- would the -- would the women with a claim for compensatory damages be able to sue that after the class prevails in this case? Theodore J. Boutrous Jr.: Our view is that she would not be because that would have been part of the core nucleus of facts in the case. John G. Roberts, Jr.: Even -- even though she could have not received notice and not had an opportunity to opt out? Theodore J. Boutrous Jr.: That's the -- that's the problem -- that goes to the problem with this (b)(2) certification, that this case, if it -- if it were going to be certified at all, needed to be looked at under Rule 23(b)(3). Rule 23(b)(3) was -- was created for precisely this sort of circumstance, the growing edge of the law where individualized monetary claims are at stake. The -- the language of Rule 23(b)(2) speaks of injunctive and declaratory relief. Sonia Sotomayor: Counsel, would-- Elena Kagan: I thought your position was that this could not be certified under Rule 23(b)(3), either; is that correct? Theodore J. Boutrous Jr.: Our view is the plaintiffs will -- will not be able to satisfy those -- those provisions, but that's why they brought it under Rule 23(b)(2), to circumvent the procedural protections of superiority, predominance, and the like. Sonia Sotomayor: --Would that bar the (b)(2) class? Meaning if their claim is, as they state it, that they're seeking injunctive and declaratory relief against a discriminatory impact or -- case or a pattern and practice case, wouldn't that have value and wouldn't that value be, standing alone without the damages component, be that the plaintiffs who come in later have a presumption that discrimination affected them and the burden shifts to Wal-Mart to prove that there was a nondiscriminatory reason? Theodore J. Boutrous Jr.: There certainly could be a benefit from an injunction if -- if the plaintiffs met all the standards. The problem here is that the -- the individualized damage claims, the back pay claims, engulfed and overwhelm the injunctive relief-- Sonia Sotomayor: Even if they did, why couldn't you separate out the (b)(2) issue from the (b)(3) question of whether monetary damages have enough common facts and law to warrant a certification under (b)(3)? Theodore J. Boutrous Jr.: --Your Honor, some courts have done that, looked at the injunctive relief claims under -- under the (b)(2) standard and the monetary reliefs under a (b)(3) standard. That can raise other complications, especially here the plaintiffs are seeking punitive damages as well, but that's at least a possibility. It would certainly be better than this, shoe-horning these monetary relief claims that are so individualized. Sonia Sotomayor: So, would you address the -- address them separately for me, and tell me why a (b)(2) class couldn't exist only on injunctive relief? And if it can, if you're conceding it can, then is your attack merely that the monetary component of this, the back pay -- which, you know, I know the dispute on whether that's equitable relief or compensatory relief or not -- why that just can't be separated out and put into the (b)(3) claim? Theodore J. Boutrous Jr.: Your Honor, our view is that the injunctive relief claim still has significant problems concerning cohesion, adequacy, typicality, commonality. On the adequacy point, this case includes at least 544 store managers who are alleged to be discriminators and victims. If that's not a conflict under Amchem and the adequacy test in Hansberry v. Lee, I don't know what is. The -- the women who are compelled to be in the class -- they can't opt out, they're current employees, they're former employees, they cut across every position in the country, and there's no demonstration that they're being affected in a common way. So, I think there would still be those commonality, typicality, cohesion problems because of the nature of the plaintiffs' case here, the notion of the common policy being giving -- giving discretion and -- and independent judgment. Ruth Bader Ginsburg: I thought that -- correct me if I'm wrong, but I thought that this district judge said that -- that the absent class members would get notice and have an opportunity to -- to opt out. So, a -- a plaintiff, a member of the class who wants to go for compensation instead of just back pay could opt out. Theodore J. Boutrous Jr.: The district court, Justice Ginsburg, limited that ruling to the punitive damage claim, and the Ninth Circuit made clear it was viewing it that way. It said under its ruling, which sent punitive damages back, that would simplify things because then there wouldn't have to be notice and an opportunity to opt out under back pay. And back pay is monetary relief for individuals. To bind people based on a balancing test under (b)(2) to a judgment to which they were not a party -- in Taylor v. Sturgell, this Court talked about the fundamental rule that an individual is not bound by a judgment to which they're not a party and said we need crisp rules with sharp corners in this area where such a fundamental right is at stake. And that's why we think it needs to be Rule 23(b)(3) when individual monetary relief is at stake. Sonia Sotomayor: That begs my question. Are you talking about any monetary relief? You're -- you're claiming, I'm assuming, that monetary relief includes equitable relief. Theodore J. Boutrous Jr.: Yes, Your Honor. Sonia Sotomayor: The Fifth Circuit has described a test where it doesn't use the predominant question; it uses the incidental test. What's wrong with that test? Theodore J. Boutrous Jr.: That test is much better than the test that was applied below. The plaintiffs have walked away from the two tests that were applied in the lower court. They have never contended they could meet the incidental damages test. And under the Fifth Circuit's case, the Allison case, only automatic back pay that goes to the group as a whole would qualify for that. Here, this is individualized relief. Sonia Sotomayor: I -- that's where I'm going to. Would you accept that incidental test as appropriate to the question of when monetary damages predominate or don't? Theodore J. Boutrous Jr.: Your Honor, the text of Rule 23(b)(2) is very clear. It talks about injunctive and declaratory relief. The only ambiguity that's created is from the advisory committee note, and as this Court said three weeks ago in the Milner case, we don't look to legislative history to try to create ambiguities. The -- the other parts of the advisory committee notes make very clear that the drafters were concerned about the historical antecedents where it was an injunctive-only case to -- of -- to desegregate and the like. I think the drafters of Rule 23(b)(2) would have been shocked if they had learned that this case that involves millions of claims for individualized monetary relief were -- were being sought to be included in a (b)(2) class. That said, Your Honor, the incidental damage test is -- is I think far superior because it's at least clearer and would be closer to a sharp, bright-line rule, which is required in this context. I'd like to go back briefly to the point I made earlier about individual relief and taking away the rights of both Wal-Mart and the absent class members. The procedures that would be used here -- the Ninth Circuit proposed a statistical sampling method. The plaintiffs do not defend that. They do not mention the Hilao case, which was the cornerstone of the -- the Ninth Circuit's ruling, which would allow sort of a prediction about who might have been hurt, how many people might have been hurt, and then a divvying up of -- of moneys based on that. The district court precluded the fundamental Teamsters hearings, which would allow, once a presumption, if one was to arise, of discrimination occurred in a pattern of practice -- would allow the defendant to then show that it didn't discriminate on -- on an individual basis, and it would allow the individuals to come in and have their day in court. That violates Title VII. It violates the Rules Enabling Act, and -- and we think it really shows some of the core flaws in this case. John G. Roberts, Jr.: What if the class does -- does not prevail; it loses? Does that bar an individual woman at a particular Wal-Mart from bringing these same claims? Theodore J. Boutrous Jr.: Yes, Your Honor. There's a presumption in -- in the world of class actions -- there's two that I think the plaintiffs are -- are relying on. One is that class actions are always good, and the bigger the class action, the better, and that the class will win. None of those presumptions can be counted on. If the plaintiffs lose, and they -- and here their compensatory damages claims, I think, would be gone because the named plaintiffs are asserting them. If they tried to bring a case as pattern or practice or pay or promotion, there would be significant questions of res judicata and collateral estoppel. And it's not fair to anyone to put this all into one big class. Elena Kagan: But you're not suggesting that they would be precluded on individual discrimination claims, are you? Theodore J. Boutrous Jr.: No, Your Honor, if they had individual claims that were separate from the nucleus of operative facts here, that might pose a different question. John G. Roberts, Jr.: But what if it were the same theory, that the reason this person was able to discriminate was because he had total subjective discretion in his hiring? Theodore J. Boutrous Jr.: Then I -- then there would be a real problem of collateral estoppel or res judicata, Your Honor. Mr. Chief Justice, I'd like to reserve my remaining time for rebuttal. John G. Roberts, Jr.: Thank you, counsel. Theodore J. Boutrous Jr.: Thank you. John G. Roberts, Jr.: Mr. Sellers. Joseph M. Sellers: Mr. Chief Justice, may it please the Court: This case follows from the -- the Teamsters and Watson models of theories of discrimination, and as a consequence, there is no requirement to have a formal policy of discrimination here. It can be-- Sonia Sotomayor: What would the injunction look like in this case? Joseph M. Sellers: --The injunction would look like a series of remedial measures that would direct Wal-Mart to provide for detailed criteria by which to make pay and promotion decisions that are job-related in a way that hasn't been true up until now. It would provide for it to hold managers accountable for the decisions they make; it would ensure effective oversight of the -- of these pay and promotion decisions in a way that the company had -- while the company did have, by the way, information regularly submitted to it about pay decisions, it took no action, and it did not effectively monitor -- allowed these problems to fester. John G. Roberts, Jr.: All right. Is it your position that on this scale subjective decisionmaking processes are necessarily illegal? Joseph M. Sellers: No, not at all, Mr. Chief Justice. John G. Roberts, Jr.: So, if this were -- how many stores are we talking about, a thousand stores? Joseph M. Sellers: Several thousand stores. John G. Roberts, Jr.: Several thousand stores. How many examples of abuse of the subjective discrimination delegation need to be shown before you can say that flows from the policy rather than from bad actors? I assume with three -- however many thousands of stores, you're going to have some bad apples. Joseph M. Sellers: Well, Mr. Chief Justice, we have some examples in the record. As Teamsters-- John G. Roberts, Jr.: No, I know there are examples. How many do you need to have? Joseph M. Sellers: --I-- John G. Roberts, Jr.: Surely it won't be -- if somebody sends one letter in saying the guy at this plant -- is -- plant -- this store is discriminating, that can't be enough to support your theory. Joseph M. Sellers: --That's correct. We don't submit that. There is no minimum number that this Court has ever set. Teamsters, as an example in Teamsters, the Court had before it about 40 examples, but significantly they weren't required. In order to establish a pattern and practice of liability -- and we have more than that, of course -- but in order to establish a pattern and practice of liability or at least a prima facie case, Teamsters holds that what you need to do is show that there were disparities sufficiently substantial to create an inference of discrimination with respect to a discrete practice. John G. Roberts, Jr.: Is it -- is it true that Wal-Mart's pay disparity across the company was less than the national average? Joseph M. Sellers: Mr. Chief Justice, the position -- I don't know that that's a fair comparison. The position that Wal-Mart has advanced makes no -- the comparison it makes is with the general population, not with people in retail. Wal-Mart's obligation under Title VII is to ensure that its managers do not make pay decisions because of sex, and the comparison that's relevant is between men and women at Wal-Mart, not the general population that includes people in retail, but includes railroad workers and all kinds of other people. That's not the appropriate comparison. Anthony M. Kennedy: It's not clear to me: What is the unlawful policy that Wal-Mart has adopted, under your theory of the case? Joseph M. Sellers: Justice Kennedy, our theory is that Wal-Mart provided to its managers unchecked discretion in the way that this Court's Watson decision addressed that was used to pay women less than men who were doing the same work in the same -- the same facilities at the same time, even though -- though those women had more seniority and higher performance, and provided fewer opportunities for promotion than women because of sex. Anthony M. Kennedy: It's -- it's hard for me to see that the -- your complaint faces in two directions. Number one, you said this is a culture where Arkansas knows, the headquarters knows, everything that's going on. Then in the next breath, you say, well, now these supervisors have too much discretion. It seems to me there's an inconsistency there, and I'm just not sure what the unlawful policy is. Joseph M. Sellers: Well, Justice Kennedy, there is no inconsistency any more than it's inconsistent within Wal-Mart's own personnel procedures. The company provides to its managers this discretion, which, by the way, is very discrete. It is not the broad kind of -- we're not attacking every facet of the pay and promotion decisions. The District Court found specific features of the pay and promotion process that are totally discretionary. There's no guidance whatsoever about how to make those decisions. But with respect to the discretion, every store, the District Court found, is provided -- managers are provided with the same level of discretion. But the company also has a very strong corporate culture that ensures that managers, not just with respect to the practices we're challenging, but in all respects, what they call the Wal-Mart way, and the purpose of that is to ensure that in these various stores that, contrary to what Wal-Mart argues, that these are wholly independent facilities, that the decisions of the managers will be informed by the values the company provides to these managers in training-- Anthony M. Kennedy: Well, is that disparate treatment? Joseph M. Sellers: --It is disparate treatment. It is a form of disparate treatment because they are making these decisions because of sex, and they -- and they are doing so with -- we have evidence that we think, through the stereotyping evidence we have here, as well as the statistical results-- Antonin Scalia: I don't -- I'm getting whipsawed here. On the one hand, you say the problem is that they were utterly subjective, and on the other hand you say there is a -- a strong corporate culture that guides all of this. Well, which is it? It's either the individual supervisors are left on their own, or else there is a strong corporate culture that tells them what to do. Joseph M. Sellers: --Well, Justice Scalia, there is this broad discretion given the managers. Antonin Scalia: Right. Joseph M. Sellers: But they do not make these decisions in a vacuum. They make the decisions within a company where they are heavily-- Antonin Scalia: So, there's no discretion; is that what you're saying? Joseph M. Sellers: --No, I'm not. I'm suggesting they are given this discretion, but they are informed by the company about how to exercise that discretion. So, it's effectively saying-- Antonin Scalia: If somebody tells you how to exercise discretion, you don't have discretion. Joseph M. Sellers: --Well, all right. That's another -- it's certainly -- the bottom line is, they didn't, and the results show it. There was consistent disparities in every one of the regions, 41 regions. Antonin Scalia: What do you know about -- about the unchallenged fact that the central company had a policy, an announced policy, against sex discrimination, so that it wasn't totally subjective at the managerial level? It was, you make these hiring decisions, but you do not make them on the basis of sex. Wasn't that the central policy of the company? Joseph M. Sellers: That was a written policy. That was not the policy that was effectively communicated to the managers. Antonin Scalia: Now, how was -- how was that established? Joseph M. Sellers: Well, what we have, as I said before, is evidence of -- for instance, at the -- at the Sam Walton Institute, where every manager has to be trained before they become a manager, they provide as a question -- a response to a standard question: Why are women so underrepresented, or so few women in management? And the response given was, because men seek advancement, are more aggressive in seeking advancement. Now, that's a typical, stereotypical statement provided to every person going through the management training program, that they then go off and inform -- that informs their decisions when they make -- when they have this discretion to make promotions. Antonin Scalia: And that causes them intentionally to discriminate on the basis of sex? Joseph M. Sellers: That's -- that is-- Antonin Scalia: That causes -- how could that possibly cause them to intentionally discriminate on the basis of sex? Joseph M. Sellers: --Well, they -- they have -- they have an intent to take sex into account in making their decisions; that is -- that is, they apply a stereotype about that women are less aggressive when it comes to assessing their suitability for promotions. Antonin Scalia: That -- that's just an assessment of why the percentage is different. They differ not only at Wal-Mart, but at -- throughout the industry. To say that that's the explanation is not to tell your people: Don't promote women. Joseph M. Sellers: Right. Antonin Scalia: If you have an aggressive woman, promote her. Joseph M. Sellers: I understand that, and there were -- there have been women promoted. But Justice Scalia, first of all, we think that that is -- the questions you are raising are ones that Wal-Mart can raise at trial. The question at this juncture is whether there are -- there are questions common to the class. We've identified what has been recognized as a -- a common policy, that there's no dispute this policy applies throughout the company. And the fact that we, at this juncture, are -- I mean, and we have shown, as we think we have to in order to satisfy commonality, that there are disparities adverse to women. And we have the means to show, through the testimony of Dr. Bielby and other evidence, that we can provide this -- connect these two through-- Antonin Scalia: Have you sufficiently shown -- despite the fact of an explicit written central policy of no discrimination against women, do you think you've adequately shown that that policy is a fraud, and that what's really going on is that there is a central -- a central policy that promotes discrimination against women? Do you really think-- Joseph M. Sellers: --We -- we have testimony in the record from the vice president of the company that that policy was lip service at the company. We have testimony from -- from the expert in this case-- Ruth Bader Ginsburg: Isn't this something that would be -- I mean, this -- we're not just talking about getting your foot in the door. We're talking about certifying the class, and you may well lose on every one of these points, but -- but the 23(a) standards, they're not supposed to be very difficult to overcome. It's just a common question of fact-- Joseph M. Sellers: --That is-- Ruth Bader Ginsburg: --that dominates at that-- Joseph M. Sellers: --I'm sorry. Ruth Bader Ginsburg: --But what seems to me is a very serious problem in this case is: How do you work out the back pay? You say -- we get through the 23(a) threshold. We got class certified under 23(b)(2). And the judge says, there's no way I could possibly try each of these individuals. So, we're going to do it how? How are they going to calculate the back pay? Joseph M. Sellers: Well, the -- the approach that the District Court endorsed, an approach we recommended, and which has been endorsed by seven circuits over a period of 40 years, is in circumstances here -- like here, which are, admittedly, the exception to the rule, where the company had no standards by which to make promotion and pay decisions, they had kept no records of who -- the reasons for people being promoted and the reasons why they pay people certain amounts, that as a consequence of that, the Albemarle decision and the Teamsters decision make clear that the obligation of the District Court upon finding of liability is to attempt to reconstruct the decisions that would have been made in the absence of discrimination. And the District Court found here -- and we submit it's not clearly erroneous -- that the more reliable method for doing so is to use a formula relying on Wal-Mart's robust database in which it captures performance, seniority, and a host of other job-related variables, factors that bear on pay and promotion decisions, and permits a comparison, a very precise comparison, in a way that having individual hearings relying on hazy memories, post hoc rationalizations, doesn't. John G. Roberts, Jr.: What if you had a situation where you had a company with a very clear policy in favor of equal treatment of men and women? You know, the answer to your -- the answer to your question was women don't have as many positions because managers discriminate against them in -- in hiring and in promotion, yet you still have the same subjective delegation system. Could you have a class of women who were harmed by this subjective policy, even though it was clear that the policy of the corporation favored equal employment opportunity? Joseph M. Sellers: Well, I think if the -- if there were -- as clear as your hypothetical suggest, that the company had a policy of that sort, it would be appropriate for it to seek summary judgment. John G. Roberts, Jr.: No, no, no, they still -- well, then you're saying it is not enough that it be a subjective decision. This company has a thousand stores, and sure enough in a thousand stores you're going to be able to find a goodly number who aren't following the company's policy, who are exercising their subjective judgment in a way that violates the right to equal treatment. Couldn't you bring a class of people subjective to discrimination as a result of that subjective policy? Joseph M. Sellers: You could bring a class case on behalf -- if I understand your hypothetical -- on behalf of women -- I'm sorry -- who were subject to discrimination as a consequence of that unchecked discretion. I -- I want to be clear that we shouldn't lose sight of the fact that we have evidence here of results from this that are, that are really extraordinary. Stephen G. Breyer: Is the -- is the common question of law or fact whether, given the training which central management knew-- Joseph M. Sellers: Right. Stephen G. Breyer: --given the facts about what people say and how they behave, many of which central management knew, and given the results which central management knew or should have known, should central management under the law have withdrawn some of the subjective discretion in order to stop these results? Joseph M. Sellers: That -- that is a fair way to put it. Stephen G. Breyer: If that is a fair way to put it, is that a question that every one of the women in this class shares in common? Joseph M. Sellers: I -- I believe so, Justice Breyer, because they've all been the subject in every one of these stores to this very broad discretion. Ruth Bader Ginsburg: The district judge didn't think so. Didn't the district judge say that in awarding back pay some would get a windfall and others would be uncompensated? Joseph M. Sellers: Actually, Justice Ginsburg, I -- I think the district judge did not find that. What he found was that the formula, and I can assure you the formula we intend -- would tend -- tend to use is a regression analysis that would permit a comparison between each woman and the amount she was paid and similarly situated men, taking into account, as I said, performance and seniority and the like, and you will find there are women that were not underpaid and the formula will show that they should get no back pay. I think that the district court-- Ruth Bader Ginsburg: I thought -- I thought his point was not simply that some women were not underpaid, but women, if you had an individual case, the employer might show this person could have been fired, disciplined, and wasn't owed any back pay, not that she compares favorably to a -- a male peer, but that she wouldn't have gotten any pay at all. Joseph M. Sellers: --Well, Justice Ginsburg, the kind of factors that are entered into this -- this economic model, performance in particular, should capture whether somebody should have been fired. That -- that is a very important part of the model here that permits people to -- and we found -- the evidence shows that women were, in fact -- had higher performance than men and were nonetheless still underpaid. Antonin Scalia: --Can I just say something here? Doesn't your class include both those women who were underpaid and both -- and those women who weren't underpaid? Joseph M. Sellers: That's-- Antonin Scalia: Doesn't your class include both? Joseph M. Sellers: --As every-- Antonin Scalia: Is that commonality? Joseph M. Sellers: --As every class does, Justice Scalia. Every class has some portion of its members who are not harmed by the discrimination. As the Teamsters case recognized, what is common about them is they were all subject to the same highly discretionary decisionmaking, even if some of them weren't harmed by it. That still presents a question common to the class. Anthony M. Kennedy: Well, correct me if I'm wrong, I thought the Teamsters case was an action by the government that wasn't a class action case. Joseph M. Sellers: That -- that is correct, but it -- it -- it is the paradigm we use for determining what you need to establish a pattern or practice of discrimination. Anthony M. Kennedy: Pattern or practice, that's correct. Help me, if you can, with this. Let's -- let's suppose that experts' testimony, sociologists and so forth, establish that in industry generally and in retail industry generally, women still are discriminated against by a mathematical factor of X. You have a company that has a very specific policy against discrimination, and you look at their -- the way their employees are treatment -- are treated, and you find a disparity by that same mathematical factor X, does that give you a cause of action? Joseph M. Sellers: If the -- I'm sorry -- if the -- it, the disparity-- Anthony M. Kennedy: The -- the -- the disparity with -- that women are subjected to are the same in the company as they are-- Joseph M. Sellers: --Outside the company. Anthony M. Kennedy: --society wide, but the company does have a policy against discrimination. Joseph M. Sellers: Right. I -- I would say that the company's responsibility under Title VII is to ensure its managers do not make pay and promotion decisions because of sex. If the comparison between the pay women receive, for instance, who are similarly situated to men within the company is such that they are underpaid compared to similarly situated men in the company, then -- then the company would have legal responsibility under Title VII, regardless of what happens in the rest of the industry, what happens in the rest of the world. Anthony M. Kennedy: Would that be true even if you could not show deliberate indifference? Joseph M. Sellers: Well, I don't know that the -- the respect that the standard is deliberate indifference. I think that under this Court's decision in Heller-- Anthony M. Kennedy: Suppose there's no deliberate indifference and a specific policy prohibiting the discrimination, can you still proceed? Joseph M. Sellers: --I -- well, I would submit you still can proceed. If -- if the policy -- announcing a policy saying don't discriminate were to be effective in -- in immunizing companies against liability in class actions, imagine every company in the country would publish that policy and have free license to go discriminate as much as it wanted to. Samuel A. Alito, Jr.: I understand your answer to Justice Kennedy's question to be that this typical company would be in violation of Title VII; is that correct? Joseph M. Sellers: That's correct. Samuel A. Alito, Jr.: That's what the -- and that's what the academic literature on which your theory is based includes; isn't that right? Joseph M. Sellers: With -- Justice Alito, I think it's not just academic literature, I think it's the precedents from this Court. I think that's the -- that's the premise behind Teamsters, that the -- you look to in Hazelwood, which makes very clear that you don't look to populations outside the company in making comparisons. Samuel A. Alito, Jr.: So, you have the company that is absolutely typical of the entire American workforce, and let's say every single -- there weren't any variations. Every single company had exactly the same profile. Then you would say every single company is in violation of Title VII? Joseph M. Sellers: It -- that could very well be the case. If -- if the -- I think that Title VII holds companies responsible for the actions they take with respect to their employees. There certainly are industries, and there were 30 years -- many more 30 or 40 years ago when Teamsters was decided, where the entire industry might have had evidence of discrimination. That would not -- there is not a negligence standard under this statute that immunizes companies because they follow the same standards as others. Antonin Scalia: What -- what -- what -- what's -- what's your answer assumes is if there is a disparity between the advancement of women and the advancement of men, it can only be attributed to sex discrimination-- Joseph M. Sellers: No. Antonin Scalia: --Well, otherwise, how could you say that all -- all of the companies are -- are -- are presumptively engaging in sex discrimination? Joseph M. Sellers: Well, Justice Scalia, I -- I -- I want to deal with the -- in this instance, we have -- it's not just any old analysis that we're -- that we're using. We have statistical regression analysis that isolates and takes into account the factors such as performance and -- and seniority. Antonin Scalia: See, I wasn't talking about this case. I was talking about your answer to Justice Alito-- Joseph M. Sellers: I'm sorry. Antonin Scalia: --which said that, you know, it may well be that every industry in the United States is guilty of sex discrimination-- Joseph M. Sellers: Well, I-- Antonin Scalia: --unless there -- you know, there -- there's equality of promotion for men and women. Joseph M. Sellers: --No, I -- I don't -- I don't take that position, Justice Scalia. What I was trying to make clear is that the fact that there are other companies in the same industry where the same problems may arise, which, by the way, wasn't true here, where Wal-Mart was behind the other large retailers, doesn't mean that a company is any less liable for the discrimination practiced in its own workplace. I can't speak for the rest of society, I don't have any reason to think the entire society is engaging in employment discrimination. Sonia Sotomayor: Counsel-- Elena Kagan: Mr. Sellers, could I take you back to the remedial question here-- Joseph M. Sellers: Yes. Elena Kagan: --and when you think it is that individualized hearings are required? You've described a kind of formula that you would use. When -- when -- when is the formula approach right and when is the individual hearings approach right? Joseph M. Sellers: Well, I think it's a -- it's a call that, of course, we leave -- we should leave to the district court in the first instance, but factors that could weigh in the balance would include whether or not you have available the kind of information that we do here from database with which to be able to more reliably construct the -- the kinds of decisions that would have been made in the absence of discrimination. Likewise, there may be companies where they have kept better records or kept any records or have more substantial standards that would permit the reconstruction of those decisions through individual hearings. I don't think this is something that -- I'm not contending that under -- that you could always use a formula-like approach in connection with these cases. This is an extraordinary case with evidence that is -- that they have kept really no standards and no records. Ruth Bader Ginsburg: I thought, didn't the district judge say because of the numbers we couldn't -- couldn't possibly have the hearing in each case on whether the particular woman was owed back pay? They did say something about this. Joseph M. Sellers: The district -- I'm sorry, the district court did make the comment that the sheer number of class members would make the administration of individual hearings difficult, but the district court went on, very importantly-- Ruth Bader Ginsburg: I thought he said "impossible". Joseph M. Sellers: --Sorry? Ruth Bader Ginsburg: I thought he said more than difficult. Joseph M. Sellers: Well, he may have said impossible, but the important point is that he went -- the district court went ahead and made specific findings about the extent to which the -- the particular record here shows that the use of a formula would be more reliable than individualized hearings. Sonia Sotomayor: --Counsel, I'm -- I'm a little confused, all right? Joseph M. Sellers: Okay. Sonia Sotomayor: Because you're saying an individualized hearing is impossible, but that's exactly what you're saying you're going to do, only through statistics. Joseph M. Sellers: That's-- Sonia Sotomayor: You're going to say through my statistical model, I will be able to identify those women in the class who are deserving of pay raises. What that doesn't answer is when in this process is the defendant going to be given an opportunity to defend against that finding? Joseph M. Sellers: --Right. Sonia Sotomayor: Because you're -- are you suggesting that the district court would appropriately bar a defendant where there's no proof of intentionality with respect to not keeping records, that it was intended to stop these women from collecting money, et cetera? When are they going to get a chance? Joseph M. Sellers: Well-- Sonia Sotomayor: And if they're going to get a chance, isn't that an individualized hearing? Joseph M. Sellers: --Yes. Effectively Wal-Mart will have ample opportunity through the arguments over which variables which to use. There was a very robust debate below already about which variables to use, that will have a significant impact on whether women are shown to be underpaid or underpromoted compared to men. So, Wal-Mart will have that opportunity, and frankly-- Sonia Sotomayor: No, no, no. That sounds like you're saying their only opportunity will be on the model. Joseph M. Sellers: --I'm-- Sonia Sotomayor: They will be precluded from attempting to show any particular evidence that a particular decision was not made? Joseph M. Sellers: --If Wal-Mart -- if Wal-Mart, Justice Sotomayor, if a Wal-Mart comes forward below and it hasn't done so, so far, and is able to persuade the district court that it can, consistent with some kind of -- in a way that's consistent with a reliable determination of who should have been paid what and promoted in the absence of discrimination-- Sonia Sotomayor: You're not answering me. Joseph M. Sellers: --I'm trying to. Sonia Sotomayor: You're -- what you're saying is we're going to preclude them from doing anything but offering a mathematical model-- Joseph M. Sellers: I'm -- I'm-- Sonia Sotomayor: --because otherwise it's going to be too hard to have individual hearings. Joseph M. Sellers: --I -- I'm -- let me answer you directly. I'm not saying that. Wal-Mart has an opportunity to make the case that with whatever showing it wishes to make it can reconstruct these decisions more reliably, and in an entirely subjective environment, and if it does, it can offer evidence in certain circumstances; but it hasn't done so; and I don't submit it's going to be able to do so here. Antonin Scalia: This -- this takes evidence, to establish that -- that it's more reliable to have a hearing with evidence on the particular promotion or dismissal of the individual, that that is more reliable than using -- I don't care how admirable a statistical guess you make; I mean is that really a question? Joseph M. Sellers: I think it is, Justice Scalia, because the-- Antonin Scalia: We must have a pretty bad judicial system then. Joseph M. Sellers: --Well, I think it's not the judicial system, it's the recordkeeping of the company, and the standardlessness of its -- of the pay and promotion processes that basically mean 10 years later, these managers are going to be coming forward to speculate about what they did 10 years earlier, with no records to cross-examine them on. That is not the -- the model for a reliable adjudication. John G. Roberts, Jr.: Counsel-- Antonin Scalia: We should use that in jury trials, too, for really old cases. We should just put a statistical model before the jury and say, you know, this stuff is too old; so, we'll-- Joseph M. Sellers: Well-- Antonin Scalia: --we'll do it on the basis of -- is this really due process? Joseph M. Sellers: --I -- Justice Scalia, I submit it is; and the circuits that have been considering this for 40 years have so held. In the narrow set of circumstances that we have here, where there are standardless, recordless decisions at issue. Anthony M. Kennedy: Well, if it's standardless and -- and recordless, then why is there commonality? It seems to me that what you -- your answer that you just gave really is a -- shows a flaw in your case on commonality. Joseph M. Sellers: No, Justice Kennedy, the -- the standardless and recordless aspect is with respect to trying to reconstruct these decisions years later. As I said before, we have a common policy here; it presents a common question. We've shown evidence that would probably create a prima facie case of pattern or practice under Teamsters, and we think we've satisfied the three components of commonality that we think need to be addressed. Ruth Bader Ginsburg: One thing you haven't touched on is to -- to have, first of all the question of whether (b)(2) is limited to injunction and declaratory relief. Joseph M. Sellers: Yes. Ruth Bader Ginsburg: But if -- if you follow the advisory committee's note, then if dollars -- if damages predominates -- if damages predominate, then you can't use (b)(2). You have to make your case under (b)(3); and the one factor here is that about half the class is gone, so -- they're not interested in injunctive relief, but everybody's interested in money. So, why isn't the money -- why do you say that the -- that the injunction -- injunctive relief is the thing and the damages are lesser, rather than the other way around? Joseph M. Sellers: Well-- Antonin Scalia: In fact it's more than half the class that's gone, isn't it? Joseph M. Sellers: --Well, I don't -- nobody knows that, because they continue to have more employees adding -- added at the company. So, I wouldn't presume-- Antonin Scalia: But nobody's leaving yet. Joseph M. Sellers: --Well, there are people leaving, but the point -- but more importantly, the advisory committee note with respect to Rule 23(b)(2) makes clear that there is a -- that the -- whether or not an action or inaction is taken with respect to the class which is the predicate to (b)(2) certification, it depends on -- it doesn't depend on the number of people who are adversely affected by that action. And so, as a consequence where the former employees are -- that they -- if they would be included in the class under (b)(2) because that -- the question is not on a day-to-day basis who should have been in a position to seek injunctive relief and who's employed and who's not. John G. Roberts, Jr.: --Thank you, counsel. Joseph M. Sellers: Thank you. John G. Roberts, Jr.: Mr. Boutrous, you have 4 minutes remaining. Theodore J. Boutrous Jr.: Thank you, Mr. Chief Justice. Let me begin with this question of back pay because Mr. Sellers has made clear under their vision Wal-Mart would never have an opportunity to prove that it didn't discriminate against a woman who was seeking back pay; and the district court did not suggest that it might be difficult, as Mr. Sellers suggested. The district court, as Justice Ginsburg suggested, said that he found it would be impossible; not just because of the number of people, but because of the nature of the claims, that discretionary decisions were being implemented in a way that affected different people differently. The -- the problem here Mr. Sellers says is that the records are not available. Then he says we're going to have a -- a proceeding where the district judge relies only on the records, that he says are inadequate, to allow a reconstruction of the decision. That is not a process known to our jurisprudence. It doesn't comport with due process. It takes away Wal-Mart's rights under Title VII; it injures the rights of the individual women, who the record-- Sonia Sotomayor: You don't -- you don't seriously contend that if a plaintiff, if a policy were found or practice of discrimination that a woman couldn't come in and say they put X in, I had a longer history at Wal-Mart, I had far superior job ratings, I had no criticisms of my work, and I wasn't promoted. Wouldn't that be enough for her to show that that policy influenced her lack of selection? Theodore J. Boutrous Jr.: --I agree with you, Justice Sotomayor. Except-- Sonia Sotomayor: And your personal database has all that information. So, why is it impossible to try these cases other than because of their large numbers? That's a different issue. Theodore J. Boutrous Jr.: --Yes, Your Honor, what you've just outlined, we agree that a woman should be able to come in and say that, and she may say well, the records don't show what really happened. I -- I had more experience; I was a much better employee than the guy working next to me. Under the plaintiff's theory in order to get a class here, they have thrown that out the window; that woman would not be able to come and testify. Wal-Mart wouldn't be able to say this person was a terrible employee, this person was a great employee. On the record, it's not impossible to recreate these decisions. The record is filled with declarations from managers who remember very well that Ms. Dukes violated company policy, that Ms. Arana was fired for infractions regarding how she kept her hours. Stephen G. Breyer: If you just spend one second, remember my question. We've got a common issue. Why isn't that enough at least to support a (b)(2) injunctive action? Theodore J. Boutrous Jr.: Your Honor, the -- the scenario you outline -- there's no dispute about the policies that existed at the time, that there were-- Stephen G. Breyer: That sounds like the merits you're getting to. His point, remember, is this is just certification. So, my question is: Assuming they can support it with evidence, why can't they have their (b)(2) class, at least on an injunctive relief? Theodore J. Boutrous Jr.: --Because, Your Honor, the -- the common policy is one that affects everyone differently by definition. Therefore, these plaintiffs are not typical, and they are not arguing that everyone was affected the same way by the common policy. Many women thrived. Maybe some men stereotyped or some women stereotyped the other direction. Five hundred and forty-four of the plaintiffs are female store managers. So, it's impossible to make these sweeping generalizations, which, of course, is what stereotyping is supposed to prevent. And so, it's -- there's absolutely no way there can be a fair process here. On the policy question, the policy -- the plaintiffs point to the general policies and the central control, but the one policy they do not want to confront is the policy against discrimination. It was not just a written policy on paper. In fact, the -- there's a declaration at page 1576 of the Joint Appendix that lays out the very aggressive efforts the company-- Antonin Scalia: What about the vice president that said it was just window dressing or something like that? Theodore J. Boutrous Jr.: --I'm glad you asked about that, Justice Scalia. Here's what he said. He testified about the diversity goals of the company at the time, the effort to get more women into management, and he said in his view, until the company linked diversity goals to compensation of managers, it would be lip service. He wasn't saying the whole program was lip service. He was one of the advocates for diversity in the company. He wanted to be more aggressive. He said his -- his goals were 20 percent and other people's were 10. So -- so, it's completely misleading to suggest he was -- he was denigrating the entire policy. Sonia Sotomayor: I think he's just making your -- their point, which is if they started paying women the same as men, they might get more diversity. Theodore J. Boutrous Jr.: They do pay the same as men, Your Honor. The record reflects that. Sonia Sotomayor: Well, that's the whole issue that's in dispute. Theodore J. Boutrous Jr.: Thank you. John G. Roberts, Jr.: Thank you, counsel. The case is submitted.

Earl Warren: -- Railway and Steamship Clerks, Freight Handlers, Express & Station Employees, et al., Petitioners, versus Florida East Coast Railway Company. Number 782, United States, Petitioner, versus Florida East Coast Railway Company et al., and Number 783 or the East Coast Railway Company, Petitioner, versus the United States. Mr. Spritzer. Ralph S. Spritzer: Mr. Chief Justice, I move the admission of Paul Bender of the District of Columbia Bar for purposes of arguing in these cases on behalf of the United States. Earl Warren: Mr. Bender you may be admitted for that purpose. Paul Bender: Mr. Chief Justice, may it please the Court. These three petitions arise from a single decision of the Court of Appeals for the Fifth Circuit. That decision affirmed in an injunction entered in the Middle District of Florida, in action brought by the United States against the Florida East Coast Railway to enjoin what we allege to be violations of the Railway Labor Act. Eleven unions representing nonoperating employees of the Florida East Coast Railway intervened in the District Court in support of the injunction and participated in the Court of Appeals. One of the petitions here has been filed by the United States, thats Number 782. One, taking essentially the same position has been filed by the unions, that's Number 750 and the third which is a cross petition has been filed by the carriers, that's Number 783. For purposes of the oral argument, I shall present the argument in chief for the position jointly taken by the unions and by the Unites States. Mr. Devaney will then argue for the carrier and Mr. Rutledge representing the unions will present a rebuttal argument for the position which the unions and the United States jointly take. The issue here essentially is a simple one. The question is where and to what extent carriers covered by the Railway Labor Act must obey first their duty to bargain with the representatives of their employees and secondly, their duty to adhere to existing collective bargaining agreements which they have previously made with those representatives. During the course of a lawful strike, the Unites States takes the position that both of those duties remain upon the carrier during the course of a lawful strike. It must both bargain with the representatives of its employees and it must adhere to collective bargaining agreements which continue to exist during the course of that strike. The carrier, on the other hand, takes the position that it is under neither those, that it must neither bargain nor adhere to existing collective bargaining agreements. Let me briefly sketch to the Court the statutory scheme which maybe somewhat unfamiliar under which these issues arise. In the first place, like the National Labor Relations Act, the Railway Labor Act contains a general duty to bargain between employers and the representatives of their employees. It goes a little bit further in general than the Railway -- than the National Labors Relations Act, however, in providing rather affirmatively that there's a duty of all carriers to exert every reasonable effort to make and maintain agreements concerning rates of pay rules and working conditions and to settle all disputes arising out of those agreements with the representatives of their employee. There's nothing like that that explicit in the National Labors Relations Act about the duty to make and maintain agreements and of course a continuing duty to bargain with the representatives. Then the Act becomes much more explicit than the National Labors Relations Act and much more absolute in describing the meaning of the duty to bargain, “once agreements have been reached with the representatives of employees, as agreements had been reached in this case, first the Act provides that when either the carrier or the union wishes to change existing agreements covering rates of pay rules or working conditions notice must be served on the other party and negotiations between the parties undertaken. If these negotiations fail to result in agreements either party may then invoke the services of the National Mediation Board which is created primarily for that purpose, to mediate disputes which haven't been settled by a negotiation or the Mediation Board may itself proffer its services even if the parties don't ask it to. If this mediation fails, the Board, the Mediation Board, is then directed to encourage the parties to submit to the dispute to binding arbitration, although it can't compel the parties to do so.” If one or both of the parties refuses arbitration and there's another step, the last resort you can create a presidential commission, an Emergency Board it's called, to recommend the solution to the dispute and again its recommendations aren't binding. And -- Potter Stewart: And the discretion of the president is not -- Paul Bender: Right. I think the Mediation Board has some rule in making recommendations for the President but of course the President does not have to appoint the Board. In thus providing these detailed procedures which don't have any direct parallel in National Labors Relations Act, the Act provides as explicitly as one can imagine that existing conditions, those subject to the dispute, those that one party or the other wants to change must not be changed by the carrier while these negotiations, the mediation, the arbitration or if there's an Emergency Board, the Emergency Board is acting, while these procedures are in progress, you may not change the existing conditions. Then there's a general provision which again provides as explicitly as you can imagine, that you cannot make changes without entering into these statutory procedures. That provision, Section 2 Seventh of the Act, provides that unless the statutory from the negotiation procedures are undertaken, no carrier, its officers, agents or agent shall change the rates of pay, rules or working conditions of it's employees as a class as embodied in agreements. Thus, it seems to us quite clear and I don't think anyone disagrees with this, that the duty to bargain under the Railway Labor Act is defined in part and perhaps its most essential part, as the duty to adhere to existing collective bargaining agreements and not to change those agreements for employees as a class not the institute what would amount to amendments or changes without bargaining with the representatives of the employees. At the same time as the carrier thus found there is a similar rule that applies to unions requiring the maintenance of existing agreements while these statutory procedures are in progress. Thus, when a union for example is engaged in a wage dispute with a carrier, it may not strike on to and I think everyone agrees with this, although this is not as explicit in the Act, it may not strike until it has exhausted the statutory procedures just as the carrier may not unilaterally change the wages until it's exhausted the procedures are the carrier can engage in a lockout until the procedures have been exhausted. When the procedures are exhausted without a solution being reached, then and only then may the union strike to achieve its aims of proposal, and then and only then may the carrier implement the changes which it proposes without first exhausting the statutory procedures, both parties have to stand by existing agreements. That's what the Act provides and I can imagine that it could do so anymore clearly. Now, it's -- as I said I think it's conceded that those provisions as I've described them are applicable in the ordinary situation. The question here is, and also let me put that they are enforceable by injunction. I don't think there's any dispute about that any longer. There once was a question whether the Norris-LaGuardia Act might have prevented either of the parties from enjoining the other party. That is no longer a question seriously open to dispute. The question in this case is whether that statutory scheme as I described, it remains applicable during a lawful strike. The carrier argues that those provisions do not. In its view, when a strike occurs even though it's a lawful strike, it is entirely free, completely free to implement whatever wages, work rules or working conditions it desires for as long as the strike continues. And that it doesn't have to bargain with the union about the implementation of any of those procedures either before the strike or during the strike. As far as it's our concerned, the strike uses a complete freedom to treat its employees as it wishes so long as the strike continues and it carriers and I quote from it's brief, it says “It's agreements with the labor organizations were suspended during the period of the strike and FEC was not required even to attempt to comply with.” William J. Brennan, Jr.: Let me see, Mr. Bender, do I correctly understand that here, the issue of which after exhaustion of the procedures, the strike occurs for these early wages, is that it? Paul Bender: Wages and a notice issue also. The question of whether, the length of notice you had to give before layoffs and job abolition. William J. Brennan, Jr.: But in any event, they were limited issues, were there? Paul Bender: Yes, just wages and that no decision, correct. William J. Brennan, Jr.: And then after the procedures had all been exhausted the union did go on strike because they're not satisfied with the -- Paul Bender: Right. William J. Brennan, Jr.: -- what was it, an award or something of --? Paul Bender: No. I'm planning to get into this in a minute, but yes, that's essentially what happened. William J. Brennan, Jr.: But in any event whatever it might be as I understand it this whole thing about the dispute over some limited issues. Paul Bender: Yes sir. William J. Brennan, Jr.: And then after everything had been exhausted there was a lawful strike. Paul Bender: That's the way you get a lawful strike in the industry. Let me say that now -- William J. Brennan, Jr.: But the -- the carrier then insisted that it had the right and the fact to abrogate all other provisions of the agreement. Paul Bender: Exactly. William J. Brennan, Jr.: And substitute its own working conditions. Paul Bender: Right. William J. Brennan, Jr.: As -- not only the conditions related to the particular issues involved in dispute but everything else. Paul Bender: Right, precisely. Now, they say they can do that. We say that they have got to adhere to their agreements as written. If the agreements provide for what they can do during a strike then they can do what the agreements provide for what they can do during the strike. Potter Stewart: Now, let me see Mr. Bender, the carrier takes the position that it was free to do this only after the strike -- only after the strike commenced. Now, after the strike, were any -- were the employees then who are working for the Railroad represented by any of these labor organizations? Paul Bender: Under the Act, they were. Potter Stewart: How? Paul Bender: Well, the Act -- Potter Stewart: They have chosen them? Paul Bender: Because the -- these labor organizations were they're designated -- had been the designated representatives of the employees in those classes. Potter Stewart: But those employees went out -- were all out on strike, weren't they? Paul Bender: Well, the union members I assume were all out on strike, at least most of them were but under the Act there had never been a new designation of representatives and the Act does not contain any provision. I think this is quite clear which provides that the loss of representation upon the union losing a majority of the employees actually working at that time. Potter Stewart: And here they -- Paul Bender: The only way you -- Potter Stewart: I mean the union didn't lose them but -- but all of those employees were out on a strike. Paul Bender: The union members were out on a strike. Potter Stewart: All of them represented -- who have been represented by these -- Paul Bender: Right. But the Act -- the union still represents the employees in that class. William J. Brennan, Jr.: Including the replacement. Paul Bender: Including the replacement. William J. Brennan, Jr.: And I gather your position is that the replacements have to work at least as regardless all issues are kept to in dispute. Paul Bender: Surely. William J. Brennan, Jr.: Under the working conditions of the contract specified. Paul Bender: We -- we believe that the replacements are entitled to the benefits of the -- or the agreements upon negotiate -- William J. Brennan, Jr.: Well, to be entitled but -- Paul Bender: Well, and they must. It -- it's a rule which is for their benefit. It's a rule which is for the benefit of the union and it's a rule which -- and this is the reason we're involved, this is for the benefit of collective bargaining in the railway industry and in the long run is the -- for the benefit of stable labor relationships. But Mr. Justice Stewart, the union doesn't lose its status as bargaining representative simply because it goes out on strike. That's not even true under the National Labors Relations Act and it's certainly isn't true under this Act where there's no provision provided for a union losing its representation without a new election, without a new representation proceeding being commenced and that has never happened in this case. Now, the Court of Appeals, in all of these, took a middle brown between these two positions. It agreed with the United States that the carrier couldn't, as it still asserts it can do, completely ignores existing agreements and ignore the union because the union is out on strike. The Court did however, purport to write a new gloss into the Act and it's a concededly new gloss that appears nowhere in the Act creating an exception to these broad prohibitions. The Court held that while a carrier can generally change its collective bargaining agreements during the strike, it can institute such changes in these agreements and -- as are and I quote again, “Reasonably necessary to effectuate its right to operate, to continue to run its railroad under strike conditions.” Now, we think this gloss, this new exception while it's not as dangerous to collective bargaining and it's not -- well, it's not dangerous to collective bargaining as the rule of carriers -- it still terribly dangerous to bargaining and it's still contrary to the terms of the Act and we also believe that there's no cause for it's creation at this time. We're frankly concerned here to overturn this principle like you can violate collective bargaining agreements during a strike when it's necessary to operate rather than its application in this case, and let me be candid about that now. The District Court in this case permitted only four changes under this exception and they were all relatively narrow minor changes. If that were all that were going to happen under this exception, it wouldn't be dangerous, but as I will try to show later, we think its potentialities are much greater and there's a very good reason for getting rid of this now because the difficulties of reviewing these broad changes in the future when they're given in the form of temporary -- temporary release maybe in surmount of. William J. Brennan, Jr.: Well did the -- did the Court of Appeals suggest some statutory source for that authority? Paul Bender: No, Mr. Justice Brennan it, as I read the opinion, suggested that it arose out of the right to operate of a railroad, out of the right to self-help during a strike. It didn't suggest any statutory basis. The most it did was suggested there was an analogy to it in the National Labors Relations Act. We don't think that's true, but even if there were, we think the Railway Labor Act as I tried to describe it, is a much more comprehensive scheme of regulation in this regard and the terms flatly prohibit any changes. And that if you are going to have an exception, you shouldn't upset the delicate balance of power in the industry by a judicially created exception. This is a kind of thing which in this industry which Congress has dealt with so specifically ought to come from Congress. The Court of Appeals did not suggest it can get it out of the Act at all. William J. Brennan, Jr.: Well, what's it that it's suggesting? Paul Bender: It came from the right of a carrier to operate. It thought -- William J. Brennan, Jr.: Where is that? Where does that come from? Paul Bender: I don't know. They didn't suggest. They just stay with the -- William J. Brennan, Jr.: They say it was constitutional? Paul Bender: No, they didn't suggest it was a constitutional right. I doubt if they did because it certainly -- our position is that when you enter into an agreement the effect of which is to make it more difficult to operate during a strike or even to make it impossible to operate during a strike, you may have agreed a way you're right to a -- William J. Brennan, Jr.: Was there any suggesting that -- the statute by implication? Paul Bender: I don't -- William J. Brennan, Jr.: Is that right? Paul Bender: I don't find that in the Court of Appeals opinion and I don't see where it could be found. Now -- Potter Stewart: Are you suggesting Mr. Bender that the railroad didn't have the -- it's not the right to operate at least fairly they're trying to operate? Paul Bender: Oh no. We agree that the railroad -- there's nothing that stops the railroad from attempting to operate. What we're suggesting is that -- that operation has to be consistent with its agreement. Potter Stewart: And you say that it's not a constitutional right, I mean true acts against right or cases like that, you think you can -- Paul Bender: Well, I suppose you might say there's an abstract right of a railroad operator -- Speaker: Well, that's been perhaps -- a constitutional right -- Paul Bender: I should think -- Potter Stewart: -- to engage in a gainful employment which is legal. Paul Bender: I should think Congress might be able to modify the right in some circumstances. They clearly haven't - Potter Stewart: You are telling us that it did. Speaker: They may have the duty to operate as a common carrier. Paul Bender: They might have a duty to operate as a common carrier under the state law but not, Mr. Justice Harlan, in violation of the Railway Labor Act. I think if those two things come into collision, there's no question that the Railway Labor Act has got to be paramount. Same -- the same sort of question arises. Suppose they can only operate in an unsafe manner which would violate federal safety regulations that the State may impose upon them the duty to operate as a common carrier but they certainly don't have the duty to operate in violation of federal safety regulations. And we say they don't have the duty to operate in violation of the law. William J. Brennan, Jr.: Mr. Bender, is there no duty to operate under the -- in the State Commerce Act? Paul Bender: I suppose there is under the Interstate Commerce Act. William J. Brennan, Jr.: But it's not really a state though? Paul Bender: Well, I suppose a common carrier with a certificate would have to attempt to operate under the Interstate Commerce Act but certainly if it was prevented from doing so by a strike because railroads generally are prevented from operating during a strike, there would be no violation of the Interstate Commerce Act. And clearly I think that you can't read either of those duties as carte blanche just ignored other duties under the Railway Labor Act including the duty to bargain. In the long run that sort of thing is much more detrimental to the passage of interstate commerce. The whole purpose of the Railway Labor Act was because labor disputes which were not settled amicably has been causing terrible disruptions to commerce. Now, if you say that you can forget about the amicable solution of labor disputes in order to permit carriers to operate that's going to boomerang and you will get -- and it's Congress' choice, it's not something I'm making off, I'm asking the Court to make up. That's the choice that Congress has made. It seems to me clear that that's the choice of this Court has got to enforce. Now, let me, although it comes rather late, let me go through these issues again fairly quickly in the context of the facts here. They may become a bit clearer. In 1961, 11 nonoperating unions, those were the unions representing people who don't actually run the trains like clerks and machinists which had had collective bargaining agreements with all of the large railroads in the country for a number of years, served notice upon all these railroads including the Florida East Coast Railroad that they desired a 25 cent an hour wage increase and some, I think six months advance notice of job abolitions and layoffs. The carriers, bargaining as a group, proposed wage decreases and notice of abolitions of only 24 hours. This dispute as to whether wages should go up or down or what the notice should be for employees, it was a dispute subject to the -- to the negotiation and mediation procedures which I described before. Thus, the carrier couldn't implement their proposals nor could the union strike to implement its proposals until the whole bargaining procedure was completed. Over the course of the next nine months, all the acts of bargaining procedures were entered into. Negotiation and mediation failed with regard to this dispute, but then the presidential board was appointed and the presidential board recommended a solution of a 10 cent an hour wage increase and 5 days notice of job abolitions. In June 1962 this settlement was accepted by every Class I railroad in the country except the carrier in this case. Florida East Coast Railroad was the only railroad of its class, those are the large railroads, not to accept the presidential board's recommended solution. After they did that, the mediation board attempted further to mediate the dispute which was now a dispute simply between the FEC and these unions. This mediation was unsuccessful and the board was unsuccessful in getting the parties to agree to the arbitration. At the beginning of both parties refused the arbitration. Later on, the union when requested again by I think the Secretary of the Labor agreed to arbitration and as it now stands, the union will agree to arbitrate the carriers will not. Thus, you have an impasse reach with Florida East Coast and these unions about this wage dispute. Then the dispute reaches the point where a strike becomes lawful where you can use self-help in these Court's work The union can go out on strike to enforce its demands. The carrier can implement its demands if it wants because they've gone through all the statutory negotiation procedures. In January 1963, such a strike began. Now, I emphasize again, this strike was entirely lawful. It occurred only after the union had in good faith attempted to bargain with the employer about the requests it made and about the proposals that the carrier made, which as Mr. Justice Brennan pointed out before it limited to this wage dispute and this notice of dispute, how much notice you need for job abolition? At the beginning the strike was apparently effective. The other employees refused to cross the picket line and the railroad shut down for about a week. The strike however didn't result as apparently most railroad strikes do result in a fairly quick settlement of the dispute and the railroad decided to attempt to operate despite the strike. As I say again, it had a perfect right to attempt to do. The question is whether in attempting to do it, it did it consistently with it's obligations on the Railway Labor Act. Potter Stewart: And included in that right, I suppose you -- was the right to hire new employees to replace the striking employees, was that it? Paul Bender: Yes. No question that they may hire replacements. No question -- Potter Stewart: They didn't have to. They weren't; confined in trying to operate the railroad to vice presidents in the second page -- Paul Bender: No, absolutely not. They can try and they did hire replacements. That's what they immediately attempted to do. Now, in hiring replacements which it started to do I think about a week after the strike began, it wholly ignored the collective bargaining agreements which existed with regard to the crafts in which these replacements were. And instead, it got the replacements to sign individual agreements setting their wages, rules and working conditions in terms as the District Court found, I don't think there's any dispute about this, substantially different from the term set out in the collective bargaining agreement. Then a bit later, in September of 1963, after they've made this rash of individual contracts, they decided to formalize and then put them in a single document which they called a condition -- William J. Brennan, Jr.: Mr. Bender, may I ask you right there? Paul Bender: Yes. William J. Brennan, Jr.: Was the railroad free or not to hire at a unilaterally fix wage rate at that point. Paul Bender: No. William J. Brennan, Jr.: It was not. Paul Bender: They were free to hire but they were not free to hire except that the wages provided in their collective bargaining agreements, yes. Potter Stewart: Mr. Benders, is anything in the collective bargaining agreement having to do with the -- how new employees are to be hired putting aside the question of let's try it during our normal operation. Paul Bender: Yes, say there is probably an elaborate procedure about bulletining the jobs advertising and taking people in terms of whether they have seniority on the road previously on -- Potter Stewart: And I suppose the union shoppers of close shoppers provide it. Paul Bender: There's the union shop. There's the union shop, yes. Now, those -- the union shop agreement was ignored. Potter Stewart: But now -- a moment ago you in answer to your question I find -- I understood you to say that you didn't question the right of the railroad after the strike commenced to hire a new employees to replace the striking workers. Paul Bender: Right. Potter Stewart: And now you have told me that the collective bargaining agreement provides quite specifically as to how new employees are to be hired. Were those provisions of the collective bargaining agreement under your position still in effect? Paul Bender: Yes. Oh surely. Potter Stewart: So they had to hire what union members and they have to -- Paul Bender: What the union members wanted to, yes. Potter Stewart: Well what if they couldn't? Paul Bender: Well, then they can hire a non-union member but the agreement doesn't provide that you can only hire union members. The union shop provision doesn't mean that you have to join the union before you go to work. Potter Stewart: Or the close shop or the union shop? Paul Bender: No, it's the union shop as I understand. Potter Stewart: I think the close shop is legal in this industry nowadays. Paul Bender: I don't know but certainly, no. Potter Stewart: Union shop -- Paul Bender: Certainly this -- none of these agreements contain the close shop. Potter Stewart: So those are union shops. Paul Bender: Right. Potter Stewart: The members after being hired had to pay the union. Paul Bender: No, they had to attempt to join the union. Potter Stewart: Yes. Paul Bender: Now, then it's up to the union whether or not to accept them into membership or not. If the -- if they attempt to join and the union refuses to permit them to which it might very well do with strike there. Potter Stewart: Yes, they will. Paul Bender: Then their obligation is relieved. In fact I think that's what largely happened in this case. Potter Stewart: Does the collective bargaining agreement provides an elaborate kind of an apprentice after a program of the employee? Paul Bender: Yes, I think so. Potter Stewart: Would it had been possible or practical at all for a railroad in hiring replacements to go through that. It had to have engineers for instance and conductors and brakemen and it didn't -- and it couldn't work with apprentice engineers or brakemen. Paul Bender: Well, this is one of the provisions, Mr. Justice Stewart, which might very well, under a fair reading of the agreement you might decide that they don't have to abide by apprentice ratios during a situation where there is a shortage of manpower. That's just -- that wouldn't only be a strike exception. It might occur if there was some other natural disaster which prevented them from getting the proper ratios. The union in this case has never seek -- the carrier in this case has never suggested that this -- that this is what they want to do, make these deviations which are absolutely necessary because it's impossible to comply with the other terms. They've never suggested that nor they suggested that such deviations would be possible under the contrary. We know Mr. Justice Stewart that in this industry it is common place to bargain about what you do during emergencies including strikes. They're the provisions and the agreements in this case which provided during a strike when manpower short they can layoff people more quickly, they can -- than they can do it otherwise. Our position is that one, the railroads are perfectly free to bargain about changing apprentice ratios when there are manpower shortages and if they want to do it they should. Secondly, even if they haven't bargained about it, so it's not explicit in the Act, we agree that it's open to them to assert that a fair reading of the agreement would permit some deviation in that regard. They have never argued that in this case and the case simply doesn't come to this Court in that posture if they had argued it, it might be a different situation, just carrying out a bit further. It seems to us that if they had made such an argument that certain changes are permissible under a fair reading of the agreement then it would be up to the union to decide whether they would agree or not that the agreement permitted that. If the union agreed of course there would be no problem. If the union disagreed, then you'd have a dispute about the meaning of the contract and that's the dispute which in our view is subject to the primary jurisdiction of the railroad adjustment -- Potter Stewart: Now, the union which is called its people out on strike is not going to agree to anything that's going to make it easy or even possible for the -- for the railroad to continue operating, is it? That's just a -- you're going to be asking for a -- Paul Bender: I don't know -- Potter Stewart: -- ambivalence, it seems. Paul Bender: I don't know. I think in the past it may have been that unions and I think it's not at all fanciful to assume that they would in the future, agree to some things like that. For example, to the use of supervisors to run trains, I'm not sure at all that unions would suggest that the use of supervisors to engage in limited operation of trains when ordinary working people were not available to do so would constitute a violation of the agreements. So I'm not sure that they could so suggest. But in any case, it's not at all clear to me that the unions would take that position. In any case, if the carrier hasn't urged it here, Mr. Justice Stewart, and I don't think that question arises. Byron R. White: Mr. Bender, you really didn't mean to say that you -- that in making -- in paying replacements you have to follow the contract? Paul Bender: Yes, I did. Byron R. White: Well, I thought that exhausted the [Inaudible] Paul Bender: Oh, I -- excuse me. They had to follow the contract insofar as it had not been -- Byron R. White: Let's find that -- Paul Bender: -- exhausted or excuse me. Byron R. White: Quite a little -- little acceptance. Paul Bender: Yes. But it does -- it's not as much as you might think Mr. Justice White because -- Byron R. White: Well, do you think they can do anything with what they had hoped? Paul Bender: Right, exactly. Byron R. White: Like that they proposed wages to go down, they couldn't increase them. Paul Bender: That's right and if they propose a 25% -- Byron R. White: But assume it's true to say, they had to pay the contract. Paul Bender: I'm sorry. I stand corrected. They didn't have to pay precisely what was in the contract. They could deviate insofar as it had been through bargaining, but what I meant to say was that as a general proposition, when you hire replacements during a strike, if the strike hasn't occurred over a wage dispute then you do have to pay the wage rates that you can find in the agreement. William J. Brennan, Jr.: Then a lot of fact that they hire these -- what rates that hires these replacements? At the contract, at the offered -- they suggested a decrease as I would call it, have they not 10% or something like? Paul Bender: You mean in the contract negotiation? William J. Brennan, Jr.: Yes. Paul Bender: Yes, they suggest a decrease. William J. Brennan, Jr.: Well, what if they hired them? Are those the decrease rates? Paul Bender: I don't think it decreases, no. William J. Brennan, Jr.: Not a thing? Paul Bender: I don't think so, no. I think -- I think that -- William J. Brennan, Jr.: Well, did they -- did they hire them at rates? The contract paid was something in excess with the contract. Paul Bender: It's hard to talk about in those terms because the fundamental thing that they did when they hired replacement was to totally ignore corrupt lines. They disregarded the fact that one man is a machinist and another man is something else. Now, the collective bargaining wage rates as I understand it, framed in terms of craft lines. So it's very hard to know when they pay people under their system which ignores the craft lines whether or not they are abiding in dollar in sense terms by the -- by the wage rates provided in the agreement. I do think that they -- to some extent at least abandoned the hourly system of compensation and attempted to compensate them on a weekly or monthly basis which is contradictory to the terms provided in the agreement, but the fundamental thing they did in hiring replacements which affects everything else, seniority, wage rates, and everything else, is to completely wipe out the craft line. I think the first provision in these conditions of employment is employees have to do whatever work they're qualified to do and whatever work they carry that calls upon. And then that's fundamentally inconsistent with the way the whole industry had been organizing that to -- up to that time. Well, let's just finish the story. After they had -- after they had done this. They finally propose to the -- to the unions some months later that these unilateral changes they had made be made permanent unilateral changes by filing a notice under the Act to negotiate about the permanent institution of these changes with the union. This was after they had implemented them already. They said that they wanted permanently to amend the collective bargaining agreements to do this. Then they had a meeting finally with the union about this, but the meeting broke up because the carrier insisted on having a court reporter at present to take that on a negotiation and the unions refuse to bargain under those circumstances. The union then took the next statutory step and invoked the services of the mediation board about this dispute. Now, this is a different dispute from the wage dispute. This is the dispute about whether that all the carrier's sweeping changes, abolition of craft lines et cetera should be permanently -- should permanently replace the existing collective bargaining agreement. Potter Stewart: And the employer -- the carrier instituted the negotiations about this? Paul Bender: Yes. They both did. They ma -- the meeting broke up -- Potter Stewart: But a matter of those requests -- to began these things. Paul Bender: Well, you have to serve a notice on the other side, setting the (Voice Overlap) Potter Stewart: Who -- who served the notice? Paul Bender: The carriers serve the notice because it proposes a change. The carrier has to, under the Act, served the notice because it proposes the change. Potter Stewart: Or the union may? Paul Bender: Well, in -- Potter Stewart: In practice it's the carrier who does it. Paul Bender: The carrier -- is the one who proposes the change that has to and in this case it was the carrier that was proposing a change. Potter Stewart: Yes. Paul Bender: Well, the Mediation Board docketed this dispute for mediation. The carriers said you can't do that because the unions forfeited its right to mediate or to engage in any of the other statutory procedures because it walk out on that meeting because of the Court reporter and the Mediation Board said “That was not a refusal to bargain because you had not right to bargain with the court report.” The carrier ignored that -- ignored the fact that the Mediation Board has docketed the dispute and went right ahead and permanently instituted these changes which it had sought to bargain about and which the Mediation Board still wanted it to bargain about. It was at this stage that the United States initiated the present litigation. In our view by permanently implementing this working agreement proposal, despite the Mediation Board's decision to docket the dispute, to carrier is directly violating Act and it's completely undercutting the Board's jurisdiction. The Board believes and we thought correctly the meaningful mediation that carriers' proposals would be entirely frustrated by the carriers having already implemented those proposals. In addition, the previous action of the carrier and just acting unilaterally with regard to its employees was in our view completely, a flagrant violation of the Act. To our knowledge, no carrier previously had ever contended that it could do such a thing and we thought it was important to vindicate the Act in the face of these action as means of maintaining good faith bargaining in our labor industry and we would -- normally we are mindful in doing this that the railroad involves survival defense installations of Cape of Kennedy and surrounding areas and that prolongation or intensification of this dispute might very well have consequences, adverse consequences on the Government's programs there. Plus it's also a standing in this action the practical standing close from the considerations that I've just said. The legal basis for the standing I think that flow from those directly with -- it's not necessary in any event because Section 2 Tenth of the Act, it seems to us clearly, gives the United States standing to initiate an action such as this and that's what we've got. Potter Stewart: And the -- the Court of Appeals agreed with you? Or -- Paul Bender: Yes, the Court of Appeals agreed. Well, the District Court as I've said ultimately after the Court of Appeals rendered this decision about reasonably necessary changes which was rendered not in this case but in a companion case, the Trainmen case, the District Court permitted this four minor such changes of -- the Court of Appeals affirmed and these petitions have -- have followed. Now, let me talk first about the carriers' argument namely, that once a strike has occurred, it can run its employee relationships entirely as it wishes. It has not duty to bargain with anyone about employee conditions and it has no duty to abide by any collective agreements. Employees hired during the strike are treated by the carrier the way the carrier wants to treat them and that this situation continues as long as the strike continues. Now this argument is -- has been squarely rejected under the National Labors Relations Act. FEC is to our knowledge that first carried an urgent -- under the Railway Labor Act and we just see no basis for it under the Railway Labor Act especially in light of the much more explicit provisions of that Act about the duty to bargain and about the fact that the duty to bargain clearly includes the obligation to adhere to existing collective bargaining agreements. Potter Stewart: Mr. Bender I thought -- am I wrong if there's an amicus brief here on the part of the association on American Railroads. Paul Bender: Right. Potter Stewart: Well, that represents all of our railroads? Paul Bender: Yes, they do it. They -- Potter Stewart: So Florida East Coast is not the only carrier to take this position all the railroads. Paul Bender: They now take the position -- Florida East Coast as we believe the only first carrier who had taken the position. They took it in this case and the amicus brief supports (Voice Overlap) Potter Stewart: The position as I understand involved the American Railroads represented by the -- Paul Bender: It is now the position having been taken by Florida East Coast. We are unaware that the position had ever been taken before. It annoys it -- a matter merely of the language of the Act which I emphasize is clearly against the carriers' position. As has been recognized under National Labors Relations Act suspension of the duty to bargain during a strike would substantially destroy the process of collective bargaining under the -- under the Act. It doesn't take an awful lot of imagination to see how that works. For example, one duty which clearly continues during a strike is the duty to settle the dispute which led to the strike, that's the thing the Act once settled, that's the wage and notice dispute in this case. You can't very meaningfully expect the union and the carrier to settle a dispute when the carrier asserts the right to violate all its agreements with the union. That kind of violation of the contract where the party was doing a bargain, it seems to me to be the antithesis of meaningful collective bargaining. Also, and this is a little more settled but I don't think it's difficult to see how it occurs, if you give the carrier this right to do whatever it wants, once the strike occurs, it makes the pressure of the strike to encourage people to engage in the collective bargaining really [Inaudible]. When the strike occurs, it's a -- it may well be a good thing for the carrier or often the bad thing for the carrier. They do whatever they want. They institute the most sweeping changes and they say to the union, “You strike as long as you want. As long as you strike, we will run a totally unrepresented shop. We will deal with our employees however we want” and they can go further as the carrier went in this case, they can propose once they've got these changes instituted, they can propose to keep them there permanently and file this Section 6 notices to permanently change throw out all the collective bargaining agreements and to run the shop on their own terms and again, they sit back. They don't negotiate meaningfully over that. They can keep their proposals in effect as long as the strike continues and when the negotiations finally fail on their long range proposals they can amend the collective bargaining agreements. Now you just, you cannot have meaningful collective bargaining in these circumstances if the union knows that as soon as strikes and the strike is the only way that the union has of trying to enforce its demands after negotiations breaks down, you cannot have meaningful collective bargaining if the union has been taking the choice between giving up the shop, giving up its power to represent the employees in striking. If it strikes it just is out completely. The carrier runs the shop as it wishes and the union just ultimately capitulates. Excuse me? Byron R. White: There is always arbitration. Paul Bender: Yes, and in this case the union agreed -- Byron R. White: What and when? Paul Bender: To arbitrary involvement. At three different occasions -- Byron R. White: How about the original dispute? Paul Bender: Yes, that's the dispute agreed to arbitrary on three different occasions. As we point out in the brief. Byron R. White: Of what stand? Paul Bender: No. On April 3rd, May 17th, and October 14th, 1963, the union agreed. It initially refused to arbitrate. Byron R. White: Yes, before the strike. Paul Bender: Yes. Byron R. White: [Inaudible] Paul Bender: But then it later agreed to -- it agreed to arbitration and certainly either side may agree to arbitration Mr. Justice White but the union can -- in those sense compelled arbitration. If it agrees and the carrier disagrees it still has the strike and that its only -- its only remaining possible economic lever that it can use and in this case the carrier refused to arbitrate and I think -- Potter Stewart: I thought -- you can -- you tell me if I'm wrong I thought before the strike when this dispute was going on between these unions and all of the railroads that it was the unions who refuse to arbitrate. Am I mistaken? Paul Bender: You mean the broad -- Potter Stewart: The issues which eventuated in this strike? Paul Bender: I don't know there were -- Potter Stewart: I thought I had read that in your brief. Paul Bender: Well, I don't know -- your impressions that all the carriers agreed to arbitrate and the unions -- Potter Stewart: I thought the union (Voice Overlap) Paul Bender: I don't know about that. What I know is true is that after the presidential board was created and it recommended the solution, that solution was adopted by all the unions and carriers except the Florida East Coast. Now, I think it's been the union's position, or at least it was the unions' position at that time that they were willing to adopt that solution. So in the sense they were willing to adopt what amounted to in arbitration (Voice Overlap) Potter Stewart: -- under the Act, it's the recommendation. Paul Bender: But it's an impartial recommendation. Potter Stewart: With the majesty of the chief executive behind this? Paul Bender: Yes -- well, now let me turn into -- Abe Fortas: Mr. Bender, the -- as I understand what you've told us this morning, it amounts to a concession that the railroad hearing the strike, they engage in certain employment practices or uncertain employment practices which are not permitted by the collective bargaining agreement such as with respect to the apprentice program. As I understand it, you have suggested that railroad would have to present those to the union first and perhaps indicate its willingness to bargain about it, about them or it might have to bargain in good faith about them if the railroad were willing to do so, am I right thus far? Paul Bender: No Mr. Justice Fortas. I'm afraid I didn't make it clear what I meant to say. It seems to me to one extent I agree with you. Whatever the union is willing to agree – Abe Fortas: I'm trying to agree with you, so let's speak clearly. Paul Bender: But I don't agree -- I don't agree that they have the right to violate the collective bargaining agreement. My position was that they have the right to assert certain deviations from the literal language of the agreement is not a violation of the agreement. Abe Fortas: It was alleged that -- Paul Bender: I think it's very important -- Abe Fortas: Mr. Bender, please forgive me if I regard that as not of the essence what you're say -- what I'm trying to get from you right now is this. Is it or is it not your position that during a lawful strike a railroad may engage in certain employment practices which are -- are not permitted by the collective bargaining agreement. The Government concedes that it can do that. Paul Bender: No Mr. Justice Fortas. Abe Fortas: As I listen to you, you suggested as an example of that the circumvention or the waving or whatever phrase you want to - whatever terms you want to apply of the apprentice program. Paul Bender: I didn't -- I suggest that they might be able to make deviations but not in violation of the agreement. My only suggestion was that there is flexibility in these agreements. They ought to be read realistically in light of situations and in light perhaps of unanticipated situation and if you assume that a fair reading of the agreement might permit some deviations from the literal term that we concede they might be able to do, that's all. Abe Fortas: Well, you may think it's very difficult for me to try to check my point with you, so I like to ask it bluntly. Is it or is it not your position that during a lawful strike the railroad is at liberty to hire necessary, essential employees to run the railroad without -- outside of the procedures specified in the collective bargaining agreement. Have I made my -- did I put my question clearly? Paul Bender: Did you say to hire them or to -- Abe Fortas: To hire them, to recruit them and to hire them. Let's suppose if the union as Mr. Justice Stewart was suggesting, suppose all the union employees were out, all the engineers were out, and the railroad says we want to run our trains, so we're going to disregard the procedures that are -- we are going outside of big procedures specified in the collective bargaining agreement to get some engineers to run our trains. It is my -- is it clear up to this point? Paul Bender: Yes. Abe Fortas: Now what I want to know is, is it your position, the railroad can do that or is it your position that the railroad cannot? Paul Bender: They cannot do that. Abe Fortas: Now, tell me why? Paul Bender: Because it's a violation of the existing collective bargaining agreement and the Railway Labor Act -- Abe Fortas: Now, I though -- I thought I may be confused but I thought that in response to Mr. Justice Stewart's questions you said just the opposite. Paul Bender: No, I didn't. If I did, I didn't mean to. What I meant to say that they may not violate the agreement. They may or -- Abe Fortas: I'm not interested -- I'm not interested in that word. Paul Bender: Well, I think, Mr. Justice Fortas maybe -- Abe Fortas: But are you saying then that the agreement itself contains sufficient flexibility so that in these circumstances the railroad could hire engineers without reference to the usual procedures. Paul Bender: I -- I don't know whether it does. I doubt very much whether it does that. Let me put -- Abe Fortas: No but this is-- this is -- I beg your pardon sir but so far as I'm concerned that's quite an important point as to whether the railroad can or cannot proceed in some way other than the way provided in the collective bargaining agreement to recruit for example engineers to run its railroads, to run its trains during a lawful strike. Paul Bender: Our answer to that is that they may not recruit in violation of the agreement. What I did try to say was that they may urge that certain recruiting practices not explicitly provided in the agreement are not a violation because of unusual circumstances. Abe Fortas: Now, who would determine that? Would that be by a court order? Paul Bender: No. Our position is that if they make such a contention and if the union disagrees with the construction of the agreement that is a dispute about the meaning of the agreement which the Act commits to the National Railroad Adjustment Board, not to the District Court and that the dispute should primarily be taken there. Now that doesn't come up here because the railroad has never suggested that the things it wants to do are permissible under a fair reading of the agreement. To sum up the position that I have Mr. Justice Fortas suppose that the agreement said at the very end in capital letters “And these provisions shall not be varied in the slightest because of the existence of a lawful strike,” there is no question in our mind that that agreement should be applied as written and it was not very unusual. Abe Fortas: I -- I understand you now, I think and it's a -- it's a -- the flat position. Paul Bender: Right. Abe Fortas: That regardless of what maybe the means of the railroad to operate during the strike, the railroad is bound by the four corners of the agreement. Paul Bender: Exactly. Abe Fortas: And if it has -- if it -- if there is any flexibility for departure from non-strike procedures the authority for such departure has to be found in a fair reading of agreement. Paul Bender: Yes, and that they can bargain for that in advance and get those flexible provisions in the agreement or if they wish, if they think what they've bargained for prevents them totally from running during the strike and that that is an impossible situation, they can agree to arbitrate the dispute and thereby and I think the union will develop this argument. Avoid these constricting procedures of the Railroad Labor -- Abe Fortas: So if they will not take that flat position, I would -- next have to ask you why you disagree with at this stage with the decision of the Court of Appeals. Paul Bender: Well it's -- it is because we do take that by position and one other reason is that the Court of Appeals decision does not flow from the agreement. It flows from the right to operate -- Abe Fortas: Why the same thing? Paul Bender: The need to operate. I think that all decisions -- Abe Fortas: I think it's the same controversy. It's the same question we're talking about. Paul Bender: All decisions in this area have to flow from the agreements. That's what the Railway Labor Act requires. I will save the rest of my time for rebuttal argument of Mr. -- Earl Warren: I'd like to ask you question, does the collective bargaining agreement authorize the use of supervisory personnel in the event of the strike? Paul Bender: That's a question which has never been presented or decided in this case. Earl Warren: No, I didn't ask you that. I ask you if the -- I ask you if the agreement provided made any provision for that. Paul Bender: Not explicitly, no. Earl Warren: Well, didn't you say a little while ago, I thought I understood you to say that the railroad could use supervisory personnel. Paul Bender: I think that -- Earl Warren: In the event of a strike. Paul Bender: I think that if the railroad suggested that that did not violate the agreement it is quite a likely possibility that the union might agree, that the use of supervisory personnel when they didn't replace any personnel covered by the agreement would not amount to a violation of the agreement. But the agreement merely says -- Earl Warren: But you say the railroad might contend that. Paul Bender: They don't here, but if they did, the union might agree. Earl Warren: Well, what is your -- it's in the question whether they will agree or not, do they have the right under the contract to do it whether the union agrees or not? Paul Bender: That is the question -- of the meaning of the contract which so far as I know Mr. Chief Justice is never going to be authoritatively decided and all I'm saying is that I'd like to know the answer. Earl Warren: Unless you -- unless you decided it yourself when you told us that they -- clearly that they did have the right to do it. Paul Bender: I didn't mean to say that. I meant to suggest -- Earl Warren: Oh, I -- I may have misunderstood you but I thought you said -- Paul Bender: I probably misspoke myself and I apologize. What I meant to suggest was that they might be able to urge that the use of supervisors would not violate the agreement and that the union might concede or that the railroad adjustment board might agree with them. If that were true and I think it's quite possible that it is, that would provide a certain amount of flexibility. The history supports that, Mr. Chief Justice. The occasions on which railroads have operated during strikes have been mostly with supervisors. And I don't know, I'm not aware that unions have strongly suggested in those cases that that amounted to a violation of the agreement. It's quite possible that the general positions unions would take is that that does not amount to a violation. My argument is that that's what the railroad should have done here. They should have urged that they could engage in operation under the agreement and they should have attempted to engage in operation under the agreement and that the Act provides all panoply of procedures for deciding any questions about what the agreement means in that context, but the carrier did wrong here was to ignore the agreement. It never attempted to comply with it and their position in this Court is just that and boldly that because they don't have to make any attempt to comply with their agreements during a strike. That is what we say is wrong, that complete negation of the collective bargaining agreement. Earl Warren: Mr. Devaney. William B. Devaney: Mr. Chief Justice, may it please the Court. If I may at the outset apply immediately to the question that Mr. Bender has raised at the very end of his argument namely, the fact that Florida East Coast has not raised the right to use supervisors and to otherwise operate with the employees if it had available and we have not challenged the jurisdiction of the Court to make these determinations. I would like only to refer to our petition -- cross-petition for certiorari. On page 30, this is question number 2. On page 32, of our initial brief and on page 36 of our reply brief, I believe it's very clear that we have said consistently all the way through this proceeding that that is the position that we have taken. Now, before getting into the -- William J. Brennan, Jr.: What was the statute's [Inaudible] William B. Devaney: This is the position that Mr. .Bender suggested that there might be things such as the use of supervisors that we could do and that we didn't raise the question and that if the unions had been asked about it and there the disagreement it would go to the adjustment board. Now, we have raised that consistently in the District Court and the Court of Appeals and we said that what the -- William J. Brennan, Jr.: I thought you referred to something [Inaudible] William B. Devaney: Oh, I did. I did, Mr. Justice Brennan. On page 3 of our petition that is question number 2 which concerns directly the jurisdiction of the National Railroad Adjustment Board to determine the questions of the interpretation and application of the agreement and we argued the same points at page 32 of our initial brief and 36 of our reply brief. Earl Warren: Well, is there anything in the agreement that gives you that right? William B. Devaney: There is not, Mr. Chief Justice. Earl Warren: Well, did you raise that question with the union? William B. Devaney: We did not. Earl Warren: [Inaudible] William B. Devaney: We did not Mr. Chief Justice. Earl Warren: In other words you never did it until after you had unilaterally adopted that factors and we're in the courts. Is that correct? William B. Devaney: We -- we didn't raise it with the unions, Mr. Chief Justice and they didn't raise it with us. Earl Warren: Well I -- William B. Devaney: That's correct. Earl Warren: Yes, but it was never raised by you until you're in the Courts. William B. Devaney: That is correct Your Honor. Earl Warren: And was that a condition of not doing some of the other things that you were doing or it's just something that you demanded in the Court as a matter of relief? William B. Devaney: Mr. Chief Justice, we have never contended or asserted the right to do anything except what was necessary under the strike conditions in order to operate the railroad. That's all we have insisted that we have the right to do. And when the strike began we had absolutely no employees, but supervisors and when we operated the first train on February the 3rd, we used supervisors because this was the only way we could operate and in using the supervisors we clearly crossed every craft line imaginable. We had to run them through terminals. We have to have them do the yard work, local freight work, inspect their own locomotives, they fueled their own diesels, they did everything that was required to be done, because there was not anybody else who could do this work for the railroad. As we began to hire replacements, in the first place when it wasn't hired until more than a month after we ran the first train, it was in April and we hired one man in April. Now, with one man we have to use his skills and ability to do whatever he could do. It is conceded all the way through that we could not hire qualified employees. They were basically unqualified and we have to train them. It was earlier asked about training time well, in shop class alone, there is a four-year apprenticeship program which is required. We couldn't get the journeymen and to train these people under the agreements themselves would take a period of four years. So we have no alternative but to hire people with as much skill as we could find and we have to use those skills the best way we could. And if the men were not fully qualified to perform the work of machinist, he had to do whatever part of that job he could do and we have something else that somebody else could do. We have to use another person to try and fill in and do the job and to keep the railroad operating. That's what we did. It was asked earlier to what we do about payment well, there's no question about this. When the strike replacement problem first came up in April, the only way we could get replacements was to pay them on a salary basis. I think it's perfectly understandable why they might have wanted a salary. They didn't know and the railroad didn't know whether we could operate this railroad one day or two days or a week or whether it would be successful but he wanted a salary. The record shows that we took the hourly rates in the contract, we converted them to a salary, that's what we did. In addition to that we did because of severe shortage of clerical employees. We did take the holiday pay provisions and included that in these base rates. Every one of the agreements had a different eligibility provision. And we just didn't have the personnel to keep all the records required so we put it all into the base rate. Now, except for those changes, this is what the people were paying and as early as April, when we were beginning to get a few more replacement employees, we started moving back to the hourly base, the hourly rate. Now what we have to do, and we don't deny, it is perfectly clear in the record that we had no choice but to use the people to perform whatever job they could do. You didn't have journeyman machinist, you didn't have journeyman electricians. And if we had a man who had been an automobile mechanic, he'd done some welding before he might be working for us as an electrician. But if we needed the welding, we have to use that man to do the welding if he was the only person available to do it. This is what we did. This is what we say we have a right to do. We say this is what self-help means and that is what this case was all about. Really, the issue is, as Mr. Bender has stated, it's a narrow one. It's whether a rail or an air carrier has the right to try to operate in the face of a strike with whatever personnel it has available and it is our position that a carrier does have that right. We say that this is precisely what self-help means. It's what this Court and many other Courts have said happens when procedures of the act are exhausted and not only that this Court say that the right, that both parties have this right of self-help but it's the only right and the only means to adjust the dispute once the procedure of the act are exhausted. Now, looking at it in point of time we have seen that the railway had no employees except a handful of supervisors who were capable of doing the various work that was required. We had to use those people. We had no choice whatever. From a workforce of 2,000, in one day our workforce was zero. There was no alternative on the part of the railroad, but to use such people as we had available and such skills as they possessed. Now, the Government -- now, the union has ever contested the complete impossibility of hiring and training the necessary replacements. It is conceded by all parties, that at the time the strike began and for a very substantial period thereafter we couldn't have operated one train in compliance with any of the agreements, not one train. In fact the record is clear and uncontradicted. Now, we could never have got back in service without using supervisors. For the simple reason that the only way we could train these people was by on the -- was with on-job-training and the only way you can give a person on-the-job-training is to operate, no other alternative. We had no choice but to do that. Now, in operating with supervisors using the skills available, we concede that this was not in accordance with the agreements, but in doing this we were following of practice that every railroad in the country has followed for at least 40 years when it's faced with a strike or some other emergency situation. Now -- William J. Brennan, Jr.: What -- what happened [Inaudible] William B. Devaney: Mr. Justice Brennan, we say that the agreement is there. We say in the first place that wheel doesn't change it's -- William J. Brennan, Jr.: [Inaudible] William B. Devaney: It's -- we say suspended. William J. Brennan, Jr.: I mean, for example [Inaudible] I gather that you don't -- they'll have a duty to bargain over the issue which was brought on the strike. William B. Devaney: None whatever Your Honor. William J. Brennan, Jr.: There's none. William B. Devaney: We -- we do not question that. They clearly have that duty, very -- that's right. William J. Brennan, Jr.: Right. If that bargaining process resulted in a settlement of the wages, would you also have departed over the rest of the concerned with the agreement or they -- the one you settled away these issues that [Inaudible] they strike again and the men goes back to work. In all other respects [Inaudible] William B. Devaney: Well, Your Honor the -- at anytime the strike is settled, the agreements then become full blown, fully applicable and must without question be complied with in every respect. William J. Brennan, Jr.: So that your position really is only during the continuance -- William B. Devaney: That -- William J. Brennan, Jr.: -- to those determinations. William B. Devaney: That is correct. William J. Brennan, Jr.: The condition herein [Inaudible] so that you may in a factual manner operate the railroad [Inaudible] William B. Devaney: That is precisely our position Your Honor. Earl Warren: Now, may I ask this Mr. Devaney? In view of the changes that you have made in the rules of the agreement in order to sustain your position on the wages. If you subsequently agreed with the railroads on wages, I mean with the unions on wages, would you then be entitled to bargain with the unions again on all of the other provisions of the contract or would those come back automatically, if you settle this particular phase of the agreement? William B. Devaney: Your Honor at any time, let us take the strike which began strictly as a wage dispute. Now, just for clarity so that they'll understand the possession of a railroad, the Florida East Coast was not a party to the national handling. And the earlier recommendation of 10.28 cents was made by the board before which the Florida East Coast didn't appear, didn't participate in anyway. We weren't parties to that national bargaining. Now, when they did go on strike the issue at that point was at 10.28 cents per hour. Now, if we had settled and been to settle that dispute and again let me say the bargaining continued in 1963 on that dispute and it has continued since that time. There's been no failure, no allegation that there's ever been any failure on the part of the railroad to bargain in good faith and to fulfill this obligation. But had we settled, certainly had we settled before the replacement issue came into being at all, I have no doubt that this would have settled the entire dispute. The temporary practices that were -- that we had to follow in that immediately upon the cessation of the strike. They had no permanents at all. They were not changes in agreements. They had in no effect whatever on the agreements that existed with these judgments. We have never denied, we've never taken a position that in an agreement can be changed in anyway. That is a permanent agreement can be change as in anyway except going through all the procedures of the Railway Labor Act. Earl Warren: Well, I wondered if you could answer my question a little more specifically. Would the settlement of this strike on the -- on the wage problem which you present here also keep intact all the other provisions of the bargaining agreement? William B. Devaney: Oh yes, indeed Your Honor. Earl Warren: You wouldn't have a right -- you wouldn't have a right to -- to renegotiate all those other -- those other provisions. William B. Devaney: We would have the right, Mr. Chief Justice to give a notice at anytime and to proceed to negotiate about changes, but -- Earl Warren: Yes. William B. Devaney: -- it would not have any effect until you've gone through all the procedures of the Railway Labor Act on that notice. Earl Warren: You wouldn't have the right to say when the -- when you agreed on these wages now because you violated your agreement is struck we want to negotiate all these other -- other phases of the contract before. You're entitled to go back to work. William B. Devaney: No, Mr. Chief Justice. There would be no such right. Earl Warren: Yes. I just wanted to -- William J. Brennan, Jr.: Then what -- what [Inaudible] settlement of the wages [Inaudible] William B. Devaney: That is correct, Mr. Justice Brennan. The question of the replacement is simply this. On the Florida East Coast, they have no -- they have no super seniority, that question had never been present. They were employed contrary what Mr. Bender may have implied. They were employed in accordance with the agreement as far as their seniority, their date of hire, and so forth is concerned. They have no special protection. The only thing that they are not subject to having done to them is to being pushed out just automatically because the strikers would not have an absolute right of displacement. Over a period of time, I think it's perfectly clear that yes, they do gradually displace. Every time a job changes, there's a vacancy, a promotion, anything that occurs that you have to re-advertise under the agreements that the vacant job, it is bid on by everybody who has seniority. Now the strikers have continued to earn seniority during the whole period that they'd been on the strike. So that -- that no matter how junior they may have been before the strike every one of the strikers will always have more seniority than the replacements, but it will have to be on a bidding basis not an automatic displacement right. They do not have that. William J. Brennan, Jr.: Well, may I ask you just one question? Assuming again [Inaudible] have the [Inaudible] a negotiation settlement or wages, was there anything about the agreements which would prevent a negotiation of the issue of what strikers in place replacements -- for what replacements [Inaudible] as they are -- William B. Devaney: This -- William J. Brennan, Jr.: Would that be subject to bargaining of what is all going through deviation of the [Inaudible]? William B. Devaney: Yes, but that is a subject for bargaining and there has been some bargaining about this variation. It certainly is a question about which the parties not only are afraid to bargain, but I think the duty to bargain would require that they both sit down and talk about that in the same manner that they would in the other proposal. William J. Brennan, Jr.: That probably would be urged [Inaudible] William B. Devaney: It has proved to be so up to this point that it is quite good. William J. Brennan, Jr.: And if you don't agree what the [Inaudible] William B. Devaney: There has been no notice, no separate notice given by the unions concerning this right because again like some of the other cases in which super seniority has been involved, they have all the seniority. It merely is a question of their waiting until they have the right and do bid on the job. I mean, jobs are bid daily. So that over a period of time, yes, every time a job is bid the most senior bidder gets the job and the strikers are the ones who have been on the strike, will of course, always have the greater seniority. William J. Brennan, Jr.: What would be the settlement for that? Could every job of the railroad be [Inaudible] tomorrow morning? William B. Devaney: No. No, they would not be. That's why I say there is no displacement right but they have the right to bid on any job as they have had throughout the strike. Every job that has been opened by the Florida East Coast has been advertised. Everyone of these people has had the right to bid on every job that we have reinstituted since the strike began. William J. Brennan, Jr.: Well, if you hired ten replacements [Inaudible] and that's all you needed to do, in some of the strikes on wages -- tomorrow morning those ten would continue to note that I gather until such time if it's in the basis -- one of the same job [Inaudible] -- William B. Devaney: That is correct, Mr. Justice Brennan. That is correct. Potter Stewart: You can bid only for vacancy -- a senior man can bump a junior manager. William B. Devaney: That is correct. There is not a direct bumping procedure. There are circumstances where this maybe the result, Mr. Justice Stewart, but it is not an automatic bumping procedure. For example, if a person has been off on an authorized leave of absence or has been sick, when he returns he would have the right to exercise seniority to job which had been bid during his absence. Potter Stewart: During his absence -- William B. Devaney: This in turn would permit -- Potter Stewart: [Inaudible] William B. Devaney: That's right. There are other -- there are other instances where this would be true but it's not an across-the-board right to bump. Byron R. White: But you've ignored the -- you've ignored the fact lines in the replacements as I understand it. So you've hired people to do jobs that never existed before in just that form. Now, what if you hired somebody to do a job that included work that's -- no one else have ever done before in that particular combination, and then the strike is settled. And then you say the agreement was back to its original form with the same job descriptions and classifications. Then what happens to that replacement who doesn't fit in any of those classifications? Does he stay on the job? William B. Devaney: Oh! Mr. Justice White really this is an exaggeration of what has happened. Byron R. White: You say you haven't done that? William B. Devaney: No. Every man who had been hired -- has been hired as an electrician or he's a machinist or he's a car man what we have had to do is we have a car man but he's not the car man as I recall as a four-year apprenticeship training program. Now, the man comes in. He has had an experience or we start him out somewhere in this apprenticeship program. Now, he comes to a job or part of that he can't do because he's not experienced, doesn't know how to do it, it maybe that the man who is a machinist, is working as a machinist will have to be called upon to do this five minutes or this hour of welding or whatever the job is. But the machinist is basically hired as a machinist. He works as a machinist; he's paid as a machinist. The car man is hired as a car man, he works as a car man and he's paid as a car man. So he's not hired to do this strenuous job that never existed before. He really is doing basically what always was done. But because we haven't had this -- Byron R. White: -- all of your people -- all of your replacements whatever work they do nevertheless they're called or they fit within the existing classification. William B. Devaney: That is -- that is exactly correct. That is precisely what we have done throughout. Tom C. Clark: You had 2,000 employees to put that? William B. Devaney: We had approximately, that's slightly less than that Mr. Justice Clark. Tom C. Clark: Yes, that number? William B. Devaney: No. I believe the -- the number is closer to 970, but it is more of 600 at present time. Tom C. Clark: Yeah, but you run in the railroad -- you did some good [Inaudible] schedule? William B. Devaney: And Mr. Justice Clark, this is correct but one slight exception. There is not as much as a passenger business because during the interim period since the strike began, the traffic is simply not there. We reinstituted the passenger service on August the 2nd, 1965 and I believe in five months that it has been operating, they've carried approximately 4800 passengers. This compares -- well annualized this would be -- this would be about 10,000 passengers a year compared to over 450,000 passengers a year in some of the prior years. Tom C. Clark: What's the definite [Inaudible] 1,100 did not -- what happened to them? William B. Devaney: Well, the -- a few of them were involved in the passenger that is the broader passenger business. But many of them were replaced, if you will, by new techniques or new or automation if you will. They have changed the requirement particularly in the maintenance of weigh departments. This is where the change has been the most dramatic. The railroad in the last three years has carried forward the program of modernization of its railroad by going to the central traffic control. It is currently in installing welded rail. It has done many things that has reduced the number of people required for the maintenance of the railroad. Tom C. Clark: Would you need that -- William B. Devaney: We would not need as many people as we had in the past. Earl Warren: May I ask you if an operating your trains at the present time, do you use the same number of employees on the train that you use under the collective bargaining agreement? William B. Devaney: You mean on the operating crew, Mr. Chief Justice? Earl Warren: Operating crew, yes. William B. Devaney: With the trainmen, Mr. Chief Justice, the -- the 1959 rules as to them replaced and to effect on February 25, 1964. This has brought about a change insofar as the distance that a trainman can be operated. And instead of using three trained crews from Jacksonville to Miami on the through freight runs, we now can use one crew that would go the entire distance. So that has changed that number. Earl Warren: That's the same number of -- same number of trainmen you use. William B. Devaney: Well, the 1959 rule -- Earl Warren: I mean -- I mean on each crew regardless of how -- how far that -- William B. Devaney: That's correct. Earl Warren: So you use the same number. William B. Devaney: There had been no -- there has been no change from our past practice as far as the number of people and the crew -- Earl Warren: How about the engine crews? William B. Devaney: You mean the engineer and fireman? Earl Warren: Yes. William B. Devaney: On the engineer and the -- the fireman, there has been no change on that. We still use the same number of engineers that we use prior to the strike. Now, it is of course our position that once the strike began, the agreements were no longer in effect and within the exercise of self-help, the railway was free to utilize the manpower and means at it's disposal to operate. Now, the basic claim of the government as we understand is the railroad was not entitled to get back into operation except in strict compliance with all agreements of the 21 different labor organizations involved. It is their position that the railway was not entitled to use supervisors to operate a train. Now, their contention really comes down to the fact that if we had hired the first man or the machinist that we can only use him as a machinist. And no matter what the need and even if he were the only person who was qualified and available to do some other job we couldn't use him for that job. Potter Stewart: I thought their contention and maybe I've misunderstood it is even more extreme than that that you couldn't hire him as a machinist, you have to hire him as an apprentice. William B. Devaney: Well, I think that Mr. Justice Stewart is correct. I think the -- Potter Stewart: In our study, that would be the logical result. William B. Devaney: And may I say that we have not -- we have not attempted to hire a person who is not qualified to bring him in and hire them as a journeyman. We have not done that. The person must be qualified if he is hired as a journeyman, but because he's not a journeyman we do have to hire him somewhere within this apprenticeship training program. Now there are age limitations under the agreement, you can't be over a given age to enter this program. We say that obviously if you have to get people, you have to get what you can and you put them in, you slide them in based on their past experience, where they belong in this apprenticeship program and then you go forward and train him here. Now -- William J. Brennan, Jr.: How far [Inaudible] beyond what the District Court has said you may do, part of the -- how much further do you want to -- William B. Devaney: We felt in the first place, Mr. Justice Brennan that the -- that the fallacy of the District Court in the first place was to tie the hands of the carrier by saying that you have no flexibility to meet any condition that comes up. You must come to the Court and get prior specific approval before you can make any deviations from the agreement. What we said was, you say “What did we want specifically?” There wasn't anything that we -- we felt other than what we listed in our petition that we had to have. William J. Brennan, Jr.: But then [Inaudible] do you want to go so far as the [Inaudible] the arrangement of this type -- the agreement shall be completely sustained? William B. Devaney: We want to go only to the extent, Mr. Justice Brennan, that if we are required to deviate in some manner from those agreements in order to operate that we must have the right to do so. And we don't feel that it's reasonable to require the railroad to come in with a petition and a hearing and a prior determination before you can meet that emergency. William J. Brennan, Jr.: [Inaudible] that's included there, that you want -- and you want to be allowed if in your business argument -- upgrading the railway and you must be so in the strike circle to the part of anything that -- William B. Devaney: Well, I think that it probably does mean that but it does not mean that they do not have both a full -- a complete and an adequate remedy for what we have done, every other railroad has it. What the District Court is doing here is telling the Florida East Coast during a strike where we're faced with the shortage of manpower that you can't do whatever the other railroad does as a matter of everyday business course. And that is, every other railroad if there is some problem that comes up, it goes ahead and it meets that problem. Now if it is used to supervisor or if it's crossed the craft line and if there is a claim, the claim goes to the adjustment board. This is where we say that all of the claims belong. And if there is -- if the Court of Appeals were right and if these agreements are not suspended then we say that these disputes belong in the adjustment board. That is the body that Congress has created and it's a body that this Court has consistently recognized as having the exclusive jurisdiction. William J. Brennan, Jr.: [Inaudible] William B. Devaney: Your Honor this was -- it was correct. There has been a backlog and as -- as you undoubtedly notice that one of the matters that is now before Congress to permit or to require other party to request the appointment of special board who helps speed up the decisional process. Byron R. White: Are -- are you really suggesting that -- that all of these things you want to be free to do are minor disputes merely -- merely grievance type things under the contract. I would think that the -- what you say that some of them wouldn't be subject to the whole this kind of an adjustment. This is really a major change in the contract. William B. Devaney: Not major change Mr. Justice White. What we are saying is that because of the strike itself and the emergency that was thrust upon the railroad that we have a right of self-help and try to operate and we're saying that if there are claims that we have not complied with the agreement that the adjustment board is a proper body to adjudicate those claims. Byron R. White: No matter what kind of a change is instituted, whether it's minor, major, or anything else? William B. Devaney: But there aren't changes in the agreement, Mr. Justice White. They don't change the agreement no matter -- Byron R. White: Then what is the adjustment board got to do with it at all? William B. Devaney: Because if there is not, compliance with the agreement then they have the power to remedy whatever violation has occurred. I mean look back -- look back if you will at the decision that have gone through the adjustment board -- Byron R. White: Do you mean to say you aren't bound by the agreement then -- that if the adjustment board found you had violated it, they have to remedy it? That's the -- the degrees of waiting your position. William B. Devaney: Well -- Byron R. White: You're able to be free to violate it. William B. Devaney: That's -- our first position is that -- our first position is precisely that the strike suspends or creates an emergency condition whereby these agreements are not affected during the period of strike. That is our first position we say, but if we're wrong about that -- Byron R. White: We'll you have to stipulate -- William B. Devaney: But if we're wrong about that then the Court of Appeals was wrong in telling the District Court that you can interpret and imply these agreements. Now, as far as the -- as far as the suspension of the agreements, Mr. Justice White, we have submitted as a supplementary reply brief the decision of the Second Circuit Court of Appeals in the Eastern Airlines case. And we submitted this for the simple reason that this illustrates very, very clearly that -- William J. Brennan, Jr.: Is that red one? William B. Devaney: That's red one, yes, Mr. Justice Brennan. This illustrates very clearly that there is no doubt whatever that when a strike occurs as it occurred in the Eastern Airlines case something happens to the agreement. Now, here in the Eastern Airlines case, Eastern had an agreement with the pilots. They had a separate agreement with the flight engineers. They bargained on a reopening notice not to cancel the flight engineer's agreement but to reopen it, it doesn't reach the agreement and in 1962 the flight engineers struck. Now, at that time recall that they had the contract with the Eastern and they were the duly designated representative of the class or craft of flight engineers. The strike occurs. Eastern has closed down for about a month. Eastern reopens using as flight engineers, pilots furnished by the pilots union who's been qualified as engineers plus a few of the returnee engineers and moreover, it doesn't just go back to work with the replacements. It then enters into a contract without the pilots union covering the work to be performed by these replacement engineers. There isn't any doubt that absent the strike Eastern could not have entered into an agreement with a different union covering the class or craft which the flight engineers had previously represented. Byron R. White: [Inaudible] William B. Devaney: So far as it's shown, Mr. Justice White, they were -- I don't know. We know they were different to this extent but instead of their being engineers and having the -- the license that the engineers had they now have the license that pilots have. Byron R. White: Do you think they could do some systems of [Inaudible] not to hire them maybe not to [Inaudible] William B. Devaney: That -- Byron R. White: Not [Inaudible] William B. Devaney: That is correct. That is exactly correct. And it did this because as the Court -- the Southern District of New York found not once but three different judges in the Court of Appeals for the Second Circuit has found in three different occasions that after the strike began, the agreement between Eastern and the flight engineers was no longer in the agreement. Now, the impact of that decision is further emphasized and underscored by the decision of the same circuit in the Ruby case which is cited in their opinion, Ruby versus American Airlines which involved the same, essentially the same agreement although it was with different airlines between the flight engineers and American, and the agreement between the pilots and American. Again you have to bargain. In the American case, it differed a little bit because the pilots and the flight engineers on American got together and they signed or issued an agreement. Then it was the pilot's international union that it refused to approve this agreement that the American pilots had negotiated. So, the -- the local pilots on American when the international refused to go along with the package they had bargained sought separate representation. Well at this point, the flight engineers asked to continue bargaining with the American. And American said, “No, you have signed this agreement and have initialed it merging your bargaining rights in with the pilots.” Second Circuit said “No, there's no strike here and American must continue to recognize and bargain with the flight engineers until there is a final consummation and a final change that changes or wipes out the bargaining rights with the flight engineers. So that there is no doubt in our judgment, look at the Court cases, look at the decisions of the adjustment board itself, the adjustment board has said over and over again that when a strike occurs it creates an emergency condition that justifies the carrier in performing the work with supervisors or in whatever way it can. We say that -- we believe the strike on Florida East Coast have that effect. Byron R. White: [Inaudible] William B. Devaney: Yes, we have Mr. Justice White. They are all cited in our brief and are detailed in some respect in our reply brief as to what the facts are. They began on the reply brief at page 20 -- 24 -- William J. Brennan, Jr.: Are those -- were those cases with this that this causes [Inaudible] questions would rather search schemes, that is for the railroad to operate were charged with this violations of the agreements and that the court held no they were not violations -- William B. Devaney: That is essentially correct. I believe that the cases by and large involved a strike by one union, another group who said “We're not on strike.” We had a right to perform this work and it had been performed by supervisor or by somebody else. So that yes, it was the expediency that the railroad was put to have the work performed. William J. Brennan, Jr.: And the adjustment board [Inaudible] did this as a matter of interpretation within [Inaudible] William B. Devaney: Interpretation of the agreement is not really the -- the precise characterization. I think it would be more proper to say that it was an interpretation of the overall -- of the implied condition of all of these agreements. Byron R. White: Well, it may not run through this -- the board [Inaudible] as a matter of interpretation speaking of interpretation that would take it to be. William B. Devaney: Correct. That is absolutely correct. Byron R. White: Without having this -- under the one roof or the other? In the [Inaudible] that had mentioned the board must say this expedience does not violate the [Inaudible] an emergency [Inaudible] is that it? William B. Devaney: That is correct. That is quite correct. Earl Warren: I understood you to say a little while ago that your practice during the strike has been used by all the railroads in the country for the past 40 years when they operate under strike conditions. Have you any idea how many strikes have been of that kind in the last 40 years where they operated the railroads during the strike and adopted this policy? William B. Devaney: No, Your Honor. I do not and the adjustment board reports which are reviewed both in our reply brief and in the reply brief of the association of American Railroads strikes over a period, I believe 1955 are reviewed in some detail as well as the early history of carriers who've operated during the strikes. But all of them have done essentially what the Florida East Coast has done. You use your supervisors to get off the ground. You use some other volunteers that these people who are performing jobs out of their regular class or craft where they can do other jobs and you hire replacements and you train them as quickly as you can. Now, most of the strikes Mr. Chief Justice in the railroad industry, in recent years have been of relevantly short duration. It was conceded that the Florida East Coast strike is unusual in that regard. It is longer, and has been longer than I believe any other strike in the railroad industry has been. So that that is a -- that is a difference. Now, prior to the Florida East Coast strike, one of the most severe nationwide strikes was the 1922 Shop Craft strike. Earl Warren: 19 when? William B. Devaney: 1922 which -- Earl Warren: 22? William B. Devaney: 1922. Now this was a nationwide strike. And during the Shop Craft strike of 1922, the -- it had a very, very serious impact on the economy of the country. There's no question about it. But during this strike many, many of the carriers as the AR has pointed out in their reply brief provided some level of service. Again, in 1946 -- Earl Warren: With the laws of -- with the -- of the laws of the same as now? William B. Devaney: No. The railroad -- the Railway Labor Act was not passed until 1926 Mr. Chief Justice, four years later. Now, we do say, and I think that it might be appropriate at this point to simply to call attention to the fact that the Railway Labor Act was passed in 1926, four years after the beginning of this nationwide strike. There can be no doubt that Congress had this specially in mind. It had the clearest example of a paralysis of the entire railroad transportation industry and the fact that carriers did provide service during the period of strike and yet in the Railway Labor Act which had passed in 1926 although it puts status quo provisions at various points before he reached the right to strike, there it's not one word in the legislative history, there isn't one word in the statute that indicates that Congress did intended to or had any intention of placing any limitation on the right of self-help once the strike began. Everything in the Railway Labor Act was designed to try to prevent strikes, but if it did not succeed in preventing strikes then the parties will allow the self-help to resolve it -- their differences. Earl Warren: Had there been any significant railroad strike since that time or what -- William B. Devaney: Oh yes. Earl Warren: -- or was it the same thing? What's one for instance? William B. Devaney: Well, one that comes to mind immediately Mr. Chief Justice was the nationwide strike which was called in 1946 by the Engineers and the Brotherhood of Railroad Trainmen. Now, this was unusual in one respect in that there had been an initial strike date set and in anticipation of this original strike date, the President of the United States seized all of the railroads in the country under a statute which was then in effect. The original strike was postponed. So that when the strike actually took place in 1946, the Government was under control of the railroads and the strike was in effect against the United States. Now, not only did the carrier after carrier and we did set forth in our reply brief a reference to the survey in the railway age of the different railroads that provided service during this period of strike. I believe this strike lasted only two days but it was nationwide in a great significance to the economy of the country. Now, not only did many of the railroads try to operate by using supervisors, but it was done at the behest of and with the complete knowledge of the United States itself. Then there was the strike on the LAN which lasted 47 or 48 days. I believe that was in 1955. There had been other strikes on airlines as well as carriers. The numbers of strikes are again detailed in the reply brief of both the Association of American Railroads and our reply brief. The 30th annual report of the Mediation Board for 1963 and 1964 for example refers to the Eastern Airlines strike which began June 23, 1962, flight operations were resumed in September of 1962, and the strike on the Florida East Coast which began January 23, 1963. The 54-55 annual report refers to the LAN strike. In each of these, the Mediation Board simply reports that these carriers resumed service or maintained service during the period of a strike. The most recent strike what I recall referred to in the -- the AR -- initial brief is the Houston Terminal Authority. This lasted well over a month, I forgot the precise number of days, but its well over a month. And again they operated throughout the period of the strike by using supervisors and by hiring replacements. Now -- Byron R. White: What was the -- during a strike like this who is the representative of your employees or do you recognize if there is one? William B. Devaney: Oh! Yes, Mr. Justice White. We recognized that each one of these unions continue to represent the employees -- Byron R. White: Which employee, the ones on the strike or the ones who are working for you? William B. Devaney: All of them -- all of -- we haven't --we have never set the -- Byron R. White: But you don't -- but you don't think there's a duty to bargain about -- that you say -- William B. Devaney: Mr. Justice White -- Byron R. White: They're the representative but during the strike not to bargain with your purpose? William B. Devaney: No. We don't say that Mr. Justice White. We say that these -- these emergency conditions that we have to resort to that this is a matter of self-help as a matter of right of the -- Byron R. White: I understand -- --carrier to put them into effect. And it does not require a bargain. Byron R. White: Alright. William B. Devaney: Now on everything else we say he has the -- he has a positive and absolute duty to bargain with the union. William J. Brennan, Jr.: So – William J. Brennan, Jr.: At least it only goes with the settlement of the strike. As Justice White suggests you wouldn't bargain on wages and hourly rates which is originally involved in the replacements that because of the emergency conditions you say, you have to have some flexible -- flexible in anyway -- William B. Devaney: That's true Mr. Justice Brennan but consider the -- consider the impossibility of going forward on the basis of bargaining about these emergency changes or the apprenticeship program. In the first place, I think that it is perfectly correct as has been suggested that the union who calls a strike is not going to agree to a weight for us to beat the strike. But if they did how long, how long would it take? The 1959 rules dispute which was before this Court in the P&O case started in 1959 and the decision of this Court wasn't until 1963. So if it's a year -- if we -- if we exceed all speed records for having a dispute under the -- the Railway Labor Act it's perfectly obvious that you could not bargain, and you could not negotiate, and could not complete the procedures of the Act in order to -- to resume the operation of railroad for an indefinite period of time in the future. William J. Brennan, Jr.: Well [Inaudible] as Justice White suggests that of course you recognized that you need to continue bargaining with the union, but that it's limited to the issues involved in the strike and in settlement and certainly does not include any [Inaudible] workout arrangements that maybe involved with the replacements. William B. Devaney: That is -- that is correct. Byron R. White: Now, how about the -- how about grievances? Those -- William B. Devaney: You would continue, Mr. Justice White. Byron R. White: Do you think -- do you think that the contract continues for purposes of contacting grievances? William B. Devaney: We believe that they would have the right to file any grievance that they might desire to file. Now, if that involved a condition which the railroad -- railway had -- Byron R. White: Yes but that involves kind of a settlement on the property? William B. Devaney: Well yes, there is a procedure for that. Byron R. White: Well I know but who would you talk to about the agreements, the union or do you talk to somebody among your replacements? William B. Devaney: No. If -- Byron R. White: What has been that [Inaudible] if you're having grievances [Inaudible] -- William B. Devaney: For -- for a very long period of time, Mr. Justice White, the unions were not processing grievances on behalf of replacements. In more recent months that they have -- William J. Brennan, Jr.: -- this type of [Inaudible] William B. Devaney: That is correct. Byron R. White: Are they refusing to do so? William B. Devaney: I do not know the answer, Mr. Justice White where a replacement has asked the union to handle his case and it had been rejected. I can only say that in the beginning they were not presenting any grievances on behalf of the replacements. In more recent months they have been. Some of the unions have been, not all of them but some of the unions have in more recent months been presenting grievances in representing the replacements. Byron R. White: Does all of your -- I take it to -- you also want to be able to -- you want to be able to say that the union Shop provision is suspended during the strike. William B. Devaney: This was a -- we felt -- Byron R. White: As I read your brief I take it that you do. William B. Devaney: Well, this was a -- we ask as one of the -- we ask as one of the -- the conditions of the District Court that the District Court say that the union shop provision was not enforceable unless and until such time his membership was offered to the replacements. Now, we weren't saying -- we weren't saying casted out, we were saying here is the history of the discrimination from the day the strike began. If you or your former members who came back to work, you have five, you are cast out of the union, the replacements who have applied for membership not one of them, not one person has ever been taken into the union. Now, we say that the -- we believe that the Court of Appeals in the Trainmen case because the same issue was raised there and when the Court of Appeals said that the corollary to the right of the union to strike was we had the right to operate and we have -- it was not a violation to hire replacements, so we had no duty to discharge unless or until membership that was offered to them without discrimination. We said to the District Court that we think the Court of Appeals meant that if these people were being discriminated against that they shouldn't be subject to discharge until membership was offered to them. The District Court did not agree with this and it did not contain this provision and to that extent you are correct. We did take the position that if these people have to be subject to the union shop agreement that it should be subject to the union making membership available and if it isn't willing to do that, then the agreement as to that should not be enforceable during the period of the strike. Now if I may refer to one last matter which the unions have raised, it is this question of the Toledo, P. & W.R. and Eastern case. Now, we believe that this has no application for any purpose. To begin with we have not asked for any equitable relief. It's our position that the right of self-help is a legal right that this all we have asked for as all we feel we're entitled to. But second, the Toledo, P & W.R. case itself makes it perfectly clear that the Court in that decision was confronted with a situation where the carrier had refused arbitration prior to the strike. Now, the exchange of correspondence is set forth in Appendix A of our reply brief. It clearly shows that Florida East Coast before the strike simply said that we believe your offer of arbitration is premature that there should be further mediation. The union came back and said, “We don't -- we reject the suggestion of mediation. We reject arbitration.” At that point, the Board listened to the dispute. Later Florida East Coast even said, “Well -- to the Mediation Board, we believe that there should be an emergency already created. There was no such recommendation and the strike began. Now, Toledo says, as I read the case clearly and without any provocation that it applies only where the procedures of Railway Labor Act including the proffer of arbitration has been rejected. There was no rejection prior to the strike which are the procedures of Railway Labor Act by the carrier. It was a rejection by the unions of arbitration. We do not believe that the offer of Secretary of Labor were some four months after the strike began to help -- to bring about a settlement means that even if equitable relief were asked for that the refusal four months after the strike had began and after we got back into operation it meant that we have not made use of the procedures of the Act. So that we say that the -- that the argument really has no application to this case. We believe that -- that however it's construed that it would not be applicable by way of limitation on anything that Florida East Coast has done. Thank you very much. Paul Bender: Mr. Chief Justice, may it please the Court. I believe I have about nine or ten minutes left and I understood under the arrangement that we had that the rebuttal would be 15, I will try to compress it within the time left so I will move fairly fast. I think that at this time of the oral argument, the point that we would like to address ourselves to right at the initial outset is where what has been conceded by both sides does the exception to the Railway Labor Act spring from. Where did the Court of Appeals find the basis for creating the doctrine which is under review here, the so-called doctrine of reasonably necessary exceptions to the Railway Labor Act? I think everybody concedes the FEC, the Association of American Railroads, the Government and the unions, that what was done here by the FEC could not have been done but for strike conditions. And the plain categorical language of Section 2 Seventh of the Railway Labor Act makes this clear. And I would like to refer to that, it hasn't been mentioned in so many words and it's very short and it's very clear. And it says “No carrier, its officers or agents shall change the rates of pay, rules or working conditions of each employees as a class as embodied in agreement except in the manner prescribed in such agreements or in Section 156 namely Section 6 of the Act. Now, the Court of Appeals for the Fifth Circuit had said that doesn't apply because of strike conditions because it bears too heavily, too hard on the railroad under strike conditions. The Court of Appeals does not refer to any language in the Act to support this exception. The Court of Appeals does not refer to any legislative history to support this exception and we submit that the mere fact that it is contended that it bears too heavily on the carrier faced with the strike conditions is not in law sufficient to create the exception here found to exist by the Court of Appeals. Now, there are three basic positions in this case. One position is that the Act applies under strike conditions just as it applies when there are no strike conditions. That is the Government's position, that is our position. The other position is the position of the American Association of Railroads and the FEC that under strike conditions even though it may be with just one union this gives the railroad the legal right as Mr. Devaney referred to it to totally suspend all of its contracts with all of its crafts, in this case there are 21 different crafts, 21 different contracts. That is the counter position. In between the Court of Appeals who said “No, you cannot totally suspend the provisions of the Act, but we will permit an application, the railroad to come in, in the nature of equitable relief and seek certain limited exceptions where it makes a showing that it is reasonably necessary for the railroad to do so in order to operate under strike conditions. We say the Court of Appeals decision is wrong because it spins out of the whole clock an exception into the Railway Labor Act which readjusts the economic balance struck by that Act by Congress. We say that the position of the railroad is wrong because it is far more extreme and even the limited exception or gloss put on the Act by the Court of Appeals and because the only actions of the railroad in this case shows that there has never been an understanding either in the industry or by this particular carrier that contracts are totally suspended under strike conditions. Three concessions have been made by counsel for the railroad in this case which are totally inconsistent with any idea of contracts or the Act being suspended during a strike. One is that the strikers earned seniority. How can they earn seniority if the contracts are suspended? One is the grievances maybe processed during the strike as they are being done on the property today. How can you have grievances if the Act or the contracts are totally suspended? The third is, if the union is the representative of the replacements -- well, how can that be if the Act or the contracts are suspended? And we would like to point to something which we think is even more clearly about what the understanding of this particular carrier and the railroad industry is generally and that is the Section 6 proposals involved in this very case. The proposals made by the carrier in September of 1963, eight or nine months after this strike began and I would like to refer to page 44 of the Exhibit record where one of those Section 6 notices is set forth, and page 254 -- excuse me, page 416 of the Exhibit record where another of those Section 6 proposals is set forth and this is what they say. They say “Article 3, “We propose a bargain with you about putting in to our collective bargaining contract Article 3 entitled work stoppages.” And then it goes on and there's a full paragraph here in which it sets out contract provisions that would govern during work stoppages. Now, how is this consistent with any idea that the contracts or the Act are totally suspended under the Act? We submit Your Honor that the whole process of the Railway Labor Act, the whole scheme of it is to take disputes and narrowly confine and refine and define them to the point where they become confined rather than expanded. This dispute started out as a very simple wage dispute. It got down to the point where the difference between the parties was only 10 cents an hour. It now involves literally every single rule, rate of pay, and working condition in 21 different contracts on the entire property. That's how the -- Byron R. White: I thought the -- I thought the railroad said that once the -- the wage matter was settled at the time that -- the contractors come back into force that in all of it's program point -- Paul Bender: That's correct Your Honor, but what they did here and what the record shows they did, they put in these conditions of employment the so-called strike imposed conditions of employment, they said they were only to be temporary but actually what they did, they put those in, they codified them and written for them on September 1, three weeks later, September 24 -- September 25, they issued Section 6 notices which are substantially the same saying “We want this as the permanent change.” In other words, what has happened here is that the whole issue has expanded to the point where the mediators involved, labor department throw up their hands. I think that's the reason the Government is in this suit is because the whole process of mediation of existing disputes once a strike exists is completely frustrated both by the doctrine of the Court of Appeals and by the doctrine asserted by the carriers in this case. Thank you. William O. Douglas: I gather that you don't object -- do you agree with the Government that self-help is permissible on their wage and notices? Paul Bender: Certainly, Your Honor. William O. Douglas: Your -- your comments only relate to conditions of employment? Paul Bender: That's correct Your Honor. Now that's the difference. That's the -- these airline cases, these Eastern Airline case for example as the first of them shows by Judge Feinberg, the changes made by Eastern Airlines were within the scope of its Section 6 notice, so there had been bargaining on that -- on that issue and the procedures of the Act had been exhausted. Eastern Airlines never attempted to operate contrary to an existing contract. The question in that case was which contract governed? It was a jurisdictional dispute but it -- Eastern the carrier there always operated in conformity with an existing contract. Thank you Your Honors. Earl Warren: Very well.

Warren E. Burger: We will hear arguments next in 75-19, United States against Santana. Mr. Easterbrook you may proceed whenever you are ready. Frank H. Easterbrook: Mr. Chief Justice and may it please the Court. This case presents the question whether police can make a warrantless arrest of a person who, they have probable cause to believe, has committed one crime only moments before and is still committing another crime, when that arrest requires a brief entry into the vestibule of a house. We submit that the answer to this question is that a warrant need not be obtained. Three independent arguments support our position. Two of these arguments assume, arguendo, that a warrant ordinarily must be obtained to make an arrest inside a house. We argue first that a warrant need not be obtained when a crime is in progress and the entry can halt that crime. Second, we argue that a warrant need not be obtained -- Warren E. Burger: Do you mean when it is in progress, or when it is in progress and that fact is known or observed by the officer? Frank H. Easterbrook: And when the officers have probable cause to believe that it is in progress. Warren E. Burger: Just to be abstract without observation or without objective fact -- Frank H. Easterbrook: Unless it was known beforehand, if it just simply turned out that it was in progress, the after the fact justification would not be sufficient. Second argument is that an entry should be permissible when it occurs within a few hours after a crime and during a time during which it might be supposed evidence might be disposed off. We submit that the case can be decided upon either of those two grounds without reaching the general issue of when a warrant must be obtained to enter a house to make an arrest. John Paul Stevens: Let me state that second ground, you say when it is supposed evidence might be destroyed, is that not always true? Frank H. Easterbrook: Our general argument in that regard is that during several hours after a crime, it should be reasonable to enter a house to make an arrest. And that the general justification for that is that evidence might be destroyed during those first few critical hours. Whether or not there is reason to believe that it will be destroyed in a particular case as we submit immaterial that the justification of reasonableness extends to those cases as a class and it is not dependent upon the facts of a particular case. John Paul Stevens: Is it dependent upon there being some likelihood that -- well, supposing you have a case in which the crime involves no other evidence other than just knowledge or reasonable cause to believe that a person say, committed a murder, but there is no evidence, you do not expect to find, does the evidence have any bearing and I understand –- I am quite following you? Frank H. Easterbrook: Well, it would be difficult to understand. There is often evidence that a murder has been committed and that evidence might dissipate. In the case of Cupp against Murphy of course there were fingernail scrapings under the fingernails, type of evidence that might dissipate. But our justification runs to crimes as a whole based upon the fact that they are often used evidence of crimes. The problem with figuring out whether there is evidence in a particular case is, we submit, the best argument against requiring the officers to figure out whether there is or is not? It is such a problematic inquiry and it depends so much upon the facts of a particular case. It will be very difficult to require officers or indeed to require courts to make that kind of determination before or after the fact in a particular case. The third argument is that it is always reasonable to enter a home to make an arrest with or without a warrant. Potter Stewart: At any time, day or night as per your argument. Frank H. Easterbrook: Historically, that has been so Mr. Justice Stewart. Potter Stewart: I just wanted, what is your argument, what your position was? Frank H. Easterbrook: Our position is that that still should be so, but it is of course not necessary to reach that question here because of the two independent grounds that I have begun to set out and also because this arrest took place during the day. Our primary support for that is historicalness, Mr. Justice Holmes wrote, “Page of history is worth a volume of logic.” But I do not intend to discuss that point further unless the Court has further questions about it. John Paul Stevens: I have just one. On both of your second and you third justifications, probable cause that a crime has been committed by the particular suspect, also a probable cause that he is within the house? Frank H. Easterbrook: Yes. John Paul Stevens: Both are required? Frank H. Easterbrook: Both are required. The facts of this case are not complicated. A Philadelphia Narcotics Squad officer arranged to purchase heroin from Patricia McCafferty. Patricia McCafferty told him that she would go down to Mom Santana’s for the dope. The officer recorded the serial numbers of $110 in $10 and $20 bills and gave the bills to McCafferty. McCafferty visited Santana’s house, spent a few moments inside, and returned to the officers’ car with heroin, but without the money. The officer gave a hand signal to other officers, and McCafferty told him that Mom Santana has the money. The other officers then drove in there van, the short distance to Santana’s house, intending to arrest her for her part in the crime and to recover the purchase money. When the group of officers drove up in there van in front of Santana’s house, they saw her standing in the threshold of her doorway with a brown paper bag in her hand. One of the officers recognized the person in the doorway as Santana. The officers left the van and ran up to the walkway to the front door of the house. There were approximately 15 feet between the curb and the doorway of the house, so it took about a moment to reach the threshold. Meanwhile, Santana had turned and retreated into the interior of her residence. One of the officers overtook her in the vestibule, as she was leaving the vestibule for the living room of the house. Respondent Alejandro was in the living room. When the officers overtook Santana they jostled her, and white packets, white packets filled with white powder, fell out the bag to the ground in the vestibule. Santana ran from the living room, attempted to pick up the packets and attempted to flee. Another officer subdued Alejandro and the arrest was completed in the vestibule. Potter Stewart: Now Mr. Easterbrook, you referred throughout this recital of the facts to these people as officers. They were not federal officers, were they? Frank H. Easterbrook: That is correct. They were officers of the Philadelphia Police. Potter Stewart: They were officers of Philadelphia. Frank H. Easterbrook: Yes. Potter Stewart: Does that make any difference or because Elkins against United States this is as though they were federal officers, is that it? Frank H. Easterbrook: In our view, they must be judged as though they were federal officers, and because of Elkins and I would add to Elkins, the companion case, Rios, 364 U.S. 260 to 61 and most recently, Cady against Dombrowski, 413 U. S. 433 at 449. Potter Stewart: This is the same as though they were federal officers? Frank H. Easterbrook: They must be treated as though they were federal officers from a constitutional point of view, and the only question is whether their actions comported with the Federal Constitution. The packets in the bag were heroin. Santana was asked to empty her pockets. The officers recovered from the search of Santana’s pockets, $70 of the purchase money. The other $40 of purchase money was never found. The officers also discovered on a table in the living room two large knives that could have been used as weapons. Warren E. Burger: When you say recovered the money, do you mean the identification was made by a virtue of them by the serial numbers? Frank H. Easterbrook: By the fact -- because the serial numbers have been recorded Your Honor. The serial numbers on the other money in Santana’s pocket did not tally with the money that had been used for the purchase. Respondents were indicted for possessing heroin with intent to distribute it. They moved to suppress the evidence seized incident to their arrest in the District Court -- Potter Stewart: Is there any state prosecution? Frank H. Easterbrook: They were originally also arrested by state authorities, initially -– Potter Stewart: That is what you just stated the facts? Frank H. Easterbrook: And they were charged by state authorities. Approximately a week after the arrest the state charges were dismissed so that there is no state prosecution now pending. They were dismissed technically without prejudice, but the state authorities, I am informed, have to intention of prosecuting. Potter Stewart: That was not a problem here? Frank H. Easterbrook: There was not. Potter Stewart: Whatever other problems we may have? [Laughter] Frank H. Easterbrook: Although the oral opinion of the District Court is not entirely clear, the Judge apparently concluded that the evidence was required to be suppressed, because the arrest of Santana was made without a warrant. Court recognized that there was, in his words, strong probable cause to arrest Santana and, in our words, absolute certainty to believe that she was at home. Moreover, the Judge stated that he did not want to criticize the officers for acting as they did under the extreme emergency posture of a case like this. Nevertheless, the Judge concluded they should have obtained a warrant to enter her vestibule to make the arrest. We appealed, the Court of Appeals affirmed without opinion. We begin from the premise that under United States against Watson decided by this Court on January 26 -- Warren E. Burger: Did District Judge say something about their being no danger of destruction of the evidence, or the concealment of it? Frank H. Easterbrook: The District Court concluded that because they found $70 in respondent Santana’s pockets, there was no reason to believe that evidence was to be destroyed. In our view this is essentially a post hoc justification. The officers had no way of knowing, whether they would find the evidence or not amongst Santana’s pocket. And the fact that they did -- Potter Stewart: I gather it was the marked money. Frank H. Easterbrook: Yes. The fact that they did find that there was happenstance and was something they could not have known at the time they were making the arrest. Under United State against Watson, we believe, police are entitled to make an arrest without a warrant, if they are, where they have a right to be, at the time they make the arrest. In Watson, the police had a right to be in the public restaurant at noon time and therefore had a right to make an arrest without a warrant. There is no doubt that police, like other visitors have the right to approach a house by using the front steps. Speaker: Excuse me Mr. Easterbrook, I am little confused, I am glancing now at the District Judge’s oral colloquy which amounted to his opinion, I guess, did it not? Frank H. Easterbrook: Yes. Potter Stewart: Page 5 indicates that not only was the marked money suppressed as evidence, but also some heroin? Frank H. Easterbrook: Yes, it was Your Honor. Potter Stewart: What heroin? Frank H. Easterbrook: It was the heroin that was found in the bag that respondent Santana was carrying at the time she was seen in the doorway. And that is the very heroin that she is charged with the possession with intent to distribute. That is the focus of the indictment in this case. Potter Stewart: Well, the heroin that was sold to McCafferty -- Frank H. Easterbrook: -- Was not suppressed Your Honor. Potter Stewart: It was not suppressed -- Frank H. Easterbrook: That is correct. Potter Stewart: That would have been that evidence that Santana had heroin in her possession with intent to distribute or sell it? Frank H. Easterbrook: It would also have been evidence. Potter Stewart: And was it, well? Frank H. Easterbrook: But that evidence is not involved in this case. She was charged with possession of the heroin that was found in the bag. That is correct. Potter Stewart: Which it is -- would be responsible for? Frank H. Easterbrook: That is correct. The indictment is a Page 5 of the separately bound appendix. Potter Stewart: She was charged with possession of heroin for sell, or distribution? Frank H. Easterbrook: That is correct. And the heroin that was the subject matter that indictment, was the heroin that was in the bag at the time she was arrested. Potter Stewart: Does that appear in the indictment? Frank H. Easterbrook: It does not appear specifically in the indictment. Potter Stewart: Then the indictment -- the heroin that was sold to McCafferty? Frank H. Easterbrook: No, Your Honor the -- Potter Stewart: There is no reason to suppress that, was it? Frank H. Easterbrook: That is correct. There was no reason to suppress that and it was not suppressed. The subject matter of the indictment relates that she possessed 587 grains of heroin. Potter Stewart: So you can tell by that quantity that there was -- Frank H. Easterbrook: That is right. McCafferty was indicted with distributing 42 grains of heroin. That is in the paragraph immediately preceding. Warren E. Burger: Looking at 4A of the petition on a writ here, and I take it all of the language appearing on 2A, 3A, and 4A following the words that the Court -- what the District Judge said -- Frank H. Easterbrook: Yes, Your Honor. Warren E. Burger: -- by way of an opinion, and among other things, the presence of the money in defendants Santana’s pocket indicates that there was no basis to conclude that it was to be destroyed, that is the Judge’s statement. Frank H. Easterbrook: Yes, Your Honor. Warren E. Burger: Predicate for his suppression? Frank H. Easterbrook: That was part of his reason for suppressing the evidence, and I booked -- Warren E. Burger: Anything else or is there any other explanation of why he thought it could not have been destroyed five minutes later, if she had locked the door? Frank H. Easterbrook: There is no other statement except to that. Warren E. Burger: Or concealed, or concealed? Frank H. Easterbrook: None other Your Honor, except the fact that it was in her pockets at the time of the arrest, which was approximately two or three minutes after the sale, and at that point, as I have pointed out, $40 of the money was already gone, $70 was recovered. Problem here we think -- Warren E. Burger: (Inaudible) the District Judge did not make any reference to disposition of the heroin at least that I observed, or did he at some point? Frank H. Easterbrook: He did on the last page of his oral opinion on Page 5A, the second paragraph from the end. The Court believes the heroin would support count two and three should be suppressed and not offered as evidence. Warren E. Burger: What should be suppressed that to -- that could have been put down to drain very quickly? Frank H. Easterbrook: That is correct. He never makes any statement that there was – that the officers knew, or did not know whether that was to be destroyed. I think it is implicit in his opinion that the officers did not know that it was soon to be destroyed. We think the problem here is whether the police who were entitled to approach Santana as she stood in her doorway, were required to stop, turn back and seek a warrant because Santana retreated from the threshold of her doorway into her vestibule. The consequences of a sudden stop would have been considerable. Respondents would have been afforded a respite of an hour or more while the warrant was being obtained. There would have been ample time then to destroy the heroin and the money which having seen the officers coming. Thurgood Marshall: Would it be fair to say that Judge said that before you move the van you should have gone and gotten the warrant? Frank H. Easterbrook: I think that is another possible interpretation, and my understanding of the oral argument in the Court of Appeals is that -- at least, one of the Judges of the Court of Appeals expressed that view. And if that is the correct view of this case, we submit that it is not because the officers were entitled to approach Santana as she stood in her doorway without a warrant, and the respondents do not seriously contest that. But if it is the correct view of the case the arguments that we make here are unaffected. It was still true that the police believed that she was committing the crime of possession of heroin, and it was still true that the arrest was quite prompt after she had committed the crime of distributing heroin to McCafferty. And I will now turn to our -- John Paul Stevens: Mr. Easterbrook, I have just one small point. Is it correct that your theory is they had probable cause to believe she was then committing the crime of possession of heroin -- Frank H. Easterbrook: Yes Your Honor. John Paul Stevens: -- as opposed to having just completed a sale? Frank H. Easterbrook: We believe that they had probable cause to arrest her for two crimes. John Paul Stevens: That is that they would -- they had before they went up after the door? Frank H. Easterbrook: We believe that it is reasonable for officers to believe that people who have just sold heroin from a house in an operation of this sort have not sold at all. John Paul Stevens: I see. Frank H. Easterbrook: It is essentially a question of common experience. The most general justification for the arrest in order to put a stop to the continuing crime was articulated by Mr. Justice Marshall in Watson. He wrote, “When Law Enforcement Officers have probable cause to believe that an offense is taking place in their presence and that the suspect is at that moment in possession of the evidence, exigent circumstances exist. Delay could cause escape of the suspect or destruction of the evidence.” That fits this case exactly. The officers have probable cause to believe that Santana was engaged in the crime of possession of heroin with intent to distribute it, and that she possessed not only the heroin but the evidence of another crime, her previous sale of heroin to McCafferty. They were therefore entitled to make a prompt arrest even though that involved an entry into her vestibule. Byron R. White: Do you think is it necessary they had probable cause to believe that the heroin was on her person? Frank H. Easterbrook: We do not believe so, Your Honor. They have probable cause to arrest her for that crime. There would be some difficulties in this case. Byron R. White: What heroin -- let us assume, they had probable cause to believe that she had heroin somewhere in the house, but not necessarily probable cause if she had it on her person. You would arrive at the same result? Frank H. Easterbrook: We believe that they could make the arrest. There would in our view be -- Byron R. White: Then they have entered the vestibule? Frank H. Easterbrook: Entered in the vestibule. There would be difficulties if they then attempted to search the house for the heroin that they have probable cause to believe was there. We believe they would, at that point, be required to desist and if the heroin was not within the reach of her or on her person to obtain a warrant to search the house for the heroin that they had probable cause to believe was there. Speaker: Except it is to be on her person, or in plain view they would be required to get a warrant, would they not? Frank H. Easterbrook: To search the house -- Warren E. Burger: To serve a status quo until someone came back with the warrant? Frank H. Easterbrook: Unless they had reason to believe that there were other people in the house, for example -- Warren E. Burger: Well, I am just assuming. Frank H. Easterbrook: Assuming that they had already arrested everyone in the house. Warren E. Burger: We will resume there at 1 o’clock. Mr. Easterbrook you may continue. Frank H. Easterbrook: I would like to expand upon my answers to two of Mr. Justice Stewart’s questions. You inquired, Mr. Justice Stewart about the nature the indictment in this case, and the indictment is indeed, as I indicated, for the possession of the heroin that was in the bag. United States Attorney informed me that that indictment was returned, because Patricia McCafferty whose testimony would have been perhaps necessary for proof of the sale to McCafferty had indicated that she was unwilling to testify against Santana. And therefore the decision was made to indict her for the possession with intent to distribute the heroin of the bag. Second question had to do with whether our position was that you could make a warrantless arrest entry at night? And I indicated that that our position was that. I should expand by saying that we believe that historically no warrant has been required and none should be required, but the reasonableness of requirement of the Fourth Amendment applies in full force, and it could -- and usually would be unreasonable to make a night time entry if a daytime entry would do as well to make an arrest. So that we do not want to leave the impression that night time entries are a preferable or indeed unquestioned way of making such arrests, they are not. They are often unreasonable. This case does not involve an entry to search for a suspect who may or may not be there. Does not involve a delayed arrest for a crime committed long ago. The officers had seen Santana in the doorway with their own eyes and they knew she had committed a crime there moments before and probably was still committing a crime. There -- Potter Stewart: How faraway were they, when they learned of the sale to McCafferty. How far were they away from Santana’s house? Frank H. Easterbrook: About a block and a half Your Honor. And they returned that block and a half in a very brief time. This immediate arrest did not only put a halt to an ongoing crime but it preserved the evidence of that crime and of the crime that had just been committed in the sale to McCafferty. It prevented any possibility of flight, it produced maximum surprise, and by that token, maximum safety to the officers, because if the officers had been compelled to desist and defect the house arrest, their personal safety could have been in some danger, if they had later attempted to make the arrest once respondents knew they were there and attempting to arrest them. In many ways, this case is similar to Scher against United States, which we discussed in our reply brief. Officers had possessed probable cause to believe that Scher was committing the crime of distributing distilled spirits and that he had some such spirits in his car. They followed Scher’s car to his home and arrested him in his garage. The Court unanimously upheld that arrest. It observed that the passage of the car into the garage did not destroy the officers’ right to follow and to arrest Mr. Scher, and so it is here. Respondent’s passage into her vestibule did not destroy the officers’ right to arrest her for an ongoing crime. John Paul Stevens: Mr. Easterbrook, may I ask about the ongoing crime theory. You told me a little earlier that the reason they had probable cause to believe she was then committing a crime was that you assume that one who sells some heroin retains some in supply. Do you also assume that the retained heroin is on the person of the defendant or merely on the premises? Frank H. Easterbrook: We assume only that is on the premises Your Honor, and as I indicated in response to a question by the Chief Justice, it would be permissible to arrest that person. At that point, if a search of the premises were necessary to discover the heroin, it would be appropriate to obtain a warrant to make the search of the premises for the heroin. John Paul Stevens: Not only appropriate, but necessary? Frank H. Easterbrook: Necessary, yes. We do not argue that you can search the premises if the heroin is not on the person who is arrested. Warren E. Burger: I think you said before that the limit of the officers conduct, once they got in the house was A - to search that person who was arrested and B - to seize any contraband in plain view, and the third alternative would be to take them in custody and preserved the status quo while awaiting another officer who would go to secure a warrant? Frank H. Easterbrook: Yes, Your Honor. The search would go no further than the permissible scope of search under Chimel against California, which included the person of the person arrested and the area within his reach at the time of arrest. We do not believe, however, that the right to make the arrest of Santana depended necessarily upon the fact that she was committing the crime of possession of heroin with intent to distribute. And we submit that it is reasonable for officers to enter the house within a few hours after a crime and hear the crime of the sale to McCafferty. Whether or not this justification is called fresh pursuit. It is based on an entirely practical understanding that the first few hours after a crime are critical, both to capture the suspect and to recover the evidence. It is a justification based on exigencies that pertain to many cases. The decisions of the courts below by requiring officers to delay and invest one or more hours in obtaining a warrant, would disable them from acting during this most critical time immediately after a crime had been committed. Once these first few hours have passed, the need for haste is diminished, but at least during the first few hours it is reasonable for officers to act promptly to make the arrest. The District Court disagreed with this argument, because it said, the police could not be sure that respondents would flee, could not be sure that respondents would destroy evidence and so on. The problem with this approach, as I indicated earlier to you Mr. Justice Stevens, is that there are many possible outcomes during the first few hours after a crime. They are in reality no more than predictions of probabilistic events. The police may know that some suspects will flee; they will know that some will arm themselves in attempt to defend themselves against arrest; they know that some suspects will destroy evidence, but with rare exceptions, they cannot know which suspects those are. Thurgood Marshall: Then did Santana know that she had been caught? She did not know it, did she? Frank H. Easterbrook: Your Honor, Santana did not know until her arrest was made and our argument -- Thurgood Marshall: Then I think there was no danger when destroying this loot? Frank H. Easterbrook: We believe that there was a very real danger as soon as the arrest of McCafferty was made only a few blocks away. McCafferty -- the arrest of McCafferty could have been observed and that in fact could have been related to Santana. Thurgood Marshall: That is it? Frank H. Easterbrook: McCafferty was arrested immediately after the sale. Thurgood Marshall: Publicly? Frank H. Easterbrook: She was -- Thurgood Marshall: Like people that go in and make purchases do not usually do not usually do it public, do they? Frank H. Easterbrook: Your Honor, she was arrested in an automobile approximately a block and a half from Santana’s house. Thurgood Marshall: Well, let us put it this way, there is nothing in the record that shows that they did not know? Frank H. Easterbrook: That is right. There is nothing. And our argument is that there need be nothing. Thurgood Marshall: And if she did know I would submit that she would have come out the back door rather than the front door? Frank H. Easterbrook: That is right. Oh, no. There is no -- Speaker: What do you mean oh, no? Frank H. Easterbrook: We are not arguing that she knew. We are arguing that the prompt arrest prevented her from running. Thurgood Marshall: (Inaudible) Frank H. Easterbrook: We are not arguing Your Honor that she was about to destroy these goods. Thurgood Marshall: But that is you submit the whole case is, do you not? Frank H. Easterbrook: Our argument is that officers might reasonably believe that some suspects will destroy evidence. We are not arguing, this was necessarily such a suspect. Warren E. Burger: What is the -- again walking up her driveway when she was standing in the open door, what would be her probable reactions since your dealing in probabilities? Frank H. Easterbrook: Her probable reaction we think is to attempt to destroy the evidence that she has and to attempt to flee, if they were required to desist after they were walking up her driveway. But again, as we have argued it is simply the question of probabilities, and we think it was reasonable for the officers in consideration of these probabilities to continue on to make the arrest. Our argument rests on probabilities and it rests on an analysis of reasonableness that pertains to the many cases other than this one. If there are no questions I will reserve the remainder of my time. Warren E. Burger: Mr. Eisman. Dennis H. Eisman: Mr. Chief Justice and may it please the Court. The issue before the Court today is in reality whether 200 years after the Declaration of Independence, Americans can be secured in the knowledge that the police may not broach the sanctity of their homes, seize them or there loved ones, carry them away without a judicial finding of probable cause for their arrest, accepting the argument that in certain cases, exigent circumstances would require an arrest without a warrant. Warren E. Burger: What do you suggest as a hypothesis for the probabilities when the officers approached the door and she was standing in the open doorway, as it turns out with the heroin either in her hands or under her person? Dennis H. Eisman: What? Speaker: But your own knowledge what shows -- the record shows that she had just engaged in a sale of narcotic? Dennis H. Eisman: Well, what the record shows in the District Court, and why the District Court I believe held this way was that the police set in motion the fact of the discovery of the arrest by their own action and immediately going to the house and taking the options of her immediately rushing up -- in plain clothes with guns drawn and rushing the house. When the Court felt below that it would have been just as easy and more constitutionally proper for them to have gone immediately to the place where, in Philadelphia, where the Justices of the Peace sit on a 24 hour basis which is only a half an hour away, gotten a warrant and return and not rush the house with guns drawn and children sitting on a steps in plain clothes in this fashion. So I think the argument that once the police ran up to the house with their guns drawn that the defendant would have known that they were coming to arrest them would have destroyed evidence, begs the issue that the District Court found was that they should not have acted in that fashion. They said they had the time. were no exigent circumstances absent what the police themselves created here in this case. The exigent circumstances, as pointed out by the Government in this case, are all circumstances which were created by the Government’s action and could have been negated by merely getting a warrant and returning to the house and making the arrest. Warren E. Burger: Suppose the lady had been on the front porch and had not identified the police as policemen, as they approached to assume that they were reps, assuming that they were magazine salesmen or whatnot, could they have lawfully arrested her then and there? Dennis H. Eisman: I think that -- Warren E. Burger: -- given the knowledge that they had about the prior transaction a few minutes before? Dennis H. Eisman: I think if she were out in the street or if it was an open porch, not connected inside the close of the house as we might say, it might -- the case might fall into the area of the Watson decision. But in this case the record clearly shows that she was inside the doorway, and a matter fact, one of the police officers testified even in the vestibule. And I think one of the reasons this case is here today is to decide the issue different from Watson, not a person out in a public place, but whether a person inside the home, has the security that we submit the Fourth Amendment gives additional rise to the security of the home. In this case, there were absolutely, according to the findings of the District Court, no exigent circumstances. There was no information whatsoever that the defendant was armed or dangerous. There was no degree of time necessary to get a warrant, as in the Miller case, another Third Circuit case where they knew that it only took 15 minutes to cut heroin. It would have taken them 45 minutes to get the warrant. Here the District Court found that under the facts of this case, they have ample time to get a warrant. Thirdly, there was no information that the defendant was in anyway aware that the police was on -- were -- was on her trail. And finally, there is no evidence whatsoever, and the record as it is stood when the police rushed the house that there would be an effort to dispose off the money, which is the only real evidence that the police were talking about. In this case, that they were going in to seize. The court below asked a specific question, on Page 37 of the record. Now, the minute you left, what was your purpose of going to the house? What did you intend to do? Answer - I immediately intended to recover the marked money that was used in the transaction and arrest of defendant Dominguez Santana. Nothing in the record, in this case, that they had a reason to believe that there are additional narcotics present in the house or that this defendant in fact possess them. As a matter of fact, the record in this case interestingly reveals, no direct information that it was this defendant who made the sale, the evidence presented in this case was that the police officer saw McCafferty go into the house with Alejandro and come out of the house shortly after. The Police had never seen Mrs. Santana at all that day. And when asked about the transaction the only thing that McCafferty said was Mom has the money, not that Mom sold the dope, but that Mom had the money. Thurgood Marshall: (Inaudible) Dennis H. Eisman: Well, she was seen going into the house with the co-defendant, Mr. Alejandro and coming out a short time after and I think it would be just as logical to assume that the dope could have been sold by Alejandro, and somehow she saw the proceeds eventually go to Mrs. Santana was told that the money would eventually go to her. But in this record, and I am not arguing with the finding of the District Court of a probable cause here. What I am saying is the record here is even a little unclear as to what knowledge the police had when they charged the house with their guns drawn, in plain clothes with children sitting on the step saying, police. Here in addition to the issues raised by the Government on their appeal -- there was the another issue that I do not think the Court really felt it necessary to get to, but that was that the circumstances of this arrest, the failure to say, we are here to arrest you, and merely running up with guns drawn into somebody’s home without stating the purpose for that entry, was in fact improper also. The sanctity of a person’s home is not only, I believe, guaranteed by the Constitution, but it is a tradition that goes back hundreds of years in England and/or Anglo-Saxon heritage. It is a problem not only that existed at the time of our revolution and, according to many writers, was one of the fundamental reasons why in 1776 there was a Declaration of Independence, but in fact, exist today outside of our country in England, the history of the Fourth Amendment which I do not intend to dwell on at any great length. Byron R. White: Why do you think the (Inaudible) was not making an arrest in her home, if without a warrant -- Dennis H. Eisman: In England? Speaker: -- if there was probable cause? Dennis H. Eisman: In England there was no requirement for a warrant to make an arrest and I submit that is the reason why our Constitution was written or Fourth Amendment was written to the Constitution was to distinguish between what was going on in England and the colonies in those days, and what was hoped for to be different in this country. Because in England today, according to at least the press in London, that is before the House of Parliament, a bill that gives the Internal or Inland Revenues Service, as it is called in England, the right to go into somebody’s home and search for any papers necessary to prove tax evasion, take away anything necessary, and break doors, if necessary. General warrants -- Potter Stewart: Without a warrant? Dennis H. Eisman: With a warrant, but not no warrants specifying to any general specific areas that -- Potter Stewart: Does the warrant have to be supported by probable cause? Dennis H. Eisman: No. It is a warrant that is obtained from a Justice of the Peace, which according to the reports I have read, has absolutely no knowledge of what the Inland Revenue Service might be interested in, but the point I am making is this is a general warrant, the type of warrant that was used in England and in the colonies before the Declaration of Independence, which lead to the eventual finding that a Fourth Amendment to the Constitution was necessary. If the Fourth Amendment does not protect us from intrusions into our home, and protect us from the police determination as to whether or not they are going to arrest us by putting between the police and the citizen a judicial disinterested determination, then what does the Fourth Amendment stand for? It has to stand for the fact that in America, citizens before they could be taken out of their house, whether be day or night -- and I do not think -- although it is a little more horrendous to be dragged from your home without a warrant at night than it is to be dragged from your home or have your sons or daughters dragged from your home in the day time without a warrant. At least if we know that before the police came to our house, absent exigent circumstances, that a Judge had found probable cause, then I believe we will be finding what our forefathers in the Bill of Rights wanted to offer for our country that we would be different from the systems in other countries, and that we would have the protections of a judicial determination of probable course. In this case, there was absolutely no exigent circumstances found by the Trial Court, and no reason to go into the home and drag out Mrs. Santana in the fashion it was done. This was a row house with people sitting, children sitting on the step and the facts are that plain clothes policemen jumped out of a van, ran up with guns drawn, ran into the house, and grabbed the defendant. It is a frightening aspect or specter to think of, even though when we consider that the crime involved is a crime that we consider serious. Warren E. Burger: Frightening Mrs. Santana, you mean? Dennis H. Eisman: Frightening that it might happen to one of us that the police may come to our house, run up with guns drawn and plain clothes, run through the doorway where we are standing on vestibule and grab us. It is frightening that to think that not only can this happen to someone as alleged like Mom Santana, but it could happen to anyone, where the police are the ones making the determination. William H. Rehnquist: Well given the exigent circumstances there is no doubt it can happen improperly up? Dennis H. Eisman: Well, I -- I concur that where the person is armed and dangerous. Where there is evidence that the person can destroy the evidence, or might destroy the evidence, or might flee, that that is a common sense and logical exception to the warrant requirement, but here in this case, and I believe, and the reason why this case is before this Court today is the determination of absent those exigent circumstances. Do we as American citizens have the protection of a judicial determination before we are seized? Normally, before this time most of the cases requiring warrants were just for the seizure of property, and I am the first to admit that property rights are extremely important in our society, but rights to physical arrest, I believe, are a little more important, and the seizure of a person is it goes even deeper than the seizure of a property, and people should at least be have the same rights to protection of a judicial determination before the seizure of their person that they have in the seizure of their property. Thank you. Warren E. Burger: Thank you Mr. Eisman. Do you have anything else further Mr. Easterbrook? Frank H. Easterbrook: Counsel for respondent has indicated that a problem in this case is the failure of the officers to announce that they were officers and to state their purpose and to demand entry. I will deal with that just quite briefly. It is not clear that the Constitution requires any announcement. Ker against California presented that question directly, and four Justices believe that it did; four Justices that it did not, and Justice Harlan expressed no view on that question. Assuming the Constitution requires some sort of announcement. The pertinent analogue would be 18 U.S.C. 3109, which requires an announcement prior to the breaking of the door of a house. Our reply brief devotes substantial space to this question. We have argued that walking in through an open door, in the view of someone who knows that the officers are coming, is not such a breaking that an announcement is required by Section 3109. And in addition, there was no chance here that any of the harms that that rule was intended to prevent could come about. The rule was designed to prevent the exertion of force by officers, the breaking of doors when that kind of breaking could be avoided by consent. It was also designed to avoid unnecessary opportunities for violence. The householder in England had the right to protect himself against those who would break down his door and enter. And the rule of announcement, by letting him know that the police were coming, would prevent that sort of violence, but this case does not present either of those two rationales and we submit should not be cover by them. Thank you very much. Warren E. Burger: Thank you gentlemen. The case is submitted.

Warren E. Burger: The next case is Bell v. United States. Mr. Allman, you may proceed whenever you're ready. Roy W. Allman: Mr. Chief Justice, and may it please the Court. It is my position here in the interpretation of the federal bank robbery statute, section 2113(b) does not cover the crime of false pretenses. Here, as the facts indicated in the brief, a client managed to take some money from Dade Federal Savings and Loan by and with their consent with an artificial trick. That is, he altered a check which was sort of obvious had they looked at it and took $10,000 from this account which he created in his own name. The check was drawn to him. It was done totally by mistake on behalf of the bank. Basically what we have-- William H. Rehnquist: Mr. Allman, Daytona wasn't the drawee of the check either, was it? Roy W. Allman: --No, Dade Federal Savings and Loan. It was a check which he somehow came into possession of, altered the deposit number on the back, i.e., put his account number after scratching out somebody else's and put it in an account that he created at Dade Federal Savings and Loan. William H. Rehnquist: The check wasn't drawn on Dade Federal Savings and Loan? Roy W. Allman: No, it was not. It was drawn through somebody else for deposit to some account of the person whose check it was. Basically, he got the bank involved through the bank's mistake. It is my position in reading the statute and it has created an ambiguity. It has got the Courts of Appeal... I think it is five to four now... construing this statute both narrowly and broadly. The bank robbery statute which in 1934 was specifically limited to bank robbery amended in 1937 to include the terms 1937 interpreted and argued by the government that, in fact, this covered only common law larceny. So the position now... The former Fifth Circuit now the Eleventh first went along with my arguments in my brief then en banc reversed itself and took the broad position that 2113(b) covered the crime of false pretense. The reason all this has come about is the way this Congress drew the statute. The statute was drawn as follows: It indicated that you take and carry away, steal, or purloin, words that are not necessarily defined specifically at common law but are in fact defined now generically. But in 1934, 1937 were contemplated in the common law sense. What has happened is this. In 1934 a broad bank robbery statute in dual form was submitted to the House Judiciary Committee. The Committee considered this bill and specifically, specifically rejected the aspects of the bill that covered crimes of false pretense, embezzlement and other crimes by trick or consensual takings and restricted it to the forceful robbery concept. Thus, the title of the Act, the text of the bill and the thrust of the situation in 1934 with the gangster-style bank robberies going on. Subsequently, apparently in briefly reading the Act the prosecutors have brought prosecutions of people who take money from banks in various types of ways, false checks, forgeries, false pretenses, trick, deceipt, fraud, et cetera. Four districts have gone along with this. Four districts have not. However, the Supreme Court itself in Jerome in 1943 took the position and the government took the position that the Bank Robbery Act, 2213(b) was a common law situation defining the crimes it intended to proscribe as robbery, burglary, and larceny even though the Act eventually uses the terms "steal, purloin, take and carry away. " which are not specific to those crimes. In Turley, the Supreme Court gave us some indications how we should interpret these nonspecific common law terms. What they have said is this. You look to the legislative history of the Act. In this case specifically in Le Master the Ninth Circuit looked at the legislative history in great detail and quoted directly from it saying they could not do better than the analysis which they put forth of the legislative history which showed specifically the Act was originally intended to be broad. It was tightened and limited to robbery in 1934 and then extended to burglary and common law larceny only in 1937. For this reason the factual situation that Mr. Bell put himself in unwittingly exempted him from prosecution under 2113(b). In the dissent in the Eleventh Circuit the judge said it is not a question that Mr. Bell has committed some kind of a crime. However, the crime he committed is not contemplated in 2113(b) because the legislative history combined with the title to the Act combined with the fact that the Act contemplated a, shall we say, active or violent taking away from, robbery, burglary, some kind of active, moving type of crime as opposed to the act of crime of false pretenses. That is something stealthily done. It is our position if you follow Turley and the appellate courts that look at Turley carefully and analyze the guidelines in Turley and apply them to the act in this case including the context of the Act, that is robbery, violent acts, taking away, carrying away, that type of thing with the fact that they were specifically in the bill in the House investigation of what they should do about the robbery situations occurring in the '30s took and eliminated the crime of false pretenses from the purview of this Act. It is my conclusion and I think the only conclusion that is reasonable if you take the Act and interpret the ambiguities in it in accordance with what has happened, legislative-- Byron R. White: You agree you must resort to legislative history to win your case? Roy W. Allman: --Yes, I do, Judge, and I think in the Ninth Circuit Le Master analyzed the legislative histories of 2113(b) even though Turley was a-- Byron R. White: What is the ambiguity in the statute? Do you think it is what meaning you give to steal-- Roy W. Allman: --Steal and purloin, yes, sir. Byron R. White: --Because there was a carrying away of money with some kind of an intent to... At least the person knew he was not entitled to the money. Roy W. Allman: There is no question about that, Judge. He committed a crime probably a state crime involving the generic term. He stole. He took somebody else's property. Byron R. White: But Jerome at least used words that had some common law meaning like larceny-- Roy W. Allman: Larceny-- Byron R. White: --and things like that, but steal or purloin does not have that kind of meaning. Roy W. Allman: --It is a generic term. That is correct, and that creates the ambiguity in this sense. If you look at the history of the law, if they intended to cover that type of crime they would not have eliminated specifically the crime of false pretenses as they did in the legislative debates that created the robbery statute. They wanted to leave the states with that type of crime specifically focusing the federal law on the crime involving robbery, active carrying away, the violent gangster-type crime that initiated this situation. That is my analysis of that ambiguity situation, Judge. In Turley where they were interpreting the dire act of the interstate transportation of stolen motor vehicles that type of thing, stolen was construed consistently with the legislative history to be a broad thing where the federal government had an interest in controlling interstate transportation of stolen vehicles. In this case it is the exact opposite. The Congress specifically eliminated the crime of false pretenses in its debate before creating the statute. That is analyzed very well, I think, in Le Master, the Ninth Circuit decision which is inconsistent with the other four decisions in applying Turley to the word "stolen" in the context of the statute along with the legislative history. The only conclusion I think you can come to reasonably if you look at Le Master and go along with Turley is that 2113(b) was a restrictive statute and the government used to argue in 1937 that in fact it was a restrictive statute. Byron R. White: Are there any other statutes that would make it a crime to get money from a bank other than by this violent kind of crime? Roy W. Allman: Yes, there are, Judge. I think every state in the Union has a generic term which they-- Byron R. White: I mean any other federal law, any federal law. Roy W. Allman: --Yes, as a matter of fact, a recent case, Williams. The Williams case construing, I think it was 1025, indicates that, and this Court held recently, I think it was 1982 that unless the Congress specifically says in so many words that this is the proscribed act, we will not expand the congressional intent to cover a generic-type situation. In analyzing the legislative history in Williams, this is exactly what they did. The government was seeking to place a broad concept on the word's use in the statute where Congress in its legislative history did not intend to say-- Byron R. White: I will put it another way. Does this Act go as far as any Act towards covering false pretenses kinds of crime, or are there some other statutes that might reach false pretenses? Roy W. Allman: --There are other statutes both state and federal. I believe-- Byron R. White: I mean federal. Roy W. Allman: --Okay. Byron R. White: Or does this come as close as any? Roy W. Allman: I believe this comes about as close as any. There are other statutes that cover, for instance, the card sharking statute which specifically contemplated false pretenses by specific language which I cite in my brief. I can't recall the case name at this time. However, in that case the Congress specifically said card sharking and false pretenses is a federal crime on the high seas... It was gambling off the shore of New Jersey or something like that... specifically enumerated by Congress. This is the reverse. In this case Congress specifically contemplated a broad bank robbery statute in the House bill and rejected it. Byron R. White: Well, do some of the cases on either side of this issue... Do some of them relate to say giving a bank false information in an application for a loan and getting money from-- Roy W. Allman: That is Williams. That was decided in 1982. That is the one-- Sandra Day O'Connor: --Well, couldn't this defendant perhaps have been charged under that section 1014? Roy W. Allman: --I don't believe so, Your Honor. Reading that as a false statement report to get money to lend. I guess that is probably inducing a bank to lend you money by false statement or some other misrepresentation. That is the way I read Section 18 U.S.C. 1014. Sandra Day O'Connor: Well, he certainly got money by means of false statements here. Roy W. Allman: Well, in reality he took advantage of the bank's mistake. He basically forged the check, eliminated the back deposit number, put his number and name on it and deposited it. The bank didn't look at the check and paid him the money. The false statement I guess... He induced the bank by trick or fraud to give him somebody else's money is what he did. There is no question about it. He committed a crime. The only problem was the crime was not 2113(b). William H. Rehnquist: Have the liabilities been settled as between the Dade Federal Savings and whatever bank the check was drawn upon in this case? Roy W. Allman: I am not certain about that, but I am certain that Dade Federal guaranteed his endorsement and, therefore, they ultimately would have paid for their mistake, I'm sure. It is an interesting footnote that the money this man got by this means was taken from him in a burglary apparently. That is immaterial, I guess. [Laughter] Byron R. White: In 1014 Congress has protected the bank against false statements in loan applications? Roy W. Allman: Yes, sir. Byron R. White: So it really has not left to the states in all circumstances the false pretenses crimes, all of them? Roy W. Allman: I would agree with that 100 percent, yes, sir. Byron R. White: Well, here is just another arguably did not leave the false pretenses kind of crime involved in this case. Roy W. Allman: I would have no problem with that in resolving the ambiguity in saying stolen or purloined if the legislative history had not specifically eliminated the crime of false pretenses. In Le Master, in Jerome if you look at the Le Master case, the House Judiciary Committee had a very broad bill. They accepted one provision and eliminated two others. Specifically section 2 said it should be a crime for anybody to trick a bank in any way shape or form, false pretenses or whatever and accomplish the taking of money from said bank. This was not enacted in the statute. It was contemplated and eliminated specifically in 2113(b). That is why I think it is different. I think it would be a good result had they left it in, but they did not. That is my problem with 2113(b) in this prosecution. Byron R. White: What would he have been charged with under state law? Do you suppose forgery? Roy W. Allman: Larceny. Straight larceny. Byron R. White: I know but how about-- Roy W. Allman: Forgery. Byron R. White: --He forged somebody's name, did he not? Roy W. Allman: In reality forgery is given very broad definition in Florida. If you do something that alters something to your benefit-- Byron R. White: Well, he purported to be the payee, did he not? Roy W. Allman: --Yes. He removed for deposit only to some account number. He scratched that out, for deposit only, me, my account number. That is exactly what he did. The bank chose to ignore the fact that he scratched out the prior limited endorsement, and they guaranteed his endorsement. That was the bank's mistake. But that is not a crime under 2113(b) and that is the whole problem here. It should be, but it is not. The Congress chose to eliminate that specifically in the legislative history, and that is the problem. John Paul Stevens: Is there not an aspect of the legislative history that you have not addressed at least yet? In the '34 bill they broke it into two parts, consensual takings and nonconsensual takings and it was with the consent of the bank that the artifice and trick line which appeared. But in the '37 bill there is no division between consensual and nonconsensual from which one might infer, I am not sure this is right, that the statute was intended to cover both categories and once it covers both categories you do not need the artifice language because takes and carries away is enough to take care of it. Anyway, you see what I mean. Roy W. Allman: You could argue that, Judge, but when Congress has done something specifically and not later taken corrective action as they have done in other cases-- John Paul Stevens: They did take out the words "without the consent of the bank. " which was also in the '34 bill. Roy W. Allman: --The bill which was not enacted into law-- John Paul Stevens: Correct. That bill said without the consent of the bank was one of the two alternatives, but that language is not in the '37 Act. Roy W. Allman: --That is correct. If you look at the '37 Act, the Attorney General said, look, we have got a robbery statute but if there is nobody around and the guy comes in and takes the money off the counter and walks out, we do not have a robbery. We cannot prosecute him under our Bank Robbery Act. Therefore, we should change the Act as follows: make it burglary, you do not have to put anybody into fear to take the money, and larceny, common law larceny. At that time the government argued, yes, the definition is common law larceny-- John Paul Stevens: If they wanted just to cover that situation, should they not have said takes and carries away without the consent of the bank because in that situation there would have been no consent-- Roy W. Allman: --That is correct. John Paul Stevens: --the one that they are talking about specifically. Somebody came in and found the money on the counter. Roy W. Allman: Takes and carries away, steals, or purloins. That is an inaccurate common law larceny definition basically. It is a little broader than that. I agree with you. John Paul Stevens: You are suggesting the statute should be read as if it included the words "without the consent of the bank? " Roy W. Allman: If we are going to separate the part... False pretenses gets us to the fact that they tricked him. The bank gave consent to take it, yes. With the larceny situation, and I think as the statute reads and as Congress intended it contemplated an active, violent, robbery, burglary concept, coming in and taking something, not coming in talking to the teller, putting a check in, going back, waiting the 20-day period and then withdrawing the money at their leisure taking a chance that the bank would not detect this. This is not common law larceny. This is false pretenses. Le Master specifically addressed this issue and said the statute does not cover it. William H. Rehnquist: Well, Mr. Allman-- Roy W. Allman: Yes, sir? William H. Rehnquist: --wasn't common law an element of I think they call it aspertation in larceny. Was that not just taking and carrying away requiring a removal right them so to speak? Roy W. Allman: This is the way I feel and this is what I think Congress was concerned with. They were concerned with, I think, the violent aspect, taking and carrying away, the robbery concept. This is the Federal Bank Robbery Act. Twenty-one thirteen (b) is, I think, a lessening of the requirement for violence but requiring still the nonconsensual taking away. William H. Rehnquist: Certainly it does not have to be robbery. It could be burglary. Roy W. Allman: Burglary or larceny, but the quick, violent active type of crime that Congress was addressing in this matter, if you look at legislative history and if you look at the interpretation in Turley, Turley says how are we going to interpret the words "steal and purloin"? Purloin could mean by stealth, but it is still the same concept. All the tellers go to the coffee machine. He comes in sees the money on the table picks it up and walks out. That is a larceny. Like you say, there is no consent from the bank. In this case the bank helped him commit this crime by a mistake. He tricked the bank as just as though he tricked the people who had the money. That is why Congress in limiting itself to the violent type of crime specifically said, we do not want to cover the crime of false pretenses by eliminating section 2 in the 1934 bill and again in 1937 not specifically enacting it. William H. Rehnquist: When you say a violent I take it-- Roy W. Allman: I mean active. William H. Rehnquist: --burglary could certainly obtain at 3:00 in the morning and no guards around. There would be no violence but there would be an immediate removal. Roy W. Allman: Nonconsensual, active taking away, yes, sir. That is my problem with this statute applying to this case. Warren E. Burger: Why is this less a removal than taking it a 3:00 in the morning when they happen to leave the door open? Roy W. Allman: It is both a removal. There is no question about it. It is a crime. The difference is this-- Warren E. Burger: He carries it away in both cases does he not? Roy W. Allman: --I'm sorry? Warren E. Burger: He carries it away in both cases? Roy W. Allman: Yes. He carries it away. There is no question about it. The difference is in this case Congress considered the option of covering consensual trickery or crimes by the bank coming in and being suckered into a deal. They considered that. They specifically eliminated it in 1934. If they had intended and if it had been a problem as the burglary and larceny aspects, the original statute was inadequate to cover the immediate taking and nonconsensual carrying away type thing, so in '37 they amended it. They changed it. But they did not go back to section 2 which they eliminated in 1934 and say this shall include either by implication and interpretation the trick, false pretense. False pretense was not larceny ever under definition in common law. False pretense was a separate crime primarily because they got possession and title. The larceny thing they got possession with the consent. In this case the bank intended him to have the money. They thought it was his money. They had made a mistake. He had involved the bank in a crime but not the crime under 2113(b) because there was no nonconsensual taking away. There was a consensual tricking of the bank not covered by this statute. The legislative history is specific on that. They could have put it in. They did not. In Williams this Court absent support in legislative history for the design of a statute to apply to the specific conduct, this Court, the Supreme Court holds it is not proscribed. That is not the conduct approached in this statute. That was the conclusion in Williams in 18 U.S.C. 1014. We have an analogous situation. Just recently the Supreme Court again said consistent with the approach of lenity the construction of a criminal statute shall be specific. They shall not be presumed to take over the state's role in prosecuting crimes. The federal bank robbery statute approaches and addresses itself specifically according to legislative history the nonconsensual, violent or active taking away from a bank not false pretense which was contemplated and rejected. This is my whole problem with 2113(b) in this case. Thurgood Marshall: Am I correct that if you win your man goes free and that the statute is wrong in the state case? Am I right? Roy W. Allman: No, sir. The statute is not wrong in the state case-- Speaker: It has not? Roy W. Allman: --and I think ultimately that is what the courts are doing. They are making sure that somebody who does something that is wrong is punished. I think what is happening is they are stretching the statutes to far when the congressional intent was specific not to stretch it to this crime. I think what really happened and basically what we are talking about is the prosecutor charged him with the wrong statute. He could have turned it over the the state. The man would have been punished. He made a mistake. In the dissent they admit he committed a crime. He did something wrong. There is no question about that. The problem is is it going to be punished or are we going to let him go because he was charged with the wrong statute. Unfortunately, under the law a few guilty men must escape so that the law maintains its integrity. I have reserved some time for rebuttal if I might. Warren E. Burger: We will resume at 1:00. Mr. Giuliani. Rudolph W. Giuliani: Mr. Chief Justice, and may it please the Court. The Petitioner in this case obtained possession of a $10,000 check that did not belong to him to be deposited into a savings account at the Dade County Savings and Loan Association. Petitioner opened an account at the Dade County Bank using a false address, birthdate and social security number. He then deposited the stolen check into this new account at another branch of the Dade Bank using a second false address and having altered the account number on the check to state his own new account number. After a 20-day holding period, Petitioner withdrew $10,000 plus interest from this account. In plain every day English, Petitioner stole $10,000 plus interest that at the time belonged to the Dade County Bank, a bank insured by the Federal Deposit Insurance Corporation. The bank theft statute, 18, U.S.C. section 2113(b) prohibits anyone from taking and carrying away with intent to steal or purloin money belonging to a bank insured by the FDIC. In plain-- William H. Rehnquist: Mr. Giuliani, did he take cash? Rudolph W. Giuliani: --Yes, Your Honor, I believe he did. In plain English that is precisely what Petitioner did. He stole $10,000. In order to avoid the express language of this prohibition, Petitioner urges that the words do not mean what they say but instead should be read to mean that Congress in 1937 meant to prohibit solely larceny at common law. That is trespassory taking or taking without consent. Harry A. Blackmun: Was there any other federal statute which conceivably could have covered his action here? Rudolph W. Giuliani: I do not believe so, Your Honor. Harry A. Blackmun: Not 1014? Rudolph W. Giuliani: Ten fourteen would not because this would under your own decision in 1014 this would not have amounted to an extension of credit. Harry A. Blackmun: The Court's decision. Rudolph W. Giuliani: Yes, Your Honor. Crucial to the crime of larceny at common law was a trespass really a physical invasion because primitive criminal law was concerned only with protection against force or violence. A trespass was necessary for any crime to be felonious. As the criminal law developed, however, and expanded to protect other interests including property rather than acknowledging the changing nature of the law, the Courts in England engaged in fiction to avoid the reality of reversing prior precedents. So crimes such as larceny by trick an unilateral mistake developed so that it was larceny to trick someone out of possession of that money, but it would not constitute larceny if the owner of the money had also turned over title. If Petitioner's argument is accepted and these ancient distinctions are revived, it would be a violation of section 2113(b) if a person cashing a check for $100 mistakenly received $1,000 from the teller, realized that mistake and decided to keep it and walked out of the bank because that at common law would have amounted to larceny by trick in the sense that according to the fiction only possession had been turned over, not title. If, however, that same-- John Paul Stevens: Is the same true that that would have been a violation of state law? Rudolph W. Giuliani: --Pardon me, Your Honor? John Paul Stevens: That would be a violation of state law, I assume? Rudolph W. Giuliani: I assume it would be. John Paul Stevens: Just in a broader sense, what is the reason why these cases ought to be in the federal court rather than the state court? Rudolph W. Giuliani: Well, Your Honor, the banks-- John Paul Stevens: I understand it is a federal insurance at a bank, but nevertheless it is a state crime as well. Just in terms of allocating law enforcement resources, why would this not be a good category to leave to the states? Rudolph W. Giuliani: --Well, first of all there is potential federal lability in the sense of all of these banks are insured by the Federal Deposit Insurance Corporation-- John Paul Stevens: I understand. Rudolph W. Giuliani: --and it is our view that this is precisely-- Thurgood Marshall: I am not too sure that the statute does not limit it to those. It says any bank. The statute says any bank, those insured or not would it not? Rudolph W. Giuliani: --No, Your Honor, it would have to be either a-- Thurgood Marshall: Are all banks insured? Rudolph W. Giuliani: --I do not believe all banks are insured, Your Honor, it would have to be-- Thurgood Marshall: Well, the statute says all banks. Does it not? Rudolph W. Giuliani: --Well, it should be-- Thurgood Marshall: Or any bank, credit union, or any savings and loan association, so it applies to all banks. Rudolph W. Giuliani: --Now it does. At the time that this amendment was passed in 1937 it was passed specifically to apply to banks that were insured by the Federal Deposit Insurance Corporation. Thurgood Marshall: But the statute we are operating under says all banks. Rudolph W. Giuliani: It has been expanded since then. That is correct, Your Honor. Thurgood Marshall: It says all banks. That is the one we are operating under? Rudolph W. Giuliani: That is correct. Thurgood Marshall: I join Justice Stevens. I do not see what the federal government's interest is in any bank. An uninsured bank, what interest would the federal government have? In stealing money from an unfederally uninsured bank? Rudolph W. Giuliani: First of all, Your Honor, this particular bank was not an uninsured bank. This bank was insured by the Federal Deposit Insurance Corporation. The statute that we are construing here was passed in order to protect the assets of federally insured banks and that is one of the reasons why we argue for an interpretation that would include all forms of theft. John Paul Stevens: Is it not true that it was passed in response to a specific problem. John Dillinger and some of his friends were running around the country crossing state lines holding up banks all over the place. Was that not what caused this statute to be enacted? Rudolph W. Giuliani: No, Your Honor, that is what caused the 1934 Act to pass. John Paul Stevens: Right, and then they picked it up to take care of the fellow who walks in and finds the money on the counter. Rudolph W. Giuliani: But I think there is a very big difference between the 1934 Act and the 1937 Act. The 1934 Act when it originally was proposed by the Attorney General would have covered all forms of taking. It would have covered robbery, burglary, and larceny both with and without consent. Warren E. Burger: I suppose one explanation on the policy issue is that that is the way Congress decided it should be. Congress enacted the statute. Rudolph W. Giuliani: But, Your Honor, I do not believe that that gives effect to what the 1937 Congress did. Warren E. Burger: No, my point is only with respect to the policy question that was suggested that why does the federal government get into it. The answer is because Congress says. Rudolph W. Giuliani: That is precisely correct. John Paul Stevens: Why didn't you read the statute correctly? If it did not say that you would make precisely the same argument to the contrary. Rudolph W. Giuliani: Well, our argument is simply that the plain language of the statute if you put aside distinctions that are 200 and 300 years old and have been criticized for 200 or 300 years as just introducing technicalities into the law that have no equity. If you read the plain language of the statute it certainly covers the conduct of this Petitioner taking and carrying away $10,000. Then when you look at the legislative history of the 1937 Act and what Petitioner has done is to confuse the legislative history of the 1934 Act with the legislative history of the 1937 Act. There is no doubt that the 1934 Act was limited to bank robberies. The House so limited it. Their concern was the Bonnie and Clyde gangster bank robbers who moved around state to state. William H. Rehnquist: Not just burglaries but robberies. Rudolph W. Giuliani: Only robberies in 1934. In 1935, however, a significant fact occurred. Congress expanded the coverage of the bank robbery statute to cover not only federal reserve banks and banks chartered by the federal government, but in 1935 Congress expanded it to cover all banks insured by the Federal Deposit Insurance Corporation, a much larger and greater area now of potential federal liability. So that in 1937 when the Attorney General went back to Congress, he asked the Congress to expand the coverage of the 1934 Act to include burglary and larceny and he used new words to define larceny, not the old words that we used in '34 but new words. The words that he used were "taking and carrying away with intent to steal or purloin. " so that the purpose of the '37 Congress cannot be the same as the limited purpose of the '34 Congress. The purpose of the '37 Congress goes beyond merely being concerned about taking by force and violence. William H. Rehnquist: Mr. Giuliani, what if Mr. Bell instead of being an outsider here had been a teller in the Dade Federal Savings and Loan Association and had simply embezzled $10,000? Rudolph W. Giuliani: That would be covered by a separate statute that had a federal embezzlement statute that applies to agents and employees of the bank. That, in fact, had already been a violation of federal criminal law, I believe, at the time these statutes were passed. William H. Rehnquist: Would you say it was covered also by this statute? Rudolph W. Giuliani: It could be covered by this statute as well. William H. Rehnquist: Does that mean you think it might be but you are not sure? Rudolph W. Giuliani: No, I believe that the purpose of the Congress in 1937 was to broadly prohibit theft from a federal bank. That term was defined then as a generic term. William H. Rehnquist: So the taking away requirement is really almost done away with because in the facts of this case you have Bell actually taking $10,000 that did not belong to him, dollar bills, so to speak, or tens or hundreds, but in the embezzlement thing it is just basically a credit or a ledger transaction. You say that is covered, too? Rudolph W. Giuliani: No. It does not have to be covered, Your Honor. You do not have to go that far because at the time that this statute was passed embezzlement was already a crime. William H. Rehnquist: But I am not trying to strike a bargain. I am just trying to find out how high you think the statute should be interpreted. Rudolph W. Giuliani: The statute should be interpreted to reach theft offenses, larceny, larceny by trick, and taking by false pretenses. William H. Rehnquist: How about embezzlement? Rudolph W. Giuliani: It does not have to be read and should not be read to reach embezzlement. Embezzlement is already covered by another federal statute. Byron R. White: Do you think embezzlement is a taking away? At least there is a taking away here, is there not? Rudolph W. Giuliani: Yes, Your Honor, there clearly is. Byron R. White: If there was an embezzlement, why would the statute not cover it? Rudolph W. Giuliani: Well-- Byron R. White: We have other instances where an act we have already recognized it that, I think it is in the bank field, where the same act violates two different criminal statutes. Rudolph W. Giuliani: --You could interpret... The statutes could cover the same ground. There is no doubt about that. Byron R. White: What about the false application on a loan application? A false statement on a loan application, that is covered in another section. Rudolph W. Giuliani: That is covered in 1014. Byron R. White: Was that on the books in '37? Rudolph W. Giuliani: I do not know if it was or not, if it was on the books in '37 or not, Your Honor. The embezzlement statute was a crime prior to 1934. I do not know about section 1014. To assume that Congress in 1937 had reintroduced these distinctions would mean that it would be a violation of this statute if someone mistakenly received $1,000 as I said before and decided to keep it. But it would not be a violation of this statute if he stole checks, forged those checks, presented those checks to a bank and over a period of time depleted the bank of unlimited amounts of money because at common law one would constitute larceny by trick because there had only been a cheating of possession and the other would constitute taking by false pretenses. Petitioner and the few Circuits supporting his view in our view confused the purpose of the 1934 Congress with the purpose of the 1937 Congress and interpret those purposes as being exactly the same. The 1934 bill as presented by the Attorney General and passed by the Senate would originally have prohibited robbery, burglary, and larceny defined actually as both taking by false pretenses and larceny at common law. The House Judiciary Committee struck the burglary and the larceny provision not as Petitioner would have it because of some concern over the reach of common law larceny. There was no discussion of common law. There was no discussion of common law distinctions. The word never even came up in the legislative history. That Congress, the 1934 Congress was concerned with limiting the crime to reach the situation of interstate gangster bank robbers and wanted to limit the crime just to robbery and not to embrace burglary or any form of larceny. The 1937 Congress when it took up this subject again clearly had a different purpose than the 1934 Congress. The 1937 bill was intended to broaden coverage beyond robbery, beyond just merely taking by force and violence to cover burglary and larceny. Concededly under everyone's interpretation of this statute, it would cover crimes such as taking money mistakenly given by the bank or larceny by trick, scarcely crimes that are committed by the Bonnie and Clyde interstate bank robbers. Once Congress removed the force and violence limitation and expanded the statute to reach nonviolent theft as well as fraudulent theft, it cannot be logical to ascribe to the 1937 Congress the same intent as the 1934 Congress. Rather the more logical and sensible conclusion is that in expanding the statute the intent of the 1937 Congress was to give broad protection to banks whose assets were insured by the Federal Deposit Insurance Corporation. Now the choice of words that Congress used, I believe, is very important. The Petitioner relies very heavily on the fact that Congress selected the words "take and carry away" and the title larceny as if those two formulations are code words for all of the ancient distinctions of common law larceny. By 1937, however, the words "take and carry away" as well as the term "larceny" no longer were limited solely to describing common law larceny. In fact, in the 1934 bill which passed the Senate it used the words "take and carry away" to go on and define takings without consent which would have been common law larceny and then taking and carrying away with consent which at ancient common law would have been a false pretenses. As this Court has noted in the Turley decision, by 1919 the law of many states had developed to include not only common law larceny but larceny by trick and false pretenses in their prohibition of generic larceny and theft offenses. This Court, in fact, in the Jerome case twice used the label larceny for a description of crimes including false pretenses and pointed out that Congress did so in the legislative history to the 1934 Act. Thus, by 1937 to conclude mechanically and dogmatically that larceny means solely common law larceny and that takes and carries away means the same thing that it meant in the 18th century is to ignore the contemporary use of those words both common use and use as words of art. Sandra Day O'Connor: Mr. Giuliani, speaking of the Jerome case, in Jerome the Court held the burglary prohibition of section 2113(a) did not cover this act and the underlying act in Jerome was, I think, uttering a forged check. Under your theory, could the government have brought that action under subsection (b) then? Rudolph W. Giuliani: No, Your Honor, because actually it was an incomplete crime. The crime was never completed in Jerome in the sense of a taking and carrying away. The Jerome case does contain dicta-- Sandra Day O'Connor: That is contrary to your position. Rudolph W. Giuliani: --That is contrary to the position that the government is now arguing. At the same time the Prince case contains dicta that supports precisely what the government is arguing. The Jerome case really involves in our view a very different issue. It involved a question of whether in determining whether Congress meant to cover in the burglary section a situation where a person enters a bank with intent to commit a felony. Did Congress mean by felony, felony under the laws of all the states in which case what it would have read into the federal statute all the differing interpretations and definitions of felony, high misdemeanors and misdemeanors that vary in the 48 states or not. It came to the conclusion actually which is supportive of our position that you should not read felony to mean what felony meant at common law and that you should give it an interpretation consistent with the purpose of the 1937 amendment which is precisely the-- Sandra Day O'Connor: If the act had been completed in the Jerome situation, could the government have prosecuted under subsection (b)? Rudolph W. Giuliani: --Yes, I believe so. It would actually be a taking of the money. Sandra Day O'Connor: Could the government in the case that we had last term in Williams have prosecuted for the check kiting scheme under this subsection? Rudolph W. Giuliani: If the scheme had actually been completed in the sense that check kiting you have the ambiguity as to whether or not the person intends to make good on the check in the period of time between the time that they write the check and the time that the check is actually finally negotiated. If, in fact, the person goes through with the check kiting scheme and takes away the money then you really move out of the strict definition of check kiting and you have an actual theft of the money. In looking at the language that was struck by the 1934 Act, the Petitioner ignores several crucial points, and I think makes more of that than the legislative history can sustain. The 1934 Congress as I said before was concerned with a situation of robberies and limited the language to robberies. It was not in any way, didn't evince any concern at all with the coverage of larceny as either being common law larceny or false pretenses so there was not a specific striking of the language because Congress was concerned with any of these distinctions as between common law larceny and false pretenses. In 1937 the new language that was presented was significantly different. It deleted the words Mr. Justice Stevens noted before it also deleted the words "without consent" which would have clearly defined solely common law larceny. So the words that it used "with intent to steal or purloin. " in our view created or evinced a concern with a broad interpretation or at least as broad as the matter that they were concerned about, the assets of federally insured banks. Thurgood Marshall: Let's get back to the other question that you made. What is there in the legislative history or the rules of the department that delineate a line between state and federal crime on a particular alleged crime? Rudolph W. Giuliani: Well, in this particular case, Your Honor, the line would be with this particular bank a bank whose actual funds were insured by the Federal Deposit Insurance Corporation so that I-- Thurgood Marshall: You mean the state law would not cover that? Rudolph W. Giuliani: --No, state law does cover it. This is one of-- Thurgood Marshall: Mine is what line says that this is a state crime and this is a federal crime? Rudolph W. Giuliani: --In this particular case it would be the federal insurance in federally insured banks, the necessary and proper clause of the constitution. Thurgood Marshall: You say it was two crimes. This is two crimes, a federal crime and a state crime. Rudolph W. Giuliani: Yes, Your Honor. Thurgood Marshall: Is there any procedure in the Department of Justice that says who should prosecute an instance of double crime when it is a crime against two sovereigns? Rudolph W. Giuliani: There is a formal procedure that exists if a person is prosecuted in one place and then there is the possibility of prosecuting him again because of the possible double jeopardy concerns involved in that. But there is no formal process that takes place in making that decision in advance. Most United States Attorneys have policies that they work out with District Attorneys as to what cases they will take and what cases would be turned over to the Department-- Thurgood Marshall: There is nothing in the record to show why this was brought in the federal rather than the state court? Rudolph W. Giuliani: --In most-- Thurgood Marshall: No, sir, in this one. There is nothing in this one. Rudolph W. Giuliani: --No, Your Honor. In most urban areas the local prosecutor is anxious for the federal government to take as many of these cases as the federal government can take because of the tremendous burden on the administration of justice. Thurgood Marshall: And there is no burden on the federal department? Rudolph W. Giuliani: Yes, there is, Your Honor, but-- Thurgood Marshall: I thought so. Rudolph W. Giuliani: --there is a sharing. There is a kind of attempt to share the responsibility and to share the burden. This would be one that would easily fall within a matter of federal interest. The amount of money was $10,000. It was not de minimis. In some of the drug cases there are guidelines that are worked out so that it has to be either a conspiracy case or a case involving a certain amount of drugs for it to involve the federal government and in some of the embezzlement cases U.S. Attorneys have dollar figures that they use to try to delineate the difference between whether the federal government will take the case or the state government. But by any standard that I know of a theft of $10,000 would certainly be enough for a United States Attorney to prosecute it anywhere. William J. Brennan, Jr.: If this savings and loan association had not been federally insured, could there have been a prosecution under this statute? Rudolph W. Giuliani: I do not... The statute was expanded in 1950, Your Honor, to cover additional institutions, and it is not limited just to institutions insured by the FDIC. There are a certain number of banks that are not covered. I am not exactly certain what the additional criteria would have to be. William J. Brennan, Jr.: Not all banks but some savings and loans institutions, I think, are purely state institutions-- Rudolph W. Giuliani: That is correct. William J. Brennan, Jr.: --without any federal insurance. I just wondered on the face of the statute any bank would seem to mean that you could answer my question yes, but I wondered-- Rudolph W. Giuliani: I think that is further defined, Your Honor, to include only banks that are federal reserve banks, federally charted banks or banks that are insured by the federal government in some way. There are very few banks left that-- William J. Brennan, Jr.: --Any bank in this statute has been so limited? Rudolph W. Giuliani: --I think it has been, yes, Your Honor. Byron R. White: How has it been limited? It has not been limited by a amendment of the statute, is it? There has been a construction? By a definition somewhere? Rudolph W. Giuliani: Yes, further on in the statute, Your Honor, 2113(f) as used in this section the term bank means any member bank, federal reserve system and any bank, banking association, trust company, savings bank or other banking institution organized or operating under the laws of the United States and any bank the deposits of which are insured by the FDIC. So it would not be... There are very few banks left in that category. Byron R. White: Well, if that were not the case, why it would apply to any bank and it would not make any difference how this case came out. Whatever the reach of this statute it would reach any bank. Rudolph W. Giuliani: That is correct. Your Honors, there are four principle reasons why we urge this Court to affirm the decision of the Fifth Circuit. First of all the plain language of this statute clearly reaches this conduct. Any ordinary person reading this statute would assume that this person's misconduct was covered by it, and there is no issue here of fair notice or in some way the Petitioner's being treated unfairly because he might have misunderstood what the statute meant. Secondly, the legislative purpose evinced by the 1937 Congress clearly covers all forms of taking from a federally insured bank. That is exactly what happened here and that interpretation, the government's interpretation is in line with that purpose. Third-- John Paul Stevens: May I interrupt right on that point? The footnote your brief quotes, I guess it is a note which I have not read but points out that Chairman Sumners of the House Judiciary Committee in 1934 sought to limit the expansion of federal power just to those situations where there was not really a strong showing of need. I am curious to know and perhaps I should not take your time, but was he still chairman of the committee in 1937? Rudolph W. Giuliani: --I believe he was. I will check that but I believe he introduced the '37 legislation as well. John Paul Stevens: That is why it would seem to me... I wonder if he thought it was as expansive as the government's argument would make. Is that consistent with the views he seemed to be espousing in '34? Do you think maybe he changed his mind? Rudolph W. Giuliani: Well, I actually do not think you have to say that in '37 you need an expansive interpretation of the language of either the statute or the legislative history, just a common sense interpretation of it. The plain meaning of the language clearly covers the misconduct and the '37 Congress was clearly intending to protect banks, federally insured banks, broadly against theft. So I don't think-- John Paul Stevens: And more broadly than '34? Rudolph W. Giuliani: --That is right. John Paul Stevens: The only example that was given, and am I correct, and it is the only example that was given was the larceny example? Rudolph W. Giuliani: It was an example that would have constituted if you use the common law distinctions of common law larceny. However, Your Honor, Chairman Sumners never displayed any interest at all or any concern about whether larceny was defined as common law larceny or taking by false pretenses. He was concerned about in '34 limiting it just to robbery. John Paul Stevens: Right. Rudolph W. Giuliani: But in '34 or '37 there is absolutely no concern at all evidenced as to whether it should be common law larceny or larceny by false pretenses. In summation, the views have now been... This question has been passed on by just about every Circuit. I believe nine Circuits have either held or expressed their viewpoint on this, and the split for whatever it is worth is six to three for the government's view. But also the most recent decision and I believe the best considered decision is the Hinton case which was decided after our brief in the Second Circuit and the Simmons case lay out the legislative history very clearly. Finally, to reintroduce these distinctions would just create unnecessary, needless distinctions that have no purpose any longer. It would become difficult to charge under this statute in the sense of bringing an indictment. It would be difficult to charge a jury as to the distinction between possession and title. It would also raise unnecessary issues on appeal that have nothing to do with the underlying equities of why theft or why protection of federally insured banks should be a federal crime. For all those reasons and for the others that we mentioned in our brief, we ask this Court to affirm. Thank you very much. Warren E. Burger: Very well. Do you have anything further counsel? Roy W. Allman: May it please the Court. Everything he said was true. The government is arguing what the statute should say and maybe what the law should be, but I am arguing what the law is and what Congress intended the law to be specifically in the development of this law. This law has been specifically expanded and amended and nowhere in all this time since 1934 has Congress taken upon itself to say it covers the crime of false pretenses. It has added larceny and burglary. The government used to argue in Jerome in 1943 it applied to common law larceny specifically. There is no question about that but the definitions are not important. What we have to decide here is the ambiguity of steal and purloin. Is it expansive to the point where it covers crime by false pretenses and the answer is no. Sumner specifically addressed that issue saying he wanted to confine the extension of federal power to those situations where the need to supplement state and local law enforcing agencies had become imperative. It was an emergency-type statute to eliminate bank robberies. It is the bank robbery statute, not the thing that is covered by state law and the statute has not run on a state law in this case with regard to the fact that a man did commit a crime by false pretenses. That is my whole point in this case. 2113(b) is not an expansive statute. It is a narrowly defined and specifically drawn federal statute that does not approach and control for that crime. Thank you. Warren E. Burger: Thank you gentlemen. The case is submitted.

William H. Rehnquist: case is submitted We'll hear argument next in Number oh oh five eleven, Verizon Communications versus FCC Worldcom versus Verizon, FCC versus Iowa Utilities Board, Iowa Utilities Board versus General Communications. Mr. Barr. William P. Barr: Mr. Chief Justice, may it please the Court. I'd like to start with a brief illustration that I think will help crystallize the legal issues, both the so-called forward-looking issues and the historical cost issues. The illustration itself self starts with a forward-looking perspective. Now, any firm that operates and builds a network incurs three costs going forward. Let's say I, the hypothetical new entrant capable of coming in today and instantaneously deploying the most efficient network possible today, I would have to expend my baseline facility costs. And let's say the FCC is right. Let's say that costs about a hundred and eighty billion dollars to reproduce the system today from scratch. Then I would face my operating costs that are dictated by the network that I just built. Let's say those are seventy-five billion dollars a year. And then I would face the incremental capital investment that I would make each year to upgrade and expand the network. Let's say that's thirty billion dollars a year. Now, let me show why under TELRIC no firm that actually makes expenditures can recover them. Anthony M. Kennedy: What what w- what was your second cost, the seventy-five? William P. Barr: The seventy-five is operating costs... William P. Barr: dictated by the network... Per year? Per y- William P. Barr: that I've deployed. Anthony M. Kennedy: Per year? William P. Barr: Per year, which is how much our operating costs are per year. Antonin Scalia: And the first was was the... Speaker: Building the network from scratch. Antonin Scalia: not the not the not the debt debt service on building it? William P. Barr: No. Antonin Scalia: But the building it. William P. Barr: Yes. Antonin Scalia: That's a o- that's a one-time cost. Speaker: Yes. William P. Barr: That's the sunk capital... Speaker: cost. David H. Souter: depreciated figure, the one hundred and eighty... Speaker: No. I'm starting I'm starting, William P. Barr: yeah. Speaker: today. William H. Rehnquist: W- You you've presented three questions. Speaker: We- William P. Barr: I'm going to show it's devoted to all three, and I'm going to show how TELRIC does not, going forward, permit the recovery because it bases compensation, for someone who has already expended money on the network, on the imaginary cost structure of a hypothetical entrant who can be unconstrained and who's capable, at any given time, of instantaneously deploying and ubiquitously deploying a brand new network that's the most efficient at that point. Speaker: But we we've said in in... William H. Rehnquist: in a number of cases, going back fifty years, that if you're talking about an a unreasonable rate of return or a taking or something that has constitutional implications, you you can't attack the method because different methods can work out differently. William P. Barr: Well well, Your Honor, I think that what the Court has done is made distinctions between ends and means. William H. Rehnquist: They're probably going to be set by by State commissions, are they not? William P. Barr: Excuse me, Your Honor? William H. Rehnquist: Aren't aren't these costs and fees going to be ultimately set by State commissions applying the FCC rules? William P. Barr: The rates themselves will be set by by the State commissions, implementing a methodology, and we are complaining about... Speaker: the methodology because... William H. Rehnquist: what the cases say you can't do, it seems to me, going back to the J- Stone's opinion fifty years ago, the opinion of the Court in Duquesne, that you can't attack the methodology unless you can point to some something wrong in the actual fee that you're allowed or the rate that you're allowed. William P. Barr: Well, Your Honor, I think that the Court has always reviewed methodologies. Speaker: Excuse me, ju- Antonin Scalia: Just a risk? It's I mean, but there's always a risk, I suppose, until you get the final determination by whoever the ratemaker is. William P. Barr: Well, if if the if if we are correct that we are entitled to a fair opportunity to recover our costs, and the Government decides that they're going to spin a roulette wheel, I can't come in and say that's a problem? That exposes me to risk? The reason we have why do we have methodologies set in the first place instead of later r- instead of later proceedings that, We have them to set up front a promise to pay that sets investor expectations and ensures that the users, not the Government, is going to end up footing the bill. Speaker: But n- nu- William H. Rehnquist: numerous cases have said that m- he- his, th- the ratemaking agency is not required to follow histor- to adopt historical costs as the method of fixing rat- William P. Barr: That's the method, but the objective has to be an opportunity of getting me back my costs. Speaker: Duquesne said, but the... Anthony M. Kennedy: different from previous rate cases in that previous rate cases, the expenditure has been made and the question is d- fair compensation, just compensation. Speaker: No. I'm saying that all the... William P. Barr: No. Anthony M. Kennedy: But but that's true in any ratemaking case. Speaker: Right. Anthony M. Kennedy: Chief Justice and Justice Scalia are saying our our cases say we have to wait to see what the rate is. Speaker: N- No. Anthony M. Kennedy: position was, well, this is different because we have an initial outlay that we're required to make now. Speaker: may maybe I misunderstand your argument. William P. Barr: The reason we have methodologies and the reason I'm entitled to know that I have a fair opportunity to recover it is that I shouldn't be forced to spend money, to lay out money unless I have a fair opportunity to get it... Speaker: back. David H. Souter: whole argument is assuming that by adopting this particular methodology, it is some kind of a necessary conclusion that at the end of the day, you're going to be getting less of a return than you would have gotten if an historic cost methodology had had been employed. William P. Barr: Well, actually, y- you know, we do know whether it's so. Speaker: But but... David H. Souter: then why haven't you come in telling us a- a- about rates that you were getting that in fact are are bleeding you dry. Speaker: Well, because we're not com-, well, William P. Barr: there are two reasons. Speaker: in the methodology. David H. Souter: could understand your argument if that systemic defect had a , by by some logical necessity, the conclusion of compensating you for what, on traditional standards of review, would be a confiscatory rate. William P. Barr: Yes. David H. Souter: But there is no such necessity that I can find in your argument. William P. Barr: There are... Antonin Scalia: You you don't concede that necessity, do you? Speaker: No, I don't. But there are... Antonin Scalia: Otherwise, you would think that a that s- that spinning a, spinning a wheel of fortune would be an adequate methodology. William P. Barr: Right. Speaker: Rates, Speaker: No. You wouldn't. You wouldn't concede that. Antonin Scalia: that that we would not accept a spinning wheel as a- a- as being adequate, a- although spinning a wheel might give you compensation, it might not give you compensation. Speaker: In in... William P. Barr: in in the Duquesne case, the Court said even a small shift in methodology warrants a p- an increase in the risk of premium because you are always entitled to get pay for wh- to whatever risk you're exposed to. Speaker: There are two things on the face of this order... David H. Souter: and where does the increase in the premium take place? It takes place in State ratemaking, doesn't it? William P. Barr: Th- The problem here i- i- the problem here in this order... Speaker: there are two... David H. Souter: correct, isn't it? That's that's that's... Speaker: No. The di- the f- William P. Barr: Th- The the decision took place in the Federal proceeding, and it took place in paragraph six eighty-eight and seven oh two of the order. Speaker: we pointed out... William H. Rehnquist: Where do we find them? William P. Barr: Joint appendix three eighty-five three eighty-six and joint appendix three ninety-five. Antonin Scalia: B- If if all of that is true and you're exposed to so much greater risk, I assume that your costs of capital will be much higher. Speaker: The States are... William P. Barr: the s- the the issue here is the cost of capital in the UNE business, our wholesale business. Speaker: compensation other than historical... John Paul Stevens: seven oh two as saying what you say it says, Mr. Barr. William P. Barr: Well, Your Honor, it it it it does say that y- you use you start with the the current rate of return and the current depreciation. John Paul Stevens: Correct. William P. Barr: It says that we bear the burden in the State proceedings of showing a business risk, and then it goes on to say that the business risk relates to actual competition. Speaker: four and five... John Paul Stevens: point Justice Scalia made, that we recognize the incumbent LEC's are likely to face increased risks o-, no we may also some, we- u- by reason of the increased cost of capital. William P. Barr: Yeah. William H. Rehnquist: But that's true of any utility in those cases that we've we've decided over the... Speaker: years. William P. Barr: They don't. Speaker: they apply their hypoth- William H. Rehnquist: who who is they? William P. Barr: The FCC... Speaker: Okay. William P. Barr: Okay. Anthony M. Kennedy: Is the Government going to tell us that there are other ways you can recover that cost through depreciation or... William P. Barr: No, because the thing they're depreci- the thing they're depreciating is the TELRIC price. Anthony M. Kennedy: Are they going to tell us you get it back on t- the cost of capital? Speaker: No. Anthony M. Kennedy: the same because it's just the capital based on the... Speaker: TELRIC... William P. Barr: Their briefs talk about cost of capital. Speaker: they take, excuse me? Antonin Scalia: Can you get it back in costs of capital? What costs of capital do they allow you? William P. Barr: They allow the cost of capital that exists in a closed market. Stephen G. Breyer: But your your point there the answer Justice Scalia's question, I take it, was forgetting your first problem that's your first problem. Speaker: Right? Stephen G. Breyer: The one you brought up at the beginning. Speaker: Correct. Stephen G. Breyer: that they're pretending actual competition is what makes the difference, but what the problem arises out of is the fact that they're pricing on a hypothetically perfectly competitive... Speaker: Right. Stephen G. Breyer: that point were wrong, then the answer to Justice Scalia, I take it, would be, there's no other problem. William P. Barr: The rule says no. Stephen G. Breyer: The r- William P. Barr: But but if you change the rule, Stephen G. Breyer: Yeah. William P. Barr: you theoretically could do a high enough rate of return. Speaker: problem. Antonin Scalia: say no? Gi- Gi- Give us the the exact text where the rule says no. William P. Barr: Okay. Antonin Scalia: This is yours... Speaker: I had also... William P. Barr: asked i- I, it's not in the record. Speaker: paragraph... David H. Souter: this is on this is at three ninety-five of the joint appendix? William P. Barr: Yes. Speaker: by the FCC... Anthony M. Kennedy: t- show us the language... Speaker: there? Speaker: Where? What's the language? William P. Barr: That the s- that the existing rate of return and existing depreciation are reasonable starting points. Speaker: Starting... Antonin Scalia: point? Speaker: Yeah, starting points. Speaker: seven? Anthony M. Kennedy: Seven oh t- Speaker: Seven oh two. Speaker: Seven oh two. Speaker: Page three ninety- William P. Barr: starting point. Antonin Scalia: Gee. William P. Barr: actual competition. William H. Rehnquist: Now, but you're you're saying rule seven oh two prevents you from ge- getting back what you otherwise should have through capital costs? Speaker: Yes. In fact, they've admitted it in their brief. William H. Rehnquist: w- what language in rule seven oh two are you relying on? William P. Barr: Yes. Speaker: It's not in the record, William P. Barr: but it is a separate order. William H. Rehnquist: Okay. William P. Barr: We recognize that incumbent LECs are likely to face increased risks given the overall increases in competition in the industry, which might warrant an increased cost of capital. Speaker: as if there's instantaneous entry. William H. Rehnquist: page eighty-three A, toward the end of seven, r- rule seven oh two, it says, State States may adjust the cost of capital if a party demonstrates to a State commission that either a higher or lower level of cost of capital is warranted without the commission conducting a rate of return or other rate-based proceeding. William P. Barr: That paragraph I think a fair reading of that paragraph and the way it is read and applied... Speaker: including... William H. Rehnquist: the language I just quoted to you? How do you distinguish that if you don't if you don't agree with me? William P. Barr: I would distinguish it by then looking at the rule, which is rule five oh five, and that's on joint appendix fifty-one and fifty-two. Speaker: But isn't isn't... William P. Barr: excuse me, Your Honor. David H. Souter: No. William P. Barr: That's right, and that's a... Speaker: Okay. William P. Barr: That's a directive to the State. Speaker: But that is not... David H. Souter: i- if if if if you understand by the distinction what I understand by the distinction, it is not a directive to the State which binds them in the ultimate rate that they can set. William P. Barr: It binds yes, it does bind them. William P. Barr: The rate... Speaker: the rate cannot... William P. Barr: The the the they cannot consider in se- in setting the cost of capital historical costs. Antonin Scalia: Well, Speaker: but they don't have to... Antonin Scalia: consider it if they give you a high enough rate on your TELRIC costs. Speaker: How do they determine what's high enough, Your Honor? Antonin Scalia: past costs were, indeed, ten million, and they're saying, well, it's just five because somebody else could do it for five if they came in right now. Speaker: you're going to be... Antonin Scalia: in just as good shape a- as if they were giving you your fifteen percent on the ten. William P. Barr: And how do they determine h- what's high enough... Speaker: unless you have a standard? Antonin Scalia: basis of what your risk is. Speaker: and it's very... Antonin Scalia: it's a v-, your risk of continuing to put in capital which will which will not b- which you will not be able to have taken into account in setting the rate. William P. Barr: Well, I think, you know, y- your concurrence in in in Duquesne, Justice Scalia, made a v- very fundamental point, which is you can't talk about return on risk without implying a standard. Speaker: It's the risk I'm not going to... William P. Barr: be able to recover my capital. Stephen G. Breyer: Right. Speaker: But now, I'm sorry. In... William P. Barr: looking at what my capital is in relation to what you're allowing... Speaker: Right. Stephen G. Breyer: That may all be true, and I have only one question to ask, and it be and I'm asking it. William P. Barr: That was mixing the apples and oranges. Speaker: So, Stephen G. Breyer: what you're saying is in response to what I said, that I am wrong in saying that the TELRIC set depreciation, capital return, and other numbers, I am wrong in saying that they will earn you a fair rate of return on a hundred and forty billion. William P. Barr: Correct. Stephen G. Breyer: And I can find that in the... Speaker: is there anything on that in the record? Stephen G. Breyer: No. William P. Barr: T- Well, by using the same depreciation schedule... Stephen G. Breyer: Mhm. William P. Barr: and hypothesizing a new network, Stephen G. Breyer: Mhm... William P. Barr: that reduces my e- my, that reduces my capital charge. Stephen G. Breyer: The capital charge will fall from a hundred and forty billion. William P. Barr: No. Speaker: because in... William P. Barr: five years I have to buy a new switch, and I strand what I haven't yet recovered. David H. Souter: But you're saying the commission sets the depreciation period and binds the State commissions... Speaker: by that? William P. Barr: the, well, yes. David H. Souter: And the commission says, five year depreciation a ten year depreciation, not five, or five not ten the That's the commission fo- i- forces that on the States? William P. Barr: The, Yes. Speaker: Can can... William P. Barr: depreciation... David H. Souter: Okay. William P. Barr: Yes. Speaker: If, This is... William P. Barr: this is a separate proceeding, Speaker: but it's... William P. Barr: their application of TELRIC. David H. Souter: Okay. William P. Barr: In the universal service. Speaker: the rate of return must either be... David H. Souter: What what are you reading from? William P. Barr: Paragr- Paragraph two fifty of that order. Speaker: it's published opinion, but it's not part of the record. Speaker: It's not in the record? William P. Barr: joint appendix, but it's a pub- i- it's the parallel proceeding to this where they were setting TELRIC for our universal service prices. William H. Rehnquist: w- o- Or or the or the State prescr- was this last part, or the State prescribed rate? Speaker: Retail rate. The retail rate. Yes. William P. Barr: I- It has to be either the Federal interstate, that's a retail rate. Speaker: there... William P. Barr: State's prescribed rate of return for intrastate intrastate services. Speaker: on the... David H. Souter: these are rates of return. William P. Barr: Well, the next paragraph, paragraph five, says that we agree with those commentators that argue that currently authorized lives should be used because the high cost areas are unlikely to face a serious competitive threat. William H. Rehnquist: Well but, What part of footnote eight are you relying on? William P. Barr: That second consideration is notwithstanding the incumbent's contrary suggestion implicit in any determination of the true economic cost of capital. Speaker: costs. You can't just... William P. Barr: make up a value... Speaker: for it. William H. Rehnquist: here no property is taken in the condemnation sense of the word. Speaker: is it? William P. Barr: No, that's wrong in two respects. Speaker: Well, have they done so? W- is... William P. Barr: percent of our lines have been taken in this respect. Speaker: Yes, but i- i- William H. Rehnquist: i- I don't think it comes under the Just Compensation Clause. Speaker: Compensation Clau- William P. Barr: Your Honor, I respectfully disagree because I think that the reason wh- w- when you dedicate property and there's a taking, the reason the Government has to come up with a methodology to pay is precisely because it has to promise to pay at the point of the dedication. Speaker: and this takes us... Antonin Scalia: every breach of contract by the Government is a taking. Speaker: I mean, every time... Antonin Scalia: Every time the Government enters a contract, it creates an expectation, and whenever the Government breaks a contract, it's a it's a... Speaker: taking. William P. Barr: Your Honor. Antonin Scalia: Compelled because you agreed to it. Speaker: return. That was the deal. William P. Barr: Right, a- a return in order to give us a fair opportunity to get our money back. Ruth Bader Ginsburg: Mr. Barr, may I ask, o- one piece of this case is you made this investment for your local telephone business. Speaker: this. William P. Barr: These use the same facilities. Speaker: But you're... Ruth Bader Ginsburg: getting back the lion's share. William P. Barr: Well, yes, but it's, that's like going to GM and saying give away your... Speaker: Chevys because you're still making money. Ruth Bader Ginsburg: piece of it that I'd like you to tell me how it fits in, and that is the quid pro quo of you can get into for the first time a new business, that you can get into the long distance business. William P. Barr: N- No. Speaker: reasonably... John Paul Stevens: argues that the word cost is ambiguous. William P. Barr: Not in the context, i- y- you have cost and you have value methodologies. William H. Rehnquist: Very well, Mr. Barr. Speaker: Mr. Chief Justice, and may it please the Court. Speaker: techniques. Antonin Scalia: think that really means that you could come up here with a with with a with an FCC scheme that says we're going to spin a wheel, and if it lands in the right place, you're going to get a good rate, if it lands in another place you're going to get a... Speaker: Well there might be, there... Antonin Scalia: that is irrational and and does d- i- is not designed to provide a fair rate of return? Don't you have the burden of showing that this is at least designed to to provide a fair rate of return? Speaker: The C-, This Court has said that the challenger of a rate has a heavy burden to make a convincing case that the outcome is confiscatory. Antonin Scalia: You you can't meet that burden with with with a wheel. Speaker: You can't meet that burden with a wheel. You're really saying that... Antonin Scalia: you can come up with a wheel and just say, well, you know, you can't prove that you're not going to get a fair return. Speaker: that... Antonin Scalia: can't be right. Speaker: Well, the the the person who challenges the way the commission is setting rates has to deter- has to present to this Court a- an explanation for why that the system that's developed, wheth- whether it's spinning a wheel or whatever and I I I won't engage in that c- hypothetical because we've got a several hundred page record that looked into various different arguments with respect to various different methods of recovery. Speaker: be based upon the statute. Anthony M. Kennedy: it seems to me that necessarily a hypothetically most efficient market will invariably, necessarily result in a rate that is less than their actual cost. Speaker: Well, no, I don't... Speaker: agree. Anthony M. Kennedy: just that just has to be. Speaker: No, it it does not have to be. Anthony M. Kennedy: Warr- Warranted by what standard? Speaker: By the circumstances and and the constitutional obligation to set a reasonable rate under the statute considering this methodology and limited by the constitutional standard that this Court has articulated as the lowest reasonable rate, a rate that is not confiscatory. Speaker: Are actual are actual... Anthony M. Kennedy: costs re- relevant in determining... Speaker: what's ultimately reasonable? Speaker: Well, this Court has repeatedly said that it would, it has refused to constitutionalize the embedded cost or historical cost formulation. Speaker: Duquesne case. Anthony M. Kennedy: must have some specific standard. Speaker: I t-, That argument is made, but it's not substantiated by anything in the record in in this this long, elaborate TELRIC articulation of of numerous standards, both with respect to cost of capital and depreciation because the very next... Speaker: paragraph... Antonin Scalia: Never mind the next paragraph. Speaker: Well, but that says... Antonin Scalia: higher or lower level of cost of capital is warranted without that commission conducting a rate-of-return or other rate-based proceeding. Speaker: utility has. Speaker: that because that's precisely what it said in the statute. Speaker: I don't care if it's required by the s- Antonin Scalia: statute or not. Speaker: capital that they've invested, Antonin Scalia: w- with a promise by the Government, that they'd be able to get a fair return on it. Speaker: Well, i- u- you may not, Justice Scalia, but the but the the case has been presented on alternative bases the heavy burden that the local exchange carriers must carry here is proving that the embedded cost, historic cost requirement is either in the statute or in the Constitution. Speaker: because... Antonin Scalia: doesn't matter if they if they end up not getting a fair return on billions of dollars that have been invested with the Government's insu- assurance that they... Speaker: that they get a fair return. Is that what you're saying? It... Antonin Scalia: doesn't matter. Speaker: I'm not saying that. Antonin Scalia: And and not compensate investors. Speaker: taken into account. Speaker: its, it that's correct. Speaker: In footnote... Antonin Scalia: depending on on how it's applied. Speaker: Yes. Antonin Scalia: assume assume and and I'm I'm sure you you d- you don't agree with it, but but assume that I that that I think this system has to not just be the spinning of a wheel, but it has to contain in it some some assurance that they'll get a fair rate of return on money that they have invested, with the Government's assurance that that they get a fair rate of return. Speaker: I'm, The problem, Justice... Antonin Scalia: Just just point to me the... Speaker: provision that shows where that will be taken into account a fair at all. Is it... Antonin Scalia: ever anywhere taken into account? Speaker: It is not taken into account what their embedded costs are with respect to portions of their network that may or may not have anything to do with the provision of the service or the network element involved here. Speaker: written. Antonin Scalia: saying some of the costs shouldn't be counted. Speaker: Let's just take... Antonin Scalia: the costs that you agree should be counted. Speaker: Let's just take... Antonin Scalia: the embedded costs that do relate that do relate... Speaker: to these services. Speaker: can't determine what those are. Antonin Scalia: That's always been the... Speaker: case. Antonin Scalia: case with rate ratemaking methodology. Speaker: So, you... Antonin Scalia: you can come up now and say, it's always been so difficult. Speaker: giving co- Speaker: Justice Scalia. Speaker: the local exchange... Antonin Scalia: you've departed from my from my hypothesis, I'm saying assuming that I don't believe that spinning a wheel is okay. Speaker: What... Antonin Scalia: telling me is spinning a wheel is okay. Speaker: No, I'm not saying that spinning a wheel is okay. Speaker: But we refused... William H. Rehnquist: to adopt that in Duquesne. Speaker: Precisely. Antonin Scalia: To say that you don't constitutionalize the prudent investment rule is not to say that any methodology will go, even one that does not enable somebody who has made investments under a commitment from the Government to allow a fair return, to recover that fair return. Speaker: exclusive. Speaker: that's one of the things that I was, that Mr. Barr said that I think the Court would take issue with. Speaker: no. Anthony M. Kennedy: the baseline standard that the utilities are entitled to rely upon? Speaker: They're... Anthony M. Kennedy: not like telling GM to give away Chevrolets. Speaker: The the baseline constitutional standard, at the end of the day, once you can look at the results, is this a non f- confiscatory result. Speaker: also... Antonin Scalia: confiscatory to say that we're going to make you use your capital plant, which costs a hundred and forty billion, and we're going to allow you to depreciate it as though it were only seventy billion? Speaker: Why isn't that confiscatory? Speaker: Court, the t- Congress might have said, with respect to a transportation company, you've had it au- that t- you've had the taxi service all to yourself for all these many years and now we're going to allow other some competition in there, and you and you've got some monopolistic facility, and we're going to let s- your competitors use some piece of it. Speaker: to allow someone else to use it. Stephen G. Breyer: I want to be sure I have a chance to ask you a different question. Speaker: What they wanted to do with the st-, the they wanted to accomplish a number of goals, which are set forth in the preface of the statute to which I alluded to before, which is to reduce prices, to inspire... Speaker: competition... Stephen G. Breyer: I would like a little bit less generality than that, i- if if i- w- i- i- if you can give it to me. Speaker: Well, they... Speaker: one of the important considerations, and it's hard to not... Speaker: deal in some generality, this area does. But one of... Speaker: the important objectives that they hoped to achieve was to develop a pricing methodology that would encourage new entrants to come into the market and pay fees that would allow them to enter the market at competitive rates and, encourage them to develop new... Speaker: Right, Stephen G. Breyer: If that's basically the objective, to get them to enter when they should enter, is that fair? To get them to enter when economically they should enter, not when economically it'd be wasteful for them to enter. Speaker: Yeah, I s-, I think that's a fair premise. Stephen G. Breyer: All right. Speaker: question? Speaker: seems to me that they did try to... Speaker: Fine. Okay. Now, that's what- all right, then you're right where I think you... Speaker: pointed out in your e- in your dissent, your... Speaker: partial dissent... Speaker: in the other other time this case was before the Court, there are a variety of different... Speaker: methodologies... Speaker: that various different economists look at and think that they can accomplish those kind of objectives. Speaker: then we can adjudicate that. All right. Now, Stephen G. Breyer: If that's what they're trying to do, then how could it possibly do that, to write an order that says the depreciation rate and the rate of return that you are going to charge is going to be based upon not what it will cost you, but rather, what it will cost some hypothetical firm that isn't there, let alone saying the same thing in respect to telephone poles, in respect to wires, in respect to efficiency of administration, in respect to a twenty-two percent discount for a competition that doesn't exist? In other words, how does it even come close to answering that question to look not at the cost of this firm, but at the cost of some hypothetical firm that by definition doesn't... Speaker: exist? Speaker: in the first place, we're not talking about replicating an entire firm. William H. Rehnquist: Thank you, General Olson. Donald B. Verrilli, Jr.: Mr. Chief Justice, and may it please the Court. Speaker: we could never compete using irrelevance... Stephen G. Breyer: blank slate. Speaker: to uphold them. I mean, that's... Stephen G. Breyer: basically the argument. Speaker: And if you're going to... Donald B. Verrilli, Jr.: Yes, thank you. Stephen G. Breyer: U- My question, I don't want to distract you because others had a different question had nothing to do with confiscation. Donald B. Verrilli, Jr.: But it it, be if depreciation and cost of capital are set right, it won't do that, Justice Breyer, and I believe that is what Professor Kahn conceded, their expert. Speaker: capital are set. Antonin Scalia: you're not asserting that the States can can kick up the cost of capital rate on the basis of u- of the fact that the utility is not is not getting depreciation on its sunk costs. Donald B. Verrilli, Jr.: It the the s- separate two questions out. Speaker: the risks of operating in the system. So, I think it... Donald B. Verrilli, Jr.: does do what Mr. Barr claims it doesn't do. Speaker: If if that that... Stephen G. Breyer: assuming that, w- his ar- Mr. Barr's argument, I take it, was that paragraph seven oh two put read in any disclaimers you want, and they have loads of them. Speaker: I mean, I take it... Stephen G. Breyer: I may not have paraphrased it correctly, but I think that's... Speaker: basically his point. Donald B. Verrilli, Jr.: That is his argument. Speaker: to... Donald B. Verrilli, Jr.: to the local... Speaker: telephone service. Antonin Scalia: that used to be done all the time, of course, Speaker: Well, what... Antonin Scalia: between local and and long distance phone rates. Speaker: Well, no, but there's a significant, I I'm sorry, Justice Scalia. Antonin Scalia: haven't been pretending to do that... Speaker: for years and years. Donald B. Verrilli, Jr.: but, Justice Scalia, a significant amount of that goes to retail which can't be allocated here. Speaker: it, Donald B. Verrilli, Jr.: it would be a very different place in fact than it is. William H. Rehnquist: Thank you, Mr. Verrilli. William P. Barr: Constitution doesn't dictate a methodology, but what t- it does say is that whatever methodology is selected, it ultimately has to be judged by this Court as to whether it provides us a fair opportunity to recover our costs. Speaker: Thank you. William H. Rehnquist: The case is submitted. The Marshal: The honorable court is now adjourned until Monday next at ten o'clock.

Earl Warren: Number 20, Walter C. Brulotte et al., Petitioners, versus Thys Company. Mr. Irons. Edward S. Irons: May it please the Court. This is an action for an accounting for royalties due under a patent license agreement. The license agreement was not for a single patent but rather for a package or group of patents many of which expired during the license term. The action was brought to collect the royalties for the continuing right to use machines covered by the expired patents, none of the other patents in the package being incorporated into the machines. The Supreme Court of the State of Washington held as a matter of law that parties might contract to pay post-expiration royalties and that there was no legal or equitable reason why they should not do so. The issue basically for consideration therefore is whether that holding by the Supreme Court of the State of Washington was correct. The position of the petitioners is that it is incorrect for two basic reasons. The first reason is that the primary premise upon which the patents laws are based is the constitutional one that the patent shall be for a limited term. Underlying this concept is the further consideration that the patent is granted on condition that when it expires the invention shall be available to the free use of the public and that the patentee is foreclosed from compromising in any way the dedication which was the condition on which he got the grant in the first place. It therefore follows that any attempt to compromise that dedication by the collection of royalties by private contract after expiration is of course contrary and in violation of the primary bargain with the people which the patents represents. And it is that primary bargain with the people requiring the dedication as a matter of law and as a matter of constitutional principle which must control over any private contract which seeks a different result. The second and I believe equally important reason why the decision of the Supreme Court of Washington was wrong is because as has been repeatedly recognized, the subject matter, the invention of a patent which has expired is indeed dedicated, it is unpatented. And so therefore, a private contract which extends the right to collect royalties to that unpatented subject matter is on its face an extension of the monopoly to unpatented materials and derogation not only of the principles of the patent laws but of the principles in antitrust laws as they had been applied in analogous situations. Now, these concepts actually it seems -- Speaker: (Inaudible) Edward S. Irons: Well, the facts Your Honor is this, as I said these licenses are for package of patents. On the face of the license, Your Honor, there are 12 patents. Speaker: (Inaudible) for other patents? Edward S. Irons: Other patents pending, that's right. Now the Court -- Speaker: (Inaudible) Edward S. Irons: Yes, that is true. Speaker: That isn't used in the machine? Edward S. Irons: It isn't used in the machine. It never was used in the machine and all the patents that are used in the machine have expired. Speaker: (Inaudible) Edward S. Irons: None of them are used. They have ever been used in the machines. Speaker: How many (Inaudible)? Edward S. Irons: Subject to correction Your Honor, I think three or four. Speaker: (Inaudible) Edward S. Irons: Well, the record doesn't support seven. That's why I said three or four. I don't mean to battle with the respondent on the fact point. I can see three or four unexpired pending patents there within. Speaker: (Inaudible) Edward S. Irons: Actually, there were only seven actually used. They have all expired. They expired long before the end of the contract term. That is why the court below found that the real consideration for the continued payment of the royalties had to be for the expired patents. The unexpired ones were never used. I -- I'm going to come to that point in just a little bit more detailed because it is a rather important one and I think perhaps we might as well meet it right now. This situation Your Honor is characteristic of so-called package or fee licensing which is widespread in the industry. This is not a -- an isolated for a unique situation. It is conventional in the industry for an owner -- of the owner of a basic patent which will expire in a stated time, to license it in a package with either unexpired patents or with the trademark or with know-how or with some form of right which exist in perpetuity. Now, the appeal of the original package normally is the basic patent or patents. The ex -- the royalties continue however undiminished throughout the term of these agreements and long after the basic patents expire. Speaker: (Inaudible) Edward S. Irons: I would say normally that is not necessarily so. It's usually based on the gross business to the licensee whether or not there is a use. Although in some cases, it is based on use. Speaker: In this case, it was quite (Inaudible)? Edward S. Irons: In this case, it was based on use. Yes, Your Honor. Speaker: (Inaudible) Edward S. Irons: Yes, Your Honor. I will certainly do that. I want to finish my comments that I was making on these package licenses and essentially it is this. A patent owner has a basic patent or patents which are needed. These are the appeal to sell the license. He does not license them alone. He licensed them -- licenses them in a package with other patents pending with know-how with trademarks which may exist in perpetuity. Now, it is self-evident that the appeal, the reason for the agreement to pay the royalty in the first place was the need for the basic patents. But the terms of these agreements extend long after the basic patents expired. And the royalties continue undiminished on the pretext that there are still some considerations in the form of some patent maybe not even thought off when the agreement was signed but it went to patents which might be pending or trademarks or know-how or some other form of right which may exist in perpetuity. I think it is a simple matter of logic that however much of that consideration was allocable to the basic patents at the beginning, continuous to be paid, there's no provision in these agreements for a reallocation. And certainly, any such arrangement necessarily results in a perpetuation of the tribute paid for the right to use the expired inventions. These are contractual arrangements by which the consequences of the dedication which is the condition on which the patent is granted in the first place are obviated and avoided. These are standard business practices in the sense that there are great many licenses of this type. My position is that -- as this Court has emphasized in a somewhat different context, each patent must stand on its own feet. The person who wishes to acquire a license under the patent must be free to deal with it on its own merit. It must not borrow quality from some other patent by any means, because if it does, this enlarges the monopoly of the patent from which it borrows quality. Manifestly, that's what happened in our case at the bar. There were presumably seven patents that were needed and that's why, the licenses were taken in the first place. The licenses however extended for years after those expired. The Court below found that the others were mere surplus and the parties gave no consideration to those as a part of the package and insofar as the basis for consideration was concerned.And so it recognized that the license did require post-expiration royalties. It expressly held that it did and the obligation to pay them was enforced. Now to specifically answer your question, there was a provision in these agreements in Paragraph 7 which the licensor put in there in anticipation of this very circumstance and it said that the royalty shall continue with an undiminished rate throughout the term regardless of the expiration of any patents. On these particular agreements before the Court, it's not a matter of argument. It's a matter of the actual provisions in the agreement itself. The same principles apply in a more general situation in which I have addressed myself. I want -- now to comment very briefly on another argument which the respondent has made and I think the brief comment is all that would be necessary. It is argued by the respondent that this maybe that they are post-expiration royalties. But these were voluntarily agreed to and they were not coerced and since they were voluntary agreed to it, there's nothing wrong with it. The position of the petitioner is that this is clearly wrong. The constitution in these patent statutes permit patents only for limited terms. This Court repeatedly has held that when the patent expires, the monopoly seizes to exist. That no part of it can be recaptured by any means and that no private contract can extend the monopoly. And so I say, it's just as illegal to extend that monopoly by a so-called voluntary private agreement as it is by any other kind. And it is therefore, not material in the context of collecting post-expiration royalties. The -- whether or not the agreement was coerced ab initio. Speaker: (Inaudible) Edward S. Irons: Well, I don't think it's irrelevant as Your Honor recognized. It is not a case and let's look at the distinction -- Speaker: (Inaudible) Edward S. Irons: But in this sense Your Honor, the payment was -- in that case, with the right to use the machine during the term of the patent. It simply was the payment which was extended and as a matter of let's say economics, there was no payment for the right to use after the patent expired. In these cases, package license agreements are obviously his and that I say is the difference. I say you cannot charge a royalty for the right to use the invention of an expired patent. If you agree in advance that this patent was going to expire on a day certain and I want to use it until it does and I'll pay you $10,000 but I want to -- financially in a situation where I want to spread that predetermined payment over a period of years, I say, there's nothing wrong with that. But I say again, that is not this case. Now, Your Honor asked me in what way these agreements restricted the alienation of the machines I believe. These agreements which are before the Court have an expressed provision in them that the machines which were involved shall not be encumbered in any way and that the agreement shall not be assigned or transferred in any way by the licensees. The result was that when the -- Speaker: (Inaudible) Edward S. Irons: Yes. But he did not permit the transfer unless the subsequent purchaser agreed to the same terms and conditions including the post-expiration royalty payments and he there -- therefore guaranteed to himself the post-expiration royalty payments. Speaker: (Inaudible) Edward S. Irons: That's right. But -- Speaker: You cannot move that if you are (Inaudible)? Edward S. Irons: Well, I think the alienability of these machines, it was sharply restricted and competition in them was restricted because it was necessary for anyone who wanted to sell them to go out and find someone else who would accept the same deal and this is unique. I don't know of any other circumstances where in -- an item of tangible property has been sold under any such restraint. You see Your Honor what happened is, this respondent did not sell the total machine. He sold what he called naked title to it, but pointedly quote, “without the right to use”. So whoever purchase this for 3000 odd dollars add machine he couldn't use. And to use it, he had to take this patent license including the post-expiration royalty provisions of it. And to sell it, he not only had to find the purchaser but he -- they had to find a purchaser who would also take the patent license. Now, it is unique. This is an effort to avoid the normal consequence of the sale of the patented device, and a license arises as a matter of law when a patented device is sold usually. It -- to use the shorthand expression, extinguishes the monopoly and the machine is free of the patent after it is sold. That law was avoided in this case by the sale of the title only, without the right to use and the requirement that you get the right to use, you must take this license which extended the monopoly of the patent. I have, I think treated the basic arguments which are advanced by the respondent, namely the voluntary matter and the matter of the royalties being justified as consideration for unexpired patents. I want to conclude by pointing out that this Court in every context in which it has appeared has recognized that the dedication of a patent is absolute and cannot be compromised. It happened early in the Law of Double Patenting which precludes a second patent for the same invention on exactly these grounds in the Singer and Kellogg cases. It was held that when a patent expired, the public right to use the invention including the very form on which it was produced under the patent passed to the public, together with the right to use the name. Singer in one case, (Inaudible) in the other so that the right would not be qualified. In Scott Paper Company, it was held that a doctrine of estoppel arising under common law contract which would normally have prevented the assignor from challenging the validity of the signed patent did not operate because if it were permitted to operate, the primary public right would be compromised, and of course the later cases are Sears and Comco which were decided in February of this year I believe, once they held that a state could not grant patents of its own or otherwise operating in such a way to compromise the paramount public right in the subject matter of a patent which had expired or in that case had been invalidated. Also, as I have said obviously under these decisions that which was once patented but it is no more is unqualifiedly in the public domain, a contract which extends the monopoly to that material clashes head on with the doctrine that the antitrust laws forbid, the extension of the patent monopoly by contract to unpatented materials. Thank you. Speaker: (Inaudible) Edward S. Irons: Well, pointedly Your Honor, the contract was for an original term perhaps significantly for 17 years which is the same term as the patent term. Well, the patents were no issue on the same time it just -- perhaps is coincidental. The first agreements were entered into in the early 40's. At the very beginning, all of those agreements extended to a time subsequent to the expiration of any patent then issued and certainly, passed the expiration of any patent then used in the machines. On the face of it, because of Paragraph 7 which provides that the royalty shall continue undiminished regardless of the expiration of the patents. The contracting terms required payment of royalties after expiration for the right to use the inventions of the expired patents, the expired ones being the only ones ever used in the machine. When it -- after they expire, this obligation as private contractual obligation to pay royalties for the right to use the subject matter of an expired patent is in violation of the fundamental principle that it patent this for a limited term, and that when it expires, the inventions is dedicated. Have I answered you at all? Speaker: (Inaudible) Edward S. Irons: Oh, if he had built the machine himself, he's still would have had to pay royalties. Speaker: (Inaudible) Edward S. Irons: And he had to pay royalties whether he used the machine or any machine or not. And he had to pay royalties that based on the extent of the use of a portable hop-picking machine, so it's the specific one so, but in any event, a minimum royalty even if he junked his machine and he couldn't cancel. He has no right to cancel during the term. The court below expressly held that so he would have accomplished nothing by building his own machine. He will still under this royalty obligation at least just to the minimum which was substantial in the economics I believe of the hop farmers. It was $500 a year. There were 200 of these contracts, 200 contracts at $500 a year is a substantial amount of money. Speaker: (Inaudible) Edward S. Irons: Well, that I think is based on the -- on an answer given by the respondents on trial record. The only fact I can answer Mr. Justice White is the royalty apparently was reduced from $5 to $3.33.B But there's nothing in the record that supports as far as I can tell this choice except this one answer of the respondent Thys and I really -- what -- Speaker: (Inaudible) Edward S. Irons: Well, if Mr. Thys had arranged -- Speaker: (Inaudible) Edward S. Irons: Well, I'll answer quite -- of course any questions. Let me make my point this way. I don't think the terms or the length of the terms is important if to any extent it goes beyond the expiration of the patent and requires the payment of royalties for the right to use a patent which has expired. Now, if Mr. Thys meant by that that he would have limited his agreements so that no royalties became due for the right to use patents after the expired, then of course there's no problem. But a mere shortening of term doesn't necessarily mean that it's coincident with the expiration of the patents. Speaker: (Inaudible) Edward S. Irons: Well, this is the -- Mr. Justice Goldberg's question and it make it down pretty much to matter of form that I think its in a very important matter. If you agree that the price, the fair value for the right to use your patent for 10 years, let say its $10,000 and the royalty is charged only for the right to use it during those 10 years, I do not contend that there's anything wrong with that even though, as a matter of economics you say, “Alright, I will let you pay it over 20.” But if you contract and say, “I will let you use my patent. I will charge you a royalty for the right to use it for a period of 10 years after it expires." To get to the $10,000 you have extended the monopoly and this is particularly aggravated when the royalty is based on the extent of use because we get into use after expiration as the royalty based. Speaker: (Inaudible) Edward S. Irons: You mean the right to use them? Byron R. White: (Inaudible) Edward S. Irons: Your Honor, I'd like to treat Hazeltine specifically this way. All Hazeltine held and the statement in Hazeltine is clear was that it was not per se illegal to base royalties on the total volume of the licensees sales. The next preceding paragraph made it clear that what was being spoken off there was existing patents. I read existing to mean unexpired patents. Byron R. White: I agree with (Inaudible)? Edward S. Irons: Was not decided in Hazeltine. My point Your Honor is -- Byron R. White: The use -- the use is not (Inaudible). Edward S. Irons: The use are not lust and I agree, you can -- Byron R. White: (Inaudible) Edward S. Irons: Yes. Let's look at it in another context if I may please. At the beginning there were -- let say 12 patents. Seven were used, some were not used. The royalty rate was fixed at that time at $5 per bale plus $500 a year, minimum royalty. This royalty was for package. Obviously, and as the court below I think found, the primary consideration for that royalty was for the patents that were used. It had to be, because there weren't any others used. The court below said there was no interests in the ones that there were not used. Now, they expired. Nobody ever used them. At the beginning, these $5 a bale and $500 a year minimum was in part allocable certainly, if not entirely to the patents which were used after they expire. You have to make a reallocation of this royalty and say, “Now, we're going to pay the same amount of money for patents we don't need.” This was never contemplated in the minds of the parties. They didn't pay anything and had no intention of paying anything for the right to use these patents they didn't need. But more particularly, in the context of package licenses when this Court has considered it particularly in paramount in laws, it is repeated again and again. Each patent must stand on its own feet. You must not borrow quality one from the other. You must be able to deal with them individually in the market place. Certainly, these patents that were needed barred quality from the ones that were -- or it wouldn't be paying for them years after the ones that were needed expired. Byron R. White: (Inaudible) Edward S. Irons: I don't think Hazeltine is relevant to this situation. I don't think it decided at any issue involved in this case. I don't put it off to one side. It's an important case that has been argued by the respondent here, that the issue and the consequences of patent expiration was not decided, and the fact that the unexpired patents borrowed quality from the needed and the expired ones was not considered in that case. Byron R. White: (Inaudible) Edward S. Irons: Yes, sir. Byron R. White: (Inaudible) Edward S. Irons: I would say so, if -- Byron R. White: (Inaudible) Edward S. Irons: Well, it's been almost universally held as I understand it Your Honor that patents which are misused are enforceable. If these patents are misused, they're part of the package. The license agreement on its face says, “It's indivisible”. The agreement on its face went it was drawn required post-expiration royalty contracts. I don't think there's any equity here which would justify a change of that rule in this case. Speaker: (Inaudible) Edward S. Irons: I -- Speaker: (Inaudible) Edward S. Irons: No, I don't agree with that, you -- entirely. I realize I'm overtime, may I answer it? Earl Warren: Yes, go right ahead. Edward S. Irons: The point is this Your Honor. If you're dealing with an individual patent, the problem is simple. It may come very close to that as long as it's done right. But if you have a package of patents, you certainly are going to have to make provisions in that package license so that the royalties are reduced as they expire or some other provision is put into these agreements so that the paramount right and the dedicated invention is not compromised. And in the context of a package license, it is not a matter of mere draftsmanship, it is a matter of substance. Because when you continue the royalty at an undiminished rate after the patents which were -- the primary appeal expire, you certainly indulge in post-expiration royalties as to those patents. They borrow -- the unexpired ones borrow quality from the expired ones. I won't repeat myself. Earl Warren: Mr. Hutcheson. Elwood Hutcheson: Mr. Chief Justice, may it please Your Honors. We believe that the petitioner's position here is entirely unsound both as a matter of fact and as a matter of law. First, let me briefly clarify several important undisputed factual matters that have immaterial bearing on both of those issues. Under the expressed language of these contracts, the mid-annual minimum warranty of the $500 per machine plus the 4% sales tax was payable irrespective entirely of the standard use of the machines during any year and irrespective of whether the machines were used at all. In other words, it was about the -- for -- particularly of our concern whether the machines were used or the extent they were used the minimum royalties were payable in any event. And the judgment center appealed from here for the -- insofar as they were entered, they cover a number of years. But the judgments that were entered for the years 1957 and subsequent years of -- were only for the minimum royalty not for anything in addition to the minimum royalty. It is undisputed that these two petitioners had hired the use of the competitive larger and newer stationary machine that were owned by their neighbors or their relatives and paid for that use. The -- here, there is no monopoly in hop-picking machines. As a matter of fact, the stationery machines have come into such favor although much more expensive that since 1947, there has been a manufacture or sale of not a single new portable picking machine. On the other hand, the suggestion in the reply brief here that these portable machines had become obsolete is utterly absurd and completely contrary to the record. Fees has not interfered or attempted to interfere in any measure with the use of any of these machines or any of these patented inventions subsequent to expiration of any of the patents. We've not brought any injunction suit or anything of that kind, either as to the general public or as to the petitioners. Admittedly as to -- this is an over simplification, but as to a particular single patent, permit expires admittedly the invention becomes in the public domain and the public has a right to use it and that seems to be one of the petitioner's principle contentions here. That in some way we're interfering with that but we have not interfered with that as to the general public. We have not interfered with that as to the petitioners except merely that we're asking for the payment of certain money by the petitioners, based upon the contracts that they entered into. Hugo L. Black: What is the mutual fact on the file? Elwood Hutcheson: Well, the -- there were several important patents that expired at the end of the 1957 season. In other words, they were granted in 1940 I believe or 41 and expired at the end of the 1957 season. Hugo L. Black: There's no payment made after 1952? Elwood Hutcheson: That is correct, yes. No payments made by either petitioner after 52. Of course, there were by other purchasers but not by the two petitioners here. Hugo L. Black: (Inaudible) Elwood Hutcheson: Well, it varied with different contracts -- Hugo L. Black: (Inaudible) contracts here? Elwood Hutcheson: Yes. And as to Brulotte, it expired at the end of the 1958 season and as to Charvet, it expired at the end of the 1960 season. In other words, it extended only a relatively short time after the expiration of these basic patents at the end of the 1957 season. Here, there were 12 original patents which were listed by number, and title, and by date of issue on the face of the contract, those 12 being all that had been issued up to that time. The contracts also said, other patents pending in addition to the 12, there are -- or first, one of the twelve, the last of the twelve did not expire until after the expiration of these royalty contracts. I'll refer to that again in the moment. There were three additional patents, in addition to the twelve, as to which applications were pending when these contracts were entered into upon which patent were later issued and there were four additional ones that were applied for later by fees, and upon which patents were later issued. And Thys' testimony is undisputed that these inventions covered by these various patents which expired later could have been incorporated and were suitable, and available and beneficial for incorporation in the machines as improvements and additions thereto. Byron R. White: Mr. Hutcheson, (Inaudible)? Elwood Hutcheson: Yes, Your Honor. Byron R. White: (Inaudible) Elwood Hutcheson: Very definitely. They could've utilized several of them if -- thus entirely optional with that, but yes, they were suitable and beneficial for use. Byron R. White: (Inaudible) Elwood Hutcheson: Well -- yes, Your Honor. Of course the manufacturer was willing to help. In other words, they could have -- these additional devices, for example, a new device for thinning crops, more thinner, eliminating the leaves and stems. These were available. They -- it wasn't surely a theoretical academic matter. They were available and whether or not the petitioners or others actually purchase and used them was entirely optional with that. But these were not dead-letter patents any of them, they were actually used by large numbers of people. Byron R. White: Were they still (Inaudible)? Elwood Hutcheson: Were these patents on the -- Byron R. White: You can use the -- and based on the same (Inaudible)? Elwood Hutcheson: Yes. That is -- the contracts were all of the same general type. William J. Brennan, Jr.: Well, this is a single contract I believe. Elwood Hutcheson: Yes. William J. Brennan, Jr.: That is all these patents go as -- Elwood Hutcheson: Yes. William J. Brennan, Jr.: -- pending as well as expires (Inaudible) -- Elwood Hutcheson: That is exactly right, yes. William J. Brennan, Jr.: And your position is that the stipulation upon (Inaudible). Elwood Hutcheson: It is my position -- yes, Your Honor. The quid pro quo referred to by the petitioner actually was -- the contract is elementary, it should be given a -- for reason -- reasonably possible in lawful interpretation, just as a statute should be as reasonably possible construed to be constitution -- in such a matter is to be constitutional. And as I see it, the benefits that were received by the petitioners, another similarly situated, was the right which the general public did not have without being subject to infringement suit, the right to use any or all of the existing or future of these patents. Byron R. White: (Inaudible) Elwood Hutcheson: Your Honor, my answer to that is that it would not have been practicable where we are concern with a single machine and additions and accessories to a single machine. It would have been very impracticable to have -- had a reduction of the royalty as time went off. In other words, that if there were a large number of items used separately and independently, that might have been practicable, but it was not practicable to this kind of a situation where we were concern with a single machine and additions on accessories too.And I submit that legally it was not necessary to do so. In other words here, before the expiration of any of these patents, these parties voluntarily entered into this contract. If the farmers had had the cash to make a full payment not only of Lindleman's charge for manufacturing the machines but also the Thys' patent royalties at the time of original purchase of the machine, well good. But this patent financing arrangements was necessary from a practical standpoint. Byron R. White: exactly Elwood Hutcheson: Well, if I understand you correctly, I would say no. In other words, I was going to mention that. But here, it is undisputed that neither these petitioners nor anyone else ever requested a license limited to certain specific patents or payable in any different manner, in other words, payable in larger amount for shorter periods. Byron R. White: (Inaudible) Elwood Hutcheson: No, I think not Your Honor. I -- I'm arguing of both -- Byron R. White: (Inaudible) Elwood Hutcheson: Yes. Yes, Your Honor. In other words, it is my belief that under the actual fact as they exist here, undisputed on this record, that the Court should not even reach this legal question as they are presented here. In other words, that is my first contention which is a factual matter based on the record of the evidence here. Secondly, it is my -- Earl Warren: We'll recess now Mr. Hutcheson. Elwood Hutcheson: If Your Honors please, I wish to emphasize that not a single decision of this Court cited by petitioners is a patent royalty case. They are patent infringement, injunction suits or antitrust suits or something of that kind and the only one or two decisions of lower courts that they have cited are royalty cases. I'd like now to refer to the Hazeltine decision of this Court because I submit that it is conclusive. It was a royalty contract case which provided for a royalty based on a percentage of the total gross sales of the licensee including both patented articles and unpatented articles, plus secondly, a -- an annual minimum royalty not of a measly $500 as in this case, but $10,000 per year annual minimum royalty. And that this Court affirmed a summary judgment granted by the court below in favor of the plaintiff and upheld the legality of the contract and the royalty arrangements in both respects. The same defenses were made, misuse of patents, violation of antitrust law and so forth. To be sure if one of them -- and I say if the Court had discussed at greater length the specific question. But the record in that -- the question necessarily was decided even though not fully discussed, I submit, the record in the Hazeltine case shows that a large number of patents, I believe about half of them had expired and others had been invalidated. The Court there emphasized, which is true factually in this case that there was never any request of a licensee for a different kind of royalty arrangement and/or refusal to give a different kind of royalty arrangement which is absolutely the fact here that that's undisputed. Either the petitioners or anyone else ever requested anything different. And to suggest, as petitioners do, that if I may say so, this Court did not know what was doing or that there was an oversight in making a decision, I submit is utterly absurd because the issues were directly raised in each of the three courts, including this Court, and especially, in view of the dissenting opinion which expressly referred to the fact that the case involved, expired patents, and invalidated patents and the dissenting opinion in that connection citing the Scott case which is -- which petitioners principally relied -- rely on and had been decided only five years previously. So, I submit that the Hazeltine case does decide these matters and is conclusive and controlling and has been generally followed in many royalty contracts since that time. And as I read the case, the Court considers in the same category unpatented articles and articles as to which the patents had expired. Both of which would be in the public domain and which is in line with the reasoning of this Court in the recent Sears, Roebuck, the Stiffel case. So, I submit that that -- the case is conclusive. The Court there also distinguished and held inapplicable the line of cases strongly relied upon by petitioners here, the tie-in cases. Well, the Hazeltine held are that those are not applicable at all to this kind of a situation and certainly they are not applicable here because these never insisted or required that unpatented articles or materials they used in connection with these machines. And that is the essence of the tie-in cases so that they are not applicable here at all. I submit that in final essence, this is closely analogous, if I may say so, to a situation of judges or teachers or policeman's retirement pensions. They are deferred of partial compensation for benefits previously received and it seems to me that that is the situation here and certainly there is nothing immoral or against public policy about them. On these matters of public policy, the petitioners rely upon the Scott case -- Speaker: (Inaudible) Elwood Hutcheson: Yes, Your Honor. That is -- I'm contending that were right on the facts but I'm meeting them head-on on their legal contention, if I make myself clear. And what I'm arguing now, I'm assuming arguendo as the State's Supreme Court did that their factual contention is correct. The -- what the Scott case hold is that -- and all that it holds, that was not a royalty but a patent infringement suit and it held that the plaintiff could not enjoin the use of an invention covered by a previous expired patent. There, it had been assigned by the defendant to the plaintiff and they held the defendant was not estopped to raise the defense of invalidity because it was covered by an expired patent. Well, here as I mentioned before, we have not and are not withholding from the public the use of anything. It is merely a matter of dollars and not of use, not of extension of the monopoly or anything of that kind. I submit that there's nothing against public policy at all in an extension of voluntary, neutrally convenient financing arrangement of this kind. On the contrary, it seems to me that for at least two reasons public policy requires affirmance of these judgments. First, it is well settled by decisions of this Court that in the absence of serious public injury or possibly fraud in the state or something of that kind, that public is a paramount -- public policy requires freedom of contract. While here, I submit there is no serious public injury at all in permitting recovery on contracts of this nature. Secondly, the validity and enforceability of arrangements of this nature, I submit is necessary for or certainly desirable from the standpoint of agricultural financing. Farmers like industry have to mechanize. Many of them are small, undercapitalized. If Your Honors strike down a convenient financing arrangement of this kind, it seems to me the effect would be frankly disastrous for undercapitalized smaller farmers or industries. So I submit that this is in accordance with the public policy and should be permitted. Speaker: (Inaudible) Elwood Hutcheson: Well, that is what the contract said. The judgments were not entered on that basis but its true, that's what the contract says. Speaker: (Inaudible) Elwood Hutcheson: Well, they must pay an unpaid balance of deferred compensation for the use and the benefits that they have received previously under the contract. Speaker: (Inaudible) Elwood Hutcheson: I would put it this way Your Honor. I contend that the -- that that is lawful and valid to do that under these circumstances where it is voluntarily entered into long before the patents expired. Secondly, in answer to the question, I would say that in any event we would be entitled to the minimum royalties which is all that we recovered in this case so that Your Honors take that view, the judgment should be affirmed in any event. The -- here, I submit there's no violation of the antitrust laws. There's no illegal price-fixing arrangement or anything of that kind. There is no monopoly because there is a very intense competition of stationary picking machines and there is no unreasonable restraint of a trade or interstate commerce. We don't restrain anybody. We don't try too. We're merely act -- asking that they pay the balance of the agreed compensation or royalties which they voluntarily agreed to pay. The great weight of authority and the better reasoning, I submit, sustains our position and Your Honors, I submit, should adhere to the Hazeltine case. The tax writers, Walker and Ellis and Corpus Juris Secundum and so forth, all definitely state the law in accordance with our position. The lower federal courts are practically unanimous to the decisions of the Third Circuit which I believe are distinguishable which I won't go into now but that is referred to into the briefs. Every state court which has considered the matter has held in accordance with this rule mainly. That -- if a contract is silent on the subject, it is automatically presumed that the royalty obligation terminates at the expiration of the patent. But if the contract expressly provides to the contrary, that is a valid and lawful provision. And that has been generally understood as the law for many years and certainly is not changed by the Scott case which did not even involved royalties at all. Speaker: (Inaudible) Elwood Hutcheson: Yes. That is one of my contentions, yes. I contend that as a matter of law that that would be true under these circumstances. Speaker: But even if you're wrong with that, you (Inaudible). Elwood Hutcheson: Yes, sir, yes. I urge the -- the facts of this case, I submit, do not present that clear cut legal question as petitioners contend. So, I am making both contentions. In other words, the matter of reduction of royalty was referred to here and it is undisputed that originally these contracts worth for $5 per bale, a few years later and before these contracts with petitioners were entered into which involved the resale of these machines, Thys voluntarily reduced it from $5 to $3.33 per bale, 200-pound bales, $3 they paid by October 15th. The $500 minimum royalty remained in the same and Thys testified and it's undisputed that at time, he had two alternatives. He could have reduced the royalty period and if he had, he might have avoided this question but it was considered for the best interest of the farmers instead of reducing the royalty period, to reduce the royalty rate and let it continue for the same period as before. Not extending the period but remained -- the period remained in the same by reducing the royalty rate. The advantage to the farmer has been that out of the economies of the machine picking operation they could pay the royalties and that it was to their advantage to have longer time to do so.No interest being charged. And thereby the amount that they would pay each year would be less which was certainly for their benefit and it is undisputed that that perhaps it did actually occur here. So, here there was no agreement that anyone was not to use an expired patent operation either the petitioners or anyone else. We have merely an agreement to pay money in a manner and on a basis that was not an excessive financial burden on the hop farmers. And these contracts were voluntarily entered into long before any of these patents expired and I submit that they are not against public policy. They are lawful and valid and the judgments appealed promptly should be affirmed. Earl Warren: Mr. Solicitor General. Archibald Cox: Mr. Chief Justice, may it please the Court. Its with sadness that I inform the Court of the death of the Herbert Hoover, the 31st President of the United States, his services to the country both before and after as well as during his Presidency will leave a mark on history and in your -- to our benefit as well as the benefit of those abroad for a long time to come. His death, well not wholly anticipated becomes, I'm sure, is a shock to all of us. I move that the Court as mark of respect to the late President now recess. Earl Warren: Mr. Solicitor General, and also with sadness that the Court receives from you the news of the passing of this Great American. President Hoover had a long and purposeful life. One of dedication, dedicated service to this nation and to the world, people of every race, on every continent of the earth are indebted to him for alleviating much of their suffering which resulted from the two most devastating wars in history. I am sure that they too had mourned his passing as we do. It is appropriate therefore that you Mr. Solicitor General should make this motion and the Court takes some consolation from the fact that it can in granting it pay its respect and veneration to his memory. Accordingly, the Court would transact no further business today and will stand adjourned until tomorrow.

John G. Roberts, Jr.: We'll hear argument this morning in Case 15-9260, Dean v. United States. Mr. Stoler. Alan G. Stoler: Mr. Chief Justice, and may it please the Court: The question confronting this Court is whether a judge can exercise discretion at sentencing in light of congressional directives in Section 924(c) that a 30-year mandatory minimum must be imposed as part of the total sentence. Throughout the Sentencing Reform Act, in the myriad of factors set forth for a judge to consider at arriving at an aggregate sentence that meets the overarching goals of being sufficient, but not greater than necessary. And we submit that there's nothing in the language of Section 924(c) that prevents the judge from reducing the portion of the sentence for crimes of violence. Ruth Bader Ginsburg: We don't have -- John G. Roberts, Jr.: We don't doubt that if the -- the mandatory minimums were out of the picture and all we had was the underlying offense here, that this sentence would be reversed on appeal, do you? Alan G. Stoler: I would -- I would submit, yes. That would -- that would be accurate, Your Honor. But in addition -- Ruth Bader Ginsburg: You said nothing in 924(c), but there is a bar on concurrent sentencing. And reading the statute the way you do would shrink the concurrency to the vanishing point if we add only one day to the 924(c) sentence. Alan G. Stoler: Well, the concurrent provision requires that it does not -- it runs in addition to the predicate offense. But the concurrent language in there is the same language that we would find, for example, in Section 1028A of the statutes, which has that same language, but it goes farther. When you look at the language in 1028A, it follows the same roadmap that 924(c) has. Ruth Bader Ginsburg: But it's 20 years later, right? Alan G. Stoler: It's 20 years later, but -- but 924(c) has -- has been recalibrated over time starting in 1968. And even after 1028A came into existence in two separate times, Congress has changed provisions in 10 -- excuse me in 924(c) to change the types of guns -- Elena Kagan: But just -- Alan G. Stoler: -- and things of that nature. Elena Kagan: Just assume the 1028 for a moment didn't exist and say you had to argue from this language, and this essentially repeats Justice Ginsburg's point, but this language says, "It shall run consecutively, it shall not run concurrently." And your version of this statute essentially allows a district court to negate that language. It's as if that language were not there in terms of what the -- the -- the district court can do. Alan G. Stoler: Well, we -- we submit that the district court has to give some sentence for the underlying crimes of violence, and then they -- Elena Kagan: Well, "some sentence," you know, a day, six hours, whatever it is, but can essentially make that -- that disappear. I mean, you know, it's concurrent plus a day. I mean, that couldn't have been what Congress meant, concurrent plus a day, when it said, "It shall only be consecutive." Alan G. Stoler: Well, Congress, we assume, knows how to write the laws that they write. And they have the ability to strictly limit -- and they have in 924(c) to some extent, as far as it having to be -- Elena Kagan: Well, you're right. The Congress did not say you -- it did not say what it said, in fact, in 1028A. But, you know, sometimes, sometimes the way we try to understand statutes is to say any reading that utterly eviscerates something that Congress clearly did say can't be a good reading. Alan G. Stoler: Well, we would submit that the "in addition to" language is making sure that a separate crime is being separately punished, that being the 924(c) crimes that carry the mandatory minimums, in this case of 30 years. But the -- the language that -- that says consecutive also is -- is meant to say that -- that it can't run with those -- those nine -- those underlying predicate offenses. Sonia Sotomayor: Counsel, during the time the guidelines were mandatory, but afterwards, many, many court of appeals basically told district courts you can't impose a sentence simply because you disagree with the guideline. You can impose it for independent reasons to ensure a just result, but you can't impose it merely because you don't like the guideline. And they monitored that pretty well. That's basically what -- this district court didn't say it didn't like the mandatory minimum. It said instead that it thought a fair sentence was, and that -- that would have been one day, if it could have done it, given that the rest of the sentence, 30 years, was even further beyond what the judge thought was adequate for punishment, deterrence, and all the other factors under 3553, correct? Alan G. Stoler: Correct. Sonia Sotomayor: So it's not negating Congress's purpose if a district court gives one day; correct? Alan G. Stoler: I would -- I would say not, no. Sonia Sotomayor: And one day is a day of punishment, isn't it? Alan G. Stoler: No question as to that, Your Honor. Yes. Sonia Sotomayor: Isn't that your point? Alan G. Stoler: Basically it is that. And the -- we also have to take into consideration you have the parsimony guideline -- or requirement that pervades the whole Sentencing Reform Act. We find in it 3551. We find it twice in 3553A that the parsimony provisions are what's considered as to the total sentence. And when you look at the factors that are set forth within 3553A, within 3551, which talks about the circumstances of the case, in -- in 3661, which says there's no limitation as to what can be considered by a court in determining an appropriate sentence. In light of that parsimony requirement, that ends up in the results that we have. Ruth Bader Ginsburg: Is -- is the -- 924(c) is a statute, it's nothing to do with the guidelines, and it does say sentences have to be consecutive. So I go back to the point I opened with. You are, in effect, asking for a concurrent sentence. Alan G. Stoler: Well, just -- just -- Ruth Bader Ginsburg: Just adding one day. Alan G. Stoler: Well, as Justice Kagan and I discussed, one day is an additional punishment. And one day -- Elena Kagan: She's Justice Sotomayor. Alan G. Stoler: I'm sorry. Wrong end. (Laughter.) Elena Kagan: She was the one helping you. (Laughter.) Alan G. Stoler: I'm sorry. Sonia Sotomayor: This is the -- Elena Kagan: I was the one who wasn't. (Laughter.) Alan G. Stoler: I got my ends mixed up. I'm sorry. But as was -- as was indicated, that is an additional sentence. That is additional punishment that is provided for according to the statutory provisions. 924(c) limits as to it having to be a consecutive sentence, in this case 30 years, but it does not tell as to the underlying crime of violence predicate offenses -- Anthony M. Kennedy: Well, it seems to me that you -- Alan G. Stoler: -- to which is something that should be decided. Anthony M. Kennedy: It seems to me that you have to concede that your position completely negates the -- or can completely negate the effect of 924, but that there are other reasons why Congress probably would have allowed that. And I suppose that's 3553 to take into account all of those factors. So you're saying, basically, that 3553 overrides 924(c), but that -- that -- that's hard to read the statute that way. Alan G. Stoler: And I'm not -- I'm not suggesting that it should be read that way. I think that they're -- they're read together. But 924(c) does have restrictions that require the "in addition to" language and it requires it be consecutive. But there's no way -- there's nothing in 924(c) that limits what the Court can determine as to the predicate offenses as to those crimes of violence. Samuel A. Alito, Jr.: I thought that you were -- I thought that your answer to the Chief Justice was perhaps telling, because you said that you thought that were it not for 924(c), this would be an unreasonable sentence under -- under 3551 and 3553. Isn't -- wasn't that your answer? Alan G. Stoler: Yes. Samuel A. Alito, Jr.: And doesn't that show that Congress, although it generally conferred on district courts the authority under those provisions to determine what is a reasonable sentence in light of the enumerated factors, withdrew that discretion with respect to the component that is covered by 924(c)? So if that's what the -- if that's what Congress was doing, then why shouldn't that entire sentence be ruled out in determining the sentence that is reasonable under the count that is not governed by 924(c)? Alan G. Stoler: Because we don't read 924(c) as being in conflict with -- with 3553(a); you read all the statutes together. And Congress knows -- I believe they know how to -- how to set constraints and set limitations, and they then did so in 924(c) to ensure that a violent crime such as -- as carrying guns in commission of a predicate offense is going to carry a long period of sentence and a severe sentence. And they wanted to ensure, if you look at the history of 924(c) and its -- and its evolution, its recalibration over time, it has made it -- I mean, when we first started off in 924(c), there could still be a -- there could still be a suspended sentence or parole. Sentencing Reform Act took those away. So they recalibrated 924(c) to reflect that, and they've done so over time. And they, again, had the -- the ability after 1028A came into existence to say that you can't consider, you can't compensate for, you can't take into account that -- that, in that case, an aggravated identity theft, but that mandatory minimum sentence when you're making a determination as to that underlying crime of violence. They could -- Ruth Bader Ginsburg: But what about -- Alan G. Stoler: -- have done something; they didn't. Ruth Bader Ginsburg: But what about Judge Lucero's point that Congress can do a belt-and-suspenders operation, as if -- that there was -- there was additional insurance in 1028, doesn't mean that 924(c) shouldn't be read to have a real sentence for the predicate offense? Alan G. Stoler: We would answer that the -- the Congress had the opportunity to do so, and they didn't do so, when they amended 924(c) at least two times since the advent of 1028A. And it's not a redundancy issue, because there, they went forward and said this is how -- they used all the language in 924(c), and they went farther and then put that additional restriction on the sentencing court to make a determination as to the underlying predicate offense that you can't consider that mandatory minimum in doing so. Congress has that ability to do so. They know how to write the laws and they know how to limit sentencing discretion, and they did so to the extent that they did in 924(c). Samuel A. Alito, Jr.: And you think that's a realistic -- a realistic assessment of the way a legislative body works? They -- so we put this in 924(c) Then we put stronger language in 1028, and now we're amending 924. And, well, maybe we better strengthen 924 to make it in line with 1028. Did they have any reason to think about that at the time when they amended 924? Alan G. Stoler: We would submit that Congress has -- Sonia Sotomayor: A circuit court's ruling -- there's at least one, the Tenth, that had ruled in your favor. Alan G. Stoler: That's correct. Sonia Sotomayor: Had it done so by the time 924(c) was amended? Alan G. Stoler: Yes. The decision in Smith came down in 2014. There's also a Sixth Circuit case, United States v. Franklin, that I believe came down in 2007 that -- that postdated the changes in 9 -- in 1028 -- Sonia Sotomayor: Postdated or predated the changes in 924 -- Alan G. Stoler: Came out -- came out -- it came after the changes. John G. Roberts, Jr.: Well, I'll pick up Justice Alito's question, then. Is there any indication that Congress was aware of those court of appeals decisions? Alan G. Stoler: Well, Congress in the past has made changes to 924(c) based upon what courts have done. If we look at the Busic opinion, for example. They -- courts had interpreted that there was no requirement for the consecutive or additional sentence, and they went and they changed 924(c) in -- in response to what this Court had done in Busic. So I submit that the Court -- that -- that the Congress has that ability. If they do make changes to 924(c) in the future, obviously, that would be in -- in relationship to what they feel is -- is the appropriate punishments that must be imposed for the crimes that have been committed. Sonia Sotomayor: How old was your defendant? Do you know? Alan G. Stoler: He was 24 years old. His -- his co-defendant brother was 23 years old. That was -- Sonia Sotomayor: So he would be 50-odd something? Alan G. Stoler: He would -- he -- under the current sentence, he would serve more time than he's actually lived. And if he had -- Stephen G. Breyer: This is something that a direct answer to, because the statutes have changed so quickly that I may have lost track. But the -- but the 3553(b) is what I'm looking at, and that talks about departures. And I take it that the sentence for robbery was a departure. The -- the guideline recommendation for -- and you did sentence the judge under the guidelines; correct? Alan G. Stoler: The judge calculated the guidelines, right. Stephen G. Breyer: All right. He didn't depart from the guidelines. He didn't -- but he did depart from the guideline sentence, which was 48 months or 44 months. Alan G. Stoler: 40 months in this case -- Stephen G. Breyer: Right. Alan G. Stoler: -- Your Honor, yes. Stephen G. Breyer: All right. And he went from there to one day. And 3553(b) says you have to -- I don't know if it's still law -- have to impose a guideline sentence unless the court finds there exists here a mitigating circumstance of a kind or to a degree not adequately taken into consideration by the sentencing commission in formulating the guideline. So you'd look and see their guideline says 48 months, and they departed down to a day for the reason that there was this add-on sentence, the mandatory. Now, is there anything that suggests that the commission did not have that in -- take that into account? In other words, is it a proper factor for departure, viewed not now from what Congress intended, not viewed from the point of view of the statutes you've been referring to, but viewed simply from the view of the commission and the Congress as to when you can depart downward? Alan G. Stoler: Your Honor, I would submit that this is not really a guideline analysis in that the judge made a determination -- Stephen G. Breyer: No. This is a statute. And the statute says, Judge, if you want to depart downward, you can do so if you're applying the guidelines only for a reason -- the words are, to repeat them, a mitigating circumstance of a kind or to a degree not adequately taken into consideration by the sentencing commission in formulating the guidelines. I'm not giving you an answer. It's not a hostile question; it's not a friendly question. It's a question I'd like to know the answer to. Ruth Bader Ginsburg: The -- the sentencing judge did depart downward considerably, because the guideline range was -- Alan G. Stoler: Yes. Ruth Bader Ginsburg: -- here, as in -- Alan G. Stoler: That's right. Ruth Bader Ginsburg: -- what was suggested. He departed downward to 40 from -- what was the range? Alan G. Stoler: It was 84 to 105 months without the -- the enhancement that would be under the guidelines if the guns were present. Ruth Bader Ginsburg: So it was a significant -- it was a significant departure. Alan G. Stoler: And he -- he gave various reasons for making that departure, that variance -- Stephen G. Breyer: But the basic reason was he thought that the mandatory was long enough. Alan G. Stoler: Well, he also -- the judge indicated that the -- the reasons he was considering this was the role that he had -- the role that Levon Dean, Jr., had played compared to the role that his brother had played. He determined that based upon his criminal history and the nature of those convictions that he had. He articulated numerous reasons as to the -- Stephen G. Breyer: But the basic reason, I think it's fair to say, is he thought the mandatories were long enough. Alan G. Stoler: If he could -- if he could have gone to -- Stephen G. Breyer: Let -- let me assume that then. And it seems to me as if I hadn't thought that through till this moment, and I still haven't, the relation of 50 -- 3553(b) It may be you haven't thought it through either. Maybe nobody has, but -- but I mean -- and maybe there isn't one, but -- but I -- I wanted to learn as much as I could if there is a relevance of that. Alan G. Stoler: Well, and I looked at the -- the factors that are set forth under 3553(a), in which the guidelines are one of those factors, the same as policy statements are one of those factors, and they go, I submit, to the overall sentence that the court imposes. And when a judge in this case, it's not a guideline sentence that he's -- he's deciding. He's varying, based upon these 3553(a) factors, those tapestry of factors that the thread of parsimony runs through in which he makes those -- those determinations. Let's look at -- at what those four main tenets of -- of parsimony are. For example, the term -- Stephen G. Breyer: I -- I know 3553(a) That isn't a problem for me. What I'm trying to think of is maybe this is a matter that lies in the hands of the commission. Maybe you could say, well, the commission didn't say you couldn't depart for that reason and, therefore, it is a factor, a mitigating factor not considered by the commission, but maybe the commission, should it choose to do so, could consider it and could say when it could and when it couldn't be, in which case the judge couldn't depart downward. You see, that -- that's -- that's what's going through my mind and there's no point repeating myself. You thought -- you might have thought about it, you might not have. It's a little bit of a side issue. Alan G. Stoler: Well, I -- I -- I'd like to think I've thought about it from the context of -- of looking at the guidelines as a -- as a starting point and as a -- as a determination that helps to -- to guide a court to consider sentencing. But it's just a factor for the Court to consider, and the overall factors that are set forth in 3553(a), as well as 3661, as well as 3551, leads us to consider all of those factors in determining what total sentence should be imposed in this case. The court varied in this instance based upon what he found the guidelines to be, but then there's additional things that he considered, those factors that he looked at to make the determination as to what would be the appropriate sentence to impose on -- on -- on the Petitioner in this case. And any -- any total sentence is obviously subject to appellate review for substantial -- for substantive reasonableness under abuse of discretion stand -- standpoint. So the government, if in this instance, felt that the court could then impose a sentence of -- of one day with the additional 30 years, the mandatory minimums required, and the government felt that that was not a substantive -- substantively reasonable sentence, that's still subject to review by the appellate courts. John G. Roberts, Jr.: How -- how does that normally work, not in a mandatory minimum way, but if you've got three different offenses and -- and you're going to be sentenced on each of them? On appellate review, how is that reviewed? Is it the total sentence or do they go by one -- one, two, and three and say, we think you abused your discretion in only giving, you know, five months for this and then that doesn't affect the three years you gave for that. How -- how does that actually happen? Alan G. Stoler: I -- my understanding is that the -- the -- the appellate review is based upon the reasonableness of the total sentence that's imposed. Now, if there is a portion of that sentence that -- that the court felt that the -- that it wasn't dealt with properly by the sentencing court, then they would address that either for clear error in -- in what was looked at and how the guidelines were applied or de novo as to the applications of the guidelines themselves. So there are those -- those considerations to be made from appellate review standpoint, but the over -- overriding consideration, I would submit, would be the substantive reasonableness for abuse of discretion. Anthony M. Kennedy: In first looking at this case, my thought was that it would be very difficult for the judge to determine what the sentence should be for the underlying crime without looking at what he was require -- or he or she was required to do under 924. But then it occurred to me that judges and lawyers do this all the time. We -- we think of a hypothetical case. Suppose 924 did not exist. What sentence would I give? Judges do this all the time in condemnation cases. We don't look at the value of the improvement. We -- we -- we can look at a problem in -- in an abstract way. So I think nothing that prevents the judge from making the -- quite a proper determination for the underlying offense and said -- then saying, but looking at the statute, it has to be consecutive and the consecutive sentence has been -- the length of the consecutive sentence has been set forth. So I -- I see nothing analytically difficult about the government's position. Alan G. Stoler: Well, that -- I -- I submit, Your Honor, that -- that turns around the determination to be made. The independence -- the -- the separate crime, the separate punishment goes to 924(c) It has to happen. I mean, it has to be put on to that. But the -- the consideration overall as to the underlying crimes of violence still lends itself to -- to discretion by the sentencing -- Anthony M. Kennedy: Well, that's -- that's -- that's -- Alan G. Stoler: Keep that in mind -- Anthony M. Kennedy: That's the question before us. Alan G. Stoler: And I -- and I believe the -- the Court in Smith, United States v. Smith, the Tenth Circuit case that we're relying upon, talks about that. You -- you can't have judges having blinders to look at just the underlying crimes of violence and then -- then doing so as the government is suggesting in this case -- Anthony M. Kennedy: Well, you couldn't under 1028A. Alan G. Stoler: But 1028A has the additional requirement. Anthony M. Kennedy: Well, but you said you can't have this, but you can if we interpret the statute the way the government wants. Alan G. Stoler: My argument is that the -- the Congress could have written the statute to include what they included in 1028A. They didn't do so in this instance. Sonia Sotomayor: Now, in terms of that analytical difficulty, there is inherent in this scheme a bit of double -- a lot of double counting, because the substantive crimes almost always, in trying to judge the severity of punishment for that, you're always thinking of the gun, and -- and that always adds to whatever analytically separate punishment you think should be given for the substantive crime. So there is a little bit of twisting of a judge by saying you have to somehow put yourself in the position of punishing this person without knowing that he's going to be punished for the gun anyway for 30 years, and think of what the punishment should be without that punishment. Because the gun is present in both crimes, correct? Alan G. Stoler: Yes. Sonia Sotomayor: The identity theft add-ons, one is -- for every crime except terrorism is only two years, correct? Alan G. Stoler: Correct, the aggravated identity theft. Sonia Sotomayor: And in many ways it's punishing for a separate activity than merely the possession of identity theft items. Alan G. Stoler: Well, there are -- listed within the statute are the specified crimes that it would apply to, yes. Sonia Sotomayor: Exactly. So the five years is for the terrorism. Alan G. Stoler: In -- in those -- in those instances, yes. I -- I would agree -- I would agree with that, Your Honor. If there are no further questions, I would ask to leave to -- have the rest of my time for rebuttal. John G. Roberts, Jr.: Thank you, counsel. Alan G. Stoler: Thank you, Your Honor. John G. Roberts, Jr.: Mr. Yang. Anthony A. Yang: Mr. Chief Justice, and may it please the Court: Petitioner asked the district court for a one-day sentence on his four non-Section 924(c) felonies, that Petitioner now concedes would be unreasonable without the 924(c) Accepting his position would directly circumvent 924(c)'s longstanding requirement that courts would impose a specified additional and consecutive sentence beyond the punishment for the predicate solely for the choice to bring a gun. John G. Roberts, Jr.: It -- it would circumvent it. On the other hand, it seems to me that if you're talking about 30 years for an offense that a judge thinks merits a lot less, if Congress wanted to prevent circumvention, they should have written the law a lot more carefully. Anthony A. Yang: Well, I think it's true that Congress could have written it more clearly, but we think that Congress here, when you take a look at both the provisions of 924(c) and then read them in conjunction with the provisions of the Sentencing Reform Act makes sufficiently clear Congress's intent that -- John G. Roberts, Jr.: I'm not sure -- I'm not sure "sufficiently clear" is enough. I think maybe "indisputably clear." I mean, in your -- in your brief you quote, to be fair, that -- that this is contrary to the thrust of 924(c), and I'm not sure when you're talking about this amount of punishment a -- a thrust is enough. Anthony A. Yang: Well, if -- John G. Roberts, Jr.: Congress doesn't pass thrusts, they pass language, and there's nothing in the language that prevents the judge from imposing a sentence recognizing that the defendant faces 30 years already. Anthony A. Yang: I agree that thrusts are not a thing. We -- we were quoting the -- John G. Roberts, Jr.: I know what you're quoting. Anthony A. Yang: -- the decision in Abbott. But the Court's decision in Abbot also says that the language compels the imposition of an additional -- and I believe this is on 25 of the opinion, this is a unanimous opinion of the Court. And I think the Court recognized that when you look at 924(c), it -- particularly when you look at the drafting history, from 1971 onward where Congress was taking step after step after step to restrict the sentencing instructions -- Stephen G. Breyer: It didn't say -- Elena Kagan: Well, that's -- Stephen G. Breyer: It didn't say it anywhere. This is not taken into account by the commission, unless you can tell me there's a guideline on this particular application of the mandatory minimum. And the statute and the guidelines both say a judge can depart for a reason not taken adequately into consideration by the commission. So unless you can point to me someplace where they take this into consideration, although they might in the future, I would say they didn't take it into consideration at all. Anthony A. Yang: I -- I think the -- Stephen G. Breyer: And therefore the language allows it. The language allows it, and indeed the theory allows it, because the theory is you could have a person there who's convicted of 19 multiple counts, you know, and -- and the judge is given considerable power to work all this out so that you have overall a fair sentence. All right? That's the whole argument. So what's your response? Anthony A. Yang: Well, I guess to the whole argument, we have a few responses. Stephen G. Breyer: I know you do. Anthony A. Yang: But -- but I think -- first of all, on the -- on the guidelines point, the guidelines have taken this into account since the very beginning when you were on the Sentencing Commission. Stephen G. Breyer: Where? Anthony A. Yang: Well -- Stephen G. Breyer: Where did you take this? Where. Anthony A. Yang: Well, the guidelines specifically address in Section 2K2.4, comment note 4, they talk about how you -- and as well as in Chapter 5 about determining a total sentence based on aggregate sentences, multiple terms of imprisonment. The guidelines said that what you do with the predicate is you determine the predicate under the guidelines, but you don't include the specific offense -- Elena Kagan: That's -- Anthony A. Yang: -- characteristic of -- Elena Kagan: That's -- John G. Roberts, Jr.: I'm -- I'm going to let you get back to a fuller answer to Justice Breyer. But that certainly cuts against you, the idea that they recognize that, yes, you do have to look to the mandatory minimums. You should take that into account in imposing the sentence. And now you say when it gets down to what the actual sentence is, you can't look at the mandatory minimums at all. Anthony A. Yang: I don't think it cuts against us, as in -- in we're going to have multiple discussions about these various factors. First, I don't think the guidelines shed a lot of light on the statutory question here. If you were to disagree with our understanding of the guidelines, that would not mean that the statute's wrong; it means that the guidelines would have to give way. We are defending the commentary in the guidelines, which, again, have existed since the very beginning. Stephen G. Breyer: You look at 2.4. I missed it. Where -- where is the place on -- Anthony A. Yang: 2K2.4, comment note 4. And -- and then subsequently, this is also cited in our brief back in the pages around the 40s when we discussed the guidelines. But about the guidelines in the statute, the guidelines would have to give way. And we are defending the commentary because we think, not only have this commentary been around since 1987 when the guidelines were first sent to Congress, and had since been there, we think this is a sensible distinction between the conduct that the court considers when determining the sentencing of the predicate, and knowing that the conduct is accounted for separately in the 924(c), and considering the total aggregate sentence. That is something different. Congress specified where courts look to the total aggregate sentence in Section 3584. In Section 3584, Congress said, "When there are multiple terms of imprisonment, the court shall, with respect to each offense, consider the 3554 -- 3553A factors when deciding whether to make the total sentence by making them concurrent or consecutive." But we know that Section 924(c) wholly removed that power. And in doing so, it removed the power of the court to tailor the total aggregate sentence, which is a power that was set to -- Ruth Bader Ginsburg: But the government must recognize that 924(c) can influence the sentence on the predicate offense because -- I think I'm correct in saying the government takes the position if 924(c) drops out if it's not proved, then when it goes back to the district court -- Anthony A. Yang: Right. Ruth Bader Ginsburg: -- the district court can enlarge the original sentence for the predicate offense. Anthony A. Yang: And because we think -- and this is what happens in -- in courts, courts are applying the guidelines. And the guideline says when you're calculating the sentence for the predicate, you ignore the offense conduct with respect to the gun because we don't want to double-count it. But if you drop the 924(c), it should -- it should go back for the court to consider the offense conduct as it considers the -- the -- the sentence for the predicate. This is a -- Stephen G. Breyer: Where? Where? I mean, I -- my quick reading of 4, I promise I didn't memorize the guidelines. I used to know them pretty well, but I don't know them perfectly, by any means, and never did. But it seems to me that comment 4 in 2K2.4 is saying that -- that defendant, you have committed a crime, and in our guideline as punishment for the crime, part of it is increased because you had a gun. And so if we're going to apply the mandatory over here, which is our special statute here, don't apply that. But I don't see anything there that says you can't subtract. Anthony A. Yang: Well, when you go to 5G1.2, which governs the total sentence, the -- when you have multiple offenses with terms of imprisonment, it says you -- you calculate the total sentence with respect to the non-924(c)'s and then you tack on -- Anthony A. Yang: 1.2, I believe. This is addressed in pages -- Stephen G. Breyer: Right -- Anthony A. Yang: I think around page 42 of our brief. 43. Nope. 42. Stephen G. Breyer: Maybe I'll find it. Anthony A. Yang: So the -- the point is the -- this is the way that the guidelines have been applied, and they were applied, in fact, in this way in this case. The district court calculated the sentencing guidelines range, which is 84 to 105 months, based on the guidelines. No one is disputing that's what the guidelines required. In fact, they conceded that that was the proper guideline sentence in district court. And then the district court then varied downward, and I think the provision that you're talking about, about 3553(b) -- Stephen G. Breyer: Yeah. Yeah. Anthony A. Yang: -- part of that was, of course, rendered inoperative under -- Stephen G. Breyer: Yeah. Yeah. That's -- Anthony A. Yang: -- under Booker -- Booker. And then -- and what the court did here is a post-Booker thing, vary. It's not a technical departure, it's a variance because he is applying -- Stephen G. Breyer: No. He varied here. He varied. Anthony A. Yang: He varied. He varied down to 40 months. And then he additionally said, if I had discretion, I'd go down to one day because I think 30 years is enough. But that is essentially a -- just a disagreement with the policy judgment. Stephen G. Breyer: No. And that's harder for you. It's harder for you, because after all, if it's a variance, he's not applying the guidelines. If he's not applying the guidelines, all this stuff in the guidelines that supports you is out the window. And -- and -- including the sentence I read. And if it's out the window, all we're trying to do is back where we started, is the statute -- does the statute, which doesn't mention this, forbid it, or is it otherwise unfair? Anthony A. Yang: Well, I would, I guess -- first of all, we're not relying on the -- Stephen G. Breyer: My fault, not your fault. Anthony A. Yang: We're not relying on the guidelines as an affirmative. We just wanted to point out in our brief we think the guidelines are consistent. Elena Kagan: But what are you suggesting ought to happen? I mean, presumably, the guidelines reflect an idea that there shouldn't be any double-counting of the gun, right? So what does -- how does the court do the -- the sentence on the underlying crime, taking away the fact of the gun? In other words, most robberies have guns in them, and the sentences are written to reflect that they have guns in them, don't they? Aren't they? Anthony A. Yang: No, actually. The guidelines take into account things like Hobbs Act robbery and separately account for the gun with a two-level enhancement. And so the guidelines range, when you commit a Hobbs Act robbery without a gun, will just be the standard Hobbs Act robbery range. Now, there are going to be other offense characteristics if you injure someone or -- you know, these things can affect -- Elena Kagan: What you think ought to happen is that the -- is that the judge should say, okay, imagine a robbery without a gun, what would be a reasonable sentence for that. Anthony A. Yang: I think the judge should do -- take into account what judges normally do under a real offense sentencing approach, which is you look at the offense conduct, you look at the history and characteristics of the defender -- Elena Kagan: Well, offense conduct, does that mean without a gun? Anthony A. Yang: But -- but without the gun. We say -- we think the judge has discretion, ultimately, to either consider it with the gun or -- or not because Congress hasn't expressly prohibited that. But the guidelines approach, which we think is permissible, is to consider it; you consider it without the gun and then you -- the reason for that is the guidelines say Congress has separately provided -- remember, the legislative history, I think, there are -- Senator Mansfield, that kind of was the -- the main proponent of the relevant text, the very stringent sentencing provisions, made clear that the whole purpose of this was to impose this additional sentence and require additional time in prison solely for the choice to use the gun, so the guidelines -- Anthony M. Kennedy: Well, that -- that's an excerpt from the legislative history that, it seems to me, is unimportant in light of what 3553 says. 3553(a) says, you know, well, that the judge at the end of the day has to consider the need for the sentence imposed to reflect the serious of the offense and so forth. And -- Anthony A. Yang: But the 3553 -- Anthony M. Kennedy: And it seems to me you're asking us to say that 924(c) really supersedes 3553. Anthony A. Yang: No. What we say is 3553 doesn't apply on its own terms. It doesn't apply on its own terms. If you look through the Sentencing Reform Act, there are at least nine provisions, all of which, when you're looking at them, fine or imprisonment or probation or whatever it might be, the court -- the provision says, the court shall, in setting this sentence, consider the 3553(a) factors. In addition, with respect to multiple terms of imprisonment -- and this is on page -- I believe it's 5A of our -- excuse me -- 11A of our appendix. If you look at 3584(b), it says, "The court, in determining whether terms imposed to be" -- "are to be ordered concurrently or consecutively, shall consider for each offense" -- remember, this is multiple offenses -- "each offense for which a term of imprisonment is being imposed the factors set forth in 3553(a)." So, normally, what happens is the courts will determine individual sentences. So you could have a sentence of seven years and a sentence of another seven years, and then maybe one is capped at five. And then the court says, I've got these individual sentences. I sentence for each offense. What's the total sentence? You could make that five and seven and seven. You could make it 19. Or you could just make it seven. It depends on whether you make them consecutive or concurrent. So the question about the total imprisonment when you have multiple terms of -- of -- with multiple offenses with terms of imprisonment is 3554(b) affects that, and it says that's where you apply the 3553(a) factors to determine the total length. But Congress took that power away. Congress took that power away totally in 924(c) by directing that you cannot do that. You must impose them consecutively. Elena Kagan: Well that's where I don't understand your -- your answer to Justice Kennedy, because you said, no, you're not saying that 924 supersedes 3553. I think you have to be saying that. You might still be right, but you have to be saying that there's this background principle, which is 3553, which is this parsimony principle and all these factors, and then 924 comes along and says, but not here. Anthony A. Yang: I guess in a sense we are saying that, but I don't think it -- it operates directly on 3553(a), because I don't think 3553(a) operates as a freestanding -- freestanding provision. It comes into play at various points in the Sentencing Reform Act where the court -- the Congress has said, you consider these factors in making this determination. In setting -- deciding whether to set on the amount of a fine, you look at the 35 -- Elena Kagan: One way you might look at this, and this goes back to what the Chief Justice said, he said, well, when there's a 30-year sentence implicated, you better be pretty clear. And also when you're legislating against a fairly strong background principle of 3553, you better be pretty clear that you're displacing that background principle. Anthony A. Yang: But the -- Elena Kagan: And here, you're just not -- you just have not been clear enough. You were clear enough in 1028(a) We know what that looks like. But here, you just haven't been clear enough to upset this background presumption. Anthony A. Yang: We think that it's clear enough because 3553(a) applies by -- when you -- for purposes of setting the total term of imprisonment, the only reason 3553(a) applies is because Congress provided that they are to be considered in 3584(b) in setting the consecutive or concurrent sentence. And so that has been removed. That has been removed. If it were true that 3553(a) just generally was a free-floating provision that applied everywhere, then all the nine provisions of the Sentencing Reform Act that specifically say you must consider the 353 -- 53 factors with respect to these specific types of sentences would be superfluous. Samuel A. Alito, Jr.: If this case had arisen before the Sentencing Reform Act was adopted, I -- I think that Dean's argument would certainly be correct, would it not? Anthony A. Yang: I think we would have a more difficult -- Samuel A. Alito, Jr.: The judge would have complied with the statute, the term wasn't consecutive, and other than that, it was discretionary. So it was completely within the judge's discretion. Anthony A. Yang: I think what we would have to argue in that case is that the Congress would have known that the traditional place that judges determine the aggregate length of a sentence, when there are multiple offenses carrying terms of imprisonment, is in the determination that -- of whether the sentences run concurrently or consecutively. Samuel A. Alito, Jr.: At a minimum, you would have had a very tough argument. On the other hand, if this case had arisen before we decided Booker, if you read the guidelines correctly -- and it does seem to be -- they do seem to say what you say they say -- then you would clearly be correct. Anthony A. Yang: Yeah. Samuel A. Alito, Jr.: So we're in this kind of weird -- we're -- we're in this weird world that this Court has created where the guidelines are advisory, but then they're not advisory, and so that's why we have this problem; is that correct? Anthony A. Yang: Well -- Samuel A. Alito, Jr.: You don't want to say that because -- (Laughter.) Samuel A. Alito, Jr.: -- nobody but me would agree with you. Anthony A. Yang: We -- we -- we obviously accept Booker as the proper interpretation of the law -- of the Constitution. But I think what I would say is that the guidelines -- there might be a slightly different analysis. And I think the guidelines would then provide yet an additional -- Sonia Sotomayor: Mr. Yang -- Anthony A. Yang: -- reason that we're correct. Sonia Sotomayor: -- I mean, the lack of beauty of the guidelines is they're so artificial on so many levels; all right? What differentiates a normal theft from a robbery is the use of force. And the guidelines, in defining the guidelines range for a theft, starts at a much, much lower base level. Starts at a seven, okay? For a robbery, it starts at a base level of 20. Once you start with that huge difference between the use of force and the nonuse of force, obviously, the robbery guideline is always going to include the use of force. The fact that it might be with a gun as opposed to a knife as opposed to a threat of violence or whatever else you want to define it, the use of force is inherent already in the guideline calculation because, otherwise, that -- there's no reason. They could have just had one table and said, if you rob someone, if it was a pure calculation, as you suggest it, without thinking about the gun, it would have been $20,000 is taken, we're all going to start at a offense level of five years and build up from there. That's not what the guidelines do. So when you're taking discretion away from a judge, I think that's one of the reasons we often require specificity, because the guidelines are artificial in so many different ways. And there are gyrations that we go through as judges to comply with dictates that are not very often very clear. Anthony A. Yang: Well, I think -- I'm not here to criticize the guidelines. I think the guidelines have worked for quite some time and have brought some rationality to sentencing that didn't previously exist, which was an important thing. The guidelines post Booker, of course, advisory -- are advisory. Stephen G. Breyer: That's -- that's what I'm trying -- I'm not criticizing, not criticizing. I'm trying to figure out what's the right system, putting this case aside. Anthony A. Yang: Well, we -- Stephen G. Breyer: Now, if we had the guidelines there -- try this. If the guidelines were here, it wouldn't be such a problem, because they would have -- the commission could look into this and it could take the factor into account. And then we'd have 3553(b) and we'd follow that in the future unless it's irrational. But they're out the window. Okay. They're out the window because it was a variance. So now we're left with 924(c), you know, the statute, and we're also left with the provision that says that a -- a court of appeals has to look at a departure or a variance and see if it's reasonable. Is that the right word? Reasonable or rational or something. What's the word? Anthony A. Yang: Well, I think -- Stephen G. Breyer: -- on the appellate part. Anthony A. Yang: -- that you'd have to look to the reasonableness of the sentence overall. Stephen G. Breyer: Over -- what -- what is it -- there's a word in the appellate part when they're doing the review. Is it reasonable or -- you know, I'll look it up. Anthony A. Yang: I think it is reasonable. Stephen G. Breyer: Yeah, I think it is too. Okay. So now -- Anthony A. Yang: Reasonable always is a good word. Stephen G. Breyer: Correct, correct, correct. (Laughter.) Stephen G. Breyer: So that's the -- that's the -- the question in this case beyond the case is really, how do we do that? And so -- so what I would try out is, it would be obvious if you're right and the statute is clear; okay? The -- the 924(c) Then you win. That's the end of it. That's what you think. I don't think it's clear. If it's not clear, what do we do? Anthony A. Yang: Well, I think -- Stephen G. Breyer: And now -- now, what about looking -- looking to see what the commission said about it, noting that this is an individual case, not general, not general where the district court has more power or other things. Now you tell me. Those are floating around in my mind. I'd like to know what's floating around in your mind. Anthony A. Yang: I -- I don't believe the commission gets any deference with respect to construing Federal statutes. John G. Roberts, Jr.: Well, I -- Anthony A. Yang: With respect to the guidelines, yes, but with respect to construing Federal statutes, I -- I don't think so. And so what we're back to is 924(c) and its interaction to the various provisions of the Sentencing Reform Act. The -- the key provisions, they rely on 3553(a) and they say look, you have to consider all these factors, but 3553(a) applies in very specific places of the Sentencing Reform Act, including when there are multiple terms of imprisonment and a court has to decide what the total imprisonment is going to be. Elena Kagan: Counsel -- Anthony A. Yang: That's 3584, and that's been taken away because Congress took away the power to -- to have concurrent sentences. John G. Roberts, Jr.: If you think the case is resolved at a higher level, it seems to me that your -- your friend has a very good technical argument that says these sentences have to run concurrently. One day, they run concurrently, end of case. And your argument is, you know, you look at the drafting history, the commentary to 2K2.4, all the other arguments you got and you make -- make -- and the basic one is well, that's technically correct, but it's obviously not what Congress had in mind. Congress obviously had in mind adding the mandatory onto a normal sentence, one way or another, under -- under the guidelines in 30 and all the provisions we've been talking about. So if you view the case that way, technically correct, you know, contrary to the obvious policy, what -- what case can you give me that tells us how to approach a conflict like that? Anthony A. Yang: Well, our -- John G. Roberts, Jr.: What's your -- what's your best case when you have a very significant sanction in the balance, and you have technical compliance on one hand, but clearly contrary to purpose? Anthony A. Yang: We don't think that the -- that they're technically correct. John G. Roberts, Jr.: Well, I understand that. Anthony A. Yang: We -- we think that there is a plausible argument that they make on the text, but we think that the proper approach is you always have to approach statutes holistically. You look at the statutory text; you look at the Congress's text structure, the context -- John G. Roberts, Jr.: Well, but then there are also these basic rules they -- I mean, you insist when citizens deal with the government that they turn square corners, and I think it's right for a criminal defendant when they're facing 30 additional years to insist that the government turn square corners. Anthony A. Yang: Well, I think what you might be referring to is the principle of lenity. But the Court has repeatedly emphasized -- I think Abramski; one of Justice Kagan's recent opinions explains this -- that lenity applies only if there's a grievous ambiguity that you might -- at the end of the day you -- Elena Kagan: But I don't think you have to go to a principle of lenity for Mr. Stoler to be right. I mean, you were just saying this is very much along the lines of what the Chief Justice was saying. You would just say something like, look, if we're going to be strictly textualist here, this does not have the kind of requirement you wish it had, which is to say it doesn't have the language that's in 1028A. Your essential argument is that, read Mr. Stoler's way, this would utterly eviscerate (c)(1)(D)(ii), the consecutive requirement. And I'm quite sympathetic to that. But there's still this question of when a statute doesn't say what you would like it to say and you're reduced to saying if you read it the other guy's way, it would eviscerate what we -- what we meant when we passed another provision, you know, what -- what should we do and where do you point us? Anthony A. Yang: I would say that it's true that it -- it eviscerates the purpose and the whole structure of the statute, but the statute says a lot by removing authority. So the question is what authority was removed. I -- I think it's helpful to look at page 11A of the government's appendix, 3584. 3584(b) governs the discretionary decision of a judge when there are multiple terms of imprisonment, how do you decide the total length. The total length is set by making them concurrent or consecutive, and 3554(b) -- or 3584(b), sorry, specifically says that in deciding the total length by making consecutive or concurrent, you apply the factors set forth in 3553(a) That's what they rely on. But 924(c) removes that authority. 924(c) removes the authority to be able to set the total length of imprisonment when there are multiple terms of imprisonment. Anthony M. Kennedy: So you're saying that in this case, the judge says I can't look at 3553(a)? Anthony A. Yang: No, he does. The -- the judge -- there are various other places, but for the total -- Anthony M. Kennedy: But -- but -- but other than for the initial downward departure. Anthony A. Yang: But -- but -- but for the total. You -- for -- you can look at 3553(a) in setting the individual terms, but Congress separately addressed how you make those terms, how you add them, make them -- the total, it depends on the aggregate; right? You -- whether you add them or run them concurrently or with each other. So that is what 3554(b) -- or 3584(b) addresses, and that's where the 3553(a) factors are applied, but Congress took that authority away. That's -- that's what I think speaks volumes. And -- and when you look at the structure of the Sentencing Reform Act, the -- the Sentencing Reform Act kind of has a modified real offense sentencing approach. You take a look at the -- the offender, the characteristics of the offender, the history. Not only the offense conduct, you look beyond this particular offense, conduct broadly, what's all the relevant conduct, critic conduct -- Anthony M. Kennedy: You're -- you're asking the judge to say, in calculating the sentence for the underlying offense, I'm going to look at all these factors. Frankly, it's meaningless, because what I'm going to do in the 924(c), but I'll do something meaningless. Anthony A. Yang: No, no, no, not at all. If -- if, for instance, a judge would say, as in this case, an appropriate sentence is 40 months, right? The judge says an appropriate sentence for this -- each of these four has a 40-month term. In a normal world, if there was also a five-year sentence, the judge would then go to 3584(b) and say I'm going to consider the 3553 factors to decide if I'm going to add the 40 to the five years, or I'm going to just run them concurrently so it's five years total. That's what normally happens. Section 924(c) says you can't do that. You have to add it. It is add -- in addition to the punishment, the punishment for the predicate offense. And so we think that simply underscores what -- what has always been the -- the thrust, the understanding of -- of 924(c). It is a harsh provision. There is no doubt. But Congress intended that to be harsh because of the extreme danger presented when you add a gun to either a crime of violence or a drug trafficking offense. And Congress made that determination that it's going to be at least five additional years for the gun, and if there's a second or subsequent, 25 years. Disagreement with that length of an imprisonment simply circumvents what Congress was doing in 924(c). Stephen G. Breyer: If -- if you -- if you're in the realm of what's reasonable and the judge is looking at, well, you are under the appellate provision because he's varied from the guidelines, of course, you have to give the mandatory minimum, there it is, the gun, 25 years. And now the judge thinks, you know, this is way beyond what this guy did. It's fine for the gun, but his total conduct here was -- doesn't warrant such a long sentence. Anthony A. Yang: On appellate -- Stephen G. Breyer: It's in -- it's in the other part, it's a reasonable thing given this individual who may suffer certain individual things, da, da, da. Anthony A. Yang: Congress -- Stephen G. Breyer: A reasonable thing to give him one day. Anthony A. Yang: Congress made the determination. You don't do a reasonable -- Stephen G. Breyer: Yeah, yeah. Anthony A. Yang: -- analysis. Stephen G. Breyer: If think that, then you win; that's the end of it. Anthony A. Yang: And -- and that's why, you know, when you have a predicate offense that Congress said add this additional mandatory on, you don't look to the length of the total, because maybe -- maybe 30 years, in the judge's view, is not reasonable, but Congress required that. That is a separate -- that is for Congress to decide what the minimum is going to be for the 924(c) What would be reasonable is when you take a look at the predicate offense and you say would this be a reasonable -- one day for four felonies, would that be reasonable? And the answer to that is of course not, as -- as my brother conceded at -- in his argument. So, again, I think the whole -- the idea that a judge would go down to one day because of a disagreement with the length of the mandatory minimum simply circumvents the statute and is inconsistent with 924(c)'s text. Thank you. John G. Roberts, Jr.: Thank you, counsel. Five minutes, Mr. Stoler. Alan G. Stoler: There's no affirmative ban in district courts considering 924(c) sentencing when considering the predicate offenses, and given the overarching theme of -- of discretion and parsimony pervades. The -- the -- counsel for the government seems to indicate that we look at 3584(b), we agree that it limits -- that there has to be that 30-year consecutive sentence, but it just guides the court's discretion with respect to the 3553(a) factors. It doesn't say that they only apply to each count, not the aggregate sentence. And you look at 3584 and you read the third provision, it talks about the aggregate sentence in itself. So the -- the reliance by the government on 3584 is -- we -- we say is misplaced and does not affect whether or not the -- the total sentencing scheme that the parsimony requirements put on ends the result of the court determining what sentence is sufficient, but not greater than necessary. We don't quarrel that 30 years must be imposed under the mandatory minimums. What we do quarrel with is whether or not the court should be able to take that -- those factors into consideration, as well as all those other factors that are set forth in 3553(a), 3551, 3661, which gives us the -- the determination to be made as to what the -- what should be the appropriate sentence in this case. If there's no other questions. Stephen G. Breyer: Well, I was thinking of at a deep level of what Thomas Reed Powell said about the law. He wants us to think of this second part, you know, as related, but really no. Look at the second part, keep it totally separate, and the statute means that the part about robbery has to be done separately. Reed Powell said if the -- you can think of a thing that is inextricably related to another thing without thinking of the thing to which it is inextricably related, you then have the legal mind. (Laughter.) Stephen G. Breyer: That's what he wants us to do. He says that's what the statute requires. Alan G. Stoler: We submit that the statute shouldn't be read that way in this instance, Your Honor. Samuel A. Alito, Jr.: Do you think it matters that it's a 30-year mandatory minimum? What if it was a one-year mandatory minimum. Would the result be different? Alan G. Stoler: It may. I mean, that's the court's -- Samuel A. Alito, Jr.: It would? Really? Alan G. Stoler: Well, it -- it may be different from the standpoint -- no. The one-year has to be imposed. Samuel A. Alito, Jr.: A year and a day would be okay? Alan G. Stoler: If, under the -- the total test of reasonableness and applying the factors the court's supposed to apply, makes that decision that he thinks that -- that that -- he or she thinks that's the appropriate sentence, that -- that may be right, but it's going to be subject to the test of substantive reasonableness on appeal. And the -- here in the instance, it's -- it's a different scenario because it's 30 years, Your Honor, and that's what we're saying. John G. Roberts, Jr.: Thank you, counsel. The case is submitted.

William H. Rehnquist: We'll hear argument now in No. 02-403, the Federal Election Commission v. Christine Beaumont. Mr. Clement. Paul D. Clement: Mr. Chief Justice, and may it please the Court: This Court's campaign finance cases consistently emphasize the fundamental distinction between contributions and expenditures. Direct transfers of cash to a candidate pose unique risks of the appearance of corruption or the threat of actual corruption while, at the same time, imposing less significant interference with First Amendment values. And so this Court's jurisprudence consistently recognizes that there is less rigorous scrutiny on limitations on contributions relative to limitations on expenditures. The court below lost sight of that fundamental dichotomy. It held that corporations of the type that this Court exempted from the general limitations on corporate expenditures in Massachusetts Citizens for Life were equally exempt from the broad prohibitions on corporate contributions to candidates. That reasoning ignores this Court's decision in Massachusetts Citizens for Life itself, which specifically distinguished between the expenditures and contributions of nonprofit corporations. More fundamentally, the decision below ignores this Court's decision in National Right to Work Committee. There this Court held that the broad limitations on corporate contributions and the specific limitations on solicitation embedded in that broad prohibition were constitutional against a First Amendment challenge. Antonin Scalia: Mr. Clement, the Government does... does not challenge the exemption of this not-for-profit corporation from expenditure limitations? Paul D. Clement: That's right, Justice Scalia. The court below addressed both an expenditure issue and a prohibition issue with respect to contributions, and the Government only took up the prohibition on contributions. So that is the only issue before the Court. I think it's important, though, to understand that that is a distinction that the court below placed insufficient emphasis on because that is a distinction between contributions and expenditures that underlies the last quarter century of this Court's campaign finance jurisprudence. And in National Right to Work Committee itself, this Court recognized that the broad prohibitions on contributions applied to all corporations, including those like National Right to Work Committee itself that were without great financial resources. Nonetheless, in the particular context of corporate contributions to candidates, this Court held that it would not second guess Congress' decision that a broad, prophylactic approach was necessary when corruption was the evil feared. William H. Rehnquist: Do you think after the decision in Massachusetts... the Massachusetts case, the NRWC would have a right to make independent expenditures? Paul D. Clement: Well, I think it would, Chief Justice Rehnquist, and I think that where I would point to first is your dissent in that case because in that case in your dissent, you made the argument that National Right to Work Committee was essentially the same as Massachusetts Citizens for Life. And the majority, in responding to that argument, didn't draw any particular distinction between National Right to Work Committee and Massachusetts Citizens for Life, but rather drew a firm distinction between the level of scrutiny that applies to limitations on contributions and the level of scrutiny that applies to limitations on expenditures. So I would read that decision as saying that the critical distinction is not the differences among the types of corporations with respect to contribution bans, but is the fact that contribution bans are much more readily approved under First Amendment analysis than expenditure bans. And National Right to Work Committee obviously wasn't the last word on that subject. This Court reaffirmed the validity of a broad, prophylactic approach to corporate contributions both in National Conservative Political Action Committee and in Massachusetts Citizens for Life itself. Particularly, in light of Massachusetts Citizens for Life, a ban on corporate contributions by nonprofits does not impose significant burdens on First Amendment interests. In the particular context of this type of corporation, the corporation is free to engage in unlimited spending on elections through the corporate form, and the individual respondents are free to give unlimited contributions to North Carolina Right to Life. In addition and equally important, the individual members of North Carolina Right to Life are free to give contributions to the candidates of their choice up to the constitutionally valid contribution limits. Accordingly, this case doesn't involve the right to associate together or the right to associate with candidates of someone's individual choosing, but only the right to assemble together collectively to give money to candidates of an organization's collective choosing. And even that rather attenuated First Amendment interest is only affected to the extent that a corporation must direct its contributions through a separate segregated fund with enhanced disclosure and reporting and bookkeeping requirements. Antonin Scalia: Why... why is that an attenuated First Amendment right? Isn't that the right that enables the formation of political parties, people forming together in order to collectively give money to particular candidates? Paul D. Clement: Well, certainly in... in the first point, parties are subject to a different type of regulation under the campaign finance laws. But secondly-- Antonin Scalia: Well, it may well be, but... but I... I wouldn't shrug off as inconsequential the importance of individuals being able to band together to support individual candidates. That's the whole basis for our... our party system. Paul D. Clement: --And... and I don't want to suggest that there's no First Amendment interest on the other side of... of the argument in this case, but what I did mean to suggest is that interest is less significant than the interest in individuals banding together to make expenditures that they might otherwise not be able to make. And I think even in the party context, this Court recognized that distinction in the Colorado Republican cases where it held that limitations on what the... the party can spend to support a candidate are not subject to limitation, but what... but there... but there are valid limitations on what the party can contribute to a candidate of its choosing. Now, in contrast to the rather minimal First Amendment interests that are interfered with by section 441b, it plays an important role in safeguarding the integrity of the election process. This Court in... in National Right to Work Committee already has recognized that corporate contributions pose a risk of the reality and appearance of corruption and that a broad, prophylactic limitation on all corporations, including those without great financial resources, is an appropriate response to that threat. All corporations, regardless of their size, also pose risks of circumvention and of undermining the workability of candidate disclosure requirements. As this Court recognized in Cedric Kushner Promotions against King, the whole point of a corporation, its basic purpose and fundamental reason for... for existing is to create legal separateness between the individuals that form and run the corporation and the artificial corporate entity itself. Giving such an artificial entity the right to contribute in its own name, independent of the individuals that underlie the corporation, obviously poses a distinct risk to a campaign finance system that is based largely on individual contribution limits. Section 441b addresses that risk by requiring that those contributions be made through a segregated fund subject to enhanced bookkeeping and disclosure requirements. Those bookkeeping and disclosure requirements, in turn, make the campaign disclosure forms that individual candidates have to file work in a meaningful fashion. If those candidate disclosure forms simply revealed that the candidate received money from an artificial entity with either an ambiguous name or what this Court in Citizens Against Rent Control v. Berkeley termed a seductive name that tends to conceal the true identity and true source of the funds, then those campaign finance forms... or disclosure forms will not provide meaningful information. If, on the other hand, 441b makes the underlying corporations use a segregated fund that discloses the individual sources of the contributions, then the disclosure forms can work in a meaningful fashion. I think it bears emphasis, as this Court recognized in Massachusetts Citizens for Life, that the distinction between contributions and expenditures applies with full force in the context of nonprofit organizations. A limitation on expenditures can prevent an organization's members, who might otherwise not have the resources to reach a certain audience, to pool their resources together to reach that audience. There is no comparable function or benefit from the pooling of individual candidate contributions. The individual candidates themselves can perform that pooling function by assembling together candidate contributions of whatever size in order to reach an audience or to engage in political speech. The intermediate pooling function that the nonprofit corporation serves can only benefit by either circumventing the individual contribution requirements or assembling an aggregate contribution of a sufficient size to potentially capture the attention of a candidate for purposes of a quid pro quo. To be sure, the same provisions of the campaign finance laws allow corporations to assemble funds in... in aggregate amounts through a segregated fund, but only with the additional safeguards that are imposed, including enhanced disclosure requirements. Congress, in adopting section 441b, drew an important distinction between corporations and their ability to contribute and individuals. In the expenditure context, the limitations on corporate expenditures stand in stark contrast to the general right of individuals to engage in unlimited independent expenditures. But no one has a right to engage in unlimited corporate... in unlimited contributions to candidates. Congress addresses the threat of individual contributions through dollar amounts. It addresses the distinct risks of corporate contributions through the requirement of a segregated fund, higher limits, and enhanced disclosure requirements. Respondents effectively ask this Court to disregard and second guess Congress' decision to treat corporations differently from individuals for purposes of candidate contributions. With respect, I think essentially respondents ask this Court to treat North Carolina Right-- William H. Rehnquist: Can you summarize briefly what the enhanced disclosure requirements are? Paul D. Clement: --Certainly, Chief Justice Rehnquist. The... the main difference is that in the context of a segregated fund, all... both all incoming contributions to the segregated fund and all disbursements must be disclosed. Antonin Scalia: You're talking about PACs. Right? Paul D. Clement: PACs. I mean, the PACs generally... there are segregated funds in the particular context of corporations and labor unions. William H. Rehnquist: And the donor is listed. Paul D. Clement: The donor is listed. There are specific provisions for very small donations where the name only goes to the FEC and is not publicly disclosed. But there's a... but really, everything that comes in and comes out of the segregated fund is traceable either by the FEC or through the public in disclosure requirements. In the context of the corporation generally, only... only donations that are given over $200 and for the express purpose of... of political activity have to be disclosed. And that does create a significant loophole. In the-- Sandra Day O'Connor: Mr. Clement, is this... is this section 441b related or affected in any way by the McCain-Feingold legislation? Paul D. Clement: --Justice O'Connor, it really isn't, at least as this case comes to this Court. The prohibitions on corporate contributions have been in the law since 1907 and have been left completely unaffected by the Bipartisan Campaign Finance Reform Act. It is true that certain limitations on electioneering activity, which is a new term introduced into the law by the Bipartisan Campaign Finance Reform Act, do apply to corporations. So in considering challenges to the McCain-Feingold legislation, this Court may have to consider the restrictions on corporations engaged in expenditures and these new electioneering activities, but not-- Sandra Day O'Connor: But at least the issue here in this case is unaffected by that. Paul D. Clement: --The issue of corporate contributions is miraculously unaffected by the many reforms that are put in place by the Bipartisan Campaign Reform Act. [Laughter] In the end-- Stephen G. Breyer: What is the... what is the limitation of the PAC? How much can they contribute, say, to a Senator? Paul D. Clement: --A... a political action committee or any segregated fund can give $5,000. Stephen G. Breyer: This... this... you're saying that this particular kind of organization can't contribute directly, but it could set up a... what you call a segregated fund, which I was thinking of as a PAC. And so if that segregated fund now wants to make a contribution to Senator Smith for his reelection campaign, is there a limit as to how much they can give? I'd think so. Paul D. Clement: There is indeed, Justice Breyer. It's $5,000. Stephen G. Breyer: $5,000. Paul D. Clement: And two points of emphasis just on that question. One is that respondents here don't just have the right to set up a segregated fund, but they've actually already done that. They've already set up a segregated fund. And I know that this Court in Massachusetts Citizens for Life emphasized that there are unique restrictions and burdens on setting up a segregated fund, and I think that's true in the context of expenditures. But I do think it's easy to exaggerate the burdens that are imposed in setting up a segregated fund. Although a segregated fund is like a PAC, there's no requirement that they have separate offices or separate officers. They have to have a distinct leadership and... and... but it can be the same leadership as the corporation itself. Stephen G. Breyer: I mean, could they have two members? Paul D. Clement: I don't know of any particular limit on... on the members. But the point is all that's really required is segregation of funds and keeping it separate. It's not an onerous requirement. And I think it's no accident that in the four cases that this Court has had that involved a nonprofit corporation, National Right to Work Committee, Massachusetts Citizens for Life, Austin against Michigan Chamber of Commerce, and this case, all four of those nonprofits had already set up segregated funds before the case got to this Court. So I don't think, at least in the contribution context, that those are onerous requirements. Antonin Scalia: Well-- Ruth Bader Ginsburg: --In Massachusetts Citizens for Life, there was a separate PAC? Paul D. Clement: There was. This Court in footnote 8 suggested that that wasn't dispositive of its reasoning because other... other entities could set... be in a position that were similar to Massachusetts Citizens for Life, might not be able to afford those burdens. But Massachusetts Citizens-- Ruth Bader Ginsburg: But the Court did say for that type of... for that type of corporation, not a commercial corporation, that was burdensome and unnecessary because the risk of corruption for that kind of corporation was significantly less than for commercial corporations. And that would apply here as well. If the... if the evil is corruption, I'm buying the candidate by my dollars, then that risk is less for an advocacy organization. Is that... isn't-- Paul D. Clement: --I don't want to suggest that the... that it may not be true that the risks are slightly less in the context of a nonprofit advocacy corporation than in the context of something like General Motors. But I think in the particular context of candidate contributions by corporations, this Court has repeatedly decided that it's willing to accept a broad, prophylactic approach and to limit all corporate contributions, including contributions by corporations without great financial resources. The Court said as much in National Right to Work Committee. It repeated that again in National Conservative Political Action Committee, but I think most tellingly, it said that in Massachusetts Citizens for Life itself. And in particular, if you look at footnote 13 of the Massachusetts Citizens for Life decision, the Court there specifically said that it understood that Massachusetts Citizens for Life would continue to be subjected to the National Right to Work Committee regime for purposes of its contributions, and it was talking about the fact that it didn't have... that Massachusetts Citizens for Life, for example, didn't have shareholders. But it was quick to... to reinforce that that didn't mean that it didn't have members for purposes of National Right to Work Committee that it could solicit, subject of course to the overall limit that it could not give direct contributions to candidates. Antonin Scalia: --That was an assumption in the case. You don't... you don't... you don't assert that it was a holding of the case. Paul D. Clement: Well, I don't think it's necessarily the holding of the case because, obviously, that case involved expenditures. But I do think that when this Court distinguishes a prior precedent of the Court, that that's not a part of the opinion that a lower court is free to ignore. I think that part of the opinion is critical to the reasoning of the Court and should be given stare decisis effect. And I don't think there's any reason that's been brought to bear here to revisit this Court's distinction in Massachusetts Citizens for Life between contributions and expenditures, which after all, is the fundamental building block of this Court's campaign finance jurisprudence. Antonin Scalia: You think whenever we distinguish a prior case in one of our opinions, that... that distinguishing has stare decisis effect. Paul D. Clement: I would think that in many respects that's the most important part of the opinion. It's not to say that the Court can't subsequently revisit that part of the opinion. I mean, that's certainly what this Court can do, but I think for purposes of a lower court, anyway, if... if this Court distinguishes two cases on the ground that the prior case involved a corporation that had less than $10,000 and a subsequent case comes along where there's $9,999 involved, I would think the lower court would be well served to heed the distinction that this Court drew. And I think in this particular context, obviously, this Court is free to reconsider its prior precedents, but I don't think there's any reason to do so. The distinction between contributions and expenditures has proved workable particularly in the context of nonprofit corporations. As I say, this isn't some abstract application of the contribution/expenditure dichotomy that this Court has never considered. Massachusetts Citizens for Life involved a nonprofit corporation and this Court was at pains, pretty much at every step in the Court's reasoning, to distinguish between contributions and expenditures. In the end, I think respondents ask this Court effectively to disregard Congress' decision to treat corporate contributions distinctly from individual contributions. They effectively ask this Court to treat North Carolina Right to Life Incorporated as if it were not incorporated, but there's no reason to disregard either respondents' decision to incorporate or Congress' decision to subject all corporations to the same regime, segregated funds, distinct disclosure requirements, and higher limits, in fact, on their contributions. If there are no further questions, I'll reserve the rest of my time for rebuttal. William H. Rehnquist: Very well, Mr. Clement. Mr. Bopp, we'll hear from you. James Bopp, Jr.: Mr. Chief Justice, and may it please the Court: Expressive associations play a vital role in our democratic republic. Because they attract financial support due to their political ideas, not their prowess in the economic marketplace, their participation in our political process poses no threat of corruption, as long as they do not serve as a conduit for business corporation contributions. Antonin Scalia: I... I don't understand that. If... if I bribe somebody, a Senator, out of... out of political motivation because I'm an environmentalist or whatever, that's not corruption? It's only... it's only if I have some economic motive that it's corruption? James Bopp, Jr.: Well, that's classic quid pro quo corruption which is dealt with by contribution limits, now-- Antonin Scalia: Well, I mean, I... it may well be, but I don't see that the distinction between whether it's an economic actor or a political actor has anything to do with whether there's corruption or not. James Bopp, Jr.: --Well, there has been some controversy on this Court on... on whether or not the... the decisions of this Court in Mass. Citizens and on Austin were in accordance with the Constitution, but in both cases the Court distinguished between the types of corruption that are entailed by the corporate form, which is the potential for unfair employment of wealth for political purposes. This applies to economic corporations, that... that is, those that are not, as Mass. Citizens or North Carolina Right to Life, formed to advance political ideas. Antonin Scalia: Well, but you can have an immense corporation formed to advance political ideas. I... I don't... this one happens to be a small one, but-- James Bopp, Jr.: Yes. And-- Antonin Scalia: --if you attract enough people, you can have an immense organization. What's the organization for... American Association of Retired Persons. I mean, that's an immense organization with... with a large amount of available money. James Bopp, Jr.: --That's right and the size of the organization is not the issue. The issue in this Court's jurisprudence is whether... is the nature of the organization itself and not the corporate form per se. If the nature of-- William H. Rehnquist: Well, Mr. Bopp, would you say that the AARP, which was referred to by Justice Scalia, the National Right to Work Committee, which was involved in that opinion, and Massachusetts Citizens for Life are all in the same boat? James Bopp, Jr.: --I don't believe so, Your Honor. I think we do-- William H. Rehnquist: Why not? James Bopp, Jr.: --Well, the... the Court in Mass. Citizens established some criteria to determine whether or not an organization, a corporation, benefitted from the MCFL exemption. And those include whether or not there are incentives to disassociate... lack of incentives to disassociate by, for instance, having insurance plans and other benefits of membership that are economically related. Secondly, you would look to the amount of corporate... business corporation contributions or business activities. If those are too much or those are not insignificant, in... in comparison with the total sums raised, then again they would not qualify. Ruth Bader Ginsburg: Mr. Bopp, on that point I thought that Massachusetts Citizens for Life went further. It said having a policy against accepting corporate contributions, which is one difference between your organization and Massachusetts Citizens for Life. They said they would take no money from corporations. You accept money from corporations. You get very little from business corporations, but you don't have a policy of turning them away. James Bopp, Jr.: That's correct, Your Honor. And the... all the circuits that have considered this, which have been four of the circuits, all agree that the features explained and... and characterizing Mass. Citizens in... in the Supreme Court's decision were not constitutional requirements, but descriptions of the organization before it. And all of them have agreed that... that not-for-profit ideological corporations can still qualify for the... for the Massachusetts Citizens exemption. William H. Rehnquist: Well, would you call AARP an ideological organization? James Bopp, Jr.: I think they have a mixture of political and nonpolitical purposes and are, therefore, more like Austin... the... the Michigan Chamber of Commerce and Austin that had a mixture of political and nonpolitical purposes and therefore did not qualify for the MCFL exemption. And to complete my answer-- Anthony M. Kennedy: I'll bet the members also get benefits-- James Bopp, Jr.: --Yes. Anthony M. Kennedy: --and... and that criterion would... would make it different from-- James Bopp, Jr.: There were also incentives that were economic in nature that would cause people to be reluctant to disassociate with Michigan Chamber of Commerce if it... if it proved to be that they disagreed with their political ideas or the advancement of their political ideas. And the four circuits that have considered the question of the amount of business corporation contributions have all said that as long as they are insignificant, in comparison with the total revenue of the organization, they still... they do not serve as a conduit for business corporation contributions and still qualify for the exemption. Ruth Bader Ginsburg: --But they could serve as a conduit for a very large donor, a very wealthy person, who wants to avoid the personal limitations on how much that individual could give. James Bopp, Jr.: Well, it is true that there are no contribution limits to not-for-profit corporations. However, the intent of a donor to circumvent those limits would be... contributing to a not-for-profit would be a highly inefficient and ineffective way of doing so because the political activities of not-for-profit corporations, both because of the major purpose test that would cause an organization to become a PAC if political activity became their major purpose, and the Internal Revenue Service's limitations on the activities of 501(c)(4) organizations, which is what the regulations require you to be qualified as in... in order to quality for the MCFL exemption, all... all mean that a very small percentage of any contribution to a not-for-profit corporation could ever be used for political activity. Furthermore, contributing to a not-for-profit versus a PAC and a... or a political party is also an unfavorable prospect for a donor. I mean, after all, the... a not-for-profit under the 441a contribution limits is limited to a $2,000 contribution, where a PAC can give $5,000 and political parties can give much more. Furthermore, all of the money that PACs or political parties receive in their hard money accounts can be used for political activity, whereas I've mentioned for not-for-profits it's really a very small percentage in order to continue to qualify under the MCFL exemption and continue to not be deemed a PAC for... for the purposes of the Federal Election Campaign Act. Now, the disclosure interest that there... that there is for contributions can be readily and in a narrowly tailored way dealt with by simply requiring that any contribution to a not-for-profit that is to be used for or is intended to be used for contributions to candidates must be reported and is... and is thereby subject to the aggregate contribution limits. This is a much more narrowly tailored way to deal with disclosure and the aggregate contribution limits than prohibiting the organization completely from making any contribution. Stephen G. Breyer: What you do then... this is what I understand you to be saying. The... one of their justifications that has been advanced for this restriction on contributions I've interpreted as the following. We have five people. These five people each write a check to Candidate Smith for $2,000. They get annoyed. They think they should be able to give $4,000, which the law forbids. So they form a committee, a nonprofit corporation, called the $4,000 for Smith Corporation. Speaker: [Laughter] Stephen G. Breyer: And now each of them writes another check for $2,000, gives it to the corporation, and the corporation gives it to Smith. And I think the Government says, well, Congress wanted to stop that. It's not actually going to limit them to zero. They're going to be limited to $5,000 as a group provided they jump through certain hoops. All right. Now, what's-- James Bopp, Jr.: Well, if they're a PAC-- Stephen G. Breyer: --what's wrong with that argument? James Bopp, Jr.: --Well, if they're... if they're a PAC, then they can give $5,000 out of the... out of the $10,000 that you posit. If they're a not-for-profit corporation, the most they can give-- Stephen G. Breyer: I know, but do you see what I'm saying? I'm saying Congress doesn't want to have groups called the $4,000 for Smith group even if they call themselves something different. James Bopp, Jr.: --I agree. Stephen G. Breyer: They want to limit each of those members to $2,000. James Bopp, Jr.: Agreed. Stephen G. Breyer: And that's what they do, though for a variety of other reasons, not directly relevant to my question, they've allowed those people to get together, jump through various hoops called the PAC hoops, and give up to $5,000 extra. So if Congress wanted to, they might say none. James Bopp, Jr.: Yes. Stephen G. Breyer: All right. Now, that's their... that's basically the argument, and I want to get a straight, you know, direct reply to it. James Bopp, Jr.: Well, the... the desire of subjecting the aggregate contribution limit or a contribution in excess of $2,000, one direct and one through another source, is dealt with two ways and can be. One is if the contribution made to this group that you posit is earmarked, then that contribution is considered to be a contribution not just to the group but also to the candidate him or herself. So that earmarked contribution is subject to the $2,000 limit, and the contribution used for that would be in violation of the act currently. Stephen G. Breyer: All right. So now... is that-- James Bopp, Jr.: That is current law. And... and so that prospect is prohibited and appropriately so. Secondly, as the Federal Election Campaign Act previously required, that anyone contributing to a organization, not a PAC, that contributes money for an independent expenditure, that that contribution must be reported by the group that does the independent expenditure. Congress could require the same thing here. They could require money given more generally, not earmarked, but more generally for candidates to be reported by the... the group and thereby subject to the aggregate contribution limits. Antonin Scalia: --Mr. Bopp, isn't it also the case that the... that the corporation that Justice Breyer posits would not qualify as... as a 501 exempt organization if the only thing it's using its money for is to make contributions to political candidates? James Bopp, Jr.: That would also be true. They-- Stephen G. Breyer: I'm just trying-- Antonin Scalia: --It has to be... it has to be a relatively insignificant part of its overall activity. James Bopp, Jr.: --Yes. The Internal Revenue Service would treat the organization that he described as a political organization-- Antonin Scalia: So these five people would had to... have to get together with maybe 100,000 other people so that their... their little portion is so watered down that it's not a significant part of the corporation's business. James Bopp, Jr.: --That's exactly-- Stephen G. Breyer: I didn't think there was a numerical limit. And my question which tried to eliminate extraneous points I think you understood perfectly well there. I mean a 503(c) corporation but... et cetera. But I want to go back to your answer. The... the... because I'm trying to get clear about this. And the... what you're saying is that Congress could take my group, with whatever else they have to do to qualify them... they could take my group and you're saying Congress could just say, very well, we will limit the corporation so that it can only give money from these five people insofar as they haven't met their $2,000 individual limit. James Bopp, Jr.: --That would be an effect of what I said, yes. Stephen G. Breyer: And... and moreover, it could require reporting so we know who they are. James Bopp, Jr.: Yes. Stephen G. Breyer: All right. Now, is that a less restrictive alternative than what Congress has actually done, which is to say, proceed through a segregated fund? James Bopp, Jr.: Yes, much less restrictive. Stephen G. Breyer: Because? James Bopp, Jr.: Well, because this Court held in Mass. Citizens and Austin that the PAC requirements, both administrative, including record keeping, appointment of a treasurer, filing regular reports, et cetera, and the limits that are imposed upon PACs... there's a $5,000 contribution limit to PACs, et cetera... all impose an... a constitutionally burden... a burden on constitutionally exercised rights that did not... that did not pass constitutional muster. So... so while it is true that you can do it under a PAC, that imposes an unconstitutional burden on the First Amendment activities. And that, of course, all goes back to, you know, is there a justification for this. In other words, we have a prohibited source-- Anthony M. Kennedy: Well, just before you go on, I don't see why your proposal doesn't have all of the same administrative inconveniences. James Bopp, Jr.: --Well, there's a one-page report. There are organizations that can do independent expenditures that are not PACs. There's a one... one-page report to file, and that... and that report would say how much is being spent on the independent expenditure and how much has been donated to the organization for the purpose of that independent expenditure. Similarly, a report like that could be filed for contributions so that we could capture those people who are trying to circumvent the limits to... to make undisclosed or excessive contributions. We would capture them because then the only choice left to the donor would be a completely undifferentiated, unearmarked contribution that is going to be used by the organization 95, 98 percent for other purposes, for lobbying, for education, for other charitable activity. Sandra Day O'Connor: Mr. Bopp, the Court basically decided this issue in National Right to Work Committee case, didn't it? You just want us to distinguish your type of nonprofit corporation. James Bopp, Jr.: Well, we are asking you to distinguish the Massachusetts Citizens for Life type-- Sandra Day O'Connor: I think that's very hard to do. I mean, we dealt with this precise issue in that case. James Bopp, Jr.: --But there was no issue in that case about whether or not the organization itself should not be viewed as a prohibited source of... of making independent expenditures or making contributions in that case. Sandra Day O'Connor: But the organization opted for the corporate form-- James Bopp, Jr.: Yes. Sandra Day O'Connor: --knowing about these limitations. James Bopp, Jr.: Yes, but this Court has... was clear in Mass. Citizens that it's not the corporate form per se, but the potential for unfair deployment of wealth for political purposes and held that these types of organizations pose no threat, no threat whatsoever. William H. Rehnquist: Well, it couldn't have been a holding in... in the Massachusetts case because there you were talking about independent expenditures rather than contributions. James Bopp, Jr.: Well, but... but-- William H. Rehnquist: Certainly the Massachusetts case doesn't control the outcome here. James Bopp, Jr.: --Well, we... we believe that it... that the holding of the Court in Mass. Citizens... that this organization serves no potential for corruption of the democratic process, was essential for the Court to hold that no independent... that independent expenditures would be allowed because, after all-- Ruth Bader Ginsburg: Mr. Bopp, at least three times in the text of the Court's opinion in Massachusetts Citizens for Life, at least three times, it distinguishes direct contributions to candidates from expenditures, and each time it explains why it reached the result it did. It makes that distinction. James Bopp, Jr.: --Yes. Ruth Bader Ginsburg: And I think that... that that's so central to Massachusetts Citizens for Life. So if... if we just had this opinion shorn of all but however, remember that this is not a contribution to a candidate and then citing back to the... the earlier decision that Justice O'Connor mentioned, the National Right to Work Committee, to distinguish it from this case, but it just seems so all over Massachusetts Citizens for Life that it is drawing this bright line between contributions to candidates and independent expenditures. James Bopp, Jr.: But in... but in Right to Work, it wasn't a prohibition on contributions. It was a... a limit on the amount of contributions. And we agree that limits on amounts-- Ruth Bader Ginsburg: Yes, but I'm... I'm talking about Massachusetts Citizens for Life and the line that Justice Brennan drew in the Massachusetts Citizens for Life between contributions to candidates. Every time he talks about the holding in this case, he said, remember, this is not contributions to candidates. James Bopp, Jr.: --Yes, Your Honor, that's correct. That's what you said. But the... the case did not involve... neither Mass. Citizens nor Right to Work involved a limit on the amount of contributions, that is, like a $2,000 limit. We have not challenged that. David H. Souter: Mr. Bopp, do you challenge the distinction for First Amendment purposes between restricting contributions and restricting expenditures? James Bopp, Jr.: Only as to a prohibition on them. That is, this Court in Buckley and reaffirmed in Shrink said that there were both speech and association aspects of making a contribution. That is, it's a... as far as speech is concerned, this is a general expression of support that is found in the undifferentiated act of contributing. Well, here they are prohibited from contributing. They cannot... these organizations cannot give one cent. Therefore, that's-- David H. Souter: So... so you're... you're saying there is a distinction-- James Bopp, Jr.: --Yes, as to a prohibition. David H. Souter: --for... for valid First Amendment purposes between the... the contribution limit and the... and the expenditure limit, but that distinction is not strong enough to forbid an entire prohibition. James Bopp, Jr.: That's correct because both the speech aspects and association aspects of contributing that are... that remain after limits on the amounts are imposed because the speech aspect is a general expression of support and the association aspect is to serve to affiliate a person with the candidate. You have your name now through the... the method of the contribution affiliated with the candidate. When you have a zero contribution limit, then there is no speech and no association that is allowed through the act of contributing. Therefore-- Ruth Bader Ginsburg: But you can say... you can-- William H. Rehnquist: --I don't think any of our cases have sliced the onion quite that fine to get into these nuances that there's a difference between prohibiting a contribution and limiting it. I think our distinctions have been primarily that contributions may be quite substantially regulated, independent expenditures cannot be. James Bopp, Jr.: --Well, that is... that is generally a correct characterization of your jurisprudence, but you have to examine why. Why is it that contributions are subject to a lower level of scrutiny? And the... the why is is that the speech and association aspects of giving a smaller contribution remain, but if you can't give any contribution, then both that speech and association aspect-- Ruth Bader Ginsburg: But when you say can't give any, you are overlooking or saying the PAC doesn't count. James Bopp, Jr.: --Yes. Ruth Bader Ginsburg: It isn't an absolute no contribution. It is, if you do it, you have to do it through this arm that you create, this segregated fund, this 501... of the 501(c)(4) organization. You can... you can do it but you have to do it in a rather cumbersome way. James Bopp, Jr.: Yes. Ruth Bader Ginsburg: So it isn't you cannot make any contributions. James Bopp, Jr.: Well, not only is it cumbersome, but it's constitutionally... it's an unconstitutional burden this Court has held in Mass. Citizens and in Austin to require First Amendment political activity to be done through a PAC. So-- Ruth Bader Ginsburg: Not First Amendment activity in... in the Massachusetts case itself, as I just said. I don't want to repeat that except that Justice Brennan did repeat it at least three times. James Bopp, Jr.: --Yes. And I'm aware of that, but I'm just asking this Court to... to consider not... not to apply what is dicta in Mass. Citizens since it did not involve contributions... to... to just apply that, but to consider the rationale. And in North... in... in National Right to Work, the Court was considering not a prohibition on soliciting contributions from members to its PAC, it was considering a limit on what is considered to be a member. So once again, that case involved contribution limits, not prohibition. Antonin Scalia: Mr. Bopp, that... that First Amendment right that you talk about as the associational interest, the... the ability to give at least a dollar will identify you with a... with the candidate, is that really a First Amendment interest that applies to the association, or does it apply to the members of the association? And as Mr. Clement pointed out, the individual members of the association remain free to give a dollar, indeed up to $2,000, to the particular candidate. All you're really talking about here is... is not the ability of individuals to identify themselves with a candidate, but the ability of individuals by pooling their resources to help a candidate significantly. It seems to me that that's the only interest at... at issue here. James Bopp, Jr.: Well, there's valid reasons unlike the representation... or the argument of the Government for people to want to pool their resources in an association. That those valid reasons are, in fact, why people already contribute to PACs and the political-- Antonin Scalia: But among those reasons is not in order to identify myself with that candidate. James Bopp, Jr.: --Well, but the-- Antonin Scalia: To... to do that, all you have to do is reach in your pocket and give them a dollar. James Bopp, Jr.: --That is true, but many people choose to pool their resources because they want the group, which has a separate existence and has a political purpose, unlike them as an individual... you know, they are not as identified with a particular point of view or political idea like a group would be, like... like NARAL would be. So if... so they choose then to pool their resources with the group in order to make the much more powerful statement about the political ideas that they are attempting to support and they want candidates to be associated with. Now, in addition, the fact that the group can aggregate these small contributions and then make a large contribution to a particular candidate enhances the... the contribution that the individual would otherwise made... be made because it is being done by the group and in an aggregate. So there are justifiable reasons why people want to associate. And then further, the association-- John Paul Stevens: Mr. Bopp, it seems to me that your argument really would go just the same way to an amount limitation as to a total prohibition. James Bopp, Jr.: --No, because amount limitations do not-- John Paul Stevens: Everybody can just contribute $10. Wouldn't that... would that be okay with you? James Bopp, Jr.: --You mean the... the amount that-- John Paul Stevens: Say the amount limitation was very low. As I understand it, you're trying to draw a categorical distinction between total prohibition and amount limitation. James Bopp, Jr.: --Yes. John Paul Stevens: And I don't know... I don't see that your argument really is directed to that. James Bopp, Jr.: Well, it goes to the source of the... of the rights, the First Amendment rights, that are implicated by a... by an amount limitation as opposed to a prohibition. John Paul Stevens: But it seems to me an amount limitation that's very, very low would have the same vice under your argument as a total prohibition. James Bopp, Jr.: Well, potentially, but that would be a case to be a decided at that point. And... now, this Court has upheld the $5,000 limit, for instance, to political action committees. And... but you would have to consider... if it got too low, I mean, there's certainly a potential for contributions that are too low... as Justices Breyer and Ginsburg explained in Shrink, there is certainly a potential if they're too low to be unconstitutional. But here we're not talking about and have not challenged the... the $2,000 limit. We accept that. We just don't accept the proposition that because the organization poses no threat of corruption to the political process, that they should be completely prohibited from making a contribution. So... so we view this then as a source limitation, not as an amount limitation, and as a result, the... the contribution jurisprudence of this Court that have accepted greater regulation of contributions is not applicable. If there are no other questions, thank you. William H. Rehnquist: Thank you, Mr. Bopp. Mr. Clement, you have 11 minutes remaining. Paul D. Clement: Thank you, Mr. Chief Justice, and may it please the Court: Let me begin with the distinction that respondents rely on between limits on contributions and prohibitions on contributions. Even if there is something to that distinction... and I rather doubt there is for some of the reasons unearthed by Justice Stevens' colloquy with... with counsel for respondent. Even if that were a valid distinction, this case does not involve an absolute prohibition. This Court, both in Massachusetts Citizens for Life and Austin, and in fact, much earlier in Pipefitters, made clear that the limitations on corporate and labor union contributions in section 441b are not a, quote, absolute prohibition, but rather just a limitation on contributions. The availability of the segregated funds to make the contributions is another way of making this a limitation, a particular limitation designed for the unique risks of artificial entities like corporations and labor unions. And I think any effort to distinguish the discussion in Massachusetts Citizens for Life and its distinguished... distinctions between contributions and expenditures on the grounds that a prohibition might be different just doesn't work because both Massachusetts Citizens for Life and National Right to Work Committee involved this very provision, section 441b. So whatever there might be in the case of an absolute prohibition on somebody's right to make contributions, 441b either isn't that or isn't that in... in a constitutionally relevant way after this Court's decisions in Massachusetts Citizens for Life and National Right to Work Committee. Some discussion was had about fine distinctions that potentially could be drawn between the American Association of Retired Persons, National Right to Work Committee, Massachusetts Citizens for Life, and North Carolina Citizens Right to Life. The point of section 441b in the contribution context is that Congress has not found a need to draw those kind of fine distinctions. MCFL itself, of course, drew some of those distinctions in the contribution context... in the expenditure context, rather, but drew a distinction between contributions in light of the inherently greater risk of corruption from contributions. Another suggestion was made that perhaps there is a seemingly less restrictive alternative. As with independent expenditures made by nonprofit associations, perhaps contributions that are made to the association with the purpose of them being used for contributions to candidates could be disclosed. William H. Rehnquist: Have we actually held, Mr. Clement, that in regulating contributions, the Government must find the least restrictive means? Paul D. Clement: No, and to the contrary. This Court has not held that. It did not apply a least restrictive alternative analysis in National Right to Work Committee. In the California Medical Association case, a plurality of the Court, in fact, affirmatively held that the least restrictive alternative was not required in the context of contributions. So I don't think there is that requirement. But I want to address the... the supposed less restrictive alternative precisely because I believe that less restrictive alternative is illusory because the suggestion is that... that individuals could say... could disclose when they give a contribution to a nonprofit organization for the purpose of a contribution. Well, if that's going to have the effect of avoiding the circumvention rationale, I wonder whether people are really going to volunteer the information that the contribution to the nonprofit is for that purpose. And additionally, even if that is a permissible way and would be enforceable in the real political world, that really doesn't give you much of a different result than what Congress has specifically provided for with the segregated fund. And indeed, the segregated fund actually is responsive to the kind of First Amendment associational interests that underlie this Court's concerns in Buckley and even going back to NAACP against Button. The concern is that disclosure requirements imposed on organizations could be a backhanded way to get at membership lists. The segregated fund prevents that by keeping the membership lists and the organization itself separate from the political activity of the organization. Indeed, if Congress hadn't provided for segregated funds as a requirement for all corporations, but simply made that available, I would think that many nonprofit corporations would avail themselves of that option precisely to avoid the interference with associational interests as in cases like NAACP against Button. The last point I'd like to talk about is simply this idea that again underlies much of respondents' arguments that because there is no threat from expenditures to these types of corporations, there is therefore no threat to these type of corporations engaging in corporate contributions. If that analysis were applied across the board, it would undermine the entirety of this Court's campaign finance jurisprudence which is based on the fundamental recognition that contributions involve greater risks than expenditures, and... and expenditures, therefore, are largely unregulated because they are... presumably do not pose as great a risk as contributions. If there are no further questions, I'd like the court below reversed. William H. Rehnquist: Thank you, Mr. Clement. The case is submitted.

Earl Warren: Number 100, the Order of Railroad Telegraphers et al, Petitioners versus Chicago and North Western Railway Company. Mr. Schoene. Lester P. Schoene: If the Court please, this case is here as a result of this Court's order of October the 12th, 1959, granting a petition for a writ certiorari to the United States Court of Appeals for the Seventh Circuit. That judgment reversed the judgment of the District Court for the Northern District of Illinois, which had denied a permanent injunction against a strike and have dismissed the complaint. The attempted strike arose out of a union's proposal under the Railway Labor Act to amend the existing agreements to include a rule, providing that no position in existence on December 3rd, 1957, will be abolished or discontinued except by agreement between the carrier and the organization. The opinion of the court below, goes into considerable discussion of the facts which we believe to be largely irrelevant and I think its holding can be readily summarized by a few quotations, beginning on page 382 of the record where the Court of Appeals' opinion appears, it actually begins a few pages earlier than that on page 377 of the record. With respect to the proposal that I have quoted, the Court of Appeals said on page 382, “Certainly, the Railway Labor Act does not divest a carrier of the right to manage and control the administrative functions of its business enterprise and conduct its business operations without exercise of a veto power by the union.” Here, the union is demanding such veto power over the abolition of any position in existence on December 3rd, 1957. The union is attempting to obtain through the collective bargaining processes through Railway Labor Act that which would prohibit North Western from complying with the orders of the South Dakota Public Utilities Commission and the Iowa State Commerce Commission. In short, this is an attempt by the union to erogate to itself the prerogatives that have been traditionally and rightfully managements while at the same time assuming none of the corresponding burdens and responsibilities. Then turning to page 384, near the bottom of the page, the Court in further substantiation of that holding sirs, we see no material difference between the Howard case and the case before us, the reference to the Howard case is of course to the decision of this Court in Brotherhood of Railroad Trainmen against Howard at 343 U.S. 768. And then on page 385 of the record, the Court says, “We therefore hold that such a demand thus here made by the union is completely outside the ambit of rates of pay rules and working conditions as those words are used in the Railway Labor Act and cites the North Shore case and hence, is not within the scope of mandatory bargaining. Therefore, the terms of the Norris-LaGuardia Act are here inapplicable. In further support, the Court relied on this Court's decision last term in the Borg-Warner case. Now the – with this holding, the Court disposed off a number of issues that were not specifically considered. As you will note from reference to the petitioner's brief, pages 14 to 15, there are a considerable variety of issues embraced in this case, all of which are disposed out by the Court's determination that a permanent injunction against the strike should have been issued by the District Court. Now, in the course of the development of this case, there have been so many instances in which by taking facts out of context. William J. Brennan, Jr.: Did you raise the jurisdictional question on the diversity issue below? Lester P. Schoene: No we did not, but the basic jurisdictional question is raised here for the first time. William J. Brennan, Jr.: May we hear you on it? Lester P. Schoene: Yes, I would -- William J. Brennan, Jr.: I mean, are you entitled to be heard? Lester P. Schoene: I beg your pardon? William J. Brennan, Jr.: Are you entitled to be heard on it? Lester P. Schoene: Yes, I think so. I think the question of jurisdiction might arise at any time. Felix Frankfurter: What if -- would you mind stating what you deem the basic jurisdictional question? Lester P. Schoene: Yes, the -- the jurisdiction on the Court would've -- of the District Court was invoked on the theory that rights were being claimed under the Constitution and laws of the United States. At the time that the complaint was filed, at least the part of the complaint seemed to have similarities to Chicago River -- Brotherhood of Railroad Trainmen against the Chicago River Railroad and it seemed at point to present his sufficient claim of federal right. There was never any jurisdictional claim on any other head of jurisdiction, but as the case has proceeded the nature of the federal right claim has seemed to us to become more and more vague until we felt compelled to bring to the attention of this Court that in the present posture of the case, there appears to be a basic lack of federal jurisdiction. William J. Brennan, Jr.: You mean -- Lester P. Schoene: I -- I'm going to tackle that -- William J. Brennan, Jr.: Meaning that they can't prove diversity and therefore -- Lester P. Schoene: That's a -- the federal right is not sufficient to support federal jurisdiction. Tom C. Clark: Well diversity was not alleged? Lester P. Schoene: Diversity was not alleged. Now, the -- I -- I say the -- the federal jurisdiction was claimed only on the basis of a claim under the constitutional laws of United States. Now there have been so many -- William J. Brennan, Jr.: This was left open in the Toledo case, was it? Lester P. Schoene: That -- that is exactly the point that was left open in the TP&W case and discovery incidentally, I must apologize for the fact that I have overlooked that fact in courts below and it came to my attention in the course of the preparation of petition for certiorari in this Court and therefore the question was raised. As I said the taking effects out of sequence, out of context and drawing inferences form them has lead I believe to a considerable degree of confusion as to what the facts actually were and how this controversy arose and I believe that I can be of greatest assistance to the Court if I first take a little time, in fact a fair amount of time to review in some details the actual sequence of the events that lead to this controversy and this litigation. Felix Frankfurter: You -- you do that I take it because you think that will make clearer the jurisdictional problem? Lester P. Schoene: Well, it will include the jurisdictional problem but I think it is necessary for the understanding of any of the issues in the case that the Court -- Felix Frankfurter: All right. I put my question because usually, I like to refresh my mind first it was so clear that there's no jurisdiction. Is that a good reason for not starting with that. That's why I assumed that I -- Lester P. Schoene: I -- I don't -- I don't think it's completely clear, Mr. Justice. Felix Frankfurter: All right. Lester P. Schoene: I think this is in one of these vague areas in which I'm not quite sure of what the holdings of this Court indicate. Now, this controversy began when on December the 23rd, 1957, the union, pursuant to Section 6 of the Railway Labor Act served a formal notice on the carrier in which it proposed to amend the existing agreement by including the rule which I have already quoted that is that, “No position in existence on December 3rd, 1957, will be abolished or discontinued except by agreement between the carrier and the organization.” Now, prior to that date, and since Mr. Ben Heineman had taken over the management of the railroad in -- on April the 1st, 1956, approximately a year-and-half before, the total employment had been reduced from 26,000 approximately to approximately 18,000. And that reduction in employment had included some 100 positions of the telegrapher's class other than the station agency positions. Also, the Railroad had applied on November the 5th, 1957 to the South Dakota Public Utilities Commission for permission to close 69 stations in South Dakota or alternatively, if it proved feasible to close 53 stations and enlarge the agents' assignments at 16 others to include limited service at the closed stations. Hearings in South Dakota had not then concluded. Now, you may wonder why I'm diverting to the proceedings in South Dakota, the reason is that throughout this case, the carrier, the railroad has taken the position that actually this strike was not motivated by the refusal of the carrier to bargain under Section 6 proposal, but was really a protest against the railroad station agency problem and was in protest or for the purpose of frustrating orders of state commissions. Therefore, I think it is important that the Court have in mind that at the time this proposal was made, over a 100 non-agency positions have been lost and the proposal to close agencies had been made only in South Dakota, hearings in South Dakota had not yet been concluded and of course no action by the South Dakota commission had been taken, and that was the posture in which the Section 6 notice was served. Now incidentally I should have stated earlier that virtually all the facts that I'm reviewing are to be found in the Court of Appeal -- in the District Court's findings of facts and some inclusion of law which appear at page 351 and following of the printed record that is before you. Now, after the service of this notice, the railroad refused to bargain. It flatly refused to entertain the proposal. That is borne out by finding number four on page 352 of the record. The letter of December 24th there referred to appears on page 34 of the record and it will be noted that the reason for the refusal to bargain by simply the carrier regarded here is not a proper subject for bargaining and the use of patient of management prerogatives and it made no mention of any of the other reasons that were later adduced for its refusal to bargain. Subsequently, as finding number four also points out this same position was reiterated in discussions and in correspondence. On January the 27th, 1958, as finding number five points out, the union notified the Railroad that it would have to treat the railroad's actions as a refusal to bargain under the Railway Labor Act and that it would proceed further in accordance with the provisions of the Railway Labor Act. In accordance with that announced position, the union on February the 5th, 1958 invoked the services of the National Mediation Board that is covered by finding number 6. Now, I would like to read specifically finding numbers 7, which says the on the date of February 24th, 1958, the National Mediation Board by its Executive Secretary addressed a letter to the Director of Personnel and the plaintiff, Mr. TM Van Battan and to the President of the Telegraphers G.E. Leighty advising that the application filed by the Telegraphers has been reviewed by the Board, advising further that the Board considered that apparently at proper Section 6 notice has been filed in this manner and accordingly, the Board have docketed the application as case number 25696 and that's a typographical error that should be number A-5696 as would appear from the record at page 43. I call the attention specifically to the reaction of the Mediation Board because insofar as there is any room for administrative determination, as to what is a proper subject to be entertained under the Railway Labor Act, this is it. Now, there's no specific finding that is bargainable, and that is subject of mandatory bargaining as Mr. Elson pointed out in the District Court in response to a question. But insofar as there is room for an administrative determination under the Railroad Labor Act, the Board after reviewing the application from Mediation wrote to party saying that apparently, a proper Section 6 notice had been served. Pursuant to the docketing of the case, mediation was actively progressed under the assignment of the mediator from May the 22nd to May the 26th, 1958. That is not included in the findings of fact but appears from the testimony undisputed appearing at page 154 of the record. Now at this point, I need again to diverge from the exact sequence of events shown in the progression of the case because Mr. Heineman testified, and it's not disputed, that on May the 26th while the mediation was going on in Chicago, then his Director Personnel Mr. Van Batten was there representing the Railroad, and Vice President of the union was there representing the -- representing the organization. On that date in Madison, Wisconsin, Mr. Heineman had a brief conversation in the car near the state office building with Mr. Leighty, the President of the Union and me. During this conversation, according to his testimony and we don't deny it, he asked us whether we would care to discuss the central agency problem, and made no offer to discuss the Section 6 notice, but having recently procured authority of the South Dakota Commission of close 53 stations that enlargely assigned with others, he wanted to know whether we were -- would like to talk about the central agency plan. We thought we were too far apart to talk about it. And I think the best evidence that this had nothing whatever to do with the -- with the proposed contract change is to be found in the fact that although the mediation was going on that date in Chicago, neither Mr. Heineman nor Mr. Leighty reported the conversation to their representatives who were conducting or representing their respective organizations in the mediation conferences. It was something entirely apart. Now, the reason I mention that is that that incident has been used in this Court by the railroad to seek to create the impression that it was the union rather than the railroad that was refusing to bargain whereas the record is perfectly planned from the acknowledgment by the railroad of the very first letter that the union wrote namely on December the 24th, 1957 that the railroad positively and consistently refused to bargain. And it was admitted in the testimony by Mr. Heineman that he never had agreed to bargain upon this particular proposal. And it is also -- Speaker: I don't understand you as far it was, you just preferred to what was the proposal that you turned down? Lester P. Schoene: Well, we didn't turned down any proposal by -- Speaker: Or that you have said you could discuss? Lester P. Schoene: Well, what Mr. Heineman had said he was willing to discuss with us was the program when he had to outline of which by this time had developed or include several other States besides South Dakota, although proceedings in other States except South Dakota was still going forward. And he was willing to discuss the impact of that problem upon the employees represented by the union. And with that that -- I mean, we went too far apart on that subject to enter into any negotiations upon it. Now, at page 2 of our reply brief, we have quoted, “Testimony of Mr. Heineman and which I cite he had mentioned that he had consistently refused to bargain upon the particular proposal that we make.” Charles E. Whittaker: There was just one proposal as I understand, am I right Mr. Schoene? Lester P. Schoene: That is correct. One -- Charles E. Whittaker: You proposed the insertion of the covenant that no position in existence on December 3, 1957, it would be abolished or discontinued except by agreement between the carrier and the organization. Lester P. Schoene: That's the proposal. Felix Frankfurter: Could I ask you this just to -- Lester P. Schoene: Sure, sure Mr. Justice. Felix Frankfurter: Could such a – isn't such an agreement depended upon what state commission is doing abolishing stations and so on? Lester P. Schoene: I think not. I would come to that in the course of the argument, but I don't get that the Railway Labor Act can be subordinated to the actions of state commissions. I have -- Felix Frankfurter: Then this must be a bargainable question under the Railway Labor Act? Lester P. Schoene: Yes, sir. And that's a -- Felix Frankfurter: In your view? Lester P. Schoene: That is in our view with this, that's right. Felix Frankfurter: I'm thinking of the early case of New Heavens where we held that certainly the public service commission except that it is called I have forgotten what, can abolish (Inaudible) the Railway Labor Act that's involved in the -- Lester P. Schoene: Well, I think that makes a big difference. Felix Frankfurter: All right. Lester P. Schoene: Well, Mr. Heineman's testimony was as it appears at page 104 of the record, you understood my testimony correctly that after the proposed rule of the order of railroad telegraphers served in December of 1957, I personally participated in making the decision that the telegraphers should be told then it is not a bargainable subject matter. I was then fully aware of that attitude of the carrier from its inception. That attitude on the party -- on the particular rule has not been modified nor in my opinion, can it be. Mediation services of the National Mediation Board, as shown in finding number 8 on page 353 of the record terminated on May of the 27th, 1958. Arbitration was proffered as the Mediation Board has required to do as its last final act when in finds that it cannot resolve the controversy and both parties declined the arbitration. Accordingly, on July the 10th, 1958, as shown by finding number 10, the Union initiated a strike both among its membership and received almost unanimous authorization to call a strike over the failure and refusal of the railroad to bargain about this issue. Strike call and instructions were issued to the membership on August the 18th calling a strike for August the 21st and that's covered by finding number 11. Now, on that same day, August the 18th, the National Mediation Board, although it had previously completely processed the case through the normal procedures have mediated it and it concluded that it could not resolve the issues and proffered arbitration as its last required act, again, entered the case on an emergency basis which it frequently does when a strike is eminent and adopted in this case, this new entry into the matter as its docket number E175. That appears in finding number 12 and it mediated the case from the -- under that emergency intervention until August 20th, 1958, the day before that the date set for the strike. On August the 20th, it again withdrew and the strike was set to begin the following morning. I mention this emergency mediation particularly because it too, gives rise to an issue in the case. As I indicated in description of the District Court's decision, the District Court denied any prominent injunction. He did however feel that the reentry into them abide the Mediation Board in to the case on the eve of the strike set a second 30-day waiting period into operation, and that therefore, the strike would have to be postponed until September the 19th and they issued that's -- an injunction accordingly until September the 19th, 1958 enjoining the strike until that date. Charles E. Whittaker: Would you tell me right exact place Mr. Schoene how did he ordered the action to dismiss and at the same time ordered an injunction to issue? Lester P. Schoene: What -- what the Court did in its order which appears at page 259 is first to order the injunction of issue until midnight September 19, 1958. Following that is that it is further ordered that the prayer for injunctive relief extending beyond September the 19th, 1958 and -- William J. Brennan, Jr.: 1959? Lester P. Schoene: No that's –- William J. Brennan, Jr.: Page 259 of the record? Lester P. Schoene: No, 359 I'm sorry. It is further ordered that the prayer for injunctive relief extending beyond September 19, 1958 and any other relief prayed for in the complaint is amended and it this hereby denied and except for the relief here in above given the complaint as amended is hereby dismissed. Now, on the same day Mediation Board terminated its emergency service -- Felix Frankfurter: May I just put in a minute? Lester P. Schoene: Surely. Felix Frankfurter: This injunction in of December 19th because of his assumption that 30 days more could be (Inaudible) have a substantial order of that -- Lester P. Schoene: That -- that's right. Felix Frankfurter: Was that contested before the District Court? Lester P. Schoene: Oh, yes. That -- by that. Felix Frankfurter: I mean, it's merely as to the -- as to the discretionary power to issue it but as to the power to issue this? Lester P. Schoene: As to the -- Felix Frankfurter: On the fraction of 30-day extension? Lester P. Schoene: A certain power as to the propriety, as to -- and if an appeal was taken from that portion of the order as well as -- Felix Frankfurter: I know that there is no second 30-day? Lester P. Schoene: That's right. Charles E. Whittaker: I must admit this new order because I never have seen a notice like this? Lester P. Schoene: Well, I don't think I have either, but, I -- I don't see that there's anything basically improper about it except the 30-day restraint that -- And also on the same day that the -- that the Mediation Board terminated its services on August 20th. This -- the complaint in this action was filed in the District Court and the motion for temporary restraining order also filed. The Court heard arguments on the motion for temporary restraining order throughout the day and throughout the afternoon of August 20th and at the close of the day, issued a temporary restraining order and continued the hearing for the next several days. At this point, another diverting factor enters in. The Railroad on August the 21st, the day after the litigation had began, the day after the temporary restraining order had been issued wrote a letter to the union saying your proposal of December 23rd is in violation of Article 6, of the National Mediation Agreement of November 1, 1956. Now Article 6 of the Mediation Agreement of November 1, 1956 set a term on certain kinds of proposals such as wages, overtime payments, changes and rights of pay, changes in health and welfare payments which would not be proposed for change until after November 1, 1959. Proposals relating the stabilization of employment were expressly accepted from Article 6 and as I say this was raised for the first time after the proposal had been before the railroad for well over nine months, after the strike had been called, after the litigation had been begun, and the temporary restraining order had been issued, the railroad also announced its proposal to submit to the National Railroad Adjustment Board the question of whether the proposal was in violation of Article 6 of the 1956 agreement. This was obviously an opportunistic and belated effort to invoke the authority of the Chicago River case. And the reason for this particular submission is very easy to trace because in the argument in the District Court, the day before, with respect to the temporary retraining order, the Railroad had argued that the real heart of this controversy is the union's claims that the station agency program would give rise to claims under the existing agreement. And therefore, the Court should look behind this proposal to amend the contract and should enjoin the strike on the authority of the Chicago River case. We responded that even though -- even if you assume that the railroad is right in its inferences, still it's not with Chicago River case because as this Court's decision a few weeks after the Chicago River case pointed out in Manion against the Kansas City Terminal Railway Company that the Chicago River case is predicated upon claims being pending before the National Railroad Adjustment Board and they had no claims pending before the National Railroad Adjustment Board with respect to violations of existing contracts. Not only that, they were not in a position to submit even belatedly and opportunistically any claims about violation of the existing contract because they had no such claims on the property. They had no controversy on the property about it. So in order to get around the Manion case -- Felix Frankfurter: I don't understand that Mr. Schoene. They had no claims on the property? Lester P. Schoene: That's right. Felix Frankfurter: I don't know what that means. Lester P. Schoene: The -- the organization have made no claims that the Station Agency Program violated the existing agreement. There was -- there was disagreement about that but -- but no claims had been filed on the management for any violation existing -- Felix Frankfurter: To clear up another thing, first is the outstanding agreement which they sought to -- of which they gave the notice -- to which you gave the notice that you wanted an amendment. A minute ago, few minutes ago you spoke of the Mediation Agreement of 1956, what was that? Lester P. Schoene: The Mediation Agreement of 1956 contains amendments to existing agreements of some 15 organizations on a national basis with the railroads represented by Carriers Conference Committees. Those amendments related to rates of pay -- Felix Frankfurter: Including Chicago North Western? Lester P. Schoene: Including Chicago North Western and that dealt primarily with rates of pay and revisions in the health and wealth program. Charles E. Whittaker: Would that then just a part of the -- of the bargaining agreement between departments? Lester P. Schoene: Yes. That occurs frequently in the railroad industry Mr. Justice Whittaker. It's the only industry that I know of where it happens with such frequency. Our basic agreements continue from year to year and are amended from time to time and sometimes by joint agreements which in this case should have 15 unions and about a 150 railroads. Felix Frankfurter: They continue automatically? Lester P. Schoene: They continue automatically until somebody serves the notice to change it under the Railway Labor Act which requires a 30-day notice. So, quite obviously because the railroad was not in the position to put before the Adjustment Board any claims under the existing collective bargaining agreement, it felt nevertheless, that by asserting on each part, a violation by the union of the National Mediation Agreement that it could generate a controversy that it could then submit to the Adjustment Board and come in and say, “now we have a dispute pending.” Are they -- Potter Stewart: Your -- your point is that their tactic was to convert this into a so-called "minor disputes?" Lester P. Schoene: That actually the exactly, Mr. Justice. William J. Brennan, Jr.: But to do so, solely for the purposes of this jurisdiction conjunctive relief, is that it? Lester P. Schoene: That -- that's right, that's right. And the -- on -- on that point incidentally, the District Court found as a matter of fact that no dispute giving rise to this part was a minor dispute and found specifically that's been the dispute that did give rise to the attempted strike was the proposal from contract amendment. Felix Frankfurter: Mr. Schoene, would you take care of curiosity of mine if you stay -- Lester P. Schoene: If I can. Felix Frankfurter: By referring to finding that it becomes now that discussing the significance whether there is a controversy as to whether the findings are challenged in the Court of Appeals and they are challenged here? Lester P. Schoene: There is no challenge to any on the findings with the exception of the last sentence of finding number 17. That -- that finding is a -- Felix Frankfurter: Could that (Voice overlap) substantially identical to the rule? Lester P. Schoene: That's right and the challenge there as I understand it is that the evidence on which that particular sentence was based on those copies of two agreements which are identical in substance to the proposal here involved except that they are for a term instead of they, as in this proposal indefinite with subject to revision at any time. Felix Frankfurter: I mean, was that challenged before the Court of Appeals? Lester P. Schoene: I believe it was although -- Felix Frankfurter: (Voice overlap) -- Lester P. Schoene: I beg your pardon. Felix Frankfurter: Could they have relevance to the constitution? Lester P. Schoene: I don't think so. Felix Frankfurter: All right. So -- Lester P. Schoene: I -- I don't think so, but with that one exception, the brief here says that they are challenging none other findings. Felix Frankfurter: All right. Lester P. Schoene: Now, the hearings before the District Court continued with some interruptions until September the 5th, 1958 and under extensions of the temporary restraining order, that appears from the documentaries on the first page of the record. On September the 5th, the District Court rendered its opinion which as I have already indicated, denied injunctive relief beyond September the 19th but granted injunctive relief until that date. That was on Friday and so, by mutual agreement, the entry of the final decree and findings in order was postponed until Monday, September the 8th so as to give both sides an opportunity to draft proposed findings and decree. Now, in addition to the findings that I have already referred to under my discussion of the facts, I would like to make a number of other significant findings, beginning with the finding number 17 on page 356 of the record. The Court found number 17, the proposed contract change incorporated on the Section 6 notice served by the defendant to (Inaudible) on December 23rd, 1957 relates to the length or term of employment as well as stabilization of employment. Collective bargaining as to the length of term of employment is common place. There are a variety of collective bargaining provisions in the railroad industry relating to stabilization of employment as such including provisions for severance allowance, supplementary unemployment compensation benefits and guaranteed employment. The latter provision in one instance goes back more than 30 years and then the challenged finding of the contract provision substantially identical to the rule proposed here -- proposed by the defendant to (Inaudible) are in existence on at least two railroads and as I understand, the challenge goes to the substantial identity rather than for the existence on the agreements. Speaker: Was that finding overruled by the Court of Appeals? Lester P. Schoene: No. No, the Court of Appeals did not disturb any of the findings of the District Court. Speaker: (Inaudible) if I remember –- Lester P. Schoene: 18 in the contract changed proposed by defendant (Inaudible) in the Section 6 notice of December 23, 1957 relates to rates of pay rules and working conditions and these are bargaining relations under the Railway Labor Act. 19, the dispute giving rise to the proposed strike goes out on the failure of the parties to reach agreement on the proposed contract change incorporated on the Section 6 notice served by defendant (Inaudible) by the plaintiff on December 23rd, 1957. 20, the plaintiff has refused to negotiate, infer, mediate or otherwise treat with defendant (Inaudible) on the proposed change and agreement set forth in the Section 6 notice served by defendant to (Inaudible) on plaintiff on December 23rd, 1957. The plaintiff did show willingness to negotiate upon the Central Agency Plan including a possibility concerning severance pay. That last sentence grows out of the conversation with Mr. Heineman in Madison, Wisconsin on May the 26th. 21, the dispute giving rise to the proposed strike is a major dispute and not a minor agreement under the Railway Labor Act. There is no issue involved there and is properly referable to the National Railroad Adjustment Board. From the various findings, the Court concluded as a matter of law, first that the complaint as amended fails to state a claim upon which relief can be granted except for the issuance of an injunction expiring at midnight, September 19, 1958 to the defendant to (Inaudible) serving and progressing in Section 6 notice of December 3rd -- 23rd 1957 has conformed to all the procedures and requirements of the Railway Labor Act. Three, no issue no involved in the proposed strike which plaintiff seeks to enjoin is properly referable to the National Railroad Adjustment Board. Four, the proposal contained in Section 6 notice served on December 23, 1957 by the defendant to (Inaudible) upon the plaintiff presents an issue which is a proper subject of negotiation and is bargainable under the provisions of the Railway Labor Act. Five, the proffer of services on an emergency basis by the National Mediation Board and its acceptance by the plaintiff and the defendant to (Inaudible) initiated the new 30-day cooling off period under the Railway Labor Act running from the termination of such services on August 20, 1958. Sixth, the Court is without jurisdiction to grant injunctive relief except for an injunction expiring at midnight, September 19, 1958. And -- Potter Stewart: You -- you understand that the -- any part of the Court's conclusion to the law were based on the Norris-LaGuardia Act? Lester P. Schoene: Yes, indeed. I think it is -- it is clear that from the argument before the Court which on our part was devoted almost entirely to the Norris-LaGuardia Act by the conclusion number six. Potter Stewart: There's no reference at all, direct sanction is there? Lester P. Schoene: I beg your pardon? Potter Stewart: Is there any reference in these findings and conclusions to the statute? Lester P. Schoene: There is in the opinion, Mr. Justice Stewart. The opinion of the Court appears at page 165 and following and I think -- and I think it's there indicated that the -- the finding number six is predicated on the Norris-LaGuardia Act. It is also apparent from the issues before the Court particularly the issues raised by our answer that the Norris-LaGuardia Act was invoked and is the basis for our conclusion number six that the Court is without jurisdiction to grant injunctive relief except for an injunction expiring at midnight, September the 19th, 1958. Charles E. Whittaker: That raises the old question that I had a while ago. I don't understand how the Court is without jurisdiction, it can be subject to some exemption for truth and then maybe it doesn't make any difference here, don't waste time about it but I just want to withstand it. Lester P. Schoene: Well I -- I can -- I can understand your difficulty and as a matter of fact, this morning I struck out of my notes an argument predicated upon that. And the union appealed from a temporary restraining order on the basis by the Norris-LaGuardia Act and from the continuances of the temporary restraining order and from the injunction to September the 19th. The railroad on the other hand appealed from the denial of permanent relief and the dismissal of the complaint. Then on September the 16th, 1958 having filed the appeal, the railroad appeared before the District Court and sought an injunction pending appeal pursuant to Rule 62 (c) of the Federal Rules of Civil Procedure. The Court, although very much troubled about its jurisdiction to grant such an injunction under the Norris-LaGuardia Act, having just held eight days before that it was without further jurisdiction in the matter, nevertheless granted an injunction pending appeal. The difficulty that the Court had with respect to this inconsistency between its having held that it had no jurisdiction beyond September the 19th is set forth in the record at page 369. The Court said it was very much troubled about whether he has jurisdiction. He doesn't want to exceed his jurisdiction. He recognizes the inconsistency between holding that he has no jurisdiction and still exercising jurisdiction purportedly under Rule 62 (c) in clear contravention of the Norris-LaGuardia Act. Nevertheless, the injunction was issued and the union then amended its notice of appeal to include appeal from the injunction pending appeal. Speaker: Is that issue before us the 62 (c) issue? Lester P. Schoene: I beg your pardon? Speaker: Is that 62 (c) issue before us? Lester P. Schoene: Yes, it is. Speaker: Where is that? I would suppose that was all merged (Inaudible) injunction. Lester P. Schoene: No. Both the injunction until September the19th and the injunction pending appeal are not moot because in both cases, bond was posted in the amount of in the amount of $50,000. And if those injunctions were wrongfully issued we're entitled in these very procedures and in the Norris-LaGuardia Act to recover under the bond. And the issue as to both injunctions was preserved on appeal and although not specifically considered by the Court of Appeals was necessarily disposed of by its holding that a permanent injunction should have issued. Charles E. Whittaker: Well I didn't understand Mr. Justice Harlan to ask you to moot but that whether they were merged in the merits -- in the (Inaudible) Lester P. Schoene: Yes, I -- you are right. I thought Mr. Justice Harlan's first question was, is the issue -- Speaker: What you are saying is if they are -- they are now appears so that we can reach them if we want to. Lester P. Schoene: That's -- now, that -- that completes the resume of the facts up to the decision of the Court of Appeals which I have already outlined. I -- my time is running short. I want to reserve a little time for rebuttal so I'm going to have to be rather rapid in my discussion of the legal issues. Hugo L. Black: Would mind repeating or could rebound it and state it now very briefly what you consider the legal issues that we have to decide? Lester P. Schoene: Yes. I think the -- the legal issues are before you are in the first place whether this proposal presents a bargainable issue under the Railway Labor Act. If it does, then I think some of the other tendered issues disappear because in that case, I'd take it there would be no doubt that the Norris-LaGuardia Act is applicable and the jurisdiction of the District Court limited by the terms of that Act. Even it is our position that even if no proposals for compulsory bargainability under the Railway Labor Act is presented, it nevertheless does not follow that there's anything illegal about making the proposal or anything illegal about striking on the count of the carrier's refusal to bargain about it nor any reason to hold the Norris-LaGuardia Act inapplicable to the resulting labor dispute. Hugo L. Black: In other words, if they could have decided that you had the right to bargain on that -- Lester P. Schoene: But then I see no -- I -- I think then the issue as to Norris-LaGuardia disappears because Norris-LaGuardia clearly is applicable, the contention that it is not -- Hugo L. Black: But suppose it decided the other way, what's left is -- Lester P. Schoene: Well, that then, it is still our contention that there's nothing illegal about the strike even if the railroad didn't have to bargain with the -- Hugo L. Black: Do you mean -- do you mean if it's permitted? Lester P. Schoene: That it's permitted and that there is no basis for holding the Norris-LaGuardia Act inapplicable even in that situation. Hugo L. Black: Well I don't see the difference between those two, I don't quite understand it. It seems to me you're saying that if you're authorized to bargain on those points by the Act and that the Court was wrong in saying so -- even in wrong in saying so that the Norris-LaGuardia Act should not have been ignored. Lester P. Schoene: I think the difference is simply this. The -- it's a question of whether the railroad is under a legal obligation to bargain with us on the one hand -- Hugo L. Black: But it is -- it is if it is permitted, isn't it? Lester P. Schoene: I don't think so. Hugo L. Black: You don't think so? Lester P. Schoene: Well, wait a minute -- Speaker: Mandatory bargaining exactly. Lester P. Schoene: And I -- my basic position is exactly what you have just stated, Mr. Justice Black, namely that the entire area of interest between employers and employees is subject to bargaining and subject to mandatory bargaining. If however -- Felix Frankfurter: Do you mean anything that may forgetting the law, anything that seems rationally related to the industrial relations, to the employer and employees on railroad is the fit subject to be tendered by the union? Lester P. Schoene: Well, that is right. Felix Frankfurter: And -- and required to be responded through the Railway Labor Act, is that it? Lester P. Schoene: That's exactly it. William J. Brennan, Jr.: And that Norris-LaGuardia? Lester P. Schoene: Well Norris-LaGuardia, I say, is applicable –- Felix Frankfurter: That follows –- Lester P. Schoene: That follows -- Norris-LaGuardia is applicable -- William J. Brennan, Jr.: That's not another issue here although it'd be -- Lester P. Schoene: Yes. William J. Brennan, Jr.: It was related this way. Whether -- whether the dispute which brought you before the Adjustment Board. Lester P. Schoene: That -- that is correct that there is another issue which is imposed and which the respondent says is an independent ground for sustaining the decision below is this related submission to the Adjustment Board. And -- Felix Frankfurter: Mr. Schoene, in the interest of time, I wonder if you can help all of us, if you state it again without arguing, leaving your time, what the materials are on which the first issue that you've stated to be resolved by this Court? And what am I look in decisions of this Court in practice before those various branches under the Railway Labor Act, et cetera, et cetera? Lester P. Schoene: Yes. I'll be glad to indicate that. You look first to the Railway Labor Act itself and you will find that Section 2 first of the Railway Labor Act, that's 152 in Title 45 of the U.S. Code says it shall be the duty of all carriers -- Felix Frankfurter: Would you mind reading it to me again? Lester P. Schoene: It's Title 45 -- Felix Frankfurter: Yes, I know that. Lester P. Schoene: 152 first. Felix Frankfurter: All right, thank you. Lester P. Schoene: It should be the duty of all carriers, their officers, agents, and employees to exert every reasonable effort to make and maintain agreements concerning rates of pay, rules, and working conditions, and to settle all disputes, and thus, it has limited to making agreements concerning rates of pay rules, and working conditions, but to settle all disputes whether arising out of the application of such agreements or otherwise in order to avoid any interruption to commerce or to the operation of any carrier growing out of any dispute between the carrier and the employees thereof. Felix Frankfurter: I don't want to argue it but -- Lester P. Schoene: Secondly -- Felix Frankfurter: But may I ask whether in the breathe of your statement, would I be entitled to infer if the trainmen today, 1960 think that their interest requires protection from membership on the Board of Directors, you would regard that as something that you have the right to present? Lester P. Schoene: No, I would not. And I think that would be called contrary to the specific prohibition that neither side shall interfere with the choice by the other of its representatives under the Act. And I think just as if a railroad felt that it required representation in the union which would violate the counterpart of that prohibition similarly, the brotherhood would have no right to bargain for representation on the -- on the Board of Directors directly. Felix Frankfurter: Well, but it isn't as broad as I have phrased it namely, anything which to thinking person not versed in law would be a relevant consideration to industrial relation at all. Lester P. Schoene: Well, I -- I suppose it is subject to those specific limitations contained in the Act. But I wouldn't recognize any others. Now secondly, you have 27 years of construction by the parties of what this scope of bargaining is. We have included in the appendix to our brief a survey what has been the subject matter of bargaining under this Act, a great variety of it particularly bargaining without question until 1953 by the parties over all sorts of subject matter especially stable as action of employment. And -- Potter Stewart: Of course there's -- what your opponents call the lengthy excursion beyond the courtroom. In other words, that's not in the record, free of the dusty baggage of cross-examination, authentication, and similar inconveniences entrusted upon the judicial process. Lester P. Schoene: Yes, that's what I call the ultimate version that they've cast on it (Voice Overlap) -- Potter Stewart: That isn't true but that was not -- that's not in the record. Lester P. Schoene: That's entirely true, that is not in the record, this is a matter of public information that shall -- that contemporaneous construction of the law by the parties. Felix Frankfurter: Not judicial knowledge but judicial notice. Lester P. Schoene: That's right and beginning at page 57 of that brief, we have also assembled what has happened since 1953 when this issue of the limited conception of bargainability was first raised with respect to our health and welfare proposals. You will note from that tabulation that with respect to over 50 proposals since 1953, the railroads have raised this issue of non-bargainability. It has become a regular tactic of bargaining puts all that issue into the picture. So that the railroad -- the union is put in the position where it must take what the railroad wants or face litigation upon that issue. I will reserve the balance of my time for rebuttal. Earl Warren: Mr. McGowan. Carl McGowan: Mr. Chief Justice and may it please the Court. I will address myself first to the question of jurisdiction of the Federal District Court because the Court expressed interest in it. Mr. Schoene concluded by saying that he would prefer to admit that he was not clear on whether there was jurisdiction and whether there wasn't. I think I can make that clear if not to him at least to this Court. The reference was made to the fact that the T P&W case, in the TP&W case, this Court left the question of jurisdiction unresolved in that situation which was one of where the injunction is found upon the back of their acts of violence committed by the brotherhood. And I think Mr. Justice Stewart in the New York Central case, when he was still on Circuit, dissented from a finding of federal jurisdiction in that case because he felt that the reasoning in the -- in the -- judgment in dissent in the TP&W case was persuasive. My comment on that is that I think the TP&W case has turn analogous to the case of the man who stands along the right of way and shoots the gun on interstate train. And whether or not, there is federal jurisdiction in that situation, I think it is a real question. I would respectfully call your attention, Justice Stewart, to the -- to a case decided earlier in Sixth Circuit, the Grand International Brotherhood of Locomotive Engineers, 226 F.2d, in which a white employee sought an injunction against a contract which the -- his union and the railroad that was proposed -- supposed to enter into. There was no diversity there, there was no diversity in our case that the District Court in that case dismissed the complaint because of lack of jurisdiction. The Sixth Circuit reversed noting that what was really asserted there was a right of action accruing under the Railway Labor Act to be free of the kind of contract which the railroad and the brotherhood proposed to negotiate and that whether or not that right could be established at trial of the case. There was jurisdiction to hear and decide on the merits on that claim. William O. Douglas: What was the citation to that case? Carl McGowan: That sir is 226 F.2d, 604, certiorari denied, 350 U.S. 967 and I suggest to, if I may, to Justice Stewart that his participation in that opinion seems to me to be more relevant to the question of jurisdiction here than the doubts he expressed in New York Central case when he was addressing himself to the rationale. It was worked out by judgment in the Seventh Circuit followed by your colleagues in New York Central case. I myself in the New York Central case would not have depended, I believe, on the sheer interference with the carriers' obligation under the Interstate Commerce Act to base jurisdiction. Because I think in the New York Central case, what the carrier really was claiming was a right under the Railway Labor Act to be free of a strike under the circumstances where the union had moved to take no action under the Railway Labor Act by way of a new contract, demand, or anything else to lay illegal basis for a strike under the Railway Labor Act. I think if the jurisdictional question of the trades in those terms, it would resemble the (Inaudible) case more than the TP&W case. Charles E. Whittaker: Mr. McGowan may I ask you sir, as I understand, your jurisdiction here was based upon 1331 and 1337. Carl McGowan: Yes, sir. Charles E. Whittaker: Now, the right then to fall within those sections must be one “arising under” not involving the Constitution or laws, is that not true? Carl McGowan: That is right, sir. Charles E. Whittaker: Now then here, does your action do more than involve the Constitution or laws? Does it arise under the Constitution or laws of United States? Carl McGowan: Well, I believe it does, sir. I think I can make that clear if I state what our precise contention is. And I won't unless I denote this moratorium issue and the (Inaudible) issue because that's unrelated aspect. It was not central to our main contention. We say that if this contract demand was proper under all the circumstances and by that I mean within the contemplation of Congress under all the circumstances as a proper demand upon the railroad, why of course it's in the basis of a legal strike. And there could have been no injunction ground to us, Norris-LaGuardia Act or not. Conversely, we say that if this demand was not within the congressional contemplation of the Railway Labor Act, it cannot be made the basis of illegal strike at the end of the exhaustion of the Railway Labor Act procedures. And therefore, under the Railway Labor Act, construed in the light of -- of all the congressional policies reflected to other statutes and respect to transportation, we have a right to be free of that strike. Now, that right in my judgment arises on the Railway Labor Act. Its existence turns upon whether you construe the Railway Labor Act the way we say it should be construed or whether you do not construe the way we should do it. We say it should be -- Hugo L. Black: What you're saying isn't it that if the cases decided if the Act is construed one way, the case will have to be decided one way. If the Act is construe the other way, the case has to be decided in another way? Carl McGowan: If construe in other way, Mr. Justice Black, we win, if construed other way, we loose and as I understand it, that has been a familiar test of federal jurisdiction in these cases. Now, I won't cite the language of that effect because I'm sure it's unnecessary. Now, the ORT attached very premise upon which our contention rests, namely that they say there can be no such thing as an improper demand under Section 6 of the Railway Labor Act. Mr. Schoene has now repeated somewhat from that because he recognized that case of one hypothetical that obviously one of the demands that could not be made the right -- the basis for legal strike. And of course, they don't really mean what they say, when they say that no demand can be treated as improper under the Railway Labor Act because it must be remembered the Railway Labor Act is of two-way street. The carriers can serve demands too and they can lock out the employees at the end of the exhaustion of the Railway Labor Act procedures if their demand was a proper one. Suppose that we would decide that we couldn't live with this kind of obstructionism with respect to modernization and that we serve a contract demand on the ORT that you cannot intervene in legal proceedings for the state commissions, for the Interstate Commerce Commission in which we're seeking authority to modernize our operations without the consent of the railroad. You think they would bargain about that, of course, not. They wouldn't have to and we couldn't impound upon that a legal lockout at the end of the exhaustion of the procedures under the Railway Labor Act. So it is obvious that they do not wish -- really wish to press the contention all the way that there are no limitations upon the kind of demands that can be met under Railway Labor Act. The second more important reason why that attack on our premise is unsound is because this Court has held in the racial discrimination cases that there are demands which cannot be proper under Railway Labor Act and which cannot be made the basis of a legal strike on the Railway Labor Act and which can be enjoined without reference to Norris-LaGuardia. And to the extent that they have tried to make it appear in their brief that all those cases deal with the situation where the brotherhood was bargaining for something which was contrary to the interest of a minority of the group, that brotherhood represented, I say, what about Howard? Howard was the last case in that series. Howard involved bargaining for the members of the class which the brotherhood represented because there, the Negro minority had their own union. They were represented by the -- the brotherhood that came forward in that case with the demand that a class of jobs called porters be abolished. I presume that the brotherhood in that case was stabilizing their employment. They were asking for all the jobs and an another group failed and it didn't affect their members at all, so that that, that particular rejection of that demand is a proper demand under Railway Labor Act, didn't turn at all upon construction of the Railway Labor Act with respect to the duty owed by the union to the members of the class represented. It was rejected because -- in the words of Howard Larvey which I think puts our whole case very well. It was because of the repugnance of the union objectives in making demands to a federal policy implied judicial construction of the Railway Labor Act. We say that when you look at the -- this demand, and the setting in which it was made with reference to its purpose and effect, and what was really aimed at, that there is an obvious repugnance between the union objectives lying behind that demand and a federal policy to be implied from a judicial construction of the Railway Labor Act. Felix Frankfurter: Mr. McGowan, how much would one have to travel outside the findings of the District Court to validate your last sentence? Carl McGowan: Sir, I'd like to deal with those findings for a moment. It is true as I've said in my brief that I challenge only one true finding of fact as distinct from the conclusions of law which were put under that heading. And that was the last sentence of the finding number 17, and I agree that it's not a very important point, but if you will look at some of the last findings that Mr. Schoene read to you, number 18 for example, the contract change proposed by the defendant Telegraphers in Section 6 notice, December 23, relates to rates of payrolls and work conditions with the bargaining under National Railway Labor Act, that's our case. That's the conclusion of law on the facts of this case and Judge Perry indeed said that he didn't distinguish too sharply between findings of fact and conclusions of law and this one is specific and I'm going to object to -- Felix Frankfurter: Except by labelling them as such. Carl McGowan: I beg your pardon? Felix Frankfurter: Except by labelling them as such. Carl McGowan: Except by labelling. That is right. But in -- when I challenged this particular finding, he said, this again could very well be in the conclusions of law as far as that is concerned and the other findings that they in -- Hugo L. Black: May I ask you this, if it doesn't bother you? Carl McGowan: Yes, sir. Hugo L. Black: The Court of Appeals reversed precisely on that point, didn't it? That this language didn't permit -- Carl McGowan: Yes -- Hugo L. Black: -- bargaining on the proposal they made. Carl McGowan: Well, Mr. Schoene said that the Court of Appeals didn't disturb the findings that like and less that the Court of Appeals virtually wiped out the findings in this case and found that the -- that the demand was aimed at an objective which I will describe in a moment and that it was not -- that Section 6 notice did not relate to rates of payrolls and working conditions but again, if it is treated as a finding of fact they reversed it, I say this is the conclusion of law. But there's nothing in these findings, there are nothing in these findings with which we cannot live and still establish in this Court the propriety of relief we got from the Court of Appeals. Hugo L. Black: I didn't mean to indicate that they reversed it to these findings of facts. I meant that they held that the statute, under that statutory language, this proposal could not be made. Carl McGowan: That is right, sir. Hugo L. Black: I don't know to what extent that depends on the fact. Charles E. Whittaker: But the whole -- it couldn't be made -- if the whole couldn't be made or only that it was on exclusive management prerogative over which (Inaudible) bargained. Now, which is (Inaudible)? Carl McGowan: Sir, let me hasten to say that I don't think this Court is held very far to our decision by analyzing this problem in terms of management prerogative. I think I can agree with my brother counsel in that effect. He won't agree with me when I also said I don't think this Court is going to be held very far towards our decision by analyzing this problem in terms of the right to strike or the literal provisions of religion to the Norris-LaGuardia Act or most importantly, the allegedly limitless scope of collective bargaining in an unregulated industry. That brings me to the -- to the -- what the facts are and then what this command is really all about and what this lawsuit is really all about. We have set forth in our brief a number -- based on the testimony whatever I know is about the condition of railroad industry and that is that without modernization, it is in real trouble that if the North Western Railroad presents an aggravated condition of that I can tell you. The testimony shows that when the new management took control on April 1, 1956, there had been $8 million loss in the first quarter. The payrolls were in danger. Our wage revenue ratio was the highest of any railroad in the country which is to say that ratio of wages paid to revenues and the North Western is slipping right down that slide towards this Court where it was less than 20 years ago. One of the -- the new management did a number of things. They dieselized fully, they spent what few funds they had on a new car shop in Iowa which centralized repair operations. One of the things they found that was most in need of action was the fact that Northwestern was built to the grainger country and it is a grain-carrying railroad very heavily, and it was laid out from the last century where about every five to 10 miles where there's an elevator and a lumber yard, there was a station with a one-man agent there. With the passage of time, the building of hard roads right alongside of this railroad, business, now like business language, trains disappeared, and the agents found themselves without anything to do. We conceives a project of trying to keep down the expense of those branch lines and these are the mostly rural branch lines by trying to reduce the cost of the agent's expense and with the hard road and the telephone, we thought it was perfectly feasible to have one agent go up the road five miles and do whatever is needed up there and down the road five miles and do whatever is needed there. So, we devised the Central Agency Plans. We filed our petition under the state statute. We filed in South Dakota, November 5, 1957. Hearings were held throughout the State. November 26 to January 17, the Telegraphers appeared in those hearings, protested, gave evidence, filed briefs, participated in oral argument and did everything they could. It's perfect to proper of the litigant to try to convince the Commission that it was not in the company's interest, for the convenience necessity for that plan we put in effect. They did the same thing in Iowa. They did the same thing in Minnesota. They did the same thing in Wisconsin. In all four of which States, we received eventually orders from the State Commission ordering us or directing us, authorizing us to put into effect with the one exception of South Dakota where South Dakota said, “We think this is so important that we direct you to put it into effect under the terms of the quite separate statute giving us power over the regulation of service and the requirement of service of a railroad. Now -- Speaker: Could these State Commissions have directed you to curtail your agency -- your stations if you had not wished to do so? Carl McGowan: South Dakota said that it only could but that's what it did. We filed them -- Speaker: Under an application? Carl McGowan: We filed under a separate section of the statute which said that whenever we -- even if it's close or consolidated a station or remove the agent, we should get permission of the state authority. They said that well, you're not really changing the service here because the agents here were serving both places, the customers are going to get the service that therefore, we don't even think this statute is perhaps adequate, but just to make it clear, we're going to ship over on another statute on which we could have gone out and ordered you too rearrange station service, either of increasing it or lowering it and therefore you are directed to -- to put this order in effect forthwith. Now in the three other states, they simply issued orders approving and authorizing us to put the matter in effect (Inaudible) with. Felix Frankfurter: Now the dates of these state orders are relevant to the dates of this litigation? Carl McGowan: Very well, Your Honor, (Inaudible). We filed in South Dakota November 5. We announced at that time that this was -- we want to reassure South Dakota in order to single him out for discrimination. So we made a public announcement and put it into petition that we were not doing this in South Dakota. This was going to be a systemwide program. So that Telegraphers knew on November 5 that we were going to initiate far reaching reorganization of a station agency program. It was less than six weeks later that we were served with this Section 6 demand. Now, I think the chronology is -- is very significant and I like to thank Mr. Schoene of being the good lawyer that he is, but he had also read the New York Central case of Justice Stewart, where the brotherhood simply walking out in protest against the closing of the yard, had nothing under the Railway Labor Act on which to found a -- to found a legal strike. He knew as long as knew that we were starting a long hard battle with the Telegraphers that a lot of other people for that matter over the Central Agency Plan, these hearings were going to drag on for the States for months and months and that's just the way it work out. By putting that demand and when they did, and assuming the exhaustion of the Railway Labor Act Procedures withstanding order about the time they got -- we got our first order if we got one, they would have the muscle of the strike weapon and that's exactly the way it worked out. Now, why do I say that -- why do I say that -- that this demand was aimed at the Central Agency Plan? I'm not just drawing inferences myself, I take it right out of their own words and that is to be found in the -- in the record in the strike ballot. July 10, 1958 confirmed all of our suspicions about what this is all about. William J. Brennan, Jr.: What page is that? Carl McGowan: It's on page 53 of the record am I am going to take the liberty of reading it to some degree because I think this is critical. Hugo L. Black: Is there any dispute between you on that point? Carl McGowan: Sir, there certainly is. Hugo L. Black: I was asking. I don't know. Carl McGowan: There is. Indeed, when they presented findings in the District Court, there was no mention of the Central Agency Plan in those findings. You can read the findings as they repost are annoying of Central Agency Plan and the only reference now is the one we got in because Judge Perry was willing to add a sentence the fact that we didn't try to bargain about the Central Agency Plan. But that -- this is the circular in which they insert the distributor strike ballot and ask for authority, they ask that the worker -- the members to vote on the strike ballot. Page 53, since Mr. Ben Heineman's described, security control has gotten on North Western Railway System, and we have all witnessed a revolution in the management of this railroad. All types of service on which the railroad has now a monopoly had been drastically curtailed with corresponding inhuman slashes in employment (Inaudible). The loss of business resulting in the curtailed service in turn leads to further reductions enforced and further reduction of services (Inaudible). Well, last fall, a program of this sort that is a violent concern to our members that initiated by this management. This program has directed the elimination of vast majority of agents serving one-man stations. Proceedings are begun of where the public service command of South Dakota, Minnesota, Iowa and Wisconsin seeking authority either to close nearly all of one-man stations or to have one agent serve two, three, or four stations. Similar proceedings in other States maybe expected momentarily. In the public interest as well as the interest of our members and the organization as a whole, we have done everything possible to resist this program to reliance on the provisions of our agreements and by that he means the existing agreement and they made the claim that South Dakota that we couldn't this on existing agreement. Through informing the residents, the effect in (Inaudible) is the consequences of the Railway's actions and to attendance that all the hearings of the various commissions with presentation of the evidence and argument, we have tried to make reasoned common sense, and humanity prevail. Since last November, practically, all the time as your general chairman and four vice presidents as well as much of the time of a number of our local chairman and our general counsel, and our president had been devoted to these efforts. And now, listen to this, however, it became evident that on early date, that they meet this on this law effectively would require strengthening of our agreements. What does that mean? That means we have got to get something new into our agreements if we're going to be able to deal with this situation effectively. Hugo L. Black: Do you think that affects a legal problem? Carl McGowan: I do, sir. Hugo L. Black: To that motive? Carl McGowan: I do because our argument is that -- that in deciding what is the scope and content of rates of pay rules and work conditions under Railway Labor Act, we're entitled to have that -- that should be construed in the light of congressional policies and purposes with respect to transportation. And if we can demonstrate to you as I think we can that there is a federal interest in avoidance of waste and in good efficient regulation, both at the State and federal levels are both regulated in interstate commerce after all. But then construed in the light of that policy, and with reference to its purposes and effect in this particular setting of facts, we do not believe that Congress could have intended or did intend that we should be put to the test of a legal strike in order to try to modernize the railroad and that's our case. William O. Douglas: Is there any provision in this Act for a second or third or fourth go around in the mediation in the 30-day period, mediation (Inaudible)? Carl McGowan: In the act itself, Mr. Justice Douglas, there are no limitations on the number of times the Mediation Board could come in and mediate. There is the first mediation referred to as a part of the process and then the usual practices whether there'd be a second mediation. Would that happen in this case, the only controversy that in this case is over whether or not the -- the second mediation start a new 30-day period (Inaudible). The District Judge held that it did and gave us an injunction on the merits on September 18. That is disputed by the other side and I -- I --. William O. Douglas: What is your conception of the Act with this 30-day cooling of period, the recurring thing when the end of the 30-day arrives as new mediation effort and (Voice Overlap) -- Carl McGowan: Well neither the -- excuse me sir, neither -- William O. Douglas: -- no result and then another 30 days? Carl McGowan: Neither side has to accept the emergency mediation so that each party has in its power after the first mediation not to participate in another emergency mediation because that's a proper service and both sides have to accept. Our contention is that if they both accepted, if they both accepted, and there was another emergency mediation. I knew that the -- we think that the Act lies in the congressional purpose is to try to give and make the mediation effective would call for a new 30-day period and that was the point on which Mr. Justice -- William O. Douglas: What -- what -- is there any terminal point on that for either party? Carl McGowan: The terminal point is that neither party has to accept the proper services by the Mediation Board. William O. Douglas: And then the -- the -- well, isn't that what has happened here? Carl McGowan: Well, the -- the district judge decided it since both parties here accepted the emergency offer of mediation, the railroad -- the union could not strike until 30 days after that mediation had finished. That was -- that was the injunction we got on the merits of September 19 in the District Court. William O. Douglas: As a practical matter, what -- what happens after the end of that 30-day period? Carl McGowan: I suppose that the Mediation Board can offer a -- well I presume there's a legal right to strike or lockout as the case maybe. I presume the Mediation Board could offer a new emergency mediation, but neither party would have to accept it. Felix Frankfurter: If there is no -- if mediate -- if emergency intervention by the Mediation Board is not accepted just as the right to strike, is there any -- any more left under the Railway Labor Act to accommodate, I am using it purposely useful word or non technical word short to accommodate the claim on one side of this, on the other short of economic tussle. Carl McGowan: The Mediation Board can certify the dispute to the White House and the President may call an emergency board and that consumes another 60 days before that could be a legal right to strike approved. Hugo L. Black: May I ask you that you don't have time this afternoon, I would like to get your idea what you think are the criteria to control the decision as whether these things are within the definition of rule of working (Inaudible) and so forth. Do we have to look at the statistics and practices or what? Carl McGowan: I think I can answer that quickly. I think -- I think that this demand in the first place, let me say this demand goes far beyond anything that they have demonstrated either in the record or outside the record in terms of a complete veto power over the discontinuance of positions, not -- not limiting layoffs where the man is affected and when he -- if he dies or resigns, his job disappears. This -- this demand is a veto power over the discontinuance of positions. And that is why we think at all that we are on sound ground and we say it also underlines the purpose here of the brotherhood was to get control over the modernization plan known as the Central Agency Plan because by freezing the position as distinct from the men in the jobs, they could ward off this threat to the number -- total number of jobs for their members. And we think that's the basic distinction, but when we talk about stabilization of employment. I know of no true stabilization employment scheme which is concerned with having men do work that is not there to be done. Their concern was trying to balance the work over the year so that the maximum numbers of men are allowed to participate, but if they all assume work to be done. Hugo L. Black: Well, have they always done that? I suppose some of the (Inaudible) vary from time to time. Carl McGowan: One of the reasons -- one of the reasons, sir that they haven't been able to do it in the Railway experience, at least in the experience of one railroad has stated the section then. They're the ones that are always feel the grant of the impact of downturn conditions because the railroad doesn't want to spend what money it has to keep the section -- to keep the railway in good shape. No, because they -- they never let go off the job, they have no permanent jobs and they get six months a year sometimes if they're lucky. The reason is because the dollars that could be used to employ them more are being paid. In this case, we say the station agents who are not really engaged in productive labor and for whom there is not enough work to be done. Earl Warren: We'll recess now.

William H. Rehnquist: We'll hear argument next in Number 93-1935, Curtiss-Wright Corporation v. Frank C. Schoonejongen. Mr. Reich. Laurence Reich: Mr. Chief Justice, and may it please the Court: The issue in this case is the effect of section 402(b)(3) of ERISA on a plan term included in a governing plan document, a summary plan description, issued by a plan sponsor that had reserved the right to modify, amend, or terminate the plan from its inception as an ERISA plan. It does not concern the right of the plan sponsor to terminate company-paid retiree medical benefits, which the lower courts agreed it has. Section 402(b)(3) provides simply that every employee benefit plan shall provide a procedure for amending such plan and for identifying the persons who have authority to amend the plan. In considering the requirements of section 402(b)(3), it should be kept in mind that ERISA applies to a variety of employee benefit plans. Initially, there is the dichotomy between pension plans and welfare plans. Pension plans are subject to a panoply of regulations in part 1 of ERISA that do not affect welfare plans Some pension plans are subject to substantive regulation under title 4 of ERISA that affect only pension plans and not welfare plans. Most pension plans have some concern with Internal Revenue Code requirements that do not affect welfare plans. In each category, there may be plans that have trustees involved and plans that do not. The presence of a trustee obviously impacts upon the need for... upon the procedure for amendment, since a trustee may require that amendments be made... affecting it be made only with its consent. Some plans are adopted unilaterally by a plan sponsor as a voluntary matter, and other plans are adopted under the provisions of a binding collective bargaining agreement which obviously adds a layer of complexity to the amendment of the plan. Other plans, both pension and welfare, are single employer plans, and some multiemployer plans. In many cases, multiemployer plans, and even, indeed, single employer plans, will involve regulations under section 302 of the Taft-Hartley Act. The Curtiss-Wright plan is the very simplest of all these plans. It is a voluntary, single employer plan unilaterally adopted by the employer, not... no collective bargaining agreement involved. There is... and there is no trustee, and as a welfare plan it is subject to no substantive regulation. As far as the amendment... requirements for amendment procedure of section 402(b)(3) are concerned, there is nothing in ERISA that intends that a... indicates an intent that a corporate plan sponsor, which, of course, is a person under section (3)(9) of ERISA, that expressly reserved unto itself the right to amend, specify which of its agents should amend. Of course, a corporate plan sponsor, being a corporation and a juridical entity, not a... a legal entity rather than a physical entity, can only act through-- Sandra Day O'Connor: Well, Mr. Reich... you say Reich, not Reich? Laurence Reich: --Yes, Justice. Sandra Day O'Connor: Okay, Mr. Reich, what do you make of the requirement in section 402(b)(3) that says, not only must there be a procedure for amending the plan, but also a procedure for identifying persons with amendment authority? It's written as though there were two separate requirements. Laurence Reich: In many cases, there might, indeed, be a need for a procedure for identifying. I would suggest that, since the end result that is obviously intended by Congress is that there be an identification, if the situation is a simple one such as here, it should be sufficient to identify the person. There should not need to be a procedure merely for saying that the plan sponsor will set forth a procedure for identifying itself as a plan sponsor. It would seem superfluous to utter those words as an incantation when the purpose-- Sandra Day O'Connor: So as applied here, you think its surplusage? Laurence Reich: --I'm sorry, I didn't hear the word. Sandra Day O'Connor: As applied in this case with a single employer voluntary welfare benefit plan, is the identification of the person who has the authority to amend just surplusage? Is that your argument? Laurence Reich: I would think it would be. Here it would be surplusage, since the goal of identification is the goal, and there is no need for a procedure here. In most... in many cases, there is a need. For example, in a Taft-Hartley plan where you have a joint union and employer administration, and you have the intervention, as I say, of section 302. Sandra Day O'Connor: A multiemployer plan-- Laurence Reich: Particularly a multi-- Sandra Day O'Connor: --you wouldn't know who would have the authority, unless it was stated. Laurence Reich: --It would be questionable. You... I believe you could state, for example, as 302(b)(5) does provide that, that it will be the trustees, who are supposed to be jointly drawn from the employers who are involved in the plan and the union that is involved in the administration of the plan. It's a bipartite board of trustees in that situation. David H. Souter: Well, Mr. Reich, would you accept the proposition that the... or the position that in fact there is a procedure in your plan for identifying the persons with authority, and that procedure is implicit in your designation as... of the company as, in fact, the entity that can amend? Laurence Reich: I would, sir. David H. Souter: And that that carries the implication that the company could amend through the action or authority of its board of directors, so that you in fact satisfy the procedure-identification criterion here? Laurence Reich: I would, Justice Souter, and I would say further that it would not merely be the board of directors, since a corporation may act by whomever the... has authority within the corporation for so acting. Ruth Bader Ginsburg: In fact, that's why Judge Roth thought you were... that you struck out, because it wasn't done by the board of directors, isn't that right? Laurence Reich: Well, Judge Roth, there's a distinction... if you read the footnote, there is a distinction between what Judge Roth said in the footnote and what was derived from that. Judge Roth said the board of directors, or whomever, may act for the company. I would not quarrel with that part of it. The majority... and perhaps Judge Roth. It's unclear in the footnote-- Ruth Bader Ginsburg: Well, why did she come out in the end ruling against you? Laurence Reich: --It's somewhat inscrutable. It's not totally clear from the-- David H. Souter: May I suggest this as a hypothesis? I mean, don't you think she was assuming that the company would act either through individual... either through the board, or by individuals designated by the board through a resolution which would be in the corporate records, or by individuals designated by the board through a resolution which would be in the corporate records, or by individuals designated in the bylaws, and apparently there was no indication in the record that this action had been taken by anyone in either of those three categories, and isn't that why she held against you on the facts? Laurence Reich: --Possibly, but the footnote says that... refers because it wasn't done by the board of directors. Indeed, authority exists... "Authority may be implied", as Fletcher, we quote in the brief, states: "Authority may be implied by the position of the individuals, agents of the corporation, not.... " David H. Souter: Well, it does as a matter of general corporation law, but isn't there a problem in this statute in relying upon that kind of identification, because at least it seems to me a likely reading of subsection (3) that by requiring a procedure for identifying the persons with authority, what Congress is trying to get at is, is to provide a means by which somebody who wants to know what the current status of the plan is can determine who to ask and, therefore, unless there is in effect something of record somewhere showing who might be amending this, that it would not satisfy the provisions of subsection (3), even though, under general corporation law, an undesignated individual might have authority to do something. Laurence Reich: Well, there is one... there is one flaw, and perhaps a second flaw, but one immediate flaw, Justice Souter, in that-- David H. Souter: May I compliment you on the way you pronounce "flaw"? I didn't do quite so well earlier this morning. [Laughter] Laurence Reich: --We have that way in New Jersey, sir. Antonin Scalia: It rhymes with law... law. [Laughter] Laurence Reich: The term that the Congress used was (3)(9) of ERISA as including a corporation. There is no indication that Congress intended, when it used a word that included "corporation", to require that there be an identification of individuals within the corporation that act for the corporation. David H. Souter: Well, I'll grant you that, but isn't it also the case that if Congress did not want some means of identifying institutionally who could take the action, then Congress wouldn't have bothered to be talking generally about identifying individuals. They simply would have said the plan must designate those persons who can amend. But by saying the plan must provide a procedure for identifying, it seems to carry the further implication that somebody who wants to know something should be able to know who to ask. Laurence Reich: Well, that... there is a gloss of legislative history on this that may suggest, Justice Souter, to the contrary, because when you witness the fact that the predecessor provision of this in H.R. 2 gave the plan administrator the authority in certain limited situations to amend the plan, and this took that and simply allowed the plan to provide for who might amend the plan. And I would suggest that, as you suggested in an earlier question, that the identification in the plan of the plan sponsor, the company, as the person with the authority to amend, should satisfy the procedure. That must have been... may have been Justice O'Connor's question, but-- David H. Souter: But under the earlier scheme, anybody who wanted to know if there had been an unpublished amendment would know enough to ask... what was it, the administrator, I guess you said? Laurence Reich: --Yes. David H. Souter: Yes... would know enough to ask the administrator in order to make sure there wasn't something not on the record. Laurence Reich: Yes, but the administrator could have been the company, as it can be and frequently is, under ERISA as enacted, so you get back to the... it's somewhat circular, because you get back to the fact that you ask the company, as the plan administrator, or you ask the company as the plan sponsor. In any event, it is the company. David H. Souter: Well, let's take your theory. Let's assume I am someone who wants to know... I am the beneficiary, and I want to know what the present state of the plan is. On your theory, whom do I ask? Do I go to the corporate secretary and say, can you tell me whether there is anyone who, under the corporation law of, what, Delaware, in this case, I guess, could be amending this plan without being designated by a vote of the directors, or by some reference in the bylaws? Laurence Reich: Well, there probably could be a variety... well, the bylaws wouldn't... probably not be there anyway. They probably could be-- David H. Souter: Yes. In that case, how would I find out? Laurence Reich: --The person who acts for the administrator is designated in the summary plan description, and that person... that person could be inquired of to... as to whether or not there has been an amendment. In this case, I would suggest that there was no need, and this is the other thing that I alluded to in response to your earlier question, and that is that this... this is not some disembodied amendment that we are talking about, some document sitting out there. This was a term that was incorporated in the document, the SP... summary plan description that the district court found to be a governing plan document and that the plaintiffs have conceded to be a... one of the two governing plan documents, the other being the plan constitution that set forth the procedure for amendment by naming the company as the amending authority. David H. Souter: Well, let me step back, if I may. If Congress didn't want to provide for anything more elaborate than the capacity of an inquirer like me to go to the administrator of the plan and say, what does it provide right now, why would it have enacted anything as elaborate as requiring an identification for a procedure for those with authority to amend? Why wouldn't Congress simply have said, the administrator must be available to answer questions about the current state of the plan, or the administrator must have a copy of the current state of the plan at all times? Laurence Reich: Congress did say that. David H. Souter: Then why did it say this, too? Laurence Reich: I think it's basically the outgrowth... and this is primarily for-- David H. Souter: May I... I'm sorry. May I interrupt you and-- Laurence Reich: --Yes, of course. David H. Souter: --ask one question before I lose it? Isn't it the case that there could be an amendment that is not recorded with or filed with the administrator for some period of time, I forget what it is? Laurence Reich: That is correct. David H. Souter: So that if you went to the administrator and said, let me see what you've got, technically the administrator might not have every amendment? Laurence Reich: No, I should retract my agreement. It is not necessarily that the administrator might not have the amendment. It is that the amendment under part 1 of title I of ERISA, under sections 102 and 104, it may... particularly, in this case, 104, it may be that the plan participants and the Secretary of Labor would not have the amendment for a period of time, up to 19 months. David H. Souter: But the administrator would. Laurence Reich: And the administrator would, particularly where, as here, the administrator and the plan sponsor are one and the same. Ruth Bader Ginsburg: And that... isn't that critical to your case? To what extent do you rely on the Government agency, one of the agencies intimately involved, the IRS, having precisely the understanding that you have about the meaning of this provision, that it addresses multiemployer plans and not single company plans? Laurence Reich: That is correct, Justice Ginsburg. Whether or not the Internal Revenue Service not being the agency that administers title I of ERISA as opposed to title II and some other aspects of ERISA, it is that understanding, and it has been since the inception of ERISA a clear understanding on the part of-- Ruth Bader Ginsburg: Did this company do any more thinking about it than simply copy the prototype plan that IRS put out in that respect? Laurence Reich: --Well, this wasn't... this did not adopt the prototype plan, but if it had-- Ruth Bader Ginsburg: This clause. Laurence Reich: --Well, it happens to virtually coincide with the prototype plan. One did not come from the other. Sandra Day O'Connor: Mr. Reich, if we think that the Third Circuit erred in saying that there was no procedure for amending the plan here, what do we do about the identification issue? Do we remand it to the court below to resolve whether someone had authority to amend it in this instance? Laurence Reich: That might... that might be a possibility, but I would suggest that in any event that does not reach basically the second... the critical issue of remedy, whether or not, assuming arguendo that there was not an adequate procedure, whether or not the Third Circuit... whether or not there is a remedy of invalidation. When Congress wanted to make a condition precedent to the validity of an amendment, it did so in a number of instances. Sections 204(g) and (h) of ERISA, section 304(b) of ERISA, section 4220 of ERISA... there were a number of... these are among... there were a number of instances in which Congress expressly made... imposed some condition on validity. There is simply no provision in the six carefully crafted provisions of section 502, to quote Justice Stevens in Massachusetts Mutual v. Russell, that suggest that invalidation of a plan provision is at all a possible remedy. It might... there might conceivably be some reason-- Sandra Day O'Connor: Well, what if it turned out that in fact no amendment had been adopted? Could the Court so state? Laurence Reich: --It was not... it was not... it was in... there was a provision in the plan description. The plan description was the governing plan document. It was simply a term that was included in this. There had been plan descriptions that... summary plan descriptions issued on other occasions whenever there was, as here, a change in the insurance carrier. That was the occasion. This was not some disembodied amendment. Sandra Day O'Connor: I'm just asking, if I may, what if the facts in a given case showed there had been no plan amendment. Do you say that a court lacks the authority to say so? Laurence Reich: Well, it's not that there had been no plan amendment. There was a plan amendment. If you're saying by the authority-- Sandra Day O'Connor: I know that's your position in this case, but what if there had not been, could a court not say so? Laurence Reich: --Well, it's not that the court said that there was no plan amendment. It's the court said that there was no plan procedure. It conceded there was a plan... a plan amendment, but because the plan... the plan procedure was lacking-- Sandra Day O'Connor: Yes, you're... that's okay. You're just not answering my question, but that's enough, I think. Your time's up. Thank you, Mr. Reich. Mr. Bress, we'll hear from you. Mr. Bress, would you mind enlightening us as to what you think the Court should do if we think the Third Circuit got it wrong with respect to whether it had reserved the right to amend the plan, the company? What do we do with respect to whether there was authority given in this case? Richard P. Bress: If you agree with the Government's position that the Third Circuit got it wrong and there was, in fact, a procedure in this case, we believe that the correct result would be to remand back to the Third Circuit to determine whether the company acted to promulgate the amendment in this case. And by "the company acted", what I mean is whether the persons or individuals within the company who promulgated the amendment had the corporate authority to do so. If they did not, it was not an action by the company at all. Sandra Day O'Connor: Does that authority have to be formalized in some way in the Government's view? Richard P. Bress: No, it does not. The authority can either be express or it can be inferred from circumstance, pursuant to longstanding corporate principles. Sandra Day O'Connor: So you disagree with Judge Roth and her view in this case on that point? Richard P. Bress: I think it's un-- Sandra Day O'Connor: She seemed to think it had to be by some action of the board of directors. Richard P. Bress: --I think it's unclear from footnote 3 what Judge Roth's view was. If that was Judge Roth's view, then I would disagree with it. Because she didn't write a separate opinion, I think it's rather unclear from the text. Ruth Bader Ginsburg: I'm not sure-- --How could her view be otherwise, though, if she supported the judgment of the court? She concurred in the court's judgment. Richard P. Bress: She may have concluded that in this case it was neither expressly delegated... the authority was neither expressly delegated to those individuals, or that it was neither expressly delegated nor impliedly delegated. She may have come to that-- Ruth Bader Ginsburg: How could she have made that conclusion on this record? Richard P. Bress: --There was a significant record before the district court regarding the manner in which the amendment was promulgated. There are facts in that record that seem to cut both ways. Ruth Bader Ginsburg: Well, the district court hadn't made any finding on it, and it would be extraordinary for a court of appeals judge to do that in the first instance. Richard P. Bress: I agree with you, Judge Ginsburg, that it would be extraordinary. I just don't know whether Judge Roth did, in fact, make that finding or whether she did not. David H. Souter: Mr. Bress, on your view, why did the statute refer to procedures for identifying those with authority, as opposed simply to requiring procedures for amendment? Richard P. Bress: There will be some circumstances in which it will not be clear who the persons are who have the authority to amend, and let me give an example, because I think that's the best-- David H. Souter: You mean, it will not be clear as a matter of corporation law. Richard P. Bress: --It will not be clear as a matter of... well, let me step back from that. We agree with the petitioner that the term "person" includes the term "corporation" and, in fact, because it includes the term "corporation", when Congress intended to refer solely to natural persons, it used the term, "individual", and it did that scores of times throughout the act. Here, where it used the term "person", we believe it did so intentionally, so that identification of the corporation would be sufficient. However, there are circumstances, for example, when you've got a standard form plan, that would be a plan that would be promulgated by a banker insurance company and marketed to individual employers. That plan may state that the sponsoring organization, which would be the banker insurance company, would reserve the authority to amend certain of the boilerplate provisions. The more tailored provisions could be amended by the employer. By specifying the sponsoring organization can amend, one would look to find out... it's a simple procedure, but one would take the second step of looking to find out who the sponsoring organization was in order to determine the person with the authority to make those particular amendments. David H. Souter: And you would then know enough to go to someone who speaks for the sponsoring organization and say, did you make any changes? Richard P. Bress: Yes, you would, but-- David H. Souter: In other words, if you know who the sponsoring organization is, I suppose you can go to its president or its secretary, or somebody who keeps its records, and say, did you make any changes with respect to this plan. Richard P. Bress: --You could do that, but if I might take a step backwards, we do not-- David H. Souter: But isn't that the reason for referring to identification? Isn't there an interest in providing some means by which someone... by which a beneficiary can find out what his benefits are at any given time? Richard P. Bress: --No. We believe that the-- David H. Souter: Why not? Richard P. Bress: --We believe that the purposes of 402(b)(3) is primarily functional, and that purpose is to make a plan amendable by providing a mechanism or a way that it can be amended, and to delegate the power to amend to an individual. The person-- Ruth Bader Ginsburg: Are you saying that it was to provide clarity for the plan administrator in these multiemployer situations, rather than to protect beneficiaries? Is that-- Richard P. Bress: --Yes, although I wouldn't restrict it to simply multiemployer circumstances. Ruth Bader Ginsburg: --Any circumstance about where there might be ambiguity for the plan administrator, but the-- Richard P. Bress: That is our view, Justice Ginsburg, and we don't believe that that leaves the beneficiaries and participants out in the cold. The plan fiduciary has an independent duty, under section 404(a) of the act, to perform his or her duties solely in the interests of the participants and beneficiaries, and to administer the plan in accordance with its terms, so the fiduciary will have a duty, given uncertainty, to determine what it is... who it is that has the ability to amend, and whether they have followed the manner of amendment that that set forth. Ruth Bader Ginsburg: --Has the IRS modified its prototype plan in response to the Third Circuit's decision? Richard P. Bress: No, it has not. It has not. I'd like to turn, if I may, to the second question presented in this case, which is whether, if the Court were to determine that the procedure in this case was not sufficient, that would mean that the amendment was therefore invalid. When a plan makes clear that the plan can be amended by the plan sponsor, it would be odd in our view to interpret that document to be unamendable simply because it lacked a detailed description of the manner of amendment. It would be far more natural, in our view, to recognize the effectiveness of the amendment if the person identified has clearly manifested its or his intention to change the plan. That's the approach that was used under the common law of trusts, and it is an approach that in our view is consistent with Congress' basic intention, which is that plans be amendable. Further, it's an approach that is consistent, in our view, with the interests of participants and beneficiaries. When you have a circumstance such as in this case, where it's clear that the plan can be amended, and it's clear that the plan... that the plan sponsor has said that the plan has been amended, the harm suffered by the participants and beneficiaries, if they've suffered harm, has been from the substance of the amendment, not from the failure to provide a procedure. It would be inconsistent, we believe, with Congress' intent that beneficiaries and participants be able to rely on the terms of the document as written to invalidate the plan under these circumstances. That leaves, of course, the question of whether ERISA itself prohibits amendments in the absence of a plan procedure. We do not believe that it does. The harm caused by the failure to have a procedure is the failure to provide guidance to the fiduciaries. The fiduciaries will, in the ordinary course, simply go to the employer in that kind of a circumstance and request further guidance, more detailed procedures. In the unlikely event that the corporation or sponsor were to refuse, ERISA provides a tailored remedy. Under section 502(a)(3), the fiduciary can enjoin the employer to provide a more specific procedure. Because ERISA provides that remedy, it need not be read to provide a remedy of invalidation, or to require a procedure for amendment as a condition precedent to amendment. We agree with petitioner that the act cannot honestly be read... that 402(b)(3) should not be read to provide... to serve as a condition precedent, because there are various other provisions in the act in which Congress has made clear its intention to have a condition precedent when it wanted to. Finally, we believe that reading 402(b)(3) as a condition precedent is inconsistent with the approach to 402 more generally. The failure to have a written plan does not mean that no plan exists. The failure to provide a procedure for establishing a funding policy does not mean that there is no funding policy, or that the plan no longer has a requirement to fund. Similarly, we would advocate that the failure to have a procedure for amendment in the written document does not mean that a procedure does not exist, nor does it mean that the procedure has not been followed. If there are no further questions-- William H. Rehnquist: Thank you, Mr. Bress. Richard P. Bress: --Thank you. William H. Rehnquist: Mr. Kennedy, we'll hear from you. Thomas M. Kennedy: Mr. Chief Justice, may it please the Court: I'd like to take this Court briefly through the process of how we got here, both to assist you in answering your questions, and to help frame the statutory issues posed. This plan had its origin in a pre-ERISA retiree benefit plan maintained by Curtiss-Wright Corporation for its nonunion retirees. In 1976, at the time ERISA was adopted, the plan created two documents, a trust and a plan constitution. That trust appears at Joint Appendix 23 of the record, the constitution at Joint Appendix 34. The record reflects formal acts taken to effectuate both of those documents. At Joint Appendix 33, the trust agreement was executed by a corporate vice president, it was dated, and the signature was attested by the secretary of the corporation. Similarly, 6 months later when the plan constitution was adopted to comply with ERISA, the record reflects at Joint Appendix 40 an execution by a corporate vice president, a dating, and an attestation by the corporate secretary. Seven years later, when this corporation acted to deprive the plaintiff class of their benefits, nothing like that type of procedure was followed. Instead, through an act of casual redrafting... and we direct the Court's attention to the findings of the district court, particularly at page 38 of the appendix to the petition... there were no formal procedures followed in any respect in connection with the adoption of the term under which these benefits were denied. The court went further and found no informal procedures were followed either. Instead, an act of casual redrafting had the effect of denying petitioners the benefits which they had been led to believe would be theirs for their lives. William H. Rehnquist: You use the phrase, casual redrafting, Mr. Kennedy. What officials participated in the redrafting, which you say was casual? Thomas M. Kennedy: The term "casual" is taken from the findings of the district court, Your Honor. William H. Rehnquist: Well, what was the district court thinking about, do you think-- Thomas M. Kennedy: The district court-- William H. Rehnquist: --since I wasn't there? Thomas M. Kennedy: --The district court, Your Honor, was referring to the fact that at trial the company representatives testified to a 3-year process in which drafts of a proposed summary plan description were reviewed at various points by various officials and there was not even... they were not even able to establish at the trial who had been responsible for initiating the particular language which resulted in the deprivation of these benefits. It would be difficult to imagine a process more lacking in any procedural basis than what was gone through in this instance to deprive the plaintiffs of these fundamental benefits. An attorney in the company legal department, one of their personnel managers, both testified that they had been responsible for inserting this language into galley sheets that came back from the printers in connection with the-- Antonin Scalia: I'm not sure you have any grievance for all of that. I mean, you acknowledge that if the plan said an amendment may be made... shall be made by the company, its procedure shall be it will be drafted by an attorney in the counsel's office, by the youngest attorney, the youngest and most inexperienced attorney in the counsel's office, that would be okay, as far as you're concerned, right? That's not your grievance. Thomas M. Kennedy: --The grievance, Your Honor, is that the lack of a procedure meant that the individuals who inserted this language into this plan never recognized or were aware that an effective amendment was being made. Antonin Scalia: Well, maybe there's no effective amendment, but that's a question of corporate law. I mean, is that your argument, that the corporation has not effectively acted, and therefore there is no amendment? We can send it back to have that... in fact, that's been the suggestion, that we send it back to have that determined. Thomas M. Kennedy: We have several problems with that approach, Your Honor. In our view, it ought to be a Federal question under 402(b)(3) of the act of when sufficiently solemn steps have been taken to effectuate a change in an employee benefit plan. David H. Souter: And yet even on your own reading, that would not be required. I mean, as Justice Scalia said in his hypo, if there is a clear designation of the youngest attorney in the department as the individual to make the amendment, I presume that on your own reading of subsection (3), that would be satisfactory. Thomas M. Kennedy: Yes, it would, and-- David H. Souter: So how, then... why, then, do you argue that somehow as a matter of law, of Federal law, we should read a corporate governance requirement into the statute? Thomas M. Kennedy: --Because if we are reading a corporate governance requirement, it's stemming from a legal default by Curtiss-White Corporation as plan sponsor. They did not act to make the youngest attorney in the legal office the individual empowered to create amendments. Ruth Bader Ginsburg: But they did put in a provision that coincides with the prototype plan put out by the IRS as a model, and it's a little hard then to come down on a company for following a form or coming up with a form that coincides with a form that a Government agency puts out as meeting the requirements of the statute. Thomas M. Kennedy: Well, even Hall of Famers strike out occasionally, Your Honor, and in this case, the Internal Revenue Service does not appear to have followed either the language or what we regard as the expressed intent of Congress, and we think it's significant that the Internal Revenue Service has no special regulatory authority for issues arising under title I of ERISA. That is under the Department of Labor. William H. Rehnquist: Well, Mr. Kennedy, what if the effect of... on your clients of this casually drafted... had been exactly the opposite. What if it has given them some very substantial benefit, but upon examination it turned out that it was just done by a couple of inexperienced lawyers in the general counsel's office, would that make the amendment which benefited them equally invalid? Thomas M. Kennedy: The amendment would be invalid as an effective reordering of plan terms. Now, going one step further, to the extent a plan sponsor were to issue to employees representations that there had been an increase in benefits, there might well be reliance interest by the recipients of those promises that would allow them to be enforced, but not as an amendment to the plan, but under more equitable doctrines which would entitle, on theories of detrimental reliance, plan participants to enforce terms under those circumstances. It would not, however, be an effective amendment of the plan. We recognize that this is a two-edged sword, and that Congress intended, from our perspective, in the curious wording of this particular statute, to accomplish two very important goals. The first is a gatekeeper function, and this particular section has two parts of it. The first is that there has to be a procedure for amending such plan. Now, in our view, that, as we said, is a gatekeeper. It allows anyone to determine when the plan has been effectively amended, and we would direct you to the other fiduciary sections of ERISA, which in our view make clear that only an effective amendment can, in fact, be enforced by a plan administrator. 402(a)(1), as an example, provides that a plan has to be not only established, but maintained pursuant to a written instrument. To be maintained pursuant to a written instrument, it has to be amended validly, or the original written instrument continues. 404(a)(1)(D) provides that plan administrators are to enforce the written terms of a plan only insofar as they are consistent with the terms of this title. An amendment which has not been adopted pursuant to a 40(b)(3) procedure is not consistent with the terms of this title. John Paul Stevens: May I ask you, in following up on your adversary's... the Government's last remark, what about an amendment to this plan which created a procedure for making amendments? Would that be valid? Thomas M. Kennedy: It would for this reason, Your Honor, and we recognize it sounds anomalous to suggest that a plan cannot be amended, but yet that could be accomplished, and I'll explain to you our reasoning, and what we believe was probably the Third Circuit reasoning. Everyone in this case acknowledges that one of the possible steps that a participant can take if a plan lacks an amendment procedure is to go to court and obtain an order under 502(a)(3) compelling the sponsor to adopt the plan amendment. In our view, a plan sponsor has an inherent right to bring its plan into compliance with the express terms of ERISA. That would not extend to an inherent right to accomplish amendments that are in its own financial self-interest and are not directed at complying with ERISA. A procedure which... or, rather, a recognition that plan sponsors can add an amendment procedure really only says to them that yes, if you notice you're out of compliance with ERISA, there's no need to wait till a participant drags you into court and compels you to accomplish that which you should have done originally, at the time the plan was created. John Paul Stevens: Does that mean that any... say there are other provisions of the plan that did not satisfy ERISA completely, and no amending procedure, they could make amendments to cure other defects in the plan, I take it, then? Thomas M. Kennedy: Well, I think in our view the sensible procedure would be to first enact the amendment procedure and then accomplish the other goals through it. John Paul Stevens: But what if they didn't realize they... say this case hadn't been decided, but they realized they didn't have the proper funding provisions, or something like that, or their benefits didn't comply with certain things, could they make amendments to just bring the plan in conformity with the statute, even though there's no amendment procedure in the plan? Thomas M. Kennedy: Well, as the Solicitor General pointed out, Your Honor, other courts have enforced ERISA plans, though they be unwritten, and though they be without a funding procedure, the theory being, I think, twofold. The first is that when there is something mandated by the statute, the law will presume it to be there. The second, that these types of situations would be construed in favor of plan participants and against plan sponsors. So my answer is yes, in my view, a plan sponsor could, consistent with the statute, take such actions as are necessary to bring it into compliance with the act, which would not, of course, authorize the amendment which took place in this case, which had nothing to do with plan qualification. The statute provides... we find this interesting... in a number of instances, 403(b)(2) is an example, 404(d)(2)(A) for another-- Ruth Bader Ginsburg: May I just back up for one moment? You used the word "casual", and I was looking at the page... the district court didn't say casual, unless I'm looking at the wrong place. He said, routine-- Thomas M. Kennedy: --Your Honor, I apologize. You are right-- Ruth Bader Ginsburg: --and I suppose that's the argument that a corporate acts... if this action was done in the routine way that corporate actions are taken, it should be okay. At least that was your opponent's argument, that a corporation is a person, and a corporation acts in this instance in the routine way that a corporation acts in instances generally, so I don't see anything negative in the district judge's use of the word "routine". Thomas M. Kennedy: --Your Honor, the... we understood it to be negative, and I apologize to the Court if I substituted a word which you regard as having other and pejorative consequences. We understood by "routine" to have meant "casual", in view of the fact that there was testimony at the trial that there was an informal procedure available to amend the plan, and even that was not followed, so that this was not a situation where typical, predictable, expected, established corporate routines were followed, and therefore it gave the amendment legitimacy. The district court found that this amendment was invalid, and not subject to respect, because it was adopted in a manner which was not consistent. Ruth Bader Ginsburg: The district said it was invalid because there was no clause that provided for... you prevailed on your statutory argument, but as far as what the corporation did, I don't get anything from this page saying it was casual. It was just done as a matter of routine, not done pursuant to a provision that says, this is the person who has authority to amend, this is the procedure for amending. I thought that was your argument, that in order to make an amendment, you must have a plan procedure for both identifying the person who amends, and the procedure for amending. Thomas M. Kennedy: Yes, Your Honor. Ruth Bader Ginsburg: It was not done that way. Instead, it was done in the routine way that a corporation acts. Thomas M. Kennedy: Your Honor, we were... my argument was based on the following sentence in the district court opinion, which is on page 38-A: "However, the court has also considered in this case the testimony of Mr. DuBois, who was a company personnel manager, which suggests that there may have been an unwritten procedure for amending the plan involving the submission to a certain executive committee which he described. " "However, as the defendant admits, even those procedures were not followed in the case of the 1983 amendatory language. " The court then goes on to hold that the language in fact was added through routine redrafting, which we understood to have been a comment suggesting the lack of appropriate procedure under which this language was added, rather than a suggestion that some form of corporate expected behavior had occurred. William H. Rehnquist: Well, isn't... didn't the evidence show that the amendment was drafted by the corporate director of benefits and labor counsel and then approved by the executive vice president? Thomas M. Kennedy: The record certainly shows that the amendment was drafted by the corporate labor counsel and the manager of benefits. There is a disagreement in this record as to whether the record effectively shows that it was approved by the executive vice president, and-- William H. Rehnquist: Well, did the district court make any finding? Thomas M. Kennedy: --No, he did not, Your Honor. William H. Rehnquist: He did not? The district court didn't think it necessary to make a finding on that question? Thomas M. Kennedy: No. He pointed out, Your Honor, that the reference to the executive vice president was the reference to the fact that there was a de facto committee which met on these things. The district court conclusion was that there had been no de facto compliance with these procedures. The informal procedures internal to the company had not been followed. That was the district court view, and-- Antonin Scalia: What harm has this caused you, unless it be the harm that the amendment was not effectively adopted by the corporation? Let's leave that question aside. Perhaps they didn't adopt it at all, but assuming it was adopted, I could see how your client would have suffered harm if the amendment was not incorporated into the plan, so that your client didn't know anything about it, and didn't know where to go to find out about it, but in fact it was incorporated into the plan, wasn't it? Thomas M. Kennedy: --It was placed into the summary plan description, and I'd like to just draw a distinction between the plan and the summary plan description. Antonin Scalia: Right. Thomas M. Kennedy: The summary plan description in this case, at Joint Appendix 53 and Joint Appendix 55, provides that in the event of conflict between the plan and this document called the summary plan description, the plan itself will control, so that there is a question about whether inserting the language within the summary plan description actually was effective to accomplish anything, though in our view, our participants were harmed by the insertion of this language in the following manner. Antonin Scalia: You don't think that you would be up here arguing for your clients that if something had been inserted into that summary of the plan and in fact had not been adopted by the corporation, the corporation would nonetheless be bound to pony up that particular benefit? Don't you think that would be the result? Thomas M. Kennedy: But Your Honor, on theories of detrimental reliance, and not on a theory that had accomplished an effective plan amendment-- Antonin Scalia: Well, but-- Thomas M. Kennedy: --which is a very important difference. Antonin Scalia: --Whatever the difference is, if that detrimental reliance works in one direction, why doesn't it work in the other? I mean, it seems to me no harm, no foul. You-- Thomas M. Kennedy: In our view, Your Honor-- Antonin Scalia: --Assuming it's been properly adopted, which is another question. We can send it back to find that. If it has been properly adopted, what harm has been done to your clients? It was there in the summary of the plan. Thomas M. Kennedy: --If the plan were properly amended to set forth this term, then we would not be here, so it's difficult to speculate as to what harm there would be. This is a question about whether the amendment was effectively adopted. The lack of a procedure caused a separate cognizable harm to my clients in the following respect. They were deprived of their right, anticipated, in our view, by Congress, to have the decision on these critical benefits made by an informed fiduciary aware that an amendment in fact was occurring. It's significant here-- David H. Souter: What is the source of that right? Thomas M. Kennedy: --In our view, the source of that right is the requirement that a specific procedure be inserted in the plan. David H. Souter: But a moment ago you agreed that, in fact, if the procedure had specified that the junior counsel in the corporation could amend the plan, that would be valid. Thomas M. Kennedy: Even were that true, Justice Souter, the junior counsel would be, then, a fiduciary. If it were up to him or her to make such an amendment, they would be aware that an amendment in fact was occurring, and they might recognize the decades of representations made to the members of the plaintiff class that they would receive these benefits for life. That decision, to make an affirmative change in the terms of the plan, rather, to enforce what the corporation may have improperly understood was part of its plan, is a substantive right. Ruth Bader Ginsburg: Mr. Kennedy, are you saying-- Thomas M. Kennedy: A procedural one, yes-- Ruth Bader Ginsburg: --Are you saying that every change, at least every change that doesn't favor the plan beneficiaries, that would ever be made in any plan that followed the IRS prototype on the amendment clause, that all of those changes would be no good, and so to know what the plan contained, you'd have to go back to the very first plan document, which would not be what the beneficiaries get routinely? Is that the effect of your argument, that any change made that is not favorable to the beneficiaries from day one, is no good? Thomas M. Kennedy: --Your Honor, though I think we could accept a de minimis rule as a matter of judicial common sense, any substantive plan change made, to be effective has to comply with the stated procedure under section 402(b)(3). Ruth Bader Ginsburg: Every change that is made that isn't favorable to the beneficiary is no good? Thomas M. Kennedy: Under our interpretation of 402(b)(3), that is correct. Under the interpretation by Judge Roth-- Ruth Bader Ginsburg: So how many... thinking of this plan, how many changes have been made since it was installed that didn't favor beneficiaries-- Thomas M. Kennedy: --This plan, very few, Your Honor. Ruth Bader Ginsburg: --that would be no good? Thomas M. Kennedy: This plan, very few. We are not aware of any. This was a hospitalization, for the most part, plan, providing for 80 percent reimburse-- Ruth Bader Ginsburg: But this would not be the only one. In fact, nobody would know what the current plan is, because you'd have to go back and check every change and then cancel out all the ones that were detrimental. Thomas M. Kennedy: --There may be a burden on a plan sponsor from the ruling we advocate, but it is a burden placed on them by Congress. Ruth Bader Ginsburg: How about the beneficiary to know what the plan contains? They get these summary statements that says, this is your plan. Now, under your interpretation, they don't have any clue what their plan is, because there are a lot of things in it now that are no good. Thomas M. Kennedy: Your Honor, let me remind you of this. Every party to this appeal recognizes that if a plan has a stated procedure, and it is not followed in connection with the adoption of an amendment, that amendment is invalid, and even if it appears in the summary plan description, does not work an effective change to the terms of the plan. If that is true, then that same risk of uncertainty is present whenever a plan has complied with Congress and in fact adopted a procedure, because even if it were to be the junior person in the corporate law department, if the changes were being made by the executive vice president to the corporation not securing the-- Ruth Bader Ginsburg: But isn't the risk much larger that when you have an interpretation, even if not a Government agency that we would defer to has put out a plan to the public, that the likelihood is that many people have adopted plans with that provision in it, so we would have a whole... not only this company's plan, but a whole set of plans where the beneficiaries would have no idea at the moment of what their plan contained? Thomas M. Kennedy: --Your Honor, obviously there's a risk involved, but let me suggest to you that that risk, which was certainly remarked upon by the petitioner in their threat-of-litigation argument, is ameliorated by a number of factors. The first is that there is a statute of limitations here which would prevent participants from going back more than 6 years to complain of amendments supplied to them that had not been properly adopted. Within that 6-year period, since at least 1990, the Third Circuit in the Frank and Hozier cases has made it quite clear that plans that persisted in adopting amendments not pursuant to a 403(b) procedure were at risk of having rendered themselves unamendable, and if a plan sponsor has proceeded to continue to maintain itself out of compliance with ERISA, and is harmed by this, it's a self-inflicted wound in our opinion. There's been ample notice to them that this was a congressional directive, and it was entitled to be respected. Stephen G. Breyer: At the moment, I'm thinking that your... they're arguing that, look, this just means you have to have a procedure and you have to know who's going to do it, and so the company says, yes, we have a procedure. We're not quite certain what it is. I mean, it's ambiguous as to whether it's the office boy or the president of the board of trustees, but there is a procedure, and the company can do it, that's who. Not the trustee, not the beneficiaries, but the company, so we've complied. You get more out of this... read the statute stronger, because you're reading it as an information requirement, whether it's to give the trustee information, to give the beneficiaries information, to give somebody else. Now, is there anything in the history of it or the position of this that suggests it's an information requirement rather than just trying to make certain there is some kind of a plan, and somebody can work the plan... work the amendment? Thomas M. Kennedy: Yes, in our view-- Stephen G. Breyer: What is it? Thomas M. Kennedy: --there is, Your Honor. When initially adopted, H.R. 2, the original ERISA statute that passed the House of Representatives, provided that plan administrators shall be deemed to have the authority to amend their plans, and gave no indication that there should be further disclosure either to participants or fiduciaries as to how that should be done or who should do it. That was specifically rejected by Congress when it did adopt the current provision of 402(b)(3), and the conference report that accompanied the adoption of ERISA, though it is brief, states clearly that every employee benefit plan shall have a procedure for amending it. Stephen G. Breyer: Well, maybe they perhaps meant that it needn't necessarily be the administrator who can amend it. Maybe the administrator with others. Maybe the beneficiaries. Maybe the workers. Maybe altogether. Maybe the trustee. Is there... I mean, as you say it, it doesn't sound like they want information to be given. Thomas M. Kennedy: Well, we coupled that, Your Honor, with the requirement set forth in ERISA that all plan documents be disclosed upon request to participants. When you understand that Congress recognized, in drafting these fiduciary requirements, that every plan document was subject to disclosure, a requirement that there be a specific procedure in our view is consistent with that disclosure obligation, and as the Third Circuit held, was a critical term to allow people to know how and by whom settled expectations could be changed. The... I'd like to address the distinction between procedural defaults which arise under the reporting and disclosure sections of the act and procedural defaults that arise under fiduciary sections. A number of courts have held that in order for a participant to obtain benefits in a situation in which there has been a default in the obligation to distribute a summary plan description and so forth, in order to obtain recovery, the participant must demonstrate a detrimental reliance upon the information that was made available to them. In our view, that's inappropriate when the default was not a reporting and disclosure obligation in section 102, but a far more fundamental section directly within the fiduciary sections of ERISA. The requirement that plan administrators adhere to plan terms only insofar as they comply with ERISA in our view suggests that a plan amendment which is not consistent with the statute cannot be enforced. The Solicitor General has argued that the appropriate response this Court should make to the Third Circuit decision is a remand. I'd like to address the type of standards that ought to be utilized by this Court should that option be accepted. It seems to me there's a difference between saying, as a bright line rule, that in order for a plan amendment to be adopted, if there is no procedure set forth in a plan, only the highest body in the corporation can undertake that amendment, in this case the corporate board of directors. That is what we understand Judge Roth to have been deciding. The position of petitioner, Curtiss-Wright, would allow notions of corporate law which go well beyond that to be utilized by this... by a reviewing court in determining whether there had been some type of adoption by the corporation, and in our-- William H. Rehnquist: Why is it you say that only the corporate board could adopt this? Thomas M. Kennedy: --In our view, State... the purpose of State law should be only to identify the highest decisionmaking authority within the sponsoring entity, and that Federal law should determine as to whether that entity has appropriately made an effective amendment. William H. Rehnquist: Why should that be? Thomas M. Kennedy: Because otherwise, Your Honor, you get into the realm of postamendment conduct as constituting the validation process, as Curtiss-Wright in fact has argued here. They suggest in their brief that one of the reasons the corporation should be deemed to have adopted this amendment is that they fought it in court for 7 years, and Congress, in our view by requiring a procedure, was clearly focusing on pre-- William H. Rehnquist: But you're building a great deal on the requirement of a procedure, that State corporation law be totally superseded. Thomas M. Kennedy: --Well, Your Honor, the definition of procedure, after all, in Black's Law Dictionary, is the mode of effectuating a legal right, as opposed to the legal right itself. That requirement that a procedure be stated in our view, given its natural reading, does require that the plan set forth the mode of accomplishing a procedure for amendment. William H. Rehnquist: What if this plan had said, the company pursuant to New Jersey corporate law? Thomas M. Kennedy: Then, Your Honor, in our view, the question would be whether the amendment had been valid under New Jersey corporate law, but the fact that a plan sponsor can self-describe that form of legal test, which is what Congress intended, doesn't mean that in the case of a default under the statute, leaving out any type of procedure, this Court should extend to them the full range of corporate law in making that determination. Antonin Scalia: What if the board of directors of the corporation had adopted a resolution which says, amendments of all plans, contracts, and other documents to which this corporation is a party may be made by the least experienced, youngest lawyer in the general counsel's office? So the board has specified that this is the way... would that satisfy you, or do you insist that this is nondelegable by the board of directors? Thomas M. Kennedy: In a situation in which the plan specifically provides that the board of directors-- Antonin Scalia: Not the plan. The plan just says what this plan says, and you say, well, only the board of directors can do it. Well, what if the board of directors has adopted a provision which says, all amendments can be made by the general counsel? Thomas M. Kennedy: --If there were express action of the board of directors to designate an amending authority-- Antonin Scalia: Right. Thomas M. Kennedy: --in our view it would be within Judge Roth's-- Antonin Scalia: That's okay. Thomas M. Kennedy: --concurrence. Antonin Scalia: Okay. Now, there isn't such an explicit resolution by the board but, in fact, from time immemorial all amendments have been made, with the knowledge of the board, by the general counsel. Thomas M. Kennedy: In our view that-- Antonin Scalia: That would not suffice. Thomas M. Kennedy: --In our view, that stretches the term "procedure" which Congress required be... to its breaking point, and reads it out of the statute to the point where all a plan sponsor need do is to state whether-- John Paul Stevens: Mr. Kennedy-- Thomas M. Kennedy: --failure-- John Paul Stevens: --a lot of these amendments are a product of negotiation between the union and the company, and I presume a collective bargaining agreement doesn't have to be approved by the board of directors to be valid, but you'd say one incidental feature, we're going to raise the pensions from $90 a month to $92.50, that would have to be approved by the board of directors? Thomas M. Kennedy: --Your Honor, I'm a union lawyer, and I know full well, when I negotiate a contract with a company, that that change to that pension plan hasn't become effective until the plan has been amended to set forth that change, even if we've got a collective bargaining agreement over here which says that the company's going to do it. John Paul Stevens: Right. Thomas M. Kennedy: Unions and companies don't negotiate the terms of single employer plans. At least, they-- John Paul Stevens: Well, they sometimes do. Thomas M. Kennedy: --They negotiate about those terms, but the effective act of bringing about the change in the plan to reflect the collective bargaining agreement is an amendment of the plan by the proper amending authorities, which would not include the union. In our view, this statute is plainly set forth. It does no more than require a plan sponsor to obey the terms of the law when taking away critical health care provisions for section... sectors of our population that are least able, really, to respond to these kinds of changes, and we would suggest that the proper benefit-- William H. Rehnquist: Thank you-- Thomas M. Kennedy: --Thank you. William H. Rehnquist: --Mr. Kennedy. The case is submitted.

William H. Rehnquist: We will hear argument first this morning in No. 86-1034, Virginia v. American Booksellers Association. Mr. Smith, you may proceed whenever you are ready. Richard Bain Smith: Mr. Chief Justice, members of the Court, may it please the Court, we are here this morning on a case involving a 1985 amendment to a Virginia statute shielding the exposure of juveniles to certain sexually explicit material by regulating the manner of its display, and despite outward appearances, frankly, from reading both sides' briefs, I would suggest to this Court that the issue in this case is really very simple, because we really have one issue, and the issue turns on the type of material that this amendment affects. Now, from the start of this litigation, from literally the first page of the transcript, the plaintiffs in this case have painted a picture of a statute with a very broad range effect, a range of material involving material with great beauty and great literary value, a range of material that they include James Joyce's Ulysses, William Faulkner's Sanctuary, and even the Penguine Book of Love Poetry, which is an anthology of all the great poems of the English language from Robert Browning to Alfred Lord Tennyson. If that range is correct, if they are correct that this amendment involves that material, then we lose the case, and I submit to the Court that we should lose the case, because the Commonwealth of Virginia does not desire to restrict in any way, directly or indirectly, that type of material. But by the same token, if the material affected is not this broad range, then I would submit to the Court that the plaintiffs cannot prevail, because every burden that they speculate about, every terrible effect that they speculate about, all of their evidence in the District Court, everything in their brief, and I am sure everything that Mr. Bator is going to say this morning turns on that concept of this broad range material, and I would say-- William J. Brennan, Jr.: This is a facial attack, is it not? Richard Bain Smith: --Yes, Justice Brenner, it is a facial attack. I would submit to the Court that the statute they are attacking, the statute involving this broad range of material is a hypothetical statute. It does not exist in Virginia. Sandra Day O'Connor: Mr. Smith, did the state concede at the appellate level below that books such as Hollywood Wives would be covered by the statute? Richard Bain Smith: Justice O'Connor, I am sure today that the day that I die my tombstone is going to say "Richard B. Smith said Hollywood Wives was obscene. " I have said it over and over again. What we said was, one of their witnesses said, of all the exhibits that they put in, of all their exhibits, that was the only one that she said she thought children should not see. And so in the Court of Appeals and the brief, I think it was in a footnote, I said, of all the exhibits, that was the only one that might be involved based on what she had said. I have since gone back... I came up, I looked through all the exhibits. Not one exhibit they have submitted falls within this statute, including Hollywood Wives. Now, what we suggest to the Court this statute involves is not this broad range of conceded beauty, conceded literary value, of very narrow range. This statute deals with borderline obscenity. It deals with exactly the same thing that Ginsburg v. New York dealt with, borderline obscenity. Sandra Day O'Connor: Well, what is your point, that the appellees had no standing below? Richard Bain Smith: Justice O'Connor, I would submit that... I agree with what Mr. Bator said in his brief, that really the standing question and the merits question here turn on the same thing. If the material they are talking about is this broad range, then they have standing, because concededly that is the type of material that they are displaying and have been selling to juveniles, and we concede that, what they are talking about. But the point is that the burden that they have suggested exists here is that because of this broad range it is impossible for them to be able to comply with the statute both financially and otherwise without putting themselves out of business, or at least severely restricting their business. And because of that, they... both their First Amendment rights and the First Amendment rights of adults will be overly restrictive. And that, I think, is the importance of this broad range effect, because if we are talking about this narrow range of borderline obscenity, for one thing, there is nothing in the record to indicate that there is any burden whatsoever placed on them by that type of material. And secondly, I would suggest to the Court that that is-- Sandra Day O'Connor: Well, how are we supposed to decide that, by looking at the words of the statute? Richard Bain Smith: --I would suggest to the Court two ways. First, the amendment and the definitional statute, because that is something that the plaintiffs have purposely ignored in this case. It is something that their witnesses below were never shown, was the definitions of the material involved in this case. And I would submit that both from the face of the statute and their evidence supports that there is this narrow range, and I say that for this reason. The definitions involved here are the same ones that the statute in Ginsburg versus New York used. It is not just any sex, any sexual content that is in a book. And that is where they have made their big mistake. They have assumed all the way through that if there is any sexual content whatsoever, then this material falls within our amendment. Byron R. White: Where did this case come from, what court? Richard Bain Smith: District Court in Alexandria, and then up to the Fourth Circuit. Byron R. White: Didn't those courts have some view of the breadth, the reach of the statute? Richard Bain Smith: They never really focused on it. The District Court never discussed-- Byron R. White: Well, they must have had some notion of what the reach was to do what they did to the statute. Richard Bain Smith: --The Fourth Circuit did a very strange thing. The Fourth Circuit refused to accept any of the findings of the District Court below, and then they took some findings-- Byron R. White: It seems to me they thought it was much broader than you say it is. Richard Bain Smith: --Justice White-- Byron R. White: Is that right or not? Did they view it much more broadly than you do? Richard Bain Smith: --They were talking about a different statute, because they were looking at a statute from Georgia. That-- Byron R. White: Well, you still don't answer my question. Richard Bain Smith: --They never came to grips with this issue. Byron R. White: With the breadth of the statute? Richard Bain Smith: They never discussed one way or the other. What they did, they talked about a case from Georgia in which evidence there dealt with a statute that the Court there found had this broad reach, and that is what-- Byron R. White: Well, I assume that if we found that the Court of Appeals or the District Court... the Court of Appeals defined this statute more broadly than you do, we might very well take the Court of Appeals view of what the meaning of a state statute is. Richard Bain Smith: --As I said, if you take the broad view, we lose, but I would suggest that what the Court of Appeals did-- Byron R. White: Well, did the Court of Appeals take the broad view? Richard Bain Smith: --What they did was, they said, we assume that there are these burdens. They never got into construing the statute one way or the other, and I would submit to the Court that even if the Court of Appeals had actually gotten to the statute, we are asking this Court to look at it a second time, because we are suggesting that it is a matter of law, not as a matter of fact. William H. Rehnquist: Did you ask the District Court to abstain in order to obtain construction of this from the Virginia courts? Richard Bain Smith: There was a request for an extension. We were... the Attorney General's office was brought into this case on the certification of 2403(b). One of the other defendants and all the defendants did ask the District Court to abstain. And ironically, the reason the District Court refused to abstain was because he said there was no unclear parts of the statute, and yet for the last two years both the plaintiffs and the state have been arguing over the meaning of all these terms. William H. Rehnquist: Now, did you raise that question in the Fourth Circuit, the District Court's failure to abstain? Richard Bain Smith: We raised the question of the District Court should have applied the narrowing constructions of the statute. We did not in so many words say the District Court should have abstained in the sense of Abstention Doctrine. We were arguing that under the First Amendment overbreadth test the District Court should have narrowed the construction. William H. Rehnquist: Well, those are two quite different points. So you didn't preserve the abstention argument, did you? Richard Bain Smith: The plaintiffs say we did. The plaintiffs say we have been arguing... that is what we have been arguing all along, and the Court of Appeals did in fact say that abstention... they addressed the issue and said abstention was not appropriate. William H. Rehnquist: The Court of Appeals decided that... they passed on it. Richard Bain Smith: They passed on it, if I am not mistaken. Byron R. White: Didn't the Court of Appeals accepted the District Court's finding that this statute would affect a certain percentage of the materials in the bookstores? Richard Bain Smith: No, sir. Byron R. White: I thought it accepted a finding that from 5 to 50 percent. Richard Bain Smith: What they said was this, and this is what I was starting to say earlier. I have never seen this done in any case. The Fourth Circuit said the evidence presented below is so minimal that we can't make a determination from what the District Court-- Speaker: Of what? Richard Bain Smith: --Of the percentage of books involved. Byron R. White: But the District Court found that. Richard Bain Smith: The District Court made that finding. Then the Court of Appeals say, but we assume that it does, and then they went off on this tangent on the statute in Georgia that has a completely different statute than Virginia's, but I would suggest to the Court that the reason that this statute deals with borderline obscenity and not this broad range, as I said earlier, it is from the face of the statute, it only involves certain very narrowly restricted types of activities. It has to have-- John Paul Stevens: May I just go back to Justice White's question for a minute? In Footnote 9, the Court of Appeals ends the footnote, saying, "The District Court found that a significant percentage of the inventory of the average general bookstore varying between 5 and 25 percent falls within the amendment's restrictions. " My question is, did you ask that the Court of Appeals set aside that finding as clearly erroneous on appeal? Richard Bain Smith: --I cannot remember. I honestly cannot remember. John Paul Stevens: Because if you didn't should we not accept that as a factual determination? Richard Bain Smith: If you read on with the footnote, Justice-- John Paul Stevens: That is the end of the footnote. Richard Bain Smith: --If you read on with the footnote, they say, and the state said there is a very miniscule amount of material involved. John Paul Stevens: Yes, you argue that, and then the last sentence is the one that the District Court found 5 to 25 percent. Richard Bain Smith: Right, and the Fourth Circuit never said who was right, and when you go back up to what that is footnoted to, the Fourth Circuit said, whatever, we are going to assume that there is this broad range, and they cited to this case in Georgia that is a completely different statute involving a completely different range of material. John Paul Stevens: Let me just put it this way. Is it correct that your position in this Court depends on our disagreeing with the District Court's finding of facts? Richard Bain Smith: Yes. Byron R. White: So if it is 25 percent, you lose. Richard Bain Smith: Yes. Antonin Scalia: Well, you call that a finding of fact, Mr. Smith? Richard Bain Smith: No, sir. Antonin Scalia: Are you sure that is a finding of fact? whether, what books in a store are covered by a particular statute? That is just a factual finding? That is all it is? Richard Bain Smith: As I said earlier, we-- Antonin Scalia: Do we have to take whatever the District Court says about that? Richard Bain Smith: --I believe... I think this Court has made it-- Antonin Scalia: Does it know how many cows there are in Virginia? Richard Bain Smith: --This Court has made it clear for the last three decades that the question of what is obscene in a book is a matter of law, not as a matter of fact. And you have to remember-- Antonin Scalia: I am not talking about what is obscene. I am talking about what the statute covers. Is that a question of fact, what books the statute covers, whether obscene or not? Richard Bain Smith: --No, Justice Scalia. I believe it is a question of law. And when you have this-- Byron R. White: But it certainly has to be based on the evidence. Richard Bain Smith: --It was based on-- Byron R. White: I mean, a court isn't going to find what percentage of books in a bookstore are covered by the statute without... even if it knows what the statute means, it has got to know what books are in the store. Richard Bain Smith: --It was based on an assessment of two things. First, the District Court said based upon the plaintiff's testimony and the exhibits, and the Court's review of the exhibits, I am submitting to the Court that as far as the exhibits are concerned, that is clearly a matter of law whether they are obscene for juveniles. Byron R. White: All right, so say it is a matter of law. Then what do we do with what the Court of Appeals did to the District Court's statement of the law? Richard Bain Smith: Well, there again, they never really said what... they had that in the footnote. They just threw it out that that is what the District Court said, but if you read the actual text of the case, they didn't accept it. They just said, we are going to assume this, and they have a footnote, and the footnote says, well, the District Court says this, and the state says that. They never say the District Court, they never say the state was wrong, they just say, we are going to assume it is based on what happened in Georgia, which is a completely different situation than Virginia. William H. Rehnquist: In order to decide what percentage of one's inventory is affected by a statute, you need to know first what the inventory consists of, and second, what the statute means, don't you? Richard Bain Smith: Yes, Mr. Chief Justice, and I would submit to the Court, which was the point I was trying to get to with Justice White, as far as the evidence presented, it was based on the testimony of two bookstore owners who admitted on cross examination that they didn't have the faintest idea what the definitions were. All of their testimony as to all of the material affected was given in a complete vacuum. There was no basis for it. There was, and I will, if I could for just a moment, this is indicative of both testimony directly from the appendix, and it will be very short. John Paul Stevens: Before you do that, may I just-- Richard Bain Smith: Yes, sir. John Paul Stevens: --Even if the witnesses didn't understand what the statute means, do you also contend the District Court didn't understand the statute? Richard Bain Smith: I would submit to the Court that for the Disrict Court to find that the exhibits that these plaintiffs presented fell within the amendment, then the District Court completely misread Virginia law, because none of their exhibits fall within the statute. Byron R. White: Well, you also there are suggesting that the plaintiffs who tried this case, those lawyers really didn't understand what was going on, that they really failed in their proof. Richard Bain Smith: Oh, yes, sir, I think that is exactly right, they failed in their proof, and I suggest to the Court that it was purposeful, because I think that from the start of this litigation, it is a lot easier if you are going into a federal court and claiming that the state is trying to restrict James Joyce's Ulysses than it is to go in and say the state is trying to restrict Hustler. And I cannot imagine any other reason why they never showed their own witnesses the definitions before they testified. They told their witnesses... their witnesses came in with a group of books. Their testimony was, and questionings from the plaintiffs, do you think that any book with a picture of nudity in it is going to be affected? Yes. That is not true. That has nothing to do with the Virginia statute. The Virginia Supreme Court has ruled, just like this Court has, it has to be a lewd view of the genitals, not mere nudity, and this permeated their testimony. John Paul Stevens: Have they done that with respect to the juvenile statute? Richard Bain Smith: I am sorry, Justice-- John Paul Stevens: Have they so ruled with respect to the juvenile statute as opposed to obscenity generally? Richard Bain Smith: --They have ruled with respect to a similar statute. They had... before this Court had the case of New York versus Ferber, which was the so-called kiddie porn case, Virginia had essentially that same case, and in talking about what is obscene for juveniles, the Virginia Supreme Court expressly held, citing Miller versus California, I believe, that whether it is adults or juveniles, mere nudity cannot be obscene for juveniles. That case is cited in our brief, Freeman v. Commonwealth. John Paul Stevens: Mere nudity can never be obscene for a juvenile? Richard Bain Smith: Mere nudity in the sense of just a picture of the human body. They went on to say that the nudity has to be a lewd exhibition of the genitals, as this Court gave as the example in Miller v. California. And I would just like to read, if I can get back to the record just for a moment, it is a question to their... and this sums up their entire case upon which this is based. This is after they have presented all of the books. This is after they have presented all of their evidence. On cross examination the state's lawyer asked, "Question: Ms. Ross, do you know what the legal definition of harmful to juveniles is? " "Answer: No. " "Question: Has anyone read that to you? " "Is there one? " "Question: No one ever told you there was one, did they? " "Answer: I don't know. " "Not that I remember. " "What is the legal definition? " That was the context of their case in the District Court. Taking that-- Byron R. White: Did they ever just describe what kind of books were in these stores? Richard Bain Smith: --They are general bookstores, just the typical... one is Ampersand Books in Alexandria, and the other one-- Byron R. White: Well, did they say... did they describe what kind of books they had in their stores? Richard Bain Smith: --Yes, their exhibits were normal books that might-- Byron R. White: Well, let's assume the District Court looked at those books, then read the statute, and decided that X percent of those books in that store would be covered. Now, let's just assume the District Court went through that routine. You are asking us to disagree with the District Court. Richard Bain Smith: --I am asking the Court that this is a matter of law, that the District Court was wrong about that, that none of their exhibits-- Byron R. White: Well, that means, I suppose, then we have to really look at... go through the exhibits, look at the evidence, and then decide what the statute means and say... you want us to say then that the Court of Appeals and the District Court were wrong. Richard Bain Smith: --I will wager this case on one exhibit, Plaintiff's Exhibit No. 4, The Penguin Book of Love Poetry. If that book falls within this statute, then we concede the case. You don't have to look at all of them. Just look at that one book. Or if you want to look at all of them, the same thing goes for all of them, because every one of them-- William H. Rehnquist: I don't want to look at any of them. You are basically arguing that the statute has a narrower meaning than the lower court said, and presumably it could affect 80 percent of the books in a pornographic bookstore or 2 percent of the books in a regular. The percentage of books affected across the board isn't so important. It is what the statute means in terms of our decided cases. Richard Bain Smith: --I think it is a joint question. I think it is important what the statute means, but secondly, I think the number is important as far as these plaintiffs are concerned, because they have built their whole case on the fact that there is such a large amount that their whole case on the fact that there is such a large amount of material involved. William H. Rehnquist: But suppose there were a bunch of people that concededly deal in pornography. Would it make much of a case for them to come in and say, look, this statute restricting juvenile access affects 90 percent of our books? Richard Bain Smith: No, because then I would suggest this Court has no problem with the case, because then you would know you were dealing with borderline obscenity in this Court in every case in this area always found that that is... the periphery of the first amendment. As Mr. Justice Stevens said in Young v. American Minitheaters, there is very little, if any, interest in the uninhibited exhibition of that type of material, and that is the type of material that we are involved in. Antonin Scalia: The percentage is really not that consequential of that percentage is derived by the proper interpretation of the statute, as you say it is proper, then there wouldn't be anything horrible about coming down on the bookstore that happens to have 20 percent of it or 25 percent of it. It is important from this context. They came up with all these horrible ways, the only ways they could comply with the statute, and one of which was borrowing... totally barring juveniles from their bookstore. I would suggest to the Court if you are talking about a normal everyday bookstore, barring juveniles from that bookstore because of supposedly this large amount of material would be devastating. I would suggest to the Court that borrowing juveniles from an adult bookstore that has 90 percent of the inventory that is borderline obscenity would not be the kind of burden that this Court was concerned about in the cases dealing with this type of situation. What is the narrowing language in the statute that you think was not adequately considered by the courts below? Richard Bain Smith: Well, there are two parts. The first part is the definitions themselves. The definitions in Section 18.2-390, which I set out in my brief, very narrowly define types of sexual activities that are involved-- Sandra Day O'Connor: Those are the definitions of what is harmful to juveniles? Richard Bain Smith: --They are the definitions of the material involved in the statute. Even if a work has that material, it is still not within the statute. It still has to be harmful to juveniles, and that is what the Eighth Circuit said in the Upper Midwest case pushes this case up to the borderline of obscenity, because... and I will give you a quick example. In Young v. American Minitheaters, those bookstores and theaters were found to be adult bookstores based on just the fact of the type of sexual material they involved, sado-mashochistic abuse, lewd nudity, this kind of thing. Those types of materials would not fall under this statute, because you have to go a step further. It has to be obscene for juveniles, and it is exactly what the Eighth Circuit was talking about in the Upper Midwest case that I cited in the brief. Byron R. White: Well, isn't your argument on this percentage business, isn't it that you are contending that this statute has only a de minimis consequence to these, the people who... the plaintiff, the plaintiffs' bookstores? Richard Bain Smith: Yes, sir. Byron R. White: That is right? Richard Bain Smith: Yes, sir. Byron R. White: And therefore it really is sort of a miniscule burden to cause them to go through the steps to comply with the statute. Richard Bain Smith: Given the... interest to the state in protecting its juveniles, given that it is borderline obscenity, that is exactly correct. Byron R. White: But if it affects a much larger percentage, you seem to agree that the steps they would have to go through would be too burdensome. Richard Bain Smith: As far as the everyday bookstore, that's correct. Speaker: Yes. Richard Bain Smith: But one of... and let me make this clear, getting back to what Justice Scalia was asking earlier. For an everyday normal bookstore to bar juveniles because of some part of their material, a miniscule part, would be devastating for them. For an adult bookstore with 90 percent books borderline obscenity, who cares? I would like to reserve the remaining time for rebuttal unless the Court has any further questions. William H. Rehnquist: Thank you, Mr. Smith. We will hear now from you, Mr. Bator. Paul M. Bator: Mr. Chief Justice, and may it please the Court, in Butler v. Michigan this Court announced a fundamental First Amendment rule, one from which it has never deviated. The states are not free to place substantial restrictions on the access of adults to books and magazines that are protected by the First Amendment, even if the purpose of the protection is to safeguard children. Our central submission today is that the Virginia nude display statute on its face violates this fundamental principle, because unlike the preexisting sales statute, which had no impact whatever on adults, this statute requires booksellers immediately to place important new restrictions on adult access to books protected by the First Amendment. It places an immediate and affirmative obligation on booksellers to screen their inventory, to reorganize their displays, and to purge from their shelves, where books are freely and readily available, all books that have enough sexually explicit materials in them that they are not suitable for sale to children. William H. Rehnquist: Why couldn't you just have an adults only part of the bookstore? Paul M. Bator: I beg your pardon? William H. Rehnquist: Why couldn't you just have an adults only part of the bookstore? Paul M. Bator: Well, Your Honor, we think that would involve a very substantial restriction on the access of the adults. William H. Rehnquist: But all you'd be restricting would be juveniles, I would think. Paul M. Bator: Your Honor, there are a couple of reasons why that would be very difficult or onerous for adults. First of all, books are sold in large numbers of places which are not bookstores. We have newsstands, we have bookstands in supermarkets, at airport and drugstore counters. They can't have two different sections. It really is not feasible for them to have an adult section. Secondly, the District Court-- William H. Rehnquist: Are they members of your... are people like that members of your organization? Paul M. Bator: --Yes. William H. Rehnquist: Airport bookstands? Paul M. Bator: Yes, we represent really the whole gamut of booksellers and distributors, including those, Your Honor. Now, another problem with-- Byron R. White: And hard core bookstores? Paul M. Bator: --I beg your pardon? Byron R. White: And hard core bookstores? Paul M. Bator: No, our clients do not include any adult or porno bookstores whatever. We do have two 20 to-- Sandra Day O'Connor: Did the appellees below, Mr. Bator, make a claim that they sold books that met the definition of what is harmful to juveniles? Paul M. Bator: --Yes, the testimony below was very clear. Sandra Day O'Connor: I mean, well, but did the... your clients, did they claim that they display routinely books which meet the statutory definition of harmful to juveniles? Paul M. Bator: The statutory definition under the Virginia display statute. Speaker: Yes. Paul M. Bator: Yes, Justice O'Connor. We have testimony in the record, very clear testimony in the affidavits as well as in the oral testimony on the part of these bookstore owners that they understood the statute to cover somewhere between 25 to 40 percent of-- Sandra Day O'Connor: Well, but did their testimony take into account the actual statutory definition, which does seem to be much more restrictive than the testimony would indicate they thought it was? There is something to be said for what the state's attorney is arguing. Or, to put it differently, Mr. Bator, if your clients indeed have 40 percent of books that meet this definition, I think you are inaccurate to say that they are not porno stores. I think it is incredible that anybody could come within this... 40 percent within this definition is very high, it seems to me. Paul M. Bator: --No, Your Honor, because I think the statute covers a large amount of material. The statute covers a large amount of material that does not fall into this classification of what do we mean by is it porno, but that does have some sexually explicit material. I go back to both questions, because I want to be able to cover it. Your Honor, these booksellers are, of course, not lawyers, but, of course, they are the ones who have to deal with this statute. Sandra Day O'Connor: Apparently they had not read the statute when they testified. Now, this definition defines it exactly as the Court has in Miller, only refined down to juveniles, predominantly appeals to the prurient, shameful, or morbid interest of juveniles, is patently offensive to prevailing standards and the adult community as a whole with respect to what is suitable material for juveniles, and when taken as a whole lacking in serious literary, artistic, political, or scientific value for juveniles. Did the testimony and the witnesses have in mind that precise definition? Paul M. Bator: Your Honor, I think the witnesses testified that they read the statute, but I think they read them as an ordinary nonlawyer would read them, and they gave an explanation of how they would understand this statute, and of course that is the perspective that is important. They understood this statute to cover a substantial amount of their inventory. Sandra Day O'Connor: Well, as I looked at it, the ordinary books like Ulysses and other things that I would think of clearly wouldn't fit within this definition, so I am just wondering whether we have two ships passing in the night here. Paul M. Bator: Your Honor, I believe, and this now goes again to Justice Scalia's question as well, that it is a perfectly reasonable understanding of the statute and really just what this statute suggests that if you think that a book is unsuitable for sale to 13-year-old you may not display it in your bookstore. Now, that does not just include porno. That includes a large range of material which I would be rather averse to having a 13-year-old child of mine buy a in a bookstore, and that very much includes a large range of popular as well as literary works. Now, we do have a District Court finding on this. That is to say, it seems to me that the Attorney General has here said everything turns on what this statute encompasses. But we have two courts below that made findings on that issue. The District Court said they... the District Court didn't accept the testimony completely. It lowered the percentage. The District Court made its own judgment. It said somewhere between 5 and 25 percent of the inventory of the non-adult bookshop is likely to be covered here. William H. Rehnquist: Did the District Court give its opinion as to precisely what the statute meant? Paul M. Bator: Yes. William H. Rehnquist: Where do we find that? Paul M. Bator: The District Court made a finding, and it is on Page A... on Page A20, third full paragraph. William H. Rehnquist: A20-- Paul M. Bator: A20 of the jurisdictional statement. The Court concludes that the average general bookstore carriers a significant percentage of materials varying between 5 and 10 percent that are harmful to juveniles as defined by-- William H. Rehnquist: --Now, that could mean two different things, couldn't it? It could mean that these bookstores are really then quite different than you have characterized them because they carry material that is much like that described in the Miller statute. Paul M. Bator: --No, Your Honor, I honestly believe the record would not support that conclusion. These are ordinary bookshops. William H. Rehnquist: But all this finding tells you is that a certain percentage of the books in the store are covered by the statute. Now, to me that doesn't militate one way or the other as to whether the statute is good or bad, because it depends on what the inventory of the bookstore is. Paul M. Bator: Yes, but the record is replete with descriptions of what these bookstores are, and I hope very much... the women who owned these bookstores gave very vivid and interesting testimony about what it is like to run an ordinary bookshop in Alexandria or Arlington. These are the opposite of porno bookshops. Now, the District Court finding was based in the context of these bookshops and the exhibits and the affidavits and the testimony, and-- Antonin Scalia: As far as the testimony goes, Mr. Bator, it is not worth a whole lot if it comes from people who haven't read the statute. Paul M. Bator: --I am sorry. Antonin Scalia: I mean, as far as the testimony is concerned, it is not worth a whole lot if it was testimony by people that hadn't read the statute that they purported to be applying to the books. Paul M. Bator: Well, the District Judge made his own finding based not only on the testimony, but the affidavits and the exhibits. The Court of Appeals was very careful not to disturb that finding, although it did say that the testimony is such that it is very hard to guess the exact percentage. Byron R. White: --of the exact percentage anyway. It is then... that is just to... as a predicate for inquiring how much of a burden it is on adults or within the bookstore. Paul M. Bator: It seems to me... again, this goes really to the interchange I had with Justice O'Connor. That is, it is terribly important to understand that the life of this statute plays itself out not at the level of constitutional theory or lawyers' interpretation. It plays itself out between the local bookshop and the local community, and that bookshops's fear of arrest and prosecution by the local attorney, commonwealth attorney and the local police. Byron R. White: Yes, but it is not impossible to comply with the statute, no matter how much percentage of the books, and your submission is, and I guess it was taken below, that none of these ways of complying would remove the burden on adults. Paul M. Bator: Our point is not that it is impossible to comply, but that the effect of good faith compliance is likely to be a very drastic restriction on the free access of adults to these books. Sandra Day O'Connor: Well, Mr. Bator, could the bookstore set up a children's only section, not an adults only, but a children's only section, so that people who are affected are the children, not the adults? Paul M. Bator: I suppose a bookstore could have a children only section. The real question is whether if you want to read a popular work or browse or look at a popular work of literature in an ordinary neighborhood bookstore, whether you have to enter a section that is labeled X, labeled adults only. Sandra Day O'Connor: Well, if you had a children's only section you wouldn't have to do that as an adult. Mr. Bator, if every store had an adults only section, as you tell us would be necessary if all bookstores have large quantities of these books, do you really think it would be a great disincentive for adults to go into that section? Have they stayed away from the movies in droves when they have adults only films? Why would their reaction to general adults only sections in bookstores be any different? Paul M. Bator: Your Honor-- William H. Rehnquist: You are being peppered with questions from both sides. Just take your time and answer them, and hope in the future they will be asked one at a time. Paul M. Bator: --Your Honor, I feel like the hockey goalie who has pucks coming from all sides. 0 [Generallaughter.] Your Honor, on the question of the deterrence, again we have... the District Court and the Court of Appeals went into that, and there was testimony. The problem here is that the sale of books is very much affected by display, that is to say a large proportion of books are sold to people who aren't planning to go but who go in to read, to browse, and they come upon a book they rather like, so it is a very sensitive area. The District Court found that there would be a substantial deterrent to adults... I understand that that doesn't deal with Justice O'Connor's hypothetical, but if it says X rated, adults only, a lot of people are going to stay out because they are embarrassed, and they don't want... These are not people in porno bookshops. These are people in ordinary bookshops. The fact is... this is not of record, and it is just based on my New York Times reading, but as I understand it, in the movie industry as well, even though movies are different because people plan to go to a movie, it is not an impulse thing, but an X rating on a movie, as I understand it, is thought to be commercial disaster, but there is another point here, Your Honor, that I want to stress before I get back to the other side of the bench. There would be an enormous change in the general ambience and atmosphere of bookshops if what we have is an adult section, X only, and a children's section, children only. That is to say, the whole atmosphere of a bookstore that we know... every one of us has been in a bookstore on Saturday afternoon, and really that is what this case is about, is what kind of bookstores do we want? Do we want a bookstore where every book or every shelf is labeled with a government seal of approval or a government seal of disapproval? That is the issue in this lawsuit. The fact is that the life of the bookstore is free circulation for browsing, and that is what we think the statute badly inhibits. Now, there is another problem, Justice O'Connor. There is a large number of books where it would be disastrous to say children only. I mean, I guess I don't even know quite what that would mean, because there are a lot of books that are absolutely proper for kids and for grown-ups and they are just general books. I don't think we can reorganize the bookshops, this world of books and of intellect in terms of these tight rules, and really, I think our question is whether it is constitutional for the government basically to create an across the board rating system for books, and there is a great-- Sandra Day O'Connor: Well, Mr. Bator, what if the statute just said it prohibited allowing juveniles to peruse and examine material that is harmful to them? Paul M. Bator: --I think that would be a more difficult case, although that also would create a tremendous problem for booksellers. Sandra Day O'Connor: But it certainly wouldn't be a burden on the adults, would it? Paul M. Bator: If the crime were for the booksellers to allow kids, I think there would be a very serious First Amendment problem, very much the same sort that the Court had in the Smith case, because the effect even of that statute would be to put pressure on the bookseller to self-censor. The vice of this statute, and I think the problem that the Attorney General has absolutely never confronted, is that this-- Byron R. White: Well, at least it would avoid the burden on the adults. Paul M. Bator: --If the bookseller looks at the statute, even in the version Justice O'Connor gives, and decides the only safe thing to do here is if it has sex in it, put it under the counter or put it in an X-ray separate section, that is the burden on the adult. Byron R. White: You think the burden would be to saying if you had a separate section in the bookstore that said minors not allowed? Paul M. Bator: It would be very problematic Your Honor. I think that a lot of adults would find that intensely uncomfortable because it really labels them. Byron R. White: As not minors? Paul M. Bator: I beg your pardon? 0 [Generallaughter.] Byron R. White: As not minors. It labels them that way. Paul M. Bator: They are not. They are not minors. I think in this world everybody knows what that is all about, and it would be a very radical departure from our traditions of what bookstores are supposed to be like. If the statute as we argue applies to a large range of perfectly ordinary literary, serious and popular works, the point about Hollywood Wives, Justice O'Connor, is not for us to wrangle about whether it is covered or not, but if Hollywood Wives is covered, then there are hundreds of ordinary best sellers, potboilers of every sort that are covered here, and in a sense they ought to be covered. That is to say, there are a lot of books that we do not want the bookseller to sell to a 12-year-old, and the vice of this statute is, if you don't want it sold to a 12-year-old, you have got to remove it from the shelf. Sandra Day O'Connor: Well, you concede that the statute, the old statute that prohibited selling the items to juveniles is constitutional-- Paul M. Bator: Yes. Sandra Day O'Connor: --Yet surely that is a burden on the bookstore owner. Paul M. Bator: It does put a burden on the bookstore-- Sandra Day O'Connor: Now, why is it a substantially different burden to say you won't allow juveniles to peruse the material that you can't sell to them? Paul M. Bator: --We have two answers to that, Justice O'Connor. We think that the burden on the bookseller in the case of the display statute is more onerous, because you have to do this advance screening of the whole inventory, but the really important point is that complying with the burden in the display context is much more dangerous to the First Amendment because it restricts the access of adults. Complying with the burden with respect to sales has no impact on adults at all. But if you remove a book from the shelf, the easily accessible shelf, because you are afraid of a kid coming upon it, you have also removed it from the adult. There is another point I would like-- John Paul Stevens: May I ask you a question, Mr. Bator? Does your argument really focus on the fact that the statute applies to written material as opposed to pictorial material, you know, the magazines such as Hustler and so forth-- Paul M. Bator: --The statute does apply to both. John Paul Stevens: --I understand it does apply to both. Would you have any objection, or does your proof support any objection to a statute which just excluded the written material? Paul M. Bator: Well, Your Honor, that would be a more difficult case, and it is not our case, and I would hope very much that the Court would not on this record and with these briefs try to answer that question. Our position would, however, be, if you push me to the corner of saying, that the Court's cases do not support and the First Amendment should not support a lesser protection for pictures than for text, but that's-- John Paul Stevens: You would say even if the statute were limited to magazines such as Hustler, assuming they are not obscene, and Playboy and the like, and those... you have a constitutional right to have those displayed publicly. Paul M. Bator: --Not a constitutional right to buy, but the access problem-- John Paul Stevens: But to display. Paul M. Bator: --I think is more difficult, but of course the important point here is that that is not what Virginia has done. It seems to me we really have to focus on what Virginia has done. Virginia should not be allowed to have it both ways. That is, they have drafted a statute that at least from the perspective of the bookseller is sensibly and, as the District Court said, consensitively viewed as a broad statute that encompasses any material that has enough sex in it so you don't want it sold to a kid. Now, they-- Antonin Scalia: I don't know how you can say that, Mr. Bator, unless you are talking about a bookseller, as some of your witnesses were, who hadn't read the statute. If you read the statute, this covers very offensive material, but only very offensive material. Paul M. Bator: --I think, Justice O'Connor, they have read the statute, but when they were cross-examined, these were women who were not used to the business of tight cross examination at law, and when they were cross examined on detail, they were vague on the detail, but that is the real world. That is how this statute is going to operate in the real world. Antonin Scalia: Mr. Bator, may I follow up on Justice O'Connor's question about whether the statute would be all right if it merely prohibited permitting juveniles to browse as opposed to requiring you to segregate materials in a fashion so that it is impossible for them to browse? Do we have any reason... is it clear that the statute requires any more than that? If you look at the definition of unlawful act it says "It shall be unlawful to knowingly display for commercial purpose in a manner whereby juveniles may examine and peruse. " Now, "may" could well mean two things. It could mean it is possible for them to do so or it could mean it is permitted for them to do so, so it may well be that all that is necessary under the statute is a sign in the store that says juveniles not permitted to browse. Paul M. Bator: Well, Your Honor, I don't think a sensible bookseller in the local community faced with the possibility of local police and local prosecutors would read the statute that way. The statute prescribes display. It says any display. Antonin Scalia: The statute also has a definition of "knowingly" which seems to suggest, and knowingly, it says "knowing display", the definition of "knowingly" says that you have to know or have reason to know the age of the juvenile. Now, that suggests that there has to be some concrete occasion in which the juvenile is being allowed to browse, and you have reason to know what his age is. Isn't that a permissible reading? Paul M. Bator: We read the "knowingly" in light of his definition again in the Virginia statute. I think the bookseller can't just sit back and say I don't know anything. I think what they have to do is make a good faith effort to comply, and compliance here means compliance with rules about display that may give access to juveniles. Now, if the statute... we are constantly dealing a little bit here with two possible statutes. I would really like to say that Virginia can't and shouldn't be allowed to have it both ways. That is what they do is, they draft a statute that is broad enough so that the bookseller is under pressure to self-censor and to comply broadly. And then the Attorney General comes in here and says, oh, no, no, no, this statute is-- William H. Rehnquist: Well, did you object to a motion to abstain in the District Court? Paul M. Bator: --There was, Your Honor. The District Court found it is not an appropriate case for abstaining. William H. Rehnquist: Did you oppose the motion-- Paul M. Bator: Yes. William H. Rehnquist: --of the state to abstain? Paul M. Bator: Yes, we have not in any way agreed that... in fact, we do not think the law would permit abstention here. Now, the Attorney General did not-- William H. Rehnquist: Well, certainly you could have gotten a conclusive construction of the statute by abstention, a statute which we are now arguing about the meaning of. Paul M. Bator: --There is no readily available narrowing construction here. The Attorney General has not come up with a standard here. William J. Brennan, Jr.: Well, may I ask, Mr. Bator, does Virginia have a certification procedure? Paul M. Bator: It does, yes. William J. Brennan, Jr.: Was any effort made to ask the District Judge to resort to that? Paul M. Bator: We do not think that there would be a meaningful question that could be certified. William J. Brennan, Jr.: As to definition as to what the statute meant? Paul M. Bator: We don't think a meaningful question could be certified on that because the Attorney General himself has not come up with an intelligible standard. I mean, what he said is miniscule. William J. Brennan, Jr.: But in any event-- Paul M. Bator: I beg your pardon? William J. Brennan, Jr.: --no motion was made to the District Court to certify. Paul M. Bator: In the District Court there was a motion made. We opposed it. I don't-- William J. Brennan, Jr.: To certify? Paul M. Bator: --Oh, no motion to certify, just to abstain. Now, I think the abstention point was abandoned in the Court of Appeals. The Court of Appeals did not pursue it. And I don't think it was pursued in any question to this Court. We did brief the question because we thought that it was an important problem in the case. Whether the Court should say, well, let's wait and see, somehow see what the state courts say, but we think that would be inappropriate. The bookseller can't wait and see. The bookseller has to comply now. And the fundamental problem is that this so-called miniscule construction has really no content. That is, the Attorney General has not come up with an intelligible standard for what this so-called narrow construction is. The Court's cases-- Sandra Day O'Connor: Well, isn't it just to apply the definitions as they are written in the statute for what is harmful to juveniles? That is pretty narrow. Paul M. Bator: --No, we read that as being very broad, and the District Court and the Court of Appeals read it as being broad, and it would be really unprecedented for this Court to reverse two courts on that issue of state law. That would be quite an unprecedented thing for the Court to do, is to reverse two courts on the meaning of a state statute on which they have agreed. I want to finish one thought if I-- Antonin Scalia: Excuse me, Mr. Bator. Where do the courts describe the meaning of it? Where do they describe the meaning of it, that we would be reversing their description of the meaning of the state law? Paul M. Bator: --Well, I-- Antonin Scalia: As opposed to just saying it covers 40 percent of all books-- Paul M. Bator: --I think their understanding of the meaning of the statute is implicit in what they understood the impact of the statute to be, that is, it is implicit in their description of what this statute does to the ordinary bookshop under the threat of prosecution and punishment by the local police and local prosecutor. I mean, what we... it seems to us that there is one thought I have been trying to get out that I would like to get out here, that we are talking about the First Amendment. We are talking about the Butler rule, which places a very serious rule against the state in doing things that can have an impact on adults. Now, Virginia passes this broad statute which the consensus of the testimony and the finding of the District Court and the Court of Appeals places a substantial burden on adults. Now, the Attorney General comes in here and says, no, no, this statute is a paper tiger. I don't think that counts as the kind of narrowing construction that this Court said can save an overly broad statute. That is what this Court should not do, is allow the statute to be reinterpreted on the... because the Attorney General comes in here and sort of says, well, we are not going to enforce this statute against any respectable bookshop. Anyway, it is not the Attorney General who enforces the criminal law of Virginia, it is the local Commonwealth Attorneys. This statute places a serious burden of self-censorship on the bookshops, and complying with that burden we feel will place a very substantial inhibition on what grown-ups have always done, freely go to a bookshop, browse in the bookshop, and decide what they want to read, decide what they want to buy, and that impact on adults, which doesn't exist at all in a sales situation we think is the fundamental vice of this statute. Self-censorship leading to an access burden on adults is what makes this statute unconstitutional under the First Amendment. Like the battered hockey goalie, I will now retire unless there are questions. John Paul Stevens: --Before the goalie retires, may I ask this question? I have been thinking, as Justice Brennan apparently suggested, about the possibility of certification. Are there three or four works that are identified in the record with respect to which the two of you disagree as to whether they are covered by the statute? Paul M. Bator: I am sorry, Justice Stevens. You will have to-- John Paul Stevens: Are there two or three specific works of literature as to which you think the statute covers and your opponent says it doesn't cover with respect to which we could ask the Virginia Supreme Court whether it covers? Paul M. Bator: --I suppose you could frame an abstention or a certification based on one or two or three books. John Paul Stevens: Do you know of any such examples that come to mind that sort of test what the breadth of the statute would be? Paul M. Bator: I suppose that there is a disagreement about Portnoy's Complaint, which is not a book I would like to have sold to a 12-year-old, and which I think is clearly covered, and I guess the Attorney General says today that it is not covered, but suppose... suppose the Virginia Supreme Court tells us it is covered or not covered. Is that the kind of intelligible narrowing construction of the statute? That is to say, it is a single book, and this Court's cases make it very clear that a whole series of litigations to narrow a statute are not sufficient. There has to be a quick cure. Sandra Day O'Connor: Well, Mr. Bator, would it make a difference if the Court said the statute was complied with if the bookstore owner just said juveniles were not permitted to browse? Would that make a difference? Paul M. Bator: Well, it would make a difference, but we do not think it would save the statute. Sandra Day O'Connor: So that is a certifiable question. Paul M. Bator: We do not think it would save the statute, Your Honor. First of all, juveniles also have a constitutional right of access to books. I mean, that is a major problem. Sandra Day O'Connor: But they don't have a right of access to books that are harmful to minors within the meaning of this definition, do they? Paul M. Bator: So again what you would have to do is, you would have to reorganize the entire display of the bookshop and you would have books that are for everybody, and some just for kids, and just some for adults, and we think that that would produce a major change in the First Amendment spirit of how bookstores are run. William H. Rehnquist: Thank you, Mr. Bator. Mr. Smith, you have six minutes remaining. Richard Bain Smith: Mr. Chief Justice, I will not take it all. The reason we didn't ask to have this case certified below was because this Court now has a tool that neither the District Court had nor the Fourth Circuit had. Virginia's certification procedure only became effective April of this year. There was no certification procedure available. William J. Brennan, Jr.: That is effective for this Court now, Mr. Smith? Richard Bain Smith: We would certainly say it is. Yes, sir. It is effective... it was effective April 1st, 1987. It is Rule 5:42 of the Rules of the Supreme Court of Virginia. It is very comprehensive, and, Justice Stevens, I won't ask that just we agree on four exhibits be sent back, you send every exhibit that the plaintiffs put into evidence below, and I will take the same position before the Supreme Court of Virginia that I am taking here that not one of those falls within the statute. Speaker: Specifically Portnoy's Complaint. Richard Bain Smith: Portnoy's Complaint was not an exhibit. John Paul Stevens: Are you familiar with the book? Richard Bain Smith: Yes. That is not covered. John Paul Stevens: That is not covered. Richard Bain Smith: That is not covered. John Paul Stevens: So you do have a square disagreement on that. Let me ask you another... may I ask you another question-- Richard Bain Smith: Certainly. John Paul Stevens: --on the meaning of the statute? In the definition of harmful to juveniles... I had it in front of me a minute ago... the last subparagraph is on A42 of the jurisdictional statement... has a subparagraph C, "is, when taken as a whole, lacking in serious literary, artistic, political. " and so forth, "value", but the introduction of that paragraph says "quality of any description or representation in whatever form. " Now, my question is, supposing you have a ten-chapter book, one chapter of which would satisfy the statute. Does the book satisfy the statute or not? Richard Bain Smith: Justice Stevens-- Speaker: The book as a whole. Richard Bain Smith: --if you would look at Section 18.2-391, which is not the definitional statute but the actual statute under... it is paragraph 2. It starts off, it says, "Any book, pamphlet"-- John Paul Stevens: I understand. Richard Bain Smith: --The last line of that answers the question. Not only must be harmful to juveniles, it has to be taken... the book has to be taken as a whole, just as with this case you cannot pull isolated passages out. John Paul Stevens: I understand that Paragraph 2 does, but the definition of "harmful to juveniles" does not. It is only because of the additional language in Paragraph 2 that you answered my ten-chapter book the way you do. Richard Bain Smith: Well, if one chapter is obscene, and then the other nine... or obscene for juveniles, and the other nine chapters are fine for juveniles, would that book fall within it? No, sir. John Paul Stevens: It wouldn't fall within... that wasn't my question. It wouldn't fall within subparagraph 2 of 391, but it would fall within the definition of subparagraph 6 of 390, would it not? Richard Bain Smith: That is where... the reason hat is where it becomes important to look at that... what I just-- Speaker: I understand. Richard Bain Smith: --the part I pointed you to, because that is dealing with books. If we are talking about just a picture, then the picture in itself is as a whole, but that is why they added in again, taking... in other words, you have got... with respect to books, you have got two taken as a wholes. Not only you have taken as a whole as far as harmful to juveniles, but the book as itself has to be taken as a whole. John Paul Stevens: Let me be sure. If I merely had the definition of harmful to juveniles, the chapter we speak of would be harmful, the book as a whole would not, but you are saying 391 would not apply to that because of subparagraph 2 to that ten-chapter work? Richard Bain Smith: I don't think it would under either way, and the reason I say that is, this is the Virginia version of Miller versus California as it relates to juveniles, and the entire work has to be taken as a whole. You can't pull an isolated passage out of the book, and that has been this Court's jurisprudence for 30 years, and that is what the Virginia Supreme Court has always followed. You can't have a book that has... and that is what happened below. They would... some of the exhibits there would be a vivid description of a rape in three pages out of 700 pages, and that doesn't make it fall within the statute. John Paul Stevens: I am not going to ask you to debate it with me. I am just trying to ask your understanding. Richard Bain Smith: I understand, and-- John Paul Stevens: If Chapter... subparagraph 2 were not in Section 391, and we were merely dealing with section 390, which I gather is the definition that existed before the recent amendment, would my example of a ten-chapter book containing one sexually explicit chapter that would follow the definition, would that book, work as a whole in your view be harmful to juveniles within that section? Richard Bain Smith: --No, and perhaps the easiest... or the reason for it is that under Virginia law this is a criminal statute, and has to be strictly construed against the Commonwealth. In any type of disagreement like that, the state loses. John Paul Stevens: Thank you. Mr. Smith, suppose a bookseller does not segregate books. Would he be able to comply with the Virginia statute by simply saying, whenever I see a juvenile, a person who looks to me like a juvenile, browsing in a book which is a book that I ought to know falls within this statute, I stop that juvenile and ask him to leave the store. That is my store policy. Would that be enough to comply with the statute? Richard Bain Smith: Yes, sir. As a matter of fact, that exact example took place in this case. One of the bookstore owners said that she had some material that she thought might be adult material, and she said, "But I keep it on a shelf next to my counter, where I keep an eye on it so juveniles can't get to it. " Of course that complies, because the state has to prove that she syinterly... we have to prove that she knowingly violated the statute. Antonin Scalia: Well, I am not talking so much about knowingly as I am talking about the language "display for a commercial purpose in a manner whereby juveniles may examine and peruse. " "May"-- Richard Bain Smith: Because I think-- Antonin Scalia: --"May" means it is possible for them to do so or they are permitted to do so. Richard Bain Smith: --This Court had a case which I have cited in my brief called the Foreign Products Case, and that case said that when used in a statute as this "May" is used, it can... mean might or it can mean reasonable certainty or it can mean actual tendency under Virginia law, since it has to be strictly construed against the Commonwealth, it has to be what you have suggested, and it would qualify. William H. Rehnquist: Thank you, Mr. Smith. The case is submitted.

William H. Rehnquist: We'll hear argument first in No. 97-2044, United States v. Haggar Apparel Company. Mr. Jones. Kent L. Jones: Mr. Chief Justice, and may it please the Court: In 1978, this Court held in the Zenith Radio case that substantial deference should be given to Treasury interpretations of the Tariff Act. In the present case, the Federal circuit, without even citing Zenith Radio, held precisely to the contrary and concluded that no deference should be given to Treasury interpretation. The court concluded that a 1980 statute directed the Court of International Trade to reach the correct decision in customs cases and that this statutory obligation was inconsistent with affording any deference to Treasury interpretations. Respondent has abandoned that reasoning in this Court, and the reasoning of the court of appeals is manifestly incorrect. The statute on which the court of appeals relied is 28 U.S.C. 2643(b). That statute merely provides procedural options for the Court of International Trade in situations where the evidence presented to that court is not sufficient for it to reach the correct decision. In adopting the statute in 1980, the legislative history made clear that Congress merely intended to provide to the Court of International Trade the same kind of remand and retrial authority possessed generally by Federal district courts. Certainly nothing in the history of that provision reflects any intention by Congress to abandon the principle of deference to Treasury interpretations that this Court had articulated only 2 years prior to that date. Stephen G. Breyer: Well, is... are these supposed to be interpretive regulations or legislative regulations? Kent L. Jones: These are... the regulations that are at issue in this case are interpretive regulations. Stephen G. Breyer: All right, then if that's the case, then what they have is the power to persuade but not the power to control. Kent L. Jones: Absolutely. It is... the question is-- Stephen G. Breyer: All right. Then we should simply look are... what they thought was are they persuasive. Kent L. Jones: --The question that the Federal circuit resolved was a different question, incorrectly in our view. The Federal circuit concluded that they could ignore the regulation altogether, that the regulation was to be given no deference, was in effect a null and void act, because, the court reasoned, that the Court of International Trade was supposed to reach the correct decision. Stephen G. Breyer: Well, I mean, you'd think... if... if it's an interpretive regulation and therefore it has the legal force that... whatever is given to the power to persuade, though not the power to control. When you have an expert body like the Treasury that knows a lot about it, you would give a lot of deference. Except, if you were an expert body that knew just as much about it, then why would they have some special power to persuade? Kent L. Jones: Well, if... if by the expert body you're referring to you're referring to the Court of International Trade, the Court of International Trade is a specialized court just like the Tax Court, and the Tax Court, just like the Court of International Trade, has been directed by this Court in decisions such as National Muffler Dealers and for the Court of International Trade in the Zenith Radio case to defer to the agency's reasonable interpretation. Antonin Scalia: Mr. Jones, did you agree with the premise that... that for interpretive regulations, we accord the agency only the power to persuade and not to control? I... I thought we-- Kent L. Jones: I-- Antonin Scalia: --the power to control so long as it was... it's within the range of the ambiguity. And even if we thought that another interpretation might be better, we would go along with the agency. Is-- Kent L. Jones: --No. Clearly... clearly you have more fairly described the actual standard that the Court has applied, and when I didn't bicker with-- Antonin Scalia: --Bicker, because I think-- Kent L. Jones: --All right. Antonin Scalia: --it's crucial to this. [Laughter] I think it's crucial to the disposition of this case really. Kent L. Jones: Well, it is crucial to the disposition of the case ultimately that the court do what this Court said it should in Zenith Radio which is to defer to-- Ruth Bader Ginsburg: But what is it precisely? Because you have used Chevron in your briefs, and then you cite National Muffler-- Kent L. Jones: --Yes. Ruth Bader Ginsburg: --which is not quite Chevron. And then Justice Breyer brought up interpretive regulations, which sounds to me like Skidmore. So, which kind of which degree of deference is it? Kent L. Jones: You're asking a question that I think it's fair to say the Court has never answered, which is in this... there... there's a high Chevron and a low Chevron, and then there's in between that hasn't been fully elaborated by the Court. The high Chevron is where the agency is given an express authority to interpret a particular statutory provision and makes a substantive legislative rule. And then it's to be treated as valid if it's not arbitrary and capricious and clearly inconsistent with the statute. There's a low Chevron that doesn't require any statutory authority to adopt rules. It's based simply on the implied authority of the agency to interpret and implement the statute that Congress has designated for it to administer. What we have here and also in the Internal Revenue Code is something in between. We have an express statutory authority to issue rules generally. For example, 19 U.S.C. 1624 is... provides a general authority to the Treasury to adopt any necessary rules under the Tariff Act. That's precisely parallel to 26 U.S.C. 7805 which authorizes the Treasury to adopt any needful rules under the Internal Revenue Code. Antonin Scalia: I didn't understand all that, Mr.... this is a much more difficult enterprise than I had ever imagined. There are three Chevrons? Kent L. Jones: Well, I think the Court has resisted the temptation to vulcanize-- Antonin Scalia: I really had thought there was... I had really thought there was just one, and I thought Skidmore was pre-Chevron and speaks from an era that... that simply bygone. I... I-- Kent L. Jones: --I may be referring to this in a more academic than a practical way. As a practical way, I think which is the way the Court has addressed it, basically there are two standards. There is the standard of what I call the high Chevron standard, which is perhaps the Skidmore test you're referring to, which is when the agency has specific rulemaking power granted by Congress for a specific subject. That's the high deference. The lower deference in Chevron doesn't require any specific grant of statutory power. It's based on what the Court described in Chevron as the implied authority to interpret and implement a scheme when Congress has told the agency to administer it. Ruth Bader Ginsburg: --At any rate, are you saying that the interpretive... the authority of the Treasury in this Customs area is identical to its authority in the Internal... for the Internal Revenue Code? Kent L. Jones: It... I... well, it's more than that. There's a parallel provision. The 1624 that I referred to is parallel to the general interpretive authority in the Internal Revenue Code. In addition, there is a specific interpretive authority for classification issues which, of course, this case involves. It authorizes the Treasury adopting the rules and regulations for the classification of goods, classification and assessment of tariffs. Now, respondent's new argument, the one that he didn't make below but is presenting to this Court, is that... that this... that a statutory authority to issue the classification rules is limited in 1502 by a clause at the end of it which says, classification rules at the port... various ports of entry. And respondent, without any authority whatever, says that just reading that, they can tell that that means that it doesn't permit rules that apply to importers, that it only applies to Customs officers. Well, that's illogical and it's also inconsistent with the longstanding principle of this Court since 1809 in Vowell and M'Clean that tariff duties only arise at the ports of entry, in the words of that opinion. So, a rule that classifies goods at the ports of entry applies directly to importers because that's where the duties arise, that's where the goods are classified and valued, and where the duties are assessed. Respondent's new argument... I think I should, you know, put it in... in its framework. Respondent's new argument is that because the Court of International Trade is to make a de novo determination of liability, that that is inconsistent with giving deference to the Treasury's interpretation of the legal issues involved in the case. In fact, respondent goes so far as to say that whenever a court is to make a de novo determination of liability, it is to ignore agency regulations even when Congress has expressly authorized the agency to adopt interpretive rules. That... that suggestion is radical and it's flatly inconsistent with general case law of this Court and, in particular, it's inconsistent with the customs and tax litigation. In customs and tax cases, Federal courts have long been charged with the responsibility of making independent factual determinations, of making determinations of law and applying the facts to the law to determine ultimately independently the amount of tax or customs duty owed. The Federal district courts do that. The Court of Federal Claims does it, the Court of International Trade and the Tax Court. They all have exactly the same responsibility. Antonin Scalia: Mr. Jones, suppose you had a statute that said in so many words the court shall decide the question de novo. Kent L. Jones: If... you know-- Antonin Scalia: Might not... might not the... the respondent's disposition apply in that situation? Kent L. Jones: --Well, no, and... and certainly I want to address that, but I also want to point out that they cited a Law Review article authored by you for that proposition. And if one looks at that Law Review article, what one sees is that the article said that if Congress directed the courts not to give any deference to the agency and provided for de novo review, that's... that's... the difference is that in providing for de novo review, Congress has not told the agencies to ignore the courts. In fact, Zenith Radio is exactly that kind of a case, as is Atlantic Mutual, which the Court decided last term. Anthony M. Kennedy: Well, Zenith Radio... they talked about administrative practice, as I recall. Kent L. Jones: There were Treasury decisions. Anthony M. Kennedy: And... and this... that's somewhat different than an interpretive regulation. Kent L. Jones: It's a lesser-- Anthony M. Kennedy: It may be... it may be that this is an even stronger case-- Kent L. Jones: --Yes. Anthony M. Kennedy: --I assume that you would argue, but there is a difference. Kent L. Jones: Yes, and the difference would be, as you pointed out, to suggest even greater deference would be owed to the agency's formal interpretation set forth in an interpretive rule. And, indeed, this interpretive rule, that we will address later on in this argument, was issued as a result of notice and comment procedures. Stephen G. Breyer: Can I ask you one quick question about that? This is something I don't know the answer to. But the Treasury, of course, is in charge of our tax laws, and basically when you write a new law, the first place Congress gets the law from is the Treasury. They run right over. They're talking to each other. They're... they're part of the legislative process. Now, is Treasury in the same relationship to the customs laws? Because from reading this, I had the impression there's the GATT in there. There are special trade reps and... does Treasury take part in the creation of the law-- Kent L. Jones: The... the-- Stephen G. Breyer: --customs as it does in the law, say, income tax? Kent L. Jones: --Well, there's two... two types of... of law... two ways to answer that. One is legislative proposals. Legislative proposals, under a formal method provided for in the tariff acts, come through the President, but with the consultation with the Treasury. And as a practical matter, I think it's realistic to assume, although the statutes don't lay this out, that the Treasury has a substantial role in that process unless the President spends a lot of time. Stephen G. Breyer: But as a matter of practical fact, is there like a whole section of people in the Treasury whose job it is to look over the customs and tariff laws and to propose-- Kent L. Jones: Well, there's the customs-- Stephen G. Breyer: --changes and do all these things? You know how they do it in the tax area. Kent L. Jones: --Oh, of course. I mean, in the tax area there's the Internal Revenue Service. Stephen G. Breyer: Right. Kent L. Jones: In the customs area, there's the Customs Service. Stephen G. Breyer: And do they do roughly the same thing in respect to evaluating substance of laws and what the proposals are and so forth or not? See, their whole argument is-- Kent L. Jones: You're asking a question that I think might be beyond my ability to answer. Antonin Scalia: --Maybe we should take evidence on this. Do you think we should take evidence on how... how much involved the agency is with the enactment of the law? Do you think it makes any difference? Kent L. Jones: I think what makes a difference is-- Antonin Scalia: Do you want us to give more deference if the agency is intimately involved? Kent L. Jones: --I just want the Court to... to repeat what it held in Zenith Radio, which is that the standard amount of deference is owed to these regulations that are-- Sandra Day O'Connor: Mr. Jones, do we also owe deference in this area to interpretations by the U. S. Trade Representative or by the International Trade Commission? Kent L. Jones: --No. In enacting the Harmonized Tariff Schedule in 1988, Congress noted the different roles performed by the various entities, and it specifically said that the role of interpreting and applying the Harmonized Tariff Schedule was designated to the Customs Service, which works, of course, for the Treasury. The... the rulemaking authority is... is designated by statute to the Secretary of the Treasury, and it is subdelegated by regulation to the Customs Service, but the Customs Service can't adopt regulations until the Secretary approves them. So, ultimately it is the function of the Treasury to adopt these rules and regulations. David H. Souter: So, if we don't defer no these regs, we don't defer to anything, or our Court doesn't defer. Kent L. Jones: It-- David H. Souter: There's nothing else to defer to. Kent L. Jones: --I can't... it's hard for me to come to grips with such a broad proposition, but certainly-- David H. Souter: Well, I don't know what other sources there would be if it wasn't the commission or the trade rep. Kent L. Jones: --There... there is no other source of interpretive authority under the Tariff Act other than the Treasury acting through the Customs Service. That is it. These are its authoritative, interpretive regulations, and the court... Federal circuit just went down this route of looking at this procedural statute and said, well, that justifies us not applying the deference that Zenith Radio said we should apply, although they didn't cite Zenith Radio and didn't try to distinguish it in their opinion. Ruth Bader Ginsburg: Mr. Jones, on Zenith Radio, I think that the respondent has said, well, that's for countervailing tariff and it has nothing to do with classification. Kent L. Jones: Respondent has done a good job of... of fairly confusing something that's really very clear. What is very clear is that up through the time that Zenith Radio was decided in 1978 and for a year past that, through 1979, in the words of the Customs Court in the ASG Industries case, which is cited on page 6 of respondent's brief... and I'll quote the court. Every countervailing duty case litigated, just as every tariff classification and valuation case in modern times has been tried de novo in this court. That de novo review was the only form of review known to the Customs Court through the Zenith Radio case. It was after that that Congress said that certain countervailing duty cases can be reviewed on the administrative record. Through 1978... and by the way, in that 1979 opinion, the Customs Court specifically referred to its opinion in Zenith Radio as an example of a de novo review proceeding. So, the Court's holding in Zenith... this Court's holding in Zenith Radio that the Customs Court should defer to the agency's reasoned interpretation of the statute is directly applicable to this case. That was just as much a de novo proceeding as this one is. Anthony M. Kennedy: Would you... would you comment on the... on the final clause of the introductory provision of the regulation which says nothing is-- Kent L. Jones: Yes. Anthony M. Kennedy: --intended to deprive the importer of the rights of judicial review? Kent L. Jones: Right. Anthony M. Kennedy: Do you... under your view is that just surplusage? Kent L. Jones: Well, I think it's more... it's sort of polite surplusage. What... what the agency meant... I think the amicus Customs and Trade Bar Association is absolutely right, that what this last sentence reflects is simply the agency making clear that its rules, as it said in the first sentence of this introductory paragraph... its rules here are interpretive and are not substantive legislative, binding legislative rules that are designed to preclude judicial review of the topics. The agency had been criticized in the comments, which frankly shouldn't be considered by the Court because they weren't properly raised in this case, but they have been filed in an untimely fashion. But in any event, the agency was asked to consider whether it had authority to adopt such rules and it concluded in the... that it had authority to adopt interpretive rules but it didn't mean to adopt binding legislative rules. And I think that was a correct assessment. Antonin Scalia: Most of the FCC's rules are interpretive rules. Are you... they're-- Kent L. Jones: It's very common-- Antonin Scalia: --Are they Chevron III? I mean, I see now why you're... why you're trying to draw this distinction between legislative rules and interpretive rules. I... I was never aware that-- Kent L. Jones: --Oh, I-- Antonin Scalia: --that we give greater deference to legislative rules than interpretive rules. Kent L. Jones: --I think, Justice Scalia, that if you look at the Chevron... the... the paragraph in Chevron that talks ultimately about reasonable agency rules, a couple of sentences earlier you'll see a standard, a sentence talking about deferring when it's not arbitrary and capricious. And that's what I was talking about, the high Chevron standard and the low. I don't think I'm making this up. I think... I would just encourage you to look at that paragraph in the Court's opinion. And I-- Antonin Scalia: One paragraph in the Court's opinion in Chevron? Kent L. Jones: --Well, it... it reflects decades of opinions. Antonin Scalia: This is a... this is a major distinction in administrative law that... that... that we are going to give lesser deference to those rules of an agency that are interpretive rules. I mean, I-- Kent L. Jones: Well, if... if I'm wrong about that, then-- Antonin Scalia: --To my mind, the force of the FCC rules, which are almost entirely interpretive, is... is... is no less than the force of-- Kent L. Jones: --It is a different articulation of the degree of deference, whether as a practical matter, as I said earlier, it results in different decisions-- Antonin Scalia: --Well, if it doesn't result in different decisions as a practical matter, why... you know, why confuse us with it? Kent L. Jones: --I think because it is in fact a very complex subject, that when Congress tells an agency to do something, it may be... and it does it, maybe that has a little more legislative effect than when the agency is just interpreting something without any legislative direction. David H. Souter: Do you think-- --I'm sorry. But that... can Chevron... may I ask? Can Chevron, as you refer to it, be read in this way, that the Court was describing as arbitrary and capricious or indicating as being arbitrary and capricious whatever was outside the realm of reasonable interpretation allowed by the ambiguity of the language, so that it was really engaging in two alternative formulations? Kent L. Jones: Let me make clear that I... this case does not turn on this distinction because all we're saying is that what we... all that I'm saying and I believe that the United States is saying is that... is that we believe that what is... what I've described as the lower Chevron deference standard applies in this case. It is the articulation of the standard in Zenith Radio that is identical to this. It's the same standard in Zenith Radio as to what I've talked about is the second standard in Chevron. Antonin Scalia: Okay, but you-- --Even so it troubles me. What portions of... what portion of Chevron are you referring to? Let me... let me look at it. Justice Stevens maybe remembers it. I don't. [Laughter] Kent L. Jones: I'm relying on that assumption. Maybe I could give you that cite on my... could I give you that cite on my reply... rebuttal argument, please? David H. Souter: How about... how about the answer to my question? I... I agree with you. I don't think the case turns on it, but you have raised the distinction. Do you think Chevron is fairly read in... in the way that I suggested with arbitrary and capricious being sort of the... an alternative formulation of what is outside the... the realm of reasonable interpretation? Kent L. Jones: I think that there is a logical and substantive difference between the two formulations. David H. Souter: Which is what? Kent L. Jones: Which is that when Congress has given an agency an express authority to interpret a specific statutory phrase... for example, an agency might be told to decide what... what kind of chemicals are bad pollutants, and when it does that, its determination is going to be upheld unless it's arbitrary and capricious and it's utterly unsupported by the statute. That's the kind of substantive legislative rule. On the other hand, if Congress didn't give such authority to the agency and the agency was simply saying we think boron is a bad pollutant, that would... should be sustained if it's a reasonable interpretation. Now, if I may, I think I should-- Antonin Scalia: An unreasonable interpretation should be sustained in the other situation. Right? Kent L. Jones: --I... I can't draw that distinction. Antonin Scalia: I can't either. That's why I don't... I don't understand. [Laughter] Kent L. Jones: I think that the distinction is not on whether another one could be unreasonably sustained. It's whether it could be arbitrary... whether if it weren't arbitrary and capricious, it could be sustained. These are tests this Court has articulated. Stephen G. Breyer: If I could-- --You want to get the other. If you want, can I ask you about the other... about the reg itself? Kent L. Jones: Please do. Stephen G. Breyer: You don't have to answer if you want to make a different point. But what's confusing me about it is it says, chemical treatment of components, permapressing. Right. And then... but... but the chemicals evidently were inserted in the United States. Kent L. Jones: Yes. Stephen G. Breyer: And... and so, does this reg mean that if you have two pairs of trousers, company A puts chemicals in it and company B doesn't. They send both to Mexico. And then in Mexico what happens is an identical thing to both: They put it in a... in a press and they press it just like that, and they send it back. Does it mean that the one company pays and the other doesn't? Kent L. Jones: If... if one... I don't want to be tautological because I don't think there is a simple tautological answer, but the tautological point is that if the permapressing occurs in the foreign country-- Stephen G. Breyer: What is just what I said. They took both pairs of trousers, they put it in an iron, and they ironed it. In the one, because there were chemicals, that led to permapressing; in the other, it didn't. So, they're treated identically. Now, is there a difference or not a difference? Kent L. Jones: --Yes, there is a difference because in... in your hypothetical the... the material that was permapressed was improved. The other material was just-- Stephen G. Breyer: All right. So, now then, I wonder is this reg rational. Kent L. Jones: --Yes. Stephen G. Breyer: Because how can it be that... that... that when you do exactly identical things to the two pairs of trousers, all you did was put them in a press and you pressed them like that-- Kent L. Jones: Because the regulation addresses the statutory issue, and so let me put the issue in the... in the context of the statute. This regulation interprets a statutory provision that provides a duty exemption for goods that are... that are manufactured in the United States, exported abroad, assembled abroad, and then returned to the United States. Those duties come back... those goods come back duty free. But the statute provides that this exemption will not be available if while the goods were abroad, they were improved by a process that was not incidental to the assembly process. The regulation interprets the statutory phrase, incidental to the assembly process, by stipulating, specifying that any substantial process performed abroad, other than assembly, than has the primary purpose of improving the article is not to be regarded as incidental to assembly. And it's one of approximately 10 examples. It says the chemical alteration of fabric by permapressing is an example of such a specific process performed... substantial process performed abroad that's for the purpose of improvement. The regulation is a reasonable interpretation of the statute because the history of the statute makes clear that Congress in... in authorizing incidental to assembly operations abroad meant to encompass only, in the words of the conference report, minor operations, minor processes, and as examples gave cleaning and lubricating of an assembled article as an... as examples, and went on to say cleaning and lubricating, in describing them, said such processes, if of a minor nature, may be regarded as incidental to assembly. Now, the regulation in saying that significant processes for the improvement is plainly generally valid under this meaning of the statute and, as applied to permapressing, is also valid because, as the facts of this case make clear, permapressing involves a significant amount of capital and time in the foreign operation. It is wholly unrelated to the assembly process, and it's for the purpose of improvement. Ruth Bader Ginsburg: --But what about the split that's involved? I mean, if... if all of the whole... whole permapressing operation were done in Mexico, then it would seem to fit within the regulation purposes. Kent L. Jones: Well, all of the permapressing operation for this purpose is done in Mexico. Ruth Bader Ginsburg: But the-- Kent L. Jones: Let me answer that. At page 20 of the joint appendix-- Ruth Bader Ginsburg: --The chemical process occurred in the United States, didn't it? Kent L. Jones: --Well, the chemical spraying of the fabric occurred in the United States, but the permapressing, as described on page 20 of the joint appendix in the complaint is... is obtained when... and I'm quoting the complaint... the heat of the oven expels a molecule of water from the pre-polymer in the fabric, which cross-links the cellulose fibers. That is the permapressing. The work done in the United States was like the manufacture of the cloth. It was a significant step towards coming up with an article that was going to be permapressed, but the permapressing actually occurred in Mexico. Anthony M. Kennedy: The statute allows painting-- Kent L. Jones: Yes. Anthony M. Kennedy: --and calls it incidental. This, you know, seems... seems to me more incidental than painting. Kent L. Jones: Well, again in saying that paint-- Anthony M. Kennedy: I don't know what I'm supposed to know about this, but-- Kent L. Jones: --in saying that painting can be incidental to the assembly process, the history makes clear that it's painting of a minor nature. And... and, indeed, in the General Motors case, for example, which is cited in... in the briefs, the court of... the Federal circuit correctly held that some kinds of operations that you might call painting are, in fact, a lot more significant than just this kind of minor nature of stuff than... that is involved in protective coating. Antonin Scalia: --Of course, this... this current issue... is that an issue of the validity of the regulation? Kent L. Jones: No. Antonin Scalia: Or is that an issue of the application of the regulation-- Kent L. Jones: It is-- Antonin Scalia: --to these facts? Kent L. Jones: --It is... it is the latter, and... and we think that the facts clearly reflect that the regulation should properly be applied in this case, but in fairness, the court has not-- Antonin Scalia: That's not the... is that the issue that we have? Kent L. Jones: --It is the ultimate issue that the courts have. Whether this Court thinks it's prepared to reach that question or not, I can't say, but I can say that the courts below have not reached it because the Federal circuit incorrectly held that it could ignore the regulation altogether. Stephen G. Breyer: Why... why is... I mean, the chemical... it says chemical, treatment of permapressing. Kent L. Jones: Yes. Stephen G. Breyer: It doesn't say anything in the reg about the chemical treatment taking place in Mexico, but it does use the example of permapressing. Kent L. Jones: Well, it-- Stephen G. Breyer: So, your interpretation, which is Treasury's interpretation, is a general interpretation of the reg. Kent L. Jones: --Yes. Stephen G. Breyer: If the permapressing... it isn't this case. It's... it's true across the board. Kent L. Jones: True. If the permapressing is performed abroad, then it's a significant operation that doesn't... that disqualifies the goods for the assembly. And in our view the permapressing is the permanent pressing that occurs. I'd like to reserve the balance of my time for rebuttal. William H. Rehnquist: Very well, Mr. Jones. Mr. Phillips, we'll hear from you. Carter G. Phillips: Thank you, Mr. Chief Justice, and may it please the Court: The Government suggests to you that the... this may be a case of high Chevron or low Chevron. I submit to you that this is a case of no Chevron. And the reason for that is that you cannot determine whether or not any kind of deference is due to the agency's interpretation simply by citing other statutory schemes or cases that interpret other statutory schemes. In order to decide in a particular case whether or not respect is due to the regulations or interpretations of the particular agency, it's absolutely essential to examine the source of regulatory authority, the nature of the judicial proceeding that Congress provided for, and in this case take a very hard look at the regulation itself because it expresses as plainly, as anything can, the very limited nature of the authority that Customs purported to exercise in this particular context. And if you follow those three sources of law, they all point in precisely the same direction, which is that Customs never has had, in the 200 years of its existence, the kind of authority that the Government purports to claim that it has now on the basis of an utterly a historic analysis of this particular problem. Instead, what we know is that Customs binds its own people at their ports of entry, and that's all Customs purports to do. It does not purport to bind either this Court or the Court of International Trade or the importer when it adopts regulations such as section 10.16 that's at issue in this case. Ruth Bader Ginsburg: But, Mr. Phillips, an agency certainly doesn't have to go through notice and comment rulemaking in order to bind it's own people. It just issues instructions. Carter G. Phillips: It does need to go through comment and notice rulemaking when it adopts a regulation pursuant to headnote 11 which provides the procedures with regard to the admission, okay, that's applicable to this particular kind of case. The procedures with regard to admission are things like inspections, what's required to inspect to make a determination with regard to the classification. That is a, quote, substantive rule. It's procedural in nature, but it is a delegation of authority and it does require the notice and comment rulemaking because you have to comply with those specific procedures in headnote 11 in order to be allowed to make a protest that's valid under the statute. But with respect to the rest of the rules, it's absolutely clear they were not intended to be substantive rules or in any way to bind anybody, and that's because Customs doesn't have the authority to do that. And... and that is as clear as can be. I think it's as clear as can be in the... the sentence in section 10.11 of the regulation. But if you read section 10.11 in context of the comments-- William H. Rehnquist: Well, where do we find these, Mr. Phillips? Carter G. Phillips: --I'm sorry, Mr. Chief Justice. Section 10.11 is on page 36 of our brief, and it says, nothing in these regulations purports or is intended to restrict the legal right of importers or others to a judicial review of the matters contained therein. Antonin Scalia: Well, the Government is not trying to foreclose judicial review. Carter G. Phillips: Well, the notion that what this regulation is really talking about is simply to prevent all judicial review is... is inconsistent with the nature of the comments that were made. No one criticized the comments because they would foreclose judicial review. Everyone criticized the comments because they purported to exercise substantive rulemaking authority that the agency did not have, and the agency somewhat inartfully said, no, no, no, we didn't mean to intend anything along those lines. And that's a perfectly rational understanding of both their authority and the nature of the responses that they made to the... to the comment. Antonin Scalia: It certainly is clumsily put if that's what they... that's what they had in mind. Carter G. Phillips: Well, but the... the other alternative interpretation is that it's utterly superfluous, that is, that... that the IR... I mean... excuse me... that Customs decided to tell the world that it was not going to foreclose judicial review. But everyone knows that agencies don't have the authority to foreclose judicial review particularly in a... in a statutory scheme like this which provides for de novo judicial review. John Paul Stevens: May I... may I ask you sort of a broad question? I understand you say it's neither high Chevron nor low Chevron; it's no Chevron. And you don't have to tell us whether you think there is a high and a low Chevron under your approach to the case. But it is your... is it your view that every statute that provides for de novo review is a no Chevron case? Carter G. Phillips: That is the argument that we make, yes, Your Honor. I believe that is-- Antonin Scalia: So, the mere fact that they provide for de novo review, that's the end of the ball game for you. Carter G. Phillips: --I think that is the clearest evidence that Congress did not mean to have issues decided in the first instance by a particular agency. I think it's clear under those circumstances that the enforcement... the ultimate enforcement of the statute is something that Congress expected the judiciary to undertake. Antonin Scalia: And you don't think there could be a category of cases in which the facts would be reviewed de novo, but there would be some degree, whether low, high, intermediate, some degree of deference to the agency's view of the law. Carter G. Phillips: Well, since the ultimate question really is one of... of congressional intent-- Antonin Scalia: Right. Carter G. Phillips: --I could imagine a situation in which Congress had expressed itself in a way that it meant for the de novo review to be limited to the facts and in a way that would allow the contrary inference. I just think that when all we know is that Congress has acted in the way it did is the de novo review mechanism... the stronger inference obviously is that it meant for these matters not to be dealt with as a matter of Chevron deference. David H. Souter: Isn't it equally clear that Congress can specify that there will be de novo review, including de novo review of rulings of law in a given case, without thereby implying anything about what would be a proper source of determining what the proper... what the correct law is, i.e., without in any way implicating that there should not be deference in... in looking to agency regulations in making the ruling for? Carter G. Phillips: I don't think that's the natural inference to draw from that kind of extraordinary scope of... of judicial proceeding. And so... I mean, you can reach an opposite inference, but I think you... I would... I would at least look for clearer evidence that Congress really meant for some deference to arise in a situation where Congress has so clearly indicated that it wants de novo review. And there are two aspects of this case that make that seem to me unbelievably powerful. One, you know, the Government doesn't mention section 2638 which in my experience is a remarkable provision. Let me see if I can find it. 2638 is mentioned in our brief again at... oh, at 2a of the... 2a of the respondent's brief. And 2638 specifically says that the... that Customs is... is... you don't even have to make the presentation to Customs in order to preserve your right to protest; that is, you don't have to make the same argument-- William H. Rehnquist: On 2a of your brief, I don't find the section that you're referring to. Carter G. Phillips: --I'm sorry. I may have... I may have misspoken. I apologize. You're right. It is 20a. I'm sorry. William H. Rehnquist: Thank you. Carter G. Phillips: I misread the 0. In section 20a, where we talk about section 2638, it's an extraordinary provision because it says all you need to do is present the fact that you protest and that's sufficient to justify allowing you to go to court to challenge it. That means that you can present one set of arguments to the Customs and a completely different set of arguments to the court, and the court reviews those de novo. And it seems to me an extraordinary concept that I could... you know, I could completely mislead Customs. They would reach a result that might be reasonable on the basis of what I present, and then I start all over again de novo. Obviously, you can't be deferring to the Customs' decision in the specific case. And therefore, it seems quite unlikely that Congress would have, in that kind of a scheme, intended to allow Customs regulations which just generally inform the Customs agents how to proceed, what the law is, and that that is in some sense binding on either importers or on the... or on the... or on... or on the courts. Antonin Scalia: Why doesn't that... why doesn't that just prevent... present the kind of situation that Justice Souter alluded to? You... you continue to acknowledge that the agency's rules are one source of law, but if the... if the person challenging the... the assessment wants to appeal to another source of law, he's... he's entitled to bring forward whatever he wants. I don't see why that provision necessarily says that agency rules are nullified in... in this... in this proceeding. Carter G. Phillips: I think that's a gross overstatement, that the agency rules are nullified. I mean, I understand that's the Solicitor General's position, but if you read the Court of International Trade and the Federal circuit's opinions, they analyzed the rule and said they thought it was inconsistent with the statute. And then in the next paragraph of their analysis, they turn to the question of whether or not it is entitled to Chevron deference, which I took to be the fullest form of it, and said-- Antonin Scalia: Well, it's never entitled-- Carter G. Phillips: --no. Antonin Scalia: --to Chevron deference if it's inconsistent with the statute, I mean, if that's what you're saying. Carter G. Phillips: No, but they... but they reviewed it in two different ways. They... they... because the... the Court of International Trade and the Federal circuit have always been willing to give what I would regard as Skidmore deference to whatever Customs does. They read it for what it's worth and they accept it for what value it has in terms of helping them to decide a case. They have never been willing to give Chevron deference for the... for all of the reasons that I've identified. One, the statutory scheme is not one that... that lends itself... it is a very de novo review proceeding and has been for the... for the entirety of 200 years. Anthony M. Kennedy: But the situation that you describe where the importer can make entirely new arguments in the court seems to me to argue for the necessity for the uniformity that would be attained by following the... the regulations of the agency. Carter G. Phillips: I don't think so. Where... where the court sought... I mean, where Congress sought clear uniformity was by creating the Court of International Trade and allowing the specialized court to set it. It did, indeed, try to have a second level of administrative uniformity because there was a problem in the relationship between the Customs houses and the commissioners of Customs at one time and the Secretary of Treasury, which is why 1502 is... is... is an extraordinary provision. It says, the Secretary shall act in a particular way and Customs shall follow the instructions. That's not an accident. That's a function of a... of a division of power between the Secretary and the... and the port commissioners. And Congress stepped into that void and said, no, no, no, it's important for at least initial administrative consistency to insist that Treasury says what the Customs officers shall do and they will do what Treasury says. Antonin Scalia: Congress has to say that? Carter G. Phillips: Yes. Antonin Scalia: Why... why would Congress have to say that? Isn't... isn't the Customs department under the authority of the... of the Secretary of the Treasury? Carter G. Phillips: To be sure as a matter of-- Antonin Scalia: Are we going to have a special law in every Department that the employees of that Department shall obey the... the Secretary? Carter G. Phillips: --In general, you'd hope not, Justice Scalia. On the other hand, it was reasonably clear that Customs commissioners viewed themselves as presidential appointees with a significant amount of independent authority. And as a consequence of that, Congress stepped in. This is an historic anomaly. I don't... I don't know of any other agency where that's true, but I don't know of any other agency that's like Customs with respect to almost any other aspect of this, which is why I think it's a fundamental mistake to look to other agencies to try to determine what authority Customs has. Yes, Justice Breyer. David H. Souter: Proposition. Congress, in legislating... in legislating the substance of tariff legislation, looks to Treasury, namely Customs, in the same way that Congress, when enacting income tax legislation, looks to Treasury, namely the Bureau of Internal Revenue. That's the proposition. Is that true or false? Carter G. Phillips: No, that proposition is incorrect. David H. Souter: All right. Now, explain to me in what way that's incorrect. Carter G. Phillips: Because it is the President and the... and the... and the U.S. Trade Representative and the International Trade Commission that serve the policy making role vis-a-vis Congress and vis-a-vis the rest of the world. And part of that's the reason for the Harmonized Tariff Schedule is because it's important to be able to reconcile our tariff arrangements with tariff arrangements in other countries. And that's done at a very high policy level. And that's why... not only is it... is it that Congress would turn to them in seeking guidance on how to proceed, but more fundamentally Congress has delegated extraordinary authority to the President to modify these tariff schedules as... as necessary, either as a matter of efficiency or as a matter of dealing with international affairs. And... and when you get the description of what's going to happen in... in response to the Harmonized Tariff Schedule, you get these majestic statements about the U.S. Trade Rep and the President and then it turns to the Customs Service, and the Customs Service is supposed to send instructions to its people on what to do. It's clear that Customs was not viewed as a policy making entity-- David H. Souter: I... I saw that too. I see that now. I see your argument definitely now. If we go back to the time when being a port... was he called a customs collector? A port... I don't know. A customs collector was a major political appointment. Carter G. Phillips: --Yes. David H. Souter: I mean, a hugely important job at that time, say, in the 19th century or earlier. Who else could Congress have looked to other than Treasury as... for advice about what the substance of... of Treasury regulation... of Customs regulation should have been? Carter G. Phillips: You mean back in the-- David H. Souter: Yes. Carter G. Phillips: --in the 19th century? David H. Souter: Yes, 19th century. Carter G. Phillips: My guess is they would have turned to the... to the Commissioner of the Port Authority of New York, as well as to the Secretary of Treasury, because these people independently seem to be acting. And that's why Congress had to pass a law in 1502 that specifically said, no, we're going to order these things in a particularized fashion, and they did so. Ruth Bader Ginsburg: On the one hand, you describe an agency that has such extraordinary independence that they have to be told to follow regulations through notice and comment, and on the other, you say they have no policy making authority. So, this is a... from both aspects, a truly extraordinary agency that has notice and comment rulemaking just binding on the people who work there, the employees, and yet, on the other hand, it certainly is unusual. But with respect to the expert... I think you said Congress set up the expert tribunal, the Court of International Trade. Well, Congress set up a Tax Court too, and the Tax Court does give deference, even if they call it National Muffler instead of Chevron. They do give deference to Treasury regulations. Carter G. Phillips: Right. The difference... there are a couple differences. One is that there is no counterpart to 2638 with respect to the... to the IRS. You must present the precise grounds upon which you choose to protest tax... a tax, or otherwise you are barred. That's the variance doctrine. It's been decided by this Court since 1940. There... so, there is a vast difference in the regulatory scheme between Treasury and Customs, and it's... in terms of de novo review. And I think it's important to recognize that 2638 is a remarkably broad grant of authority that... that distinguishes Treasury from Customs. And... and, you know, the Solicitor General in his reply brief saying that they were placed on a par is just simply wrong. There is no statutory-- Ruth Bader Ginsburg: Does 2638 have nothing to do with appraisals? You say that as distinguished from classification where the agency gets no deference-- Carter G. Phillips: --Right. Ruth Bader Ginsburg: --they do get deference when it comes to appraisals? Is that-- Carter G. Phillips: I'll-- Ruth Bader Ginsburg: --Setting the value of the goods. Carter G. Phillips: --Well, the... there has been some lower court decisions dealing with deference under those circumstances. My argument would be, I think, that that's... those probably are wrong, but that's not an issue for this case. Ruth Bader Ginsburg: So, you think the same thing goes for appraisals as for classifications. Carter G. Phillips: Yes, Your Honor. I think they are covered by precisely the same statutory scheme. And so you have... and let me go back to the rulemaking authority because I think it's very important to understand under 1502. Not only does it only... I mean, that language at the ports of entry is terribly pivotal language, and it... and it goes back to the distinction of the Zenith case that Mr. Jones made a great deal about in his... in his argument. If you look at the Zenith opinion, the Court says in Zenith, it describes the grant of regulatory authority and it's a broad authority to deal with all duties. But you know what's missing in the language of the Zenith opinion is any reference to the ports of entry, and the reason for that is clear, is because the grant of authority in countervailing duties cases, even in 1979, was significantly broader. And then in the 1980 statute, we have this extraordinary de novo review that's provided with respect to Customs in the classification context, and Congress then dealt with the countervailing duties, consistent with this Court's decision in Zenith, and said that that's based on an administrative record and that that's based on... on ordinary standards of administrative review. So, Congress, even with respect to Customs... I want to be clear about this because one of the things the Government challenges us on is that somehow we are saying that Customs, as an entity, is divested of any kind of... of respect or deference as a consequence of our decision... of our arguments here. And nothing could be further from the truth. Again, I think you have to look at the three sources of... of information with respect to what Congress intended. Anthony M. Kennedy: Why... why... why is it that because there's no administrative record in the scheme we are reviewing here, that the Secretary is entitled to no deference as to the regulations? It seems to me those are two very different things. Carter G. Phillips: Well, I think it's an odd notion to say that how you take your regulation and apply it to a specific case is a decision that the courts will utterly ignore. And yet, how you adopt an abstract rule in a particular context should in some sense be binding in a legislative fashion. Anthony M. Kennedy: Well, it seems to me that this is a case where uniformity is all the more necessary and that we should, therefore, defer to the regulations as the source of law even though in the Court of International Trade there will be a de novo hearing on a new record. At least we'll have uniformity as to what the source of law is. Carter G. Phillips: That would be... I would think that more persuasive. And... and it seems to me that the only point that that goes to is the extent to which de novo review in some sense divests this regulatory scheme and the regulations of their authority. It still doesn't answer what I... what I regard as the more... the continuing and fundamental problem, which is Congress never delegated to Customs the authority to adopt regulations that it intended to be binding in making these kinds of substantive determinations. And that is precisely what section 1502 says by saying those regs are limited to the ports of entry, and it's the same thing when you look at the... at the Harmonized Tariff Schedule because... I'm sorry. Stephen G. Breyer: You... you just... how are the... what are Customs hearings of this sort normally about? I mean, are Customs hearings where there are disputes of brute facts common or not? I mean, do some people argue, no, I did import a piece of steel that looks like this, and somebody says, no, no, that was not imported on such and such a day? Or is it that they concede what the item was and the question is whether to... how it fits within a given tariff? Carter G. Phillips: I think it is more the latter than it is the former. Stephen G. Breyer: Well, do we have any... because if it's... I mean, I guess that's your argument. Do we have any factual basis? I mean, if it's only the latter kind of thing, a de novo hearing would be irrelevant I guess under the Government's interpretation of the law, but if it's a lot of the latter thing, if it's a lot of disputes of real brute facts, then I guess that de novo would have a big meaning. How do I find out the answer to that? What are Customs hearings about? Carter G. Phillips: Well, perhaps Mr. Jones would be in a better position to give you a broader based assessment of what Customs hearings are about, but-- Sandra Day O'Connor: Well, isn't entirely possible that they might involve factual inquiry into things like precisely what was done in the United States and precisely what was done in Mexico-- Carter G. Phillips: --Yes, I would... I would expect-- Sandra Day O'Connor: --as a factual matter. I can imagine that there would be a lot of factual evidence on things of that sort, wouldn't there? Carter G. Phillips: --Oh, I'm... I'm sure there are lots of disputes that raise lots of factual questions. That's why there's a significantly large number of Customs officers out there, and presumably they're keeping themselves well occupied. So, I don't... I don't have any doubt about that. I think the... the nature of the process is, however, extremely informal and tends to move quite rapidly, and then in somewhat contrast to the judicial proceedings which are somewhat more... obviously, more formal as a process matter but are not particularly complicated given that this is a routinized process-- John Paul Stevens: Mr. Phillips, could you repeat your argument with reference to 2638 for me? I'm not quite sure I really understand your point. The statute, as I understand it, says that if you make a protest, you can bring a civil action under... under 515, but you're not limited in the civil action to grounds of the protest that you made at the port of entry. Carter G. Phillips: --Right. John Paul Stevens: Now, why does that have anything to do with the rules that should govern the disposition of the civil action? That's what I don't quite understand. Carter G. Phillips: Well, what... what it says, at least to me... it seems an... illogical to say that we have a set of rules and the agency acts pursuant to those rules and makes a decision. John Paul Stevens: Right. Carter G. Phillips: But that decision could have been based on completely the wrong... everything could be wrong about that-- John Paul Stevens: Well, but they're two different decisions. Carter G. Phillips: --because you didn't have to raise the argument. John Paul Stevens: They're two different decisions. One you make at the port of entry. Carter G. Phillips: Right. John Paul Stevens: And you say, these goods didn't come from Mexico; they came from Spain. And then you later realize you're wrong and you bring a suit and say, well, the real problem was they did the permapressing in Mexico and I... I failed to point that out. Now, the fact you can make that argument in the later proceeding doesn't seem to me to have anything to do with the question of whether a regulation that relates to permapressing shall be given deference. It just seems to me they're two entirely different ball games. Carter G. Phillips: Well, it's... it's very much the same question Justice Kennedy asked me, and obviously I'm not being as persuasive as I'd like to be. But my-- Antonin Scalia: Indeed, you... you've persuaded me to the contrary. [Laughter] Carter G. Phillips: --Now, I'm really unhappy. [Laughter] Antonin Scalia: It... it seems to me that if... if you're position is right, 2638 is inexplicable. If indeed it is an... an entirely new determination not only on the facts, but on the law, if that's what de novo review means, why would you need 2638? Carter G. Phillips: Oh, I think to define precisely the breadth of the... of the de novo review. Otherwise you would assume-- Antonin Scalia: --de novo. You decide what the law governing this thing is. Carter G. Phillips: --But... but, see, the difference is that if you go back to the... to the example that the Solicitor General points to, which is review of IRS protests, you have to identify the precise grounds and you are stuck with the precise grounds that you've identified. All I'm saying is that this... this is to my mind the broadest, perhaps the most breathtaking, de novo proceeding that I know about. Anthony M. Kennedy: But when you answered Justice Stevens' question and my question, why isn't this a preeminent case for applying at least a uniform source of law on which we can then make a de novo determination based on the facts? Carter G. Phillips: Well, there's two answers to that. One is the inference to draw when Congress creates an entire scheme of de novo review is that it does not look to the enforcing agency as the source of uniformity. And then, two, when you get to the... the genuine source of uniformity in this particular statutory scheme, we know that it's the Court of International Trade because it is a specialized court. William H. Rehnquist: Well, but the Court of International Trade in a case like... is certainly bound to follow the decisions, say, of the Federal circuit, is it not? Carter G. Phillips: Oh, to be sure, and of this Court-- William H. Rehnquist: So, de novo doesn't mean you just decide as an original proposition for yourself what the law is if other courts which are above you in the hierarchy have said differently. Carter G. Phillips: --That's... that's clearly the case and that's the fair inference you'd draw from the... from the statutory scheme Congress has created of... of appellate review. But the question is, what inference do you draw from a scheme of extraordinary de novo review coupled with a remarkably narrow grant of rulemaking authority? And let's remember, there are five provisions that were cited in the adoption of these regulations, and each one of them points to the ability to bind Customs or to bind individual employees of the particular service. And the Government only discusses essentially 1502 and, in doing that, reads out of the statute ports of entry, that language, which I submit to you is terribly important. And then when you get to the regulation-- Ruth Bader Ginsburg: But what makes it so important? I mean, that's where it happens. The goods come in and they have to be classified at the port of entry. Carter G. Phillips: --If you contrast that language, Justice Ginsburg, to the language in Zenith, the grant of authority in Zenith, you would say the same thing there, but the term, ports of entry, isn't included in the grants of authority to deal with countervailing duties. Those presumably arise as well at the ports of entry, just like every other duty arises there. The fact that Congress put that language in there was terribly important to-- Antonin Scalia: Well, but your argument is... is also that this language is just a reflection of a long historical tradition of the distinctiveness of the Customs Service and whatnot. That's quite inconsistent with the way we came out in Zenith, even though we didn't have this statute. You assert that this statute just reflects a long historical tradition, and in fact in Zenith, it seems to me that historical tradition was... was not observed. Carter G. Phillips: --Well, it may not have been observed in part because I don't think the issue of... of deference arose... was briefed in Zenith. And if you just look at the sources of authority that the Court looked to in passing, it said that this is an ordinary administrative... judicial review and administrative proceeding, which is one in which you would routinely grant deference, and second, it described the... the authority conferred upon Treasury in... in terms that are significantly broader than the terms that are employed in this particular case. I submit to you that Zenith simply does not help to get to the right result in this particular case. Again, I'd like to go back to the regulation because I think to my mind what is extraordinary about this case is the way all the parts fall together. This is remarkably broad de novo review judicial proceedings. It is remarkably narrow grant of authority, and Customs, in 1974 at the pivotal time, recognized in response to a very pointed set of comments that it was not exercising the kind of authority to which Chevron deference would be applied. I guess I go back to my initial point. This is not high deference... or high Chevron or low Chevron. This is no Chevron. I'm inclined to rest on our briefs-- John Paul Stevens: Of course, in 1974 there was no Chevron then. That's clear. [Laughter] Carter G. Phillips: --That's true. I could address the substantive regulation, but if... if there are no questions, I'm inclined to rest on the briefs. Ruth Bader Ginsburg: Well, one question about that. Would you... would you reach the same result if the chemical treatment also occurred in New Mexico... I mean, in Mexico? Carter G. Phillips: Well, they would certainly have a... a stronger argument, although I... I think the more compelling arbitrariness of this regulation arises in the different treatment of the pants that Haggar has itself because they have one set of pants that come in chemically treated from the United States that are pressed and then receive a permanent press as a consequence of that, and another pair of pants that are pressed and then baked and are both treated in the same way. And those get absolutely contrary treatment under this particular regulation. Ruth Bader Ginsburg: Well, that could be a question of the application of the regulation, not... not whether permapressing can't be taken out from this-- Carter G. Phillips: Well, I guess it goes to the... to the validity of a... of a regulation that... that tries to use the term permapressing which is I think not a self-defining concept and one that doesn't seem to provide much help in terms of how to resolve any specific case. And... and indeed, I... I would read that one paragraph of the Federal circuit's analysis of the permapressing regulations as just saying, look, this is inconsistent with the statute. The statute tells us incidental to assembly is a comparative process. We use the Mast factors. We always engage in individualized decision making. We ought to treat the permapressing process the same way we treat the painting process. It's all a presumption but it's not categorical. There are no irrebuttable presumptions embodied here, and if it does that-- Ruth Bader Ginsburg: --But the... one of the things about Mast, the last factor in that, seems that... that the importer would always win because it's always cheaper to do it all someplace else. Carter G. Phillips: --Well, except that if the cost of the assembly process is... of the incidental parts... incidental... of the parts that aren't the assembly process are expensive, as in a case like General Motors or Chrysler, then... then you would bar it under those circumstances and you'd say it's not incidental because it's not a minor operation. It is at that point a significant operation. But that is precisely what Mast is designed to get at and that is precisely why you don't need a regulation here. You just need consistent application of the analysis the Federal circuit has devised and to be applied. And it was applied properly in this context. The Government doesn't contest it on that basis, and accordingly, the Court should affirm. If there are no further questions. William H. Rehnquist: Thank you, Mr. Phillips. Mr. Jones, you have 3 minutes remaining. Kent L. Jones: Thank you, Mr. Chief Justice. I just want to see if I can point the Court to what seems to be a little bit of a confusion in the presentation here. There are three steps to reaching a conclusion. You find the facts, you determine the law, and you apply the facts to the law. Chevron operates at that second stage only. A court can make a de novo determination of the facts and that doesn't change the fact that in determining what the law is, it is to defer to the agency's reasoned interpretations. The Court has held that in many cases and has specifically held it in... in the one case that respondent cites as his leading authority, Adams Fruit Company v. Barrett. In Adams Fruit Company, the Court held that there was a de novo review, that the agency couldn't interpret the scope of the judicial remedy, but that that didn't deprive the agency of its authority to make substantive interpretations of the statute. And the Court went on to say that in that de novo exclusive judicial proceeding, the Court would defer to the agency's reasoned interpretations of the substantive scheme. That is a principle that the Court has applied in numerous contexts, not just in tax and customs cases, but has specifically applied it in customs cases. The Court would have to, in effect, overrule Zenith Radio to... to change that standard in this case. Ruth Bader Ginsburg: If we could get down to the last thing, if you have just a moment to it. Kent L. Jones: Sure. Ruth Bader Ginsburg: The argument is in the end you are absolutely absurd to make a distinction between pressing a little longer and pressing and baking. Kent L. Jones: Well, I don't think that there are facts in this case that involve pressing a little longer. In fact, the facts show that they didn't do that, that that's not practical. And I don't know what is being referred to at this point in the argument. But let me answer your... your question more generically. A quibble about the application of the permapressing rule to this case doesn't denigrate the... the validity of the substantive provision of the regulation. It defines acts incidental to assembly to not include significant processes. The Court can rely on the... on the general standard even if it's confused about the application of the example. And the general standard plainly applies when... when... on the findings of the trial court that there was significant capital, significant time. It was unrelated to assembly and it was for the purpose of improvement. The trial court said that these factors militate against a duty allowance, but the court balanced them to reach a different conclusion. Well, the agency's balance is different, and as this Court has held in many situations, the agency doesn't have to establish that its regulation is the only reasonable interpretation or that it's the one the Court would adopt in the first instance. It's sufficient, under Chevron, that the agency made a reasoned exposition of the text consistent with its purpose in history. Antonin Scalia: Mr. Jones, I... I wish you could give me some... make up some explanation for the extraordinary provision in the regulation that says, you know, this... this will not deprive anyone of the right to judicial review. Kent L. Jones: Well, I think-- Antonin Scalia: Of all of the materials brought forward by... by the respondent, I really think that... that is the one that most smells like what he says this whole system is set up to do. Kent L. Jones: --If you look at the very first sentence of that paragraph in the regulation, it says, these sections-- William H. Rehnquist: Where are we, Mr. Jones? Kent L. Jones: --I'm sorry. I am holding in my hand a copy of the regulations. This issue was raised in respondent's brief, and I don't think... I don't know if it's cited. The very first sentence of the regulation says that these sections set forth definitions and interpretive-- John Paul Stevens: That's at page 36 of the red brief. Kent L. Jones: --Thank you. Stephen G. Breyer: It says that these regulations set forth interpretive regulations. That's what the agency intended to accomplish. The last sentence... I think amicus Customs and Trade Bar is right... just reflects that, yes, these are interpretive rules, not binding legislative rules. You have a right to go to court to challenge them. I know my time has run, but the cite that you asked for, Justice Scalia, is 467 U.S. 843 to 844. Thank you. William H. Rehnquist: Thank you, Mr. Jones. The case is submitted.

William H. Rehnquist: We'll hear argument now in Number 93-517, the Board of Education of Kiryas Joel Village School District v. Louis Grumet, and two cases consolidated with it for argument. Mr. Lewin. Nathan Lewin: Mr. Chief Justice and may it please the Court: The statute that is being challenged in this case as inconsistent on its face with the Establishment Clause of the First Amendment involves no governmental participation in the teaching and propagation of religious doctrine and underwrites no public employee to participate directly in religious indoctrination. These were factors that were present in the Government program that the Court sustained last term in the Zobrest case, and they led Justices Blackmun and Souter to dissent in that case. By contrast, the New York legislature has authorized the residents of a legally incorporated village that has existed since 1977 that elects a mayor and a village board and enacts ordinances that comprise the code of the Village of Kiryas Joel to operate a wholly secular public school. Sandra Day O'Connor: Mr. Lewin, may I inquire, this is a special act of the legislature just directed to form this one school district? Nathan Lewin: It is an independent... yes, Justice-- Sandra Day O'Connor: Were the laws of the State of New York not such that other people similarly situated could form their own special school district? Why did a special law have to be enacted here? Nathan Lewin: --The legislature in New York has... does enact laws that creates school districts and bounds of school districts. That's referred to specifically in the complaint in this case. That's the way the-- Sandra Day O'Connor: Is every school district in the State of New York formed by a special act of the legislature? Nathan Lewin: --It's formed by acts of the legislature. Sandra Day O'Connor: Rather than by a general provision that allows residents of areas to form their own district. Nathan Lewin: My understanding is that that's correct. The enactment of the boundaries of school districts is done by legislative enactment. Sandra Day O'Connor: It's always done that way-- Nathan Lewin: Yes. Sandra Day O'Connor: --not by some general law-- Nathan Lewin: Not by some general law. Sandra Day O'Connor: --that would allow similar groups to form districts. Nathan Lewin: Correct. Anthony M. Kennedy: Is it fair to say that governmental power was transferred here to a geographic entity based on the religious beliefs and practices of its residents? Nathan Lewin: I think, Justice Kennedy, that that's not a fair characterization. It was transferred to the residents of a village. Those residents are indeed all of a particular religious denomination, and very devoutly so, but the... it was not that the statute in any way itself drew lines that distinguished on the basis of religion. Anthony M. Kennedy: If my characterization that I used in the question were deemed the appropriate characterization, would you lose the case? Nathan Lewin: Well, I don't think so, not even under those circumstances, although that's not this case, Justice Kennedy, because I think that if in fact, as a matter of legislative accommodation, a group of individuals residing in a particular geographic area would warrant having a separate public school for secular reasons, which is what happened in this case, it would be permissible to accommodate to them, and... or even to accommodate to their religious practice. Our view is that accommodation by the legislature to the needs of a religious community is permissible. My example would be, for example, this book covers garbage disposal within the Village of Kiryas Joel. There's a code that talks about trash disposal. If a community, for example, said, we will not accept trash disposal on the Sabbath, on Saturday... we think it's inappropriate for religious reasons... if the legislature then said, all right, for that reason we'll allow you to conduct your own trash disposal on some other day of the week, and you do it yourself, we think that's within the spirit of what the free exercise laws-- Sandra Day O'Connor: Well, Mr. Lewin, if... if such a law were to neutrally extend to everybody in New York, so that anybody similarly situated could dispose of their own trash, I think you have a very good argument. I have a little trouble seeing why the same analysis applies when the law that you're examining is not neutral. It's just limited to this one situation. It isn't a broadly based law that says people living in a village can have their own school district, whoever they are, whether they're this group or some other group, and yet it seems that New York has chosen to do this quite separately, so I hope you will address that aspect. One other question, preliminarily. I guess we wouldn't be here today but for this Court's decision in Aguilar. Nathan Lewin: --That's correct, Justice O'Connor. It's this Court's decision in Aguilar that precipitated the situation that required some action to be taken regarding the disabled children of Kiryas Joel. Sandra Day O'Connor: If Aguilar-- --And had we held-- --Excuse me. --otherwise, then the services would be provided with the Federal aid on the premises of the religious schools. And if that were happening, would the mechanism of the accommodation that is in question here have been permissible? Nathan Lewin: I think, Justice Kennedy, it would have been permissible. Indeed, it appears from the position of the Monroe-Woodbury School District that from the vantage point of the overall school district, this is a preferable accommodation. The Monroe-Woodbury School District did not want to provide teaching at a neutral site in Kiryas Joel. They-- Anthony M. Kennedy: No, no, no, my question, following Justice O'Connor's, was, had Aguilar v. Felton come out the other way-- Nathan Lewin: --Yes. Anthony M. Kennedy: --And these services had been provided in the private schools themselves, would you then nevertheless have had the constitutional option to have the district formed as it was here? Nathan Lewin: No. If... we agree that if, in fact, the services were being provided under the pre-Aguilar procedure, there would not have been any justification for the legislature saying we have to accommodate or we have to take this step. Under those circumstances, there would be much more basis to argue that this is only being done to provide some kind of authority to these citizens who happen to be religious. David H. Souter: Well, Mr. Lewin, may I ask you a question of fact there? You have spoken several times of the fact that they happen to be religious. Is it part of the record in this case that the village district upon which the school district was superimposed was... was defined geographically by reference to the religious affiliation of the people in it, so that non-Satmar Hasidim were excluded, and those within the village all fell within the category of the Satmar sect? Nathan Lewin: Justice Souter, I think the record really establishes the contrary. The record establishes that what happened in this case... and it appears in the very first pages of the Joint Appendix... that what happened in this case was that the original village that was proposed... and that's at page 12 of the Joint Appendix... the Satmars presented a petition to form a new village of very large dimensions which included many properties and people not of the Satmar belief, so that consequently the original petition was not in any way limited by where Satmar Hasidim happened to live. What happened, the real basis for the creation of the village was a zoning dispute. Since Satmar Hasidim have large families... indeed, I think the record shows there's over 60 percent of the population is under 17 years of age, they needed homes which would accommodate larger families, and that precipitated, as I say, a zoning dispute. The consequence ultimately was, as page 13 of the Joint Appendix shows, that a new village on a much smaller scale than originally proposed was presented only because the people who were to be included in the larger area said they did not want to be in this village, so that the-- Antonin Scalia: Well, that maybe unconstitutional too, Mr. Lewin, I guess. If people for religious reasons have larger families we can't have special communities with special zoning rules for them, either. Nathan Lewin: --Well, Justice Scalia, of course, our view is that the accommodation authority that legislatures have and that this Court has recognized... indeed, even as strong a proponent of the Establishment Clause as Justice Brennan in his Texas Monthly case in footnote 8 specifically referred to the fact that the authority to accommodate is far broader than the mere confines of the Free Exercise Clause. Antonin Scalia: But the argument being made is that if they had large families for some other reason, not a religious reason, you could... you could establish a special community with different zoning laws for that group, but if they have large families for religious reasons, just as this community has certain customs that make it difficult for them to go to another community for their schooling for religious reasons, then it's bad. Nathan Lewin: Well, our view, of course, is that that-- Speaker: It seems to me that's the argument being made. Nathan Lewin: --That turns the First Amendment on its head. That essentially means that the free exercise of religion, which is protected by the Constitution, becomes the one impermissible vice that invalidates anything that's done, and we think-- David H. Souter: But leaving that argument aside, I take it that the upshot of the creation... of the forces that led to the creation of the village was that in fact the village was defined by adherence to this sect. Whether the precipitant for that was concern over zoning, that was the result, I take it. Nathan Lewin: --The consequence was... yes, Justice Souter, that they are... all the residents of the village are Satmar Hasidim, but the point that I'm trying to make-- Ruth Bader Ginsburg: Mr. Lewin, am I right that there's no dispute in this record that compliance with the New York law in establishing villages isn't at issue. It's rather easy to form a village, and although this opinion that you cited allows the village rather grudgingly makes the point that whatever this group was, that they met all the requirements of New York State law to form a separate village, so that's-- Nathan Lewin: --There's no dispute, Justice Ginsburg, and I think the petitioners have never challenged the existence of the village. They've-- Ruth Bader Ginsburg: --Your case I think would be considerably harder if you didn't have the school district that coincided with the preexisting village boundaries. Nathan Lewin: --We acknowledge that. It would be more difficult. The question then would be squarely presented whether, in order to accommodate a religious group living within an area which had not previously defined, it would be permissible for the legislature to draw lines to accommodate that religious group, but that's not this case. Antonin Scalia: Well, you'd say that would be okay, too. Nathan Lewin: Well, again, with the caveat that that is not by any means this case-- Speaker: I understand. Nathan Lewin: --We believe that that is part of the spirit of accommodation, that if in fact-- Ruth Bader Ginsburg: But it would not be all right if, say, a religious body... say, the board of the synagogue... had been appointed the board members of the school board. That would-- Nathan Lewin: --Absolutely not. We agree with that, Justice Ginsburg. It would be impermissible, and here the important point is that this property of the village is privately owned by its residents. They have chosen to purchase the property and to live together, and anybody... anybody in this room, anybody in New York State, is permitted, and indeed, under New York law, may not be discriminated against if they choose to seek to purchase property in that village. Harry A. Blackmun: --Mr. Lewin, will you clear up one factual situation that I'm confused about? Were all of the students here residents of this school district? Nathan Lewin: All... no, Justice Blackmun. Currently... again, initially when the school district was created, it was created with the intention of serving the students in Kiryas Joel, the children of Kiryas Joel. Once it was created, since it provides a bilingual and bicultural program, there are other students who have... who are disabled from other neighboring communities who have been permitted, under procedures which, Justice O'Connor, in line with your question as to whether this is universal, with procedures which are universal with regard to other school districts and other circumstances have been permitted to attend this public school which neighbors or adjoins their own home districts. Harry A. Blackmun: Roughly how many of them are there, percentagewise? Nathan Lewin: I think the percentage runs maybe 10 to 20 percent or so. I don't think it's higher than that. It is a very-- Speaker: May I-- Nathan Lewin: --It is a relatively small number, but there are a number of them that-- John Paul Stevens: --May I ask one other factual question? Nathan Lewin: --Yes, Justice. John Paul Stevens: Are the children separated by sex, or are they all... boys and girls take training together? Nathan Lewin: In this school, Justice Stevens, boys and girls go to class together. John Paul Stevens: That puzzles me, because is that consistent with the religious doctrine? Nathan Lewin: It is consistent with the religious doctrine, because the views of the Satmar Hasidim and of their religious authorities is that when the purpose of education is this kind of remedial education, which is to... it is permissible to have boys and girls study together, and so that that has been approved by... or has long been the practice within the religious community. John Paul Stevens: Was that also true during the pre-Aguilar special education program? Nathan Lewin: My understanding is yes, it was always true. William H. Rehnquist: Thank you. Is this place geographically located up around Rochester? Nathan Lewin: It's near Harriman... Monroe, is it near Rochester... it's further south, I'm sorry. William H. Rehnquist: So it's not Monroe County, then. It's on the Hudson. Nathan Lewin: I'm sorry, I... Orange County. It's in Orange County. I'm sorry. The points that we wish to emphasize with regard to this statute is that it is a legislative determination. Justice O'Connor asked whether this applied uniformly. As we have indicated, accommodations, we believe, can be applied, and always are applied, indeed, to particular situations. This Court said in its Employment Division v. Smith case, for example, that if there were a legislative exemption for the smoking of peyote, that would be permissible. Now, that by its very nature applies only to one religious group, because... for its religious practice, and consequently we-- Sandra Day O'Connor: How about the Sabbatarian case? Nathan Lewin: --The Sabbatarian-- Sandra Day O'Connor: Well, that was struck down, wasn't it-- Nathan Lewin: --Well, that was-- Sandra Day O'Connor: --because it didn't apply neutrally to people with other needs for a day off. Nathan Lewin: --With all respect, Justice O'Connor, I think the Sabbatarian case was one in which this Court felt that there was a burden on others to pick up for the Sabbatarian, and in that footnote in which Justice Brennan in his Texas Monthly case speaks of accommodations, he refers to the fact that that's a distinction, whether the nonobservers are burdened by the statute. In this case, there's no burden on anyone else. This is simply a statute which applies to this municipality and essentially what the courts below have said is that these people, because they are religious, cannot be trusted to run a public school system. David H. Souter: Mr. Lewin, I took you a moment ago in your answer to Justice Kennedy's question about the significance of Aguilar to accept the proposition that in judging what is a permissible, permissive accommodation, that the range of possible alternatives for the accommodation should be considered. Is that... do you think that's a... basically a fair premise? Nathan Lewin: Well, the need for accommodation, I don't think the range of accommodations. In other words, this is not an area... and I know that there is one judge in the court below, Judge Kaye-- Speaker: Yes. I was getting at that, yes. Nathan Lewin: --Judge Kaye, who said, look, this... the least restrictive alternatives standard should apply. We think that's wrong. When the legislature-- David H. Souter: Well, I think I would agree with you there, but you can reject the least alternative theory and still accept the view that alternatives should be considered in deciding just how far the accommodation can legitimately go. Nathan Lewin: --I think that's true, and I think it's particularly important in deciding whether there should be any accommodation at all, and under Justice Kennedy's hypothetical, it appeared to me there's no need for any accommodation because this very same service is being performed neutrally by the regular procedures in a way that is perfectly consistent with the religious observance. I'd like to reserve-- Ruth Bader Ginsburg: Mr. Lewin, I have one question about one of your copetitioners. There was a reference by the Monroe-Woodbury School Board in their brief that compared the alleged restraint on sale and rental of property to people outside the Satmar community to a church tithe that the individual is free to pay or not to pay, and I found that disturbing, because as I understand it, there is no choice. The State law and the Federal law requires that sale and rental be on a nondiscriminatory basis. The Satmar does not have a choice to refuse to sell to an outsider. Is that your understanding? Nathan Lewin: --We agree with that entirely, Justice Ginsburg. They have no choice, and if anybody comes in and wants to live in that community and purchase a home, they're entitled to do so. I'd like to reserve the rest of my time for rebuttal. William H. Rehnquist: Very well, Mr. Lewin. Ms. Mereson. Julie S. Mereson: Mr. Chief Justice, and may it please the Court: Do I need to lower the microphone? Speaker: It might help. Julie S. Mereson: Okay. The issue here is whether the State's action was one that tolerated religious and lifestyle differences, or whether it advanced, promoted, or furthered the Satmar sect itself. The former is commanded by the Constitution, but the latter is prohibited. Antonin Scalia: Do you see a difference between the two? I mean, is that a usable test? By tolerating it and facilitating it, you advance it. I mean, do we have to pretend that there's a difference between the two? Julie S. Mereson: I believe there's a great difference between the two. Speaker: There is? Julie S. Mereson: In fact, there's a red line between the two that sometimes is hard to discern, perhaps, but on the one hand you have an ability to tolerate and to acknowledge something that preexists the legislation or State act, and then on the other side, you have things that actually encourage religious practice or make it particularly advantageous to practice a religion... for instance, the prayer in the schools. Tolerance is a recognition of differences and an alleviation of a burden. On the other side of the Establishment Clause, the free exercise right, the tolerance is an accommodation. It's a means of making somebody's religious life not disadvantageous. Sandra Day O'Connor: Well, do you think that the State's accommodation needs to be neutrally applied, if possible, so that all people similarly situated have the same option, or can the State single out one sect or one religious group and provide some benefit there, but not make it generally applicable? Is there a difference, in a neutrally applied scheme open to all? Julie S. Mereson: The neutrality here is not in the sense of applying to all. There is neutrality here, and yes, the State needs to be neutral, but the neutrality exists in the context of the particular problem. When you're dealing-- Sandra Day O'Connor: Well, how is this neutral, if the legislature set up just a special school district for this one situation, instead of passing a law to the effect that groups of people or villages or towns can form their own school district by applying neutral criteria? Julie S. Mereson: --Because here the legislature was reacting to a particular local problem. There was a local problem that did not need a general statute for other groups in the State. The problem here-- Sandra Day O'Connor: Isn't it a dangerous precedent to let the legislature tackle a so-called accommodation by singling something out like this, as opposed to passing a neutrally applicable law? Julie S. Mereson: --There's no need for a broader law, and no, I don't think that it's dangerous for the reason that when you need accommodation sometimes you have a specific problem. The burden that were on... that were on the Hasidic parents and children of this community is not a burden that was shared by the rest of the State or the rest of the country. Antonin Scalia: Ms. Mereson, doesn't the legislature always single out a school district? Doesn't it create... I thought from Mr. Lewin's description that it always creates school districts single case by single case. Julie S. Mereson: When there needs to be new lines drawn other than the historically existing school districts, yes. Antonin Scalia: On the basis of any general criteria, or on the basis of whether a particular group seems to be a community? I assume that's how they do it, isn't it? Julie S. Mereson: Well, normally these special lines that are drawn by the legislature are called special acts school districts, and they are coterminous with institutions, so they would be created in response to a need for them, which is what happened here. There was a need for this, because what the State was faced with was an impasse between the parents of handicapped students living in the village and their school district, which is Monroe-Woodbury, over whether these special needs-- Antonin Scalia: Ms. Mereson, does the need carry the State as far as the State went, because even assuming that it's appropriate for the State to deal with these problems on a case-by-case basis, the State could have done so here, I presume, by a statute simply mandating that some kind of a special school in a neutral place be set up by the existing school district to accommodate these particular children, and by doing that it would not have involved the... in effect the identification of the governance of the school district with a particular religious sect. The State could have done the former, couldn't it? Julie S. Mereson: --I don't think... they could have done the former. They could have done anything. The problem with the former is that there would be more of an argument to be made that in this impasse, in this dispute between the Monroe-Woodbury School District and the Kiryas Joel parents, that they would be taking sides more by taking the discretion that Monroe-Woodbury enjoys along with the rest of the school districts of the State of New York in terms of where they choose to apply-- David H. Souter: Well, there might have been... there might have been an argument that they were taking... I don't... I'm not sure that I think the argument is any stronger than the argument that they're taking sides here, but leaving that aside, there may have been that argument but there wouldn't have been an Establishment Clause issue, would there? Julie S. Mereson: --I think there would have been? Ruth Bader Ginsburg: Why? Julie S. Mereson: In fact, you can make the exact same arguments that they're making here. Ruth Bader Ginsburg: Wasn't that Judge Kaye's position in the New York Court of Appeals, though? Isn't... didn't she say you could have the same facility, only it would be under the aegis of the Monroe-Woodbury School Board and not the Kiryas Joel Village School Board, and that would be all right? Wasn't that essentially her position? Julie S. Mereson: That was her position, but we disagree with her position, because if the New York State legislature and Governor enacted a law that said to Monroe-Woodbury you must relinquish your discretion and you must provide a neutral site against your judgment, against your wishes, to these religious people in this religious community, there would be people back in court saying, you have favored the Satmar sect, you have... you are advancing their religion by-- David H. Souter: Well, they would have, but you would have had a much easier case, wouldn't you? Julie S. Mereson: --Well, I actually believe we would have had a harder case. Anthony M. Kennedy: Well, but they would not have been able to say that the solution to the accommodation that you adopted was the transfer of power, governmental power, based on the religious beliefs and practices of the recipients. Julie S. Mereson: We believe you still can't say that, because the transfer of the power was not to any religious organization, it was to the residents of a community. Anthony M. Kennedy: Well, is that a question of fact? Julie S. Mereson: Yes. That is in the record. The power was given by the statute to the residents of the community, and not to any religious organization. Anthony M. Kennedy: Yes, but I had thought that it was the whole basis of both sides in this case that the conceded fact that the rationale for the drawing of the geographic lines of this district was the religious beliefs and practices of its residents, pure and simple. Julie S. Mereson: There's one factor in between, which is that this is a cultural and sociological problem which arose out of these people's religion, so it's one step removed from the religion. What the State did was to address the cultural, secular, sociological side of the problem without preferring or promoting or advancing the actual religious tenets. John Paul Stevens: Would you explain that a little more? You started to answer a question earlier, what the need was that the State was accommodating. Would you state again exactly what the need for this legislation was? Julie S. Mereson: Certainly. There was a deadlock. It was an absolute deadlock between the parents of disabled, handicapped children who need specially appropriate educational services-- John Paul Stevens: Which were being provided. Julie S. Mereson: --Which were not being provided... the parents felt-- John Paul Stevens: Which were available. Let me say, which were available. Julie S. Mereson: --They were not appropriate according to these parents. They felt that these services were not being provided by Monroe-Woodbury, because the services that they were offering was not appropriate to these children's unique and special needs. They did not address-- John Paul Stevens: In what respect were the services inappropriate? I don't understand that. Julie S. Mereson: --They felt that they were not addressing their unique vulnerabilities and needs because they come from a very insular environment, where they don't have television, they don't have radio, they don't have English language newspapers, they don't watch a cartoon, and when they go to the Monroe-Woodbury Schools with children who dress differently, who speak differently, these... the Kiryas Joel children don't particularly speak English. Their first language is Yiddish. This environment was so alien to them that they felt that it had a very negative effect. The emotional and psychological trauma that they suffered had a very negative effect on their educational process, so much so that they felt that that overpowered their need to be in school. Speaker: The "they" you're referring to is the parents or the children. Julie S. Mereson: The parents of these children, and they took them out of the school, so when this came to the State... this did not come to the State in the first instance. This problem was with the parties for a while. It went through the entire appellate court process, and at the top of the process-- John Paul Stevens: But the critical fact is, they didn't want these children exposed to these out-of-district influences that they would be exposed to out of the district. Julie S. Mereson: --It was more than that, Justice Stevens. It was that they felt that the insularity of the community did not permit them to participate in the education in such a way that they could get anything positive out of it, because they were so traumatized by being in an environment that was alien to theirs. William H. Rehnquist: Thank you, Ms. Mereson. Mr. Worona. Jay Worona: Mr. Chief Justice, and may it please the Court: This case is about the limits of the Establishment Clause. The respondents urge this Court to affirm the decision below because the statute clearly violates that clause. As this Court has explained, a statute cannot be divorced from the circumstances existing at the time it was passed. The circumstances leading to the enactment of the statute before this Court today at the Village of Kiryas Joel demonstrate that the law was enacted in direct response to the New York State Court of Appeals' decision in its Monroe-Woodbury v. Wieder decision, where the Village of Kiryas Joel residents unsuccessfully sought to acquire a religiously segregated environment in which their children could receive special education services. Antonin Scalia: Excuse me, you say religiously segregated. That sort of begs the question, doesn't it? It was culturally segregated, certainly, you might say linguistically segregated, but why necessarily religiously segregated? Jay Worona: Well, when I refer to religiously segregated, Your Honor, I'm referring to the fact that this community is comprised exclusively of Satmar Hasidic individuals, and as Mr. Lewin indicated, the boundary lines were specifically drawn to only include those members. Antonin Scalia: Well, but... well, you could say it was drawn to include those members, or you could say it was drawn to include people who speak Yiddish. Their customs spring out of their religion, but the State was accommodating primarily their customs, wasn't it? Jay Worona: That's correct, Your Honor, but-- Antonin Scalia: Was it accommodating any of their religious practices, their religious ceremonies, anything of that sort? Jay Worona: --Well, Your Honor, all I can respond to is that in the Monroe-Woodbury v. Wieder case before the appellate division, the residents of the Kiryas Joel Village maintained a free exercise claim for their need to acquire a religiously segregated environment for the children to be educated. Antonin Scalia: I think what they were saying is, if you do not make accommodation for a culture which springs out of the religion, you are discriminating against the religion, but that isn't the same thing as saying cultural accommodation is necessarily accommodating their religious beliefs. I don't see how the State is accommodating any of their religious beliefs. It doesn't allow any worship in this school district, does it? Jay Worona: Not that I'm aware of, Your Honor. Of course, that's not the issue before this Court, but as the court of-- Ruth Bader Ginsburg: That would be a different challenge. There's a facial challenge here. You're saying, even if they follow all the rules of the State of New York for secular education. Jay Worona: --Yes, Your Honor, because the specific issue before you today is not what the residents of Kiryas Joel may be doing constitutionally or unconstitutionally, it's what the State of New York did when it enacted this particular piece of legislation. And in response to Justice Scalia's question from before, in the court of appeals decision in Wieder, the Monroe-Woodbury Central School Districts, the court acknowledged, undertook efforts to accommodate the cultural bilingual needs of the Satmar community, including the employment of Yiddish-speaking teachers and the provision of reports for the Satmar parents in Yiddish, so there were accommodations to that specific cultural basis that were made. Antonin Scalia: The parents didn't think it was enough. Jay Worona: Well, that may be true, Your Honor, but when we look at a statute to determine whether we are responding to bilingual, bicultural needs of a community, and we see a school district has in fact responded to those needs, certainly we cannot ignore that particular fact. Antonin Scalia: You're saying the record shows that it is responding to the religious needs. In what way? Jay Worona: Well-- Antonin Scalia: I really don't understand that. It seems to me they're responding to purely cultural needs, special language, special isolation from modernity such as television, and so forth. Jay Worona: --However, Your Honor, in the court of appeals decision in Monroe-Woodbury v. Wieder, we saw that the village residents were willing to forego bilingual services as long as they acquired a segregated environment for their children to be educated-- Speaker: Well, let's start with the-- Jay Worona: --and I think that's a very big distinction with a difference. Yes, Your Honor. Ruth Bader Ginsburg: --Can we start with the village, the creation of the village? Jay Worona: Yes. Ruth Bader Ginsburg: That came up in Mr. Lewin's argument. Are you acknowledging that the creation of that village was consistent with the Establishment Clause? There was no violation of the Establishment Clause for the... whatever it was, the zoning authority to issue this decision giving approval... the supervisor of the Town of Monroe giving approval under the New York laws on the creation of the village, to the creation of the Village of Kiryas Joel. Jay Worona: Well, we are not conceding that the village was necessarily incorporated in a constitutionally permissible manner. Certainly, that's not directly before this Court. I agree with Your Honor's question before, which was addressed to Mr. Lewin with respect to the village law in New York State, which does not allow individuals to contest the formation of villages in the same grandiose manner that other particular municipalities may be contested. Ruth Bader Ginsburg: But there was a contest at least to the extent that the original boundaries proposed were much broader than just the Satmar community, and there was opposition to that-- Jay Worona: That's right. Ruth Bader Ginsburg: --And they were cut back to the... but the original proposal was for a larger village that would incorporate more than just this one community. Jay Worona: That's correct, Your Honor, but the reality that we cannot ignore is that those boundary lines were specifically drawn to only include members of the Satmar Hasidic community. In the petition which is before you on Joint Appendix page 10, in the first full paragraph, the supervisor of the Town of Monroe in signing this petition indicated that the residents are and will be all of the Satmar Hasidic persuasion. He indicated that the sociological way of life for the Satmar Hasidim is one of disdained isolation from the rest of the community. Ruth Bader Ginsburg: Well, let's take it that we have the village as it is. Would there be any constitutional problem if the same facility existed but it was operated by the Monroe-Woodbury School Board instead of the elected people from this particular community? Jay Worona: If that facility, Your Honor, was based upon secular concerns and not solely religious concerns, I suppose that facility would be constitutional permissible. Ruth Bader Ginsburg: Make it the same facility that now exists, except that instead of having a Kiryas Joel county or village school board you have the same Monroe-Woodbury School Board that is administering all the other schools in the Monroe-Woodbury area. Everything's the same, except the board that runs it is different. Jay Worona: Your Honor, if I may respond in two parts, firstly, the establishment of that type of a school for these individuals would certainly not have an element that is involved in this particular case, which is that we would not be imbuing a religious community with governmental powers and functions, and we certainly would not be-- Ruth Bader Ginsburg: Well, do you see a difference... you keep saying, religious community. The cases that are closest to this one, the precedents that are closest, as you know, involve a religious body being given the authority, a church body, where here it's citizens of a village who belong to a particular religious community but are not themselves church, synagogue officials. Isn't there a distinction... you keep talking about a religious community. If the power were given to the board of a religious community, then you would have a clear case. Jay Worona: --Well, I think we do have a clear case. I agree with the point that you're making. I think that in order to analogize this particular community to that of a church, we do need to look at the entire context in which this particular statute was enacted. Mr. Lewin even in his reply brief has acknowledged that this particular section... or this particular statute is in fact placing the Satmars in a position where they would have been without the statute-- William H. Rehnquist: What you're saying is that the Satmars, because they all live together, can't exercise the ordinary kind of secular authority that any other group living together could. Jay Worona: --No, that's not what we're saying. Speaker: Well, it seems to me you are. Jay Worona: No. We're asking this Court to examine the context in which this particular piece of legislation was established. If a group of folks happen to reside in an area, and it was mere happenstance that they simply were able-- William H. Rehnquist: Supposing a large group of Roman Catholics lived close together in some part of New York State, and they decide they would like a separate school district, and they go through the normal forms of it, an the State legislature creates a special act school district, is that suspect under the First Amendment? Jay Worona: --It might be. I don't think it would necessarily be unconstitutional, if indeed the circumstances surrounding the passage of that legislation are not as they are in this particular case, Your Honor. William H. Rehnquist: Well, suppose they said, we'd like to have our own school district. We think pretty much alike on school issues, and we just want our own school district-- Jay Worona: Well-- William H. Rehnquist: --and they're all... 99.9 percent of them are Roman Catholic. Jay Worona: --I think the major problem that we have in this particular case is that-- William H. Rehnquist: Well, will you answer my question? Jay Worona: --I will try, Your Honor, and forgive me-- Speaker: Try right away, will you? Jay Worona: --Yes. [Laughter] I don't think it would necessarily be unconstitutional for a group of individuals who happen to be of one particular religious persuasion to be granted the authority of having a school district within their community. It's very different in this case, because we have a situation where New York State specifically decided to provide this community with the ability to run a segregated school district, and that is-- David H. Souter: But isn't... wouldn't New York also specifically provide a... the same authority to the Chief Justice's Roman Catholic group? Of course it would. If the New York law is otherwise the same, and you can only charter school districts on a case-by-case basis, it would do the same thing there that it would do here. Jay Worona: --Well, that's precisely the point that the respondents are making, and we believe-- David H. Souter: But isn't the difference that there wouldn't be any alternative to having a school district in the Roman Catholic case, where there is an alternative to having this school district in this case? Jay Worona: --That's correct, because this school district, Your Honor, was one of a... was part of an existing school district at the time, which I think is a very big distinction, and indeed, the establishment of this school district I think would violate some fundamental principles of the Establishment Clause. William H. Rehnquist: Well, are you-- --Supposing that my Roman Catholic hypothesis, they want to break away from the school district they're in, just like the people did here? Jay Worona: If they wanted to break away for the reason of acquiring governmental powers and functions to live an insular life style in conformity with their religious precepts, I suppose that would be unconstitutional as well, Your Honor. William H. Rehnquist: Well, is it a necessary element of your answer that they want to live an insular lifestyle? What's that got to do with the First Amendment? Jay Worona: Well, it has to do with the First Amendment in that I don't think this particular culture can be divorced from its religious traditions and practices. Ruth Bader Ginsburg: How would you distinguish this from, say, just a community in Utah, where the people in a village are all coreligionist? Jay Worona: As I understand the formation of Utah, certainly the United States Government required the Mormons, who were predominantly occupying the State prior to it becoming a State, they were required to put special provisions in their Constitution to protect the United States from acquiring a State that would be arguably theocratic, and the difference, I think, is that if somebody happens to move into a place where there isn't... there is not already an existing school district that is serving them, we have a situation where there is a secular need. They need to be served. They need to acquire a school district. Here, the Kiryas Joel Village residents were already part of the Monroe-Woodbury Central School District. Antonin Scalia: That's the problem. They did it too late. If they'd only gone out in the wilderness where there was another-- [Laughter] Where there was not another school district near them to start off with, they would have been okay. Jay Worona: I don't know if-- Antonin Scalia: So all they have to do is move further out into New York State and they can start their own... they'll do it if you say that's okay, I'm sure. Jay Worona: --Well, Your Honor-- [Laughter] As I understand it, Your Honor, every single... every single parcel of land in New York State is presently occupied by the boundaries of a school district, so I don't think that frontier type of a scenario would necessarily exist. Anthony M. Kennedy: Is it your contention that one of the principal, or maybe the only purpose of forming the new district was to transfer powers to people by reason of their religious beliefs, or is that not your contention? Jay Worona: I'm sorry, Your Honor, could you repeat that question? Anthony M. Kennedy: Is it your contention that one of the principal purposes of this statute was to transfer governmental power to a group of persons by reason of their religious practices and beliefs? Jay Worona: I suppose the answer to that question is, we believe that a political constituency defined along religious lines has in fact been established by the statute, Your Honor. The particular community of individuals who are devoutly religious were imbued with governmental powers and functions to allow them not simply to be exempted, as this Court has in the past accepted, to privately pursue their religious perspectives, but rather, New York State has offered its arm to these individuals to be able to run a school district with full governmental-- Anthony M. Kennedy: For what reason? Why a town but not a school district? May I just finish? For what purpose? Jay Worona: --For what purpose what, your Honor? Anthony M. Kennedy: For what purpose was the power given to them? Jay Worona: To allow them-- Anthony M. Kennedy: Because it seems to me, otherwise you cannot distinguish your case from the Chief Justice's hypothetical. Jay Worona: --Well, I think the purpose certainly here is one of segregation along religious lines. It was the pursuit of that particular principle that was primarily sought after, and indeed was advanced by this legislation. David H. Souter: The... aren't you giving two different answers? I mean, you're giving a purpose answer to Justice Kennedy, and a moment ago you gave a no alternative answer to me when we were discussing the problem posed by the Chief's hypothetical on the Roman Catholics. Is the problem, as you see it, that there was an express purpose to transfer power to a religious group, or is the problem here that there were alternatives to doing that, to accomplish the same result, and they didn't avail themselves of the alternatives? Which is it? Jay Worona: Well, we're not suggesting it's necessarily the latter. I think having the latter present will perhaps provide a greater effect of unconstitutionality of this particular piece of legislation, but we are maintaining certainly that the legislature designed this particular piece of legislation to allow this particular religious community to dictate what educational services would be provided in conformity with their traditions and beliefs. Ruth Bader Ginsburg: I don't see why that isn't present in a good many communities, as Justice Ginsburg suggested, in the State of Utah, where members of the Church of Latter Day Saints live in certain communities and want to have their own school districts, and they do, so under your view, all those would be invalid. Jay Worona: No, I don't believe they would all be invalid, Your Honor, I believe that this case can only be analyzed in looking at the entire context in which this particular legislation was effectuated. If, indeed, we have a community, as I answered the Chief Justice before, that happens to be of a particular religious persuasion, which happens to have a school district, that doesn't necessarily make it constitutionally infirm. The constitutional infirmity here is by setting up political constituencies defined along religious lines-- Antonin Scalia: Well, it's defined along cultural... let me give you a two-part hypothetical. Suppose you have a community divided by railroad tracks. One side of the community is a very swinging, modern-type crowd, and they like avant-garde education, sex education and all that. The other side of the tracks, influenced by a reaction to modernity, feminist aversion to obscenity and so forth, they want old-fashioned education. They can have two school districts if the State sees these people want different things in education? That's okay? Jay Worona: --Well, I presume in your hypothetical there would not be religious beliefs that were present. Antonin Scalia: Right. Jay Worona: Okay. I think that we would not be dealing-- Antonin Scalia: That would be okay. Jay Worona: --with an Establishment Clause-- Antonin Scalia: Right. Now, my second hypothetical is-- [Laughter] --they have the same beliefs, the same... some like sex ed, some don't. However, the reason for it is not feminism, or avant-gardism, the same cultural preferences spring from their religious beliefs. Then you couldn't do it, right? Jay Worona: --I suppose there would be an Establishment Clause problem. Speaker: Oh, no. Jay Worona: Our position is not based upon anything but the fact that there is an Establishment Clause at this point. Antonin Scalia: You cannot accommodate any... any beliefs that spring from religious motivation? Jay Worona: No, that is not our position, Your Honor. We believe that accommodation is certainly acceptable. This accommodation, however, will in fact place the balance off the kilter of the scale. Ruth Bader Ginsburg: Was Judge Kaye's accommodation okay? That is, she said in her most recent opinion that if you... as I understand it, you had this neutral facility, same facility, but it was run by the Monroe County School Board. That accommodation would be okay. Jay Worona: If, in fact... yes, Your Honor, if in fact that accommodation was in conformity with this Court's pronouncement in Wolman v. Walter, which dealt with the provision of neutral sites to children who were attending parochial schools. Ruth Bader Ginsburg: Well, let's take the if out of it. Just... everything that we have here, except that it's the Monroe County School Board, not a separate school board, that's running it. If that's okay, then I think what you're suggesting is that we have to look to the purpose... one of the hardest problems as I see it is that these people are citizens of a community, and they're elected the way representative elections are conducted, but they're also members of a tightly knit religious community, and your argument seems to hang on equating them, saying that they can't take off their religious hats when they're elected to be members of the school board. I think that's the essence of your argument. Jay Worona: Well, it really isn't, Your Honor. I think the essence of our argument, if we were looking at Lemon v. Kurtzman and its three prongs, would be the second prong, because chapter 748 of the laws of 1989 communicates a message of endorsement to the public, and they may fairly understand that the purpose of this act was to accommodate Satmar separatist beliefs, and the public perception of endorsement is reinforced by this statute in that it's not a statute of general applicability, as many justices have already noted. David H. Souter: Well, if the New York law read that school districts will always be coterminous with religious districts, would you have an objection? Jay Worona: With religious districts, Your Honor? David H. Souter: I'm sorry, with municipal districts. Jay Worona: No. I think that would be a secular particular law, and if in application there was a problem, certainly there could be a challenge at that particular time. Here, we're dealing, as I started to indicate-- David H. Souter: Would you have a challenge to it? Jay Worona: --Would I have a challenge? Not based upon this particular facial challenge, Your Honor. The respondents in this action believe that this particular action of the New York State legislature, if precedentially allowed to exist in this Nation, will not only politically fragment our Nation, but will place children in a position of understanding that the way we deal with diversity and respect for ourselves religiously is to have Government separate people along religious lines, and that is something that we don't think is palatable for the country or consistent with-- John Paul Stevens: Let me test that if I may. Is it not true that this district accepts students from outside the particular neighborhood? Jay Worona: --That's correct, Your Honor, but our understanding, and it's in the record, all of those children are also members of the Satmar community. John Paul Stevens: Do you know what language the teaching is conducted in in this district? Jay Worona: I do not know. In the petitioner's papers, they indicate that they are maintaining a secular program, but since that is not the issue before the Court, I do not have any personal knowledge of that. John Paul Stevens: Is there any New York law that requires that school districts do their teaching in the English language? Jay Worona: That... that-- John Paul Stevens: That English language be taught in schools in New York? Jay Worona: --Not that I am aware of, particularly, but of course, that's not the issue before us. The issue is not what, again, Kiryas Joel may be doing in maintaining their program, but rather what New York State did when it established this particular school district. I want to make one other point that I think is very relevant, because I think we all are here today to talk about the children, and I think one of the things we cannot ignore is the fact that this particular statute in essence precludes these children from acquiring the protections of both Federal and State laws that serve disabled children. Those laws are predicated on the premise that those children must be mainstreamed as much as possible, and as much as feasible. These children are in-- John Paul Stevens: That's a statutory violation. I mean, you can bring another suit for that, I suppose. Let me ask you this, Mr.... let me ask you this question about our Federal Congress. I'm reading from the Congressional Record in which the Senate Majority Leader, Mr. Mitchell, is describing the legislative schedule for the 102nd Congress in 1991. He lists the nonlegislative periods. He lists Presidents' Day, Lincoln's Birthday. March 29th, Good Friday. March 30th, Passover. March 31, Easter. September 9, Rosh Hashanah. Is all that unconstitutional? Jay Worona: --No, I don't believe so, Your Honor. Speaker: Why not? Jay Worona: Well-- John Paul Stevens: It's just accommodating the religious practices of people for Congress to go out of session in order to accommodate people who want to observe Good Friday or Rosh Hashanah. Why isn't that unconstitutional? Jay Worona: --Because we're not imbuing any particular governmental functions on any particular religious person to carry out those... his religion. We are rather allowing people to privately pursue their religion. Ruth Bader Ginsburg: But you can have a minister be a member of a legislative body. Jay Worona: Yes, Your Honor. Ruth Bader Ginsburg: And so that's... and so, why can't you have a school board composed of people of a certain religion who are not the political... who are not acting in their capacity as a governing body of a church? Jay Worona: Well, we are not, again, Your Honor, maintaining that our argument is predicated upon a belief that the Satmar religious leaders will necessarily be incapable of exercising governmental powers and functions. We maintain that that is true, but that's not the basis upon which our argument lies. Rather, we are indicating that we are taking-- Ruth Bader Ginsburg: You maintain that is true as opposed to, say, a Catholic priest serving as a legislator? Jay Worona: --No, Your Honor, but in this particular record, when the school board was first established, a gentleman tried to run for the school board against the directives of the Grand Rebbeh, and as I under-- Ruth Bader Ginsburg: Maybe you have some kind of an as-applied challenge. There's been a lot of things outside the record that have been suggested, that the claim that this school is run in a secular way and that the school board is acting as any secular school board would operate, that that's not true. That would be a different case, not the one that's here. This is a facial challenge, right? Jay Worona: --Well, that's correct, Your Honor, but we think the record is very clear about the points that you are maintaining. For example, prior to the establishment of this school district, the Monroe-Woodbury Central School District urged the Governor to sign this legislation, and they indicated that if a non-Hasidic child requiring regular education moved into the Kiryas Joel School District's geographic boundaries, and then... this is on page 2 of the Joint Appendix, and this is virtually impossible. The child would be tuitioned to Monroe-Woodbury or another district. The legislators who passed this action also were well aware-- Antonin Scalia: It seems eminently reasonable. He would have a cultural problem in the Kiryas Joel district, just as the Kiryas Joel children have cultural problems in the other district. Why do you find that so extraordinary? Jay Worona: --Because if we look at what was provided... and Your Honor is quite correct, we are dealing with a situation here where looking at disabilities laws is a Federal statute and would not necessarily be a constitutional impermissibility. However, if these children are incapable of acquiring their rights under Federal and State law, and we understand why, and that is because their parents wished to maintain a lifestyle, then-- Antonin Scalia: It's like a parent in the hypothetical I gave you who wants her child to have sex education and seeks permission from the school district on the one side of the tracks to send the child to the school district on the other side. What's so wrong about that? Jay Worona: --Well, again, I think the principal point of where we maintain our argument, which a crucial distinction is that there is not an imbuing of governmental powers and functions upon an individual in that situation. There is simply-- Antonin Scalia: Isn't there-- Jay Worona: --that is provided. David H. Souter: --Isn't there also another difference, and that is the Monroe-Woodbury School District didn't have a plan to tuition-out every student from this community, whereas what you have just read to us sounds like a plan to tuition out every one who is not a member of the community. Jay Worona: Right. I think that is a crucial distinction, Your Honor, and I think that certainly under New York State law, Monroe-Woodbury could have provided the benefits that are being sought here. Indeed, when they began this litigation in Monroe-Woodbury v. Wieder, the case that was looking for a neutral site, they maintained that they could not serve these children any other place but the public schools. The court of appeals, New York State's highest court, ruled that that was not necessarily true. They also maintained that there was some constitutional infirmities with segregating these children along religious lines, and now they stand before you today and indicate that it is not necessarily unconstitutional to do the same thing by having New York State segregate children along religious lines. Ruth Bader Ginsburg: Mr. Worona, on the tuitioning out, do I understand correctly that the people who tuitioned out are the regular students for whom there are no facilities, but if they were someone... a disabled child who was from... who was not of the Satmar community, that person wouldn't be tuitioned out, would that person? Jay Worona: Well, Your Honor, they can by this statute have a regular school. The... everyone envisioned that this school-- Ruth Bader Ginsburg: But I'd appreciate an answer to that question. Suppose there is a child in the school district who is not of the same religion, and who is disabled, that child would not be tuitioned out, would that child, under the-- Jay Worona: --Not necessarily, but of course we maintain that everyone understood quite well that that would not happen. I'm sorry, Your Honor. David H. Souter: --Then the distinction that I was making wouldn't apply. Jay Worona: Well-- David H. Souter: I thought you agreed with the distinction I was making, but as I understand your answer to Justice Ginsburg, that answer wouldn't be apposite. Jay Worona: --Well, what we are asking this Court to look at-- David H. Souter: Well, regardless of what you're asking the Court, what is the answer to my question? Jay Worona: --Well, could you repeat the question, Your Honor? David H. Souter: Well, I thought your answer to an earlier question was that there was a distinction to be drawn between a plan to tuition out all non-Hasidic students, as distinct from a plan to tuition out of the main school district all students who were Hasidic, and as I understand your answer to Justice Ginsburg's question, the plan that you referred to on page, I think 10 of the record, was simply a plan to tuition out all nondisabled students. Jay Worona: Well... yes. William H. Rehnquist: Is the latter correct? Jay Worona: That is correct. However, I think the-- David H. Souter: Then the distinction I was drawing does not apply. Jay Worona: --Well, we believe it does, because even though those are the words in this particular paragraph, I think the context of those words, when it says virtually impossible, is referring to the fact that no other non-Satmar individual would be residing in that community. I don't think that's really in dispute here. Mr. Lewin has admitted that most of the residents, or all of the residents, are members of the Satmar community. I think the essential question that needs to be asked, and if, indeed, the Kiryas Joel Village School District was indeed capable of becoming as heterogenous as the Monroe-Woodbury Central School District, what benefit would have actually been afforded to these individuals? The statute would have had absolutely no purpose. So I think we can all move on from that particular issue and answer the question as to whether it's a violation of the Establishment Clause, not whether it was indeed capable of being as heterogenous as the school district that it was seceding from. David H. Souter: Let me ask you a different question going back to something you said a few moments ago, and I'm not sure that I understood you. Did you indicate a few moments ago that you thought the suggestion which I guess was made by Chief Judge Kaye that the State could have set up a separate neutral place for the education of these handicapped children alone would have been unconstitutional? Jay Worona: It could have been unconstitutional. I don't believe it necessarily would have been unconstitutional. What we were indicating is that it would still have to be in conformity with this Court's pronouncements in Wolman v. Walter. William H. Rehnquist: Thank you, Mr. Worona. Mr. Lewin, you have 2 minutes remaining. Nathan Lewin: With respect to Judge Kaye's suggestion, Justice Souter, we, in addition to thinking it's the wrong test, we think it's not clear that that's the least restrictive alternative by any means. Providing responsibility, as well as authority, is what this statute did, and what is one going to conclude, what is the least restrictive alternative? Monroe-Woodbury School District itself prefers this solution, which apparently it believes is less restrictive in terms of the overall school district, than the solution of forcing them to provide neutral sites. Justice Kennedy asked about the purpose, and I think that clearly distinguishes this case and makes it so much stronger than the hypothetical that the Chief Justice suggested. In this case, there are a body of disabled students. In the Chief Justice's hypothetical, it is a community that wants to have its own school district, and there's nothing unconstitutional, even if they're religious, and we agree. But all the more so is that true if there is a reason for the legislature to deal with a group of disabled students, and in this case, the record is clear from the respondents' own expert, Joint Appendix page 88. She says, "These parents kept their children out of the public school to avoid the trauma they believe the children would suffer because of their cultural uniqueness. " That's what their own expert said in an affidavit that's in the record. And in response to Justice O'Connor with regard to other... other school districts, the complaint itself alleges in paragraph 63 of the second amended complaint, at page 62 of the appendix, "the legislature has exercised this authority most commonly for the purpose of creating a public school in the case of.... " William H. Rehnquist: Thank you, Mr. Lewin. Nathan Lewin: Thank you. William H. Rehnquist: The case is submitted--

Warren E. Burger: -- Regester. Mr. Jaworski, you may proceed whenever you are ready. Leon Jaworski: Mr. Chief justice and may it please the Court. As was true in the case argued just before, that's one the Attorney General of the Texas, the honorable John L. Hill has participated in the preparation of this appeal. He has the staff with us, and in order to avoid the providing of arguments, he has asked that I present the argument on behalf of the state. I think it perhaps a more accurate description of what this case really involves could hardly be made and the characterization given it by the Central Judge who stated that this was an instance of the majority entering fields of the purely state and local management. Now under the provisions of Article 3, Section 28 of the Constitution of Texas, a Legislative Redistricting Board has assembled, if the legislature fails to redistrict the state after its first regular session following the publication of each United States decennial census. So the legislature convened in January 1971, was under constitutional mandate, to provide this redistricting. Our Texas has a bicameral legislature, and because the legislature had failed to redistrict in both houses, of course, any effort at redistricting failed and as a consequence, the redistricting board was assembled and considered the matter of providing a plan of redistricting the senate, and also a plan of redistricting the lower house. Now, this board consists as constituted by several elected officials, state officials serving on it. There is the Lieutenant Governor, the Speaker of the House, the Attorney General, the Comptroller of Public Accounts, and the Commissioner of the General Land Office. Now three or more of these members of the redistricting board may assign whatever plan they agree upon, and it certify to the Secretary of State, and then it becomes an effective plan. Now, I might say that the house plan is the only one. The plan relating to the representative is the only plan that's involved on this appeal. Perhaps, brief reference should be made to the commencement of those litigation after they planned to file, a suit was instituted in Houston, Texas by Curtis Graves, a black state representative from Harris County that?s Huston in which he contended that there was unconstitutional apportionment of the senatorial districts because of an alleged racial gerrymandering. His point being that there should have been district carved out in which 80% are blacks and that because one was not carved out in that matter that it was unconstitutional. And then next came, a number of others civil suits that were filled challenging the boards plan for the house of representatives in different parts of the state with different groups, filing these suits, and interventions were also filled on behalf of a number of groups and there was a consolidation of all of these actions and they were heard before the Three-Judge Court. Now, the court ordered first that unless the legislature of Texas on or before July of the 1, 1973, adopted a plan to reapportion the legislative districts in accordance with the constitutional guideline set out in the court's opinion that the Court will then proceed to reapportion the state itself, and then the Court further ordered that the counties of Dallas, that is where the city of Dallas is and the County of Bexar that's where San Antonio is that both of these, the reapportioned into single-member representative districts in conformance with a plan of reapportionment that the court provided. Harry A. Blackmun: Mr. Jaworski, was there injunctive relief granted? Leon Jaworski: Yes sir, an injunctive relief, excuse me sir. The injunctive relief consisted all of the state being restrained from proceeding. The elections could not be held in accordance with the plan that had been filed by the redistricting Board. A judge would say, state it very frankly that he'll wholeheartedly disagree with his colleagues in declaring the state plan unconstitutional, saying that he could think of nothing that illustrated more vividly the chaos that existed in the area of restructuring the political districts of a state as was attempted to be done and ordered by the court in this particular instance. It'd be done by July 1, 1973 or else of course the plan had to be adopted. Of course the Mahan versus Howell case is very significant. A number of the courts' pronouncements in that case are quite applicable here. Perhaps I should point out that what the majority did in our case was relied on the Kirkpatrick versus Preisler case and repeatedly refrying to it also on Wells versus Rockefeller, both which is we know are congressional redistricting cases. Warren E. Burger: Mr. Jaworski, has the court has said at least once and perhaps more often that a good deal more flexibility is permitted in state legislature then in congressional districts? Leon Jaworski: That's what this Court of course said in the Mahan and Howell case. Warren E. Burger: Well, we have said it before that? Leon Jaworski: And also said it, yes sir in the Reynolds -- Warren E. Burger: Reynolds against Sims. Leon Jaworski: Right sir, but it was quite well emphasized in a case that was decided or relevant in [Voice Overlap] Warren E. Burger: So that there was nothing new in Mahan against Howell in that respect? Leon Jaworski: No, I do not think so. I think it did some reemphasizing and perhaps having come so recently or something that we might talk about little more, but let me just pass counsel, but certainly there was nothing new in it. The interesting thing is that Judge Wood who so strongly dissented in this case from the actual majority, recognized that difference in his dissenting opinion. And he recognized the difference between congressional districts and legislative districts, pointing to the cases, pointing to Reynolds versus Sims. Now what the majority did here was required, first a much stricter standard of state legislative reapportionment, permissible deviation and had been approved theretofore. Actually in this case the total variation of 9.9% under the board was on question thus far as the majority opinion was concerned. I notice wherein in one of the briefs some question was raised whether that might be entirely accurate, but there had been nothing before the lower court raised any question beyond that of it being assumed and considered that the total variation was only 9.9%. Now, this was under the board's redistricting plan. I should point out that actually the average variation was only 1.82%. Now one of the problems in this case, a matter on which so very much stress was laid by majority the court which in our view led the court exactly to nothing as far as the end result was concerned, where the procedural (Inaudible) is simply followed by this board. There were several tings that took place. Of course these men, all of them had to depend upon staff assistance because they had other duties to perform as state officials and they did have considerable staff assistance. Perhaps the one official who participated more than any one else in this particular matter was the Attorney General himself who counseled with the redistricting board constantly on what should be done and also letting him know on the what was permissibly legal as he interpreted the decisions. But the Court has gone to considerable extent in talking about, not the end results so much as these procedures that was employed in finding fault with them, and finding fault with the particular assistance that had been rendered by members of the staff and such as that forgetting it seems to me at least for a moment that even judges need the assistance or at least utilize the assistance of law clerks at times. But, also it is very clear, there was a complete misapprehension of Whitcomb versus Chavis actually said. What the Court here did was not only indicated, went into the matter of redistricting the entire state also found fault with what had been specifically insofar as single and multi-member districts were concerned and the two counties that I mentioned. What the court failed to do as we see it was to employ the equal protection test and that a state must make an honest and a good-faith effort to construct the districts as nearly of equal population as is practicable and there is nothing here to indicate in this record that this good-faith effort was not made. And let me regress for a moment if I may, because I have noted that there were some references made in some of the briefs to some alleged evidence in this case that frankly is no evidence. What happened at the outset was that the Chief Judge of this Three-Judge Court, the presiding judge and announced that everything that was offered by anyone would be admitted in evidence. He didn't want us to even make any objections. If the matter was conjectural, if it was hearsay or whatever the proper objection may have been it went into the record anyway and the announcement being that the court would at the end consider those things that were admissible on those matters that were not admissible, but there were no rulings ever made by the court and as a consequence the floodgates were opened and everybody led into thinking that you want to bring before the court just introduced it into evidence and then proceed. We don't know actually what the court did consider and what it didn't consider speaking of the majority. But, we do know that there were some matters tendered here that were not admissible in evidence and that the record presently is cluttered with some of those matters. I mention that simply because what should really be a relatively a easy case to discuss with the court and the issues being well defined as we see it, is complicated a little because of some of the references that have been made in some of the briefs to what the evidence purportedly showed. Now, the court, the majority, apparently everywhere just placed the burden upon the state. It may, you know to show that there was no inequality of any kind, that there was no discrimination of any kind, that there wasn't any type of dilution and had us carry the burden throughout the case. So, far as I tell we discharged the burden although it is questionable as to whether we had the burden in all of these instances. Now Texas is a large state as is known, we will not engage in talking about how large it is, but it's not only a large one, but it is also has a shape and it does not render it very easily susceptible to a division among districts. So, some problem is going to be encountered, but we actually -- what was necessary here were -- well, let me say first the ideal district was about 74,000, seventy four thousand plus. There were a 150 representatives to be elected to the lower house and a large number of districts had to be carved out in addition to it. This particular board was confronted with a decision -- first with the provision of the Constitution of our state which had been interpreted in the case of Craddick versus Smith which we cite in our brief and under that county lines could not be crossed, unless it were absolutely necessary to do it in order to make up this district of 74,000, the ideal. It also required that it go to a contagious county if it were necessary to do that. Now, Texas as we know and as the Court doubtless knows, not only has this large metropolitan cities, but it has rural areas that has large areas that are very sparsely settled. Now actually there was no instance in which our constitutional requirements and the integrity that was required for this board to follow was not carefully embraced in each instance with the possible exception, well would be exception of Red River County and there we had a real problem up in the part that adjoins Arkansas with the Red River and between the two of them had a problem as to Buren County. So, what was actually done is that in that one instance the county line, it was crossed. Now, the total population incidentally as the Court probably has already gathered from what I had said is according to the last census about eleven million two hundred thousand. The senatorial district is not involved here, but maybe of interest of the Court is of approximately 360,000 to 368,000. Now, if we were to draw comparisons here and I do this only because a case has just been decided by this Court and to show a similarity of the situations if I may reveal those in the Virginia, there was a total variation of 16.4 under what the board that here, the total variation of 9.9 and average variation in the Mahan case of 3.89 in Texas of 1.82. Within the 4% there were 35 of the districts in Virginia. In Texas we had 93 under this Board's plan. Those that exceeded 6% were 9 In Virginia, there were none under this Board's plan in Texas and only two exceeded the 5%. I indicated a few moments ago that it was our view that what Whitcomb v. Chavis had been misinterpreted and we do feel that that is definitely in the case. I want to mention one effort that was made in particular, that was injunction in the case the fact that perhaps one difference was that in Indiana particular the Marion County which was involved in the Whitcomb v. Chavis case that there was no racial history and a suggestion was made the Texas had a racial history. Here is no one that would deny that Texas has true what so many of the states has a racial legacy. It is untrue that there is any showing whatever that there has been any such happenings, any sort of racial violation with respect to the electoral process in our state. The last one according to testimony in this case undisputed is coming from a witness who appeared on behalf of the appellees was back in 1956. So that this is really not in the case despite the fact the witness was put on the stand to testify that or undertake to testify and this is one of the particular matters to which I refer that has made it somewhat difficult to briefly argue this case because the court admitted everything. Man who opposed does an expert and undertook to say that there was a difference as far as racial history in Indianapolis and Marion County was concerned and in Texas. And then it turned out when I asked them the question on cross examination that he had never even been to Indiana much less Indianapolis had not made any type of study of the matter and as I said in our brief to show what we had to contend with. I should say that there is a stipulation in the record in order to lay at rest completely the matter of all having been free to engage in our process of registration as well as holding, there is a stipulation that there has been and none of that in our state for a number of years and of course the evidence shows nothing of the kind. Now, we get into another phase that I want to discuss with the court if I may and that has what happened with respect to Harris County, Houston under the boards plan being divided into single member districts and what happened and so far as Dallas -- it is Dallas County and San Antonio Bear County being multimember districts. Now there of course is some difference one could say Huston a very large city, a million seven hundred thousand either fifth or sixth largest city of the nation at the present time. Dallas, a million three, Dallas county. San Antonio, even a much smaller city than that, traditionally Dallas had multi member districts same was true of Bexar County. And as far as Huston is concerned Harris county the legislators themselves, the delegation from their more or less favored single member districts. So on the surface you might say why does the Harris County have single member districts and why does Dallas and Bexar County have multiple member districts? Really it was done without to being the slightest intimation on the record that in the individual group sacrificed any constitutional rights by virtue of it, it was done largely because the board had before it witnesses who thought that this was a sensible thing to do in Harris County had witnesses before that thought it was a sensible thing to do in Dallas and Bexar County what was done in those. Now our position is they tops in, the showing of something that shows that either voting strength is being diluted or that something has been done that has occasioned the transpiration of a constitutional right that certainly much has been made of nothing. Potter Stewart: You say the reason Mr. Jaworski was - historically this is always this is been-- Leon Jaworski: No sir this is -- I didn't intend to say that sir, I didn't intend to say that that was true as far as Dallas was concerned and I believe Bexar County because they have -- but it was not true as far as Harris County is concern. Harris County had some election in past they have floatorial representative or even. I said what really brought it on more than anything else is a delegation should come from these particular areas and the board in shifting what people wanted but their representative said they want, made these provisions of single member districts for Huston, for Harris County multimember for Dallas and for Bexar County. Potter Stewart: And Dallas and Bexar is directly have had multi member? Leon Jaworski: Dallas and Bexar historically have had multi member. Potter Stewart: And Huston has also had multimember plus (voice overlap) Leon Jaworski: Has had but also some mixture Mr. Justice Stewart there have been mixtures of floatorial representative and such as that are whole voters. Potter Stewart: Now wasn?t there a state policy expressed somewhere earlier that should have, -- that the state would have multimember until a number got to 15 is not somewhere here written. Leon Jaworski: That may have been in the history of -- Potter Stewart: And thereafter you would have. Leon Jaworski: I do not think that this was a part of what was before the board, I do want to make mention of this. Now you take Bexar County for example, this is as County of San Antonio where a large segment of the population is Mexican American, actually 50% of them are. You don't have a minority there of Mexican Americans toll, the record shows that if they undertook to exercise the election process they are right to vote, they are register in vote, there would not be any problem. The problem is been that less than 30% of more approximately 30% of them seek to exercise that privilege. This is where your trouble has been as far as Bexar County is concerned. I should make mention of this too because it?s in the record, no matter that probably will be talked about. Dallas County has a strong political party; it?s a party that has had on it slate, blacks as well as whites. Here the record shows that they were contemplating three blacks on their slate following this active redistricting, actually that they have had at different levels are just even include in the legislative level black on the slate before, that is true that it is as strong political organization it is true that a black placed on that slate probably would be elected is also true when a white placed on that slate would be elected. It is also true that if this organization opposed a white that he would hard time been elected, just as much as if the organization opposed a black. The while routed in history as I answered to Mr. Justice Stewart's question the matter of multimember districts has never been used in Dallas and direct this completely silent, there is nothing to show that the multimember district arrangement for Dallas County was used or conceived either to dilute or cancel the voting strength of blacks and I think that this distinguishes it from some other and inferences and pronouncements that had been made by this court in other cases and I believe with that Mr. Chief Justice and may I please court. I will wait with the concluding argument until after counsel for the (Inaudible). Warren E. Burger: Very well Mr. Jaworski. Mr. Richards. David R. Richards: May it please the court Mr. Chief Justice. We -- let me open with the brief luminary we are dividing our 45 minutes between three counsel, I would attempt to open to discuss the what we consider to be the underlying irrationality of the state plan and the dilution of the Negroes voter vote in Dallas County. Mr. Idar will follow discussing the underlying distinctions we think on this record between Whitcomb v. Chavis and the impact of the at-large scheme on the Mexican American minority of Bexar County. Mr. Gee on behalf of State Republican party will follow to discuss what everything we forget including jurisdiction and I think the inordinate costs of election campaigns in the County which would suggestive. As a preliminary matter the order below is a first, it?s a complicated four part, four law suits consolidating with various contentions I guess the order below is of two parts. There is a declaratory judgment which does feed to the statewide apportionment plan but that was not effectuated by injunction but rather it was left to be operative only in July of this year and the event the legislature did not address themselves to it. There was injunctive relief it was narrow. It effected only two Counties and the state of Texas those Counties of Dallas and Bexar their single member district plans were implemented by the court unanimously Judge Wood who have did descent from the other portions for the court's opinion below agreed that this was so egregious in Dallas and Bexar County that implementation of immediate single member districts was in order. So we think the jurisdictional issue is in the case Mr. Gee will address himself to it. The route problem that confronted the Texas legislature when it or readily redistricting board when it began to consider the reapportionment to the Texas legislature was what to do with the urban counties. The testimony is clear that this was in words of one witness enraging controversy across state of Texas. Hearings were held by the legislative redistricting board on two occasions concerning what was to be done all of the witnesses who appeared were concerned only with this single issue. Urban counties of Dallas, Bexar and Harris whether to be divided into individual districts or something last then at large are worthy to left at large. Now the board and what is remains and orderly unarticulated decisions decided to divide Harris county in the 23 individual member districts and to leave and Dallas and Bexar county running at large Dallas has become what we all saying recognized to be the largest legislative districts in the nations history. 18 legislators elected from at-large of one million four hundred thousand people. No requirement of geographic distribution they could all come from one city block with in the city of Dallas. Now the peculiarity here quite granted there was a history of at-large representation in the urban cities of Texas. It was true of all the cities of Texas until 1965 when the Texas legislature did for the first time a portion Harris County, Huston into something less than the County wide districts at that time in Kilgarlin V. Martin the State of Texas explained to the Federal Courts that a policy existed and that policy was at anytime a County became a one million in size, or more than 15 legislators, it became simply unworkable to run at-large and that in the future, then anytime a county became that size, that county itself would be a portion down in something less than at-large representation. Well, then Dallas County hit a million for this year, larger than Harris was an 65. That policy went by the board without even whisper on the part of the board members. Of this Legislative Redistricting Board, three of them had been defendants in the Kilgarlin case who presumably had the sparse of that explanation for the -- at that time for the apportionment of Harris County. At no time, although now in their reply brief, the court -- the appellant say that that really never was a policy. They certainly never told the court that, the court's opinion it was a policy. When the appeal papers were filed here, there's no indication of any disclaimer of that policy when the Kilgarlin v. Martin was considered here as Kilgarlin v. Hill. The only reason that appears ever for this rather curious treatment of the two counties was in the jurisdictional statement filed by the appellants and they suggested there that the reason they left Dallas County at-large was the dominant democratic organization Dallas County preferred to take when they will take all election. They have not sponsored that as their reason in their subsequent briefs. We talked about the board procedures in our briefs and we did deal with it, not because we want to go behind the board or not because they want to indite what they did because they did it on a sloppy manner but because it points to no rational state policy that underlies this very crucial decision in terms of how people are going to be elected in a county, the size of Dallas. 500,000 registered voters in that county to which any person who seeks to be elected to the legislature must somehow communicate. The last general primary election in Dallas had 68 races on it, 3+ congressional seats, 3+ state senate seats and a submerged 15 member legislative delegation. Results of this rather whims or goal if you will, if not penal decision with respect to Dallas of course is to isolate the black minority of that city which has suffered a traditional isolation that this record speaks to quite strongly and just simply and intolerable bind, there is no relief. Texas remains a one-party state, this is not a situation such as Indiana in which conceivably the explanation for the under-representation of the ghetto was winning and losing elections in November. What happens in Texas is, you win or lose in a Democratic Primary, the Democratic Primary is a majority place system that means and order to obtain the nomination, you must -- if you are a black candidate, ultimately be pitted vis-a-v a white candidate, in a county in which racial segregation, discrimination has still been the order of the day, granted it diminishes, but as this record establishes, it diminishes rather slowly. What this record further shows is that the dominant political organization of that county, the DCRG, when circumstances require and their candidates are threatened by a black candidate or by a candidate that has the support of the Negro minority, they simply try out the old game of race in order to win. In 1970, two candidates made it into the run-off, Democratic Primary run-off against the DCRG candidates, the DCRG being a private sort of modern day chambered association, of course we are concerned. In that run-off, the DCRG mailed to some -- the white voters of Dallas County, literature saying ?Black voting tactics will take place in the South Dallas, the Negro area of Dallas. If you don't get out to propose him vote,? and it said the philosophy of these candidates is best described by being close. One of the candidates was white, in the previous year, he had sent out a mailing for a biracial voter registration activity. It was this philosophy that the DCRG, which runs Dallas County politics concluded, was the most effective way to appeal to the voters of Dallas County and it was quite effective. The other two they used, they simply used a picture of the black candidate, contrasted with his white opponent. It was quite effective as I say in the black precinct of Dallas, these candidates, white and black got 90% and 87% of the vote. They were obliterated in the white precincts and were defeated very sizably. Now, that's the reality, the political reality this record establishes, as we say if the black minority of Dallas County establishes -- it fostered as we see it by other factors. The massive size of the legislative district is such, there is simply no way that a candidate can address himself to that electoral without enormous finance, the record rangers estimates to run a state legislative rates from anywhere from $60,000 to a $125,000. This means that only if a candidate has that kind of finance, could he ever even expect to receive individualized consideration in the rate as a legislative candidate. The affect of it has been to really prevent the emergence of a two-party system in Texas. The record, although it maybe a little shocking, but that's what the record is. But the Republican Party in Dallas has been unable and unwilling to mount serious legislative races in November, simply because the financing is beyond their means. So, what we have is again, a one-party system, terminations being made in the Democratic Primary and a majority place system and a primary that continues to be dominated by a white alagarky that has not permitted black participation. Speaker: Let?s assume for the moment that the validity of the entire state plan is here, assuming the jurisdiction of the issue, the District Court upset the entire plan based on three things. One, variation -- David R. Richards: Deviation, just straight deviation. Speaker: Now, did that variation on the numbers reach, Harris, Dallas and Bexar Counties -- what is the motive when the district issue had not been here? David R. Richards: The deviation of the two major districts, Harris and Baxar was not sinful to the court's decision on deviation if I make myself clear. The way the deviation was calculated in those two counties was simply the binding number of legislators -- Speaker: Tell me about some parts of the plan were invalidated solely on deviation? David R. Richards: Some parts were, but not those parts dealing with the multimember, single-member district issue. Some parts of the plan, I don't think is purely deviation. I think -- if I read the court's opinion correctly, what we have is the state's sponsor and explanation, a county line explanation is being the justifications of deviation, but once you go behind that explanation and look to the plan, you think it just don't make sense. Speaker: I understand, but now on the multimember district rational, that was because Harris was divided and the other metropolitan areas were or were not? David R. Richards: Yes, it was, indeed there are two strings to that I suppose, the irrational that why could Harris leave Dallas and Bexar at-large with no appropriate reason. Two, the effect to that is the leaving of those two at-large was to minimize, dilute or press the minority voting. Those two -- Speaker: But, there are other metropolitan areas that had multimember districts and they didn't touch those. David R. Richards: -- and that's I suppose a shortcoming on the part of plaintiffs. This case was tried in -- Speaker: No, but that was because there wasn't any finding with respect to racial -- David R. Richards: There was no evidence offered a findings made with respect to racial impact as regards the other multimember districts in the state and the reason was and it is in record of this case was put together in trial number, compressed period of time and we stated very frankly to the court, we are not conceding are like legitimacy of the others, but we simply could not muster the proof in a time frame in which will operate. Speaker: Other than the racial item, the District Court would have contemplated handling all metropolitan areas the same one way or another, absolute racial? David R. Richards: Well, they didn't do that and they didn't -- I am not sure. Speaker: But conveniently they would have -- David R. Richards: That may or may not be a fair construction of the opinion. I suppose they would have -- no, I suppose they truly would have any of the evidence came forward in terms of racial or ethic discrimination, quite clearly yes, they would have considered. Whether they would have in absence of such evidence or findings implemented single-member districts, I can't -- Speaker: Now that -- left existing, what they said wasn't rational. David R. Richards: Well, right and we might have believed -- it all can, I suppose we would be back to the court saying, you want to cut the rest of them all, I know we are not dishonest with the court, but they didn't do it, the contentions weren't there and how they would react if and when we have to, we were back in court making that contention I can't tell you. But there is -- at least let me say, that there is a difference in my mind between a multimember district that let's -- of a county of a 150,000 elects in two legislators and a multimember district of a million for electing 18, simply in the capacity to isolate the minority then this inertia alone is a force it seems to me when it comes that size. William H. Rehnquist: Would you refresh my recollection, Mr. Richards as to how many representatives Harris had, how many -- David R. Richards: 23. William H. Rehnquist: Harris had 23, Bexar had how many? David R. Richards: 11, Dallas, 18. William H. Rehnquist: Dallas, 18. David R. Richards: And one of the ideas, I guess in the plan was that in Bexar County, one of those candidates may have at-large and presumably all operating pursuant to state policy of preserving county lands, probably the Board for some reason cut a piece out of Bexar County, attached it to a rural district for no reason that this record will explain, it were from the deviation as a matter of fact that would have been resulted, had have been left intact and I suppose it was whimsical things of this nature which caused the -- capricious, I suppose is a better word, caused I mean the Lower Court defined that there were simply no rational purpose underlying this plan, clearly no rational purpose as far as the at-large representation in the urban counties or stated the other way, the at-large representation in the urban counties, in no way fostered a state purpose that was urban county lands, indeed of the eleven counties in which they were left in large, eight of them were actually cut their county lands and portions of the county removed and allocated to other districts. Warren E. Burger: Something you said, it comes me to ask this question and I'll try not to take too much time for that. Suppose in a large county like Harris, it was demonstrable that there was no racial problem at all, but that republicans were concentrated in certain areas and democrats in the larger areas and that the democrats in an at-large situation could dominated in definitely, electing all of their party members, do you think that gives rise to a constitutional problem? David R. Richards: The court below did not think so, refuse to find some although that intension was right. Warren E. Burger: Is this part ever indicated that there is a constitutional issue in that kind of situation? David R. Richards: Well, there is an dictum in at least certain opinions of this court suggesting that if the plan diluted as I have called racial or political minorities that it might be inbounded on the protection policies, if not so held as I understand. Warren E. Burger: That hasn't been held. Suppose the Catholics for example were concentrated in one area and non-Catholics of all kinds in another. Would you say that gives rise to a constitutional problem? David R. Richards: If there were historical exclusions in Catholics from a franchise and from every aspect of life in that committee I would say ? I would just like so. Warren E. Burger: I am not assuming any of that, just arguing them -- David R. Richards: We are not here arguing that, we are not here arguing, I don?t mean suggest that we are that only blacks can represent blacks and only Catholics can represent Catholics or that there is an entitlement to a representation of a sort of vertical of somewhat of my like kind. It would simply arguing that this system on this record establishes the kind of dilution that this court said it would invalidate when it's solved. Warren E. Burger: Some of this religious hypothesis that I gave you. David R. Richards: Conceivably it provides the dignity of the constitutional -- Warren E. Burger: I assume it's a reality that people who are Catholics tend to ? want to live in areas where there are Catholic Churches or if they are none to build them and so, it's not surprising if they happen to be concentrated, is it? David R. Richards: I don?t think such concentrations certainly do exist. Warren E. Burger: But you have seen all constitutional -- David R. Richards: Well, I guess I have not seen -- I have seen none and I simply see that I don't have to carry that burden, I think in this period. Warren E. Burger: No, but I am not trying to see how far this problem of dealing with abstract minorities is carried? David R. Richards: Well, because we are dealing -- at least we feel we are dealing with a precise minority that comes in a context that we think demonstrates how it can be submerged -- Warren E. Burger: The court has used the term Identifiable Minority. David R. Richards: Yes, and I think -- and Texas identified that minority by statutes, by its practices and policies for a number of years and it's just finally beginning to see so that if -- having identify the minority, I suppose they are stuck with it. Thurgood Marshall: In the Dallas County, has there been any racial discrimination in voting of any kind in Dallas County since April 14, 1944? David R. Richards: If you mean Your Honor -- well, if you mean, the record which shows that in 1956 there is testimony that black voters presented themselves and propose in a Democratic Primary in Dallas until they could not vote there. I would not suggest to you however that that has been the case. I think the case has been -- the poll tax, the case has been the substitution for poll tax, the angle registration system. I think the record will show other factors which in fact did detour black voting. Now, I think the poll tax being the most clearest -- the clearest one in that case. But physical intimidation, we did not argue the physical intimidation of black voters. Thurgood Marshall: Well, then they have been voting since April 14, 1944. David R. Richards: Mr. Justice Marshall, I am simply not informed that it has been -- I am not informed. I am sorry sir, but this bring out -- Thurgood Marshall: I am just trying to get the statements you said in an atmosphere there where there had been racial discrimination in voting and you put Dallas in that category. David R. Richards: I am sorry, if I said it in that way, I guess I meant -- in voting I don't know, I meant racial discrimination, blacks in Dallas were segregated by law, well into the night, the decade or the 60s or the 50s, and by practicing of the 60s. I did not mean to say to you that -- Thurgood Marshall: I don't remember correctly that Dallas segregation ordinance was thrown out in the 1940. David R. Richards: I participated in stand in Dallas in the mid 1960s. Thurgood Marshall: (Inaudible) ordinance David R. Richards: No, I guess the policy, but we still had segregation in the jail, we had segregation in the Dallas County jail as recently as three or four years ago. The record will show there's still black and white drinking fountains in the county courthouse up until four years ago. Thurgood Marshall: Well, we might apply this rule in every state and every segregated jails. David R. Richards: Well, thank you. Warren E. Burger: Mr. Idar. Ed Idar, Jr.: Mr. Chief Justice, may it please the court. Pursuing the matter that has just been raised I think that for our part we would like to stress that we conceive the right to vote has going far beyond nearly casting a ballot, marking it in custom and this court has so held and our position here primarily as to Bexar County is that because of certain statutes in Texas. Our minority in Bexar County has been totally submerged. Now, I would like to point out that the lower court found that race is still an important in Bexar County and because of it Mexican Americans were frozen into permanent political minorities destined for constant defeat of the hands of the controlling political majority. Now, I will emphasize that this is a finding made by three judges who have spent their entire life in Texas, one of them being Judge Wood from San Antonio. Now, I would like to stress on the multimember district issue that as far as a Legislative Redistricting Board where he initiated his work on the House Redistricting Plan, it expressly had before it certain cautionary language on the part of the Texas Supreme Court in the case of Mauzy v. The Legislative Redistricting Board which is the one mandamus the board to redistrict the house. The Texas Supreme Court who presumably is familiar with the democracy of our state, of our municipalities, our metropolitan areas of the distribution and concentration of the minority groups expressly stated as follows. In exercising its discretions as to whether to create multimember districts within a single county, we must assume that the board will give careful consideration to the question of whether or not the creation of any particular multimember district would result in discrimination by minimizing the voting strength of any political or racial elements of the voting population. Now, I would like to point out to this court that it is on the record that from 1880 to 1970, there were only five Mexican Americans have been elected to the Texas house, one of them in 1890, four of them since 1961. I would further stress that between 1960 and 1970 and this is part of the record and it is un-controverted. Out of a 133 races in the Democratic Party primaries, only 22 were entered by Mexican Americans and of course as I already have stated, only four were actually elected during that period. Now, from the particular area where the Mexican Americans concentrated in San Antonio, which is on the record as 28 contiguous census track area, only four candidates win from that area between 1960 and 1970, two Mexican Americans, one Negro, one Anglo-American. Now, I can not overstress what Mr. Richards touched upon and that is the size of the multimember districts that we are dealing with. Bexar County 830000 and 460000 population the city of San Antonio 654000 is larger than seventeen of it a 132 countries in the United Nations. It is larger than the combine population of four of those countries. It is larger than 11 states but elect 22 United States senators. It has an land area larger than the state of Rhode Island. Now 1246 squared miles, it is larger both in land area and population than the State of Columbia. Four senators are elected from States that have a total population less than Bexar County. Speaker: And the Bexar, you could either -- you will touch upon the suggestion made by your opposition that the one of the reasons is the Mexican Americans don't turn out to vote. Ed Idar, Jr.: They don't vote. I think we have to ? that?s where the racial history of our state counseling to play Your Honor and I would like to stress up. Since 1966 through 1972 we have had 6 Federal Court decisions dealing with the political, with the electoral system in Texas, five of those between 1970 and 1972. The poll tax was set aside in 1966 the excessive filing fee requirement in 1970, the six months residency requirement 1972. The over increased cities and small town in South Texas and local city charter provision requiring property ownership for election to city office was set aside by a single judge or District Court. In the case Archer V. Smith in 1971 the certain provisions in the Texas electoral court denying the right to illiterate voters to have an election judge help to mark the ballot was set aside on the grounds that that seem right was not denied to blind or physically disable olds. Now when I touch upon a literacy in that case, I must point out that persons may be illiterate in English or not necessarily illiterate persons because they do speak and read Spanish and they do follow Spanish radio and television and they do have the means at hand to form political judgments. We have had in addition to that, since 1971 three decisions having to do with Jury service, the denial of opportunity to serve on juries and we have seeks decisions is 1970 dealing with education, one of them is now before this court which is one involving the Rodriguez case in the Independent School District in San Antonio on school finance. So, in reply to that question why don't we vote, we need to assess a situation of the Mexican American actually has developed in the history of this country. A slate 1972 we cannot wipe all of this hindrances and then overnight inspect the injured group to be able to compete on an equal fooding with those people who have never been hindered and when you throw them into the type of multimember district county that we have where they have to compete in an area of over a thousand square miles or they have to appeal to an electoral that is close to a million voter where they have to raise a finances and I am not minimizing the fact that the record in our brief make some profuse references to economic, educational, in any number 4 to 5, that has be adverse to the Mexican American population. We cannot equate numbers simply with the denial of right. I think in minority constitutionally those have define purely on the basis of numbers. So my position is, our position is that because of these hindrances true, we don't hold to the extent that other people (Inaudible) also incidentally I forgot to mention that I know the part of the record is that the Anglo American population in Bexar County we vote on a ration of 6:1 to 9:1 against Mexican American candidates. I might further pointing out that I said result for the single member district that were in post on the Counties where order for the county by the Trail Court. At the time the case was tried out of 10 representatives on Bexar County to the State legislature. Nine were Anglo-American and none was black or Negro and none was republican and only one was mixed Mexican and Anglo-American parent. Today as a result of last year selections there were four Mexican-Americans, one Negro and two Republicans in Dallas County. Today we have three -- Byron R. White: And (Inaudible). Ed Idar, Jr.: Of course the Mexican-Americans and the black or Negro over them or blacks. Byron R. White: What are the common issues or that?s all the evidences, what do you think? Ed Idar, Jr.: That is eleven. That would make a democrats I am sorry, 10 democrats because there is only two republicans were elected -- Byron R. White: Yes but there were four Mexican-Americans? Ed Idar, Jr.: One black or Negro and two Republicans. Byron R. White: So it is five out of the eleven where Mexican-Americans were Negro? Ed Idar, Jr.: Yes, yes Your Honor. Byron R. White: And is that what is you would expect out of single member district out there? Ed Idar, Jr.: Not necessarily because we have recognized that a single member district is no millennium, its not (Inaudible). Byron R. White: I suppose that you probably had a pure and maximal head count majority in other single-member districts? Ed Idar, Jr.: In some of them yes, Your Honor. In other -- Byron R. White: Again your, your failure directed to both (Inaudible). Ed Idar, Jr.: Being the once or no Mexican-Americans were elected, I don't know that we had any Mexican-Americans running in any of those other races. I do not believe it so Your Honor; I think they were mostly concentrated in those districts where they felt they had an opportunity whether or not they had a substantial majority of the vote. What our argument here is not that we feel entitled to representation as such. Our argument is that we are entitled to participate to an opportunity to compete. Not to be counted out by the cost of running an election, the cost of campaigning, the area in which we have to campaign by the attitude of the people or the opposition. I might stress a fact that as far as Mexican-American is concerned, there is no need to circulate campaign literature showing what it looks like because his name makes it put a self-evidence on the ballot and you don?t want to vote for Mexican-American, all you have to do is look the name on the ballot and you do not have to read resort to overt methods of racial methods say for hiding black as your opponent. I would like to make preference to one stipulation that was referred to this court and that is that the stipulation is on record that nobody has been denied the right to register and vote. I have already stressed that we feel the right to vote goes far beyond just to right to register and vote, but I would like to stress this stipulation relates only to the name plaintiffs in the law suit. Now we are not making and we are not hinging our case on denial of the right to register and vote. We are hinging it on the fact that we have been submerged totally in this tremendous multimember district. I wanted to stress the distinction between this district and Virginia in the Mahan case. Fairfax County, 455000 population, 10 representatives and the legislature there as this Court has stated in its opinion, expressly went out of its way, not to fragmentally but so simply divided. So as not to wind up with too large a multimember district, they wind up with two fine member districts. In contrast to that, we have Bexar County with 830,000 population, that?s almost twice the size of Fairfax County and with that I would like to thank the Court and allow Mr. Gee. Warren E. Burger: Thank you Mr. Idar. Mr. Gee, the arguments seems to be made as I am following that a minority, any kind of a minority is entitled to have the area structured, so that it can get the maximum amount of representation without respect to whether they do or do not register the voter is denied -- Thomas Gibbs Gee: Correct yourself Mr. Chief Justice that is not our position, our position is that any minority except perhaps a political ones such as I represent is entitled not to have the area structured so that they do not have a fair opportunity to participate. We claim no right to any special preference. May it please the Court, I would like to respond very briefly to a question which was asked by Mr. Justice Stewart of Colonel Jaworski, as regard to the state policy, the Trail Court noted at page 21A of the appendix that jurisdictional statement, in there a trial brief the state asserted, this is the trial brief, may it please Your Honor in the Kilgarlin case and their trial brief state asserted that the explanation to the different treatment of Dallas and Harris Counties was that whenever the county attained a million resonant, it was allocated 15 legislatures and so. I would like to respond to one other suggestion made by Colonel Jaworski and that is that Dallas was mulitimembered because of the desires of the citizens there. This record makes in amply clear, that the desires of the citizens there taken by professional and disinterested pole hich testimony was before the redistricting court where two or three to one in favor of single member district and that in fact of the desires of the people in Dallas were not at all for the multimember point. The Court will find that in the record, in the testimony of Mr. Robertson at page 964 of the record. Now it falls to me, may it please the court to attempt a handle in very short time and quite a few sayings and I am going to attempt to moving on rather quickly. Byron R. White: And here ? what about jurisdiction? Thomas Gibbs Gee: I intent to say word on that and I will commit. Byron R. White: Jurisdiction if you talk about the early and as the case it would be -- Thomas Gibbs Gee: Customarily Mr. Justice White it does, I will attempt to deal with that right now, and in the past this Court has word shortly is the expert on its own jurisdiction. This matter has held at the three judge court as in Moody v. Flowers or in the new last case must be properly constituted but I pleading asking for an injunction having state wide influence. Byron R. White: Do you challenge the legitimacy of this Three-judge court? Thomas Gibbs Gee: No, not at all, not at all Mr. Justice White. Byron R. White: So there was properly constituted at Three-judge court? Thomas Gibbs Gee: There is no doubt of that Your Honor. Byron R. White: And only question is whether there was injunctive? Whether the deterrent that that would (Inaudible) jurisdiction? Thomas Gibbs Gee: Mr. Justice White in the Gunn case. In the Gunn case this court held where the injunction was not evidence, even though the Three-judge court was properly constituted that this court did not have jurisdiction. Now, it is only step from that to a holding that the court's jurisdiction is not appropriate in this case where an injunction which is now, which applies only two counties in Texas. Byron R. White: You do not have any authority for that. Thomas Gibbs Gee: No sir, we have no authority whatsoever but I suggest that by melding of what the Court has held in the Moody and in (Inaudible) with his decision in Gunn. Byron R. White: Does that what you says an injunction? Thomas Gibbs Gee: I am aware of that Your Honor however I would like to point this out to the Court to find -- Byron R. White: -- you are dealing jurisdiction question raised in. Thomas Gibbs Gee: Yes Your Honor. Byron R. White: Let's assume there is an injunction, let's assume that we just agree with you and said that there was a jurisdiction have what? Thomas Gibbs Gee: Of the injunction which applies to Dallas county and Bexar county Mr. Justice White I should say. Byron R. White: And you would say that you would not have jurisdiction that would not extend to reviewing the judgment of the court with respect to the variations. Thomas Gibbs Gee: I would not wish to say that the Court's penalty jurisdiction would not extend in there Mr. Justice White. I will say this however, if the Court intents to hold that now that the procedure device of a alleging a claim for state wide relief wide relief and perhaps contending for only narrow injunctive relief. A complainant can place jurisdiction in this court whether it will nor not. Then the Court's jurisdiction likely to be widely extend. I would suggest that if the relief sort here had been in Dallas and Bexar counties and release, the relief sort had been granted then we would have precisely the Swann case as regards the practicalities of the matter at this point. It is not the seeking of relief having state wide impact which calls for immediate review by this court; it is the granting of it and the disruption of the states process which is incidental too. I would like to say a word about Dallas County, time is very short but if it is been said that the court has long been troubled, it seems to me by the tendency to submerge minorities which is inherent in the size of multi-member district. Connor v. Johnson notes that the several member districts is the preferable model and Whitcomb against Chavis, the same note is made and even earlier in the Lucas case way back in 1964. The Court realizes that the larger the district gets the more invidious, its effect are. Now here we deal with the largest districts known to exist in the entire country and as Dallas is number one, may it please the court Bexar County is number two. At the time of the trial and Heaven knows what it is now, Dallas had 1,327,000 and 5,00,000 registered voters. Dallas was larger in population than 15 states. 30 United States senators are elected from constituencies which are smaller than that to which Miami wants to set in the Texas House of Representatives from Dallas, Texas after run. Now I submit that this situation is toggle, it might have been otherwise this is not the case as a great wide open space is of West Texas where you have to take in a great deal of land in order to get an ideal district. This is something which could have been and should have been otherwise and would have been but for the board and it plan. Bexar County as describe by (Inaudible) is much smaller, it is smaller it's not quite a million people. It's larger than Rhode Island, 8, 30,460 people. This is still a bracket which is fair sized I submit. Well, if this district, may it please the court, for instance First and Fourteenth Amendment muster then any will, any in the country and the courts concern with multimember districts with the size of districts is over until Dallas reaches two million or three million or whatever within a short period of time. If such a district, as this, may it please the Court, the record shows that although the state law forbids it, the voters had to take cheatsheets with them to the poll even to remember who is what that they wanted to vote. It shows that you can?t get the number of candidates who are on the ballot on the standard voting machine, there is not enough room. It shows that even the chairman of the DCRG, the dominant political sub party in Dallas when he was asked before legislative committee to name the 15 democratic legislators from Dallas County, he was able to name only and that appears on the record as well. William H. Rehnquist: Mr. Gee, supposing Dallas county where a 100% White or 100% Negro?s they didn?t have any racial question, would you say there is a constitutional claim simply on the basis of the facts that its created as a multimember district? Thomas Gibbs Gee: Mr. Justice Rehnquist, I would. I would because Houston, which is 200 miles down the pike, has got, if I want to run for the legislature and Huston I can run to 75,000 people. William H. Rehnquist: But would it be an equal protection claims? Thomas Gibbs Gee: Yes, yes. William H. Rehnquist: Well supposing the Houston, supposing Harris and Bexar and Dallas are all multidistrict types of places. So there is no equal protection claim, would you still claim there is any constitutional deprivation? Thomas Gibbs Gee: I do, I think it would be very bad policy to have district of that size, Mr. Justice Rehnquist but it seems to me that it is the desperate treatment, the selection of different systems that represented the government in Texas which raises the equal protection question. Warren E. Burger: In your view how many people should be in the district for the state legislature under the constitution? Under the federal constitution, how many people assured to be in the district? Thomas Gibbs Gee: That?s very clear sir. Warren E. Burger: I am not talking about the federal I am talking about state legislature. Thomas Gibbs Gee: Well, between 74,000 and 75,000 people Mr. Chief Justice that?s all we can do. Now there is ? the Chief Justice referred to the multimembered district? Warren E. Burger: I am just talking about district, take your chance? Thomas Gibbs Gee: Mr. Chief Justice I don?t know what it would be but I am satisfied that it is actually less than an million and half. It seems to me that this is out of all reason; it seems to me that it is under the Chief Justice, and the opinion written by the Chief Justice in Bullock v. Carter. We have in Raymond, the (Inaudible) against the Court or under such instance in this record shows that you can not run it effectively in the district the size of Dallas without going to television and radio and that in Huston you can, you can campaign on posters and so on. Potter Stewart: I just saw, Mr. Gee going back to my brother Rehnquist questions, that you were making the argument that in the district as big as Dallas, quite apart from how the state treat Houston and quite apart any racial discrimination that you are making the basic argument in a district as big as Dallas it violets the constitution have multimembered districts, aren?t you making that issue? Thomas Gibbs Gee: Mr. Justice Stewart, I certainly have and if I will answer your question that I was not -- I beg you Mr. Justice Rehnquist pardon. Thurgood Marshall: Would you like to tell me what section of the constitution you are talking about? Potter Stewart: The equal protection clause. Thomas Gibbs Gee: Yes. Thurgood Marshall: Is that what you are talking about? Thomas Gibbs Gee: Yes I am sir. Byron R. White: In spite of Whitcomb v. Chavis? Thomas Gibbs Gee: In spite of Whitcomb v. Chavis and because of Bullock v. Carter Mr. Justice White. Now I would like to say one last word on the subject of the Mahan v. Howell which was just been handed down and in which I think no argument on this dictum in this regard. In Virginia a 16% variation was upheld by this court because Virginia had decided to let these counties pass its legislature pass local legislature as I understand the courts opinion. I would like to point out then under the Texas constitution the legislature not only is not authorized to pay us local legislation under Texas constitution, the legislature is specifically forbidden by local legislation. Article 3, section 56, the Texas constitution state, the legislature shall not except as otherwise is provided in this constitution pass any local or special law authorizing regulating the further counties, cities, town, board or school districts locating or changing county seats in cooperated city, towns and so forth creating offices or describing the powers and duties of offices. William H. Rehnquist: Does the Texas legislature ever passed laws dealing with all cities having populations over a million or over a million five hundred thousand, are they sustained by the courts? Thomas Gibbs Gee: They aren?t in some instances Mr. Justice Rehnquist, we call this back at legislation and this is the main whereby the legislature attempts to get around this provision. Now, some times they are at the brackets are broad enough and whole legislation was closed brackets which says settings on so and so population in generally not substantive. It seems to me that this is a valid distinction between Mahan v. Howell if county legislation was done by the Texas legislature, it is certainly done in the dark at the moment and it is frequently invalidated by the Texas Supreme Court. Further Texas, now unlike Virginia as I indicated by the courts opinion has not consistently fallowed the state policy of respecting county line. In Smith v. Craddick the Texas Supreme Court felt them strain to invalidate a legislature plan enacted by the Texas legislature or which disregard county and it has not, may it please the court done so in this case where 19 counties are could, I am confused by the reoccurring statement that only one county is divided. The record is clear that 19 counties. William H. Rehnquist: Out of how many? Thomas Gibbs Gee: Out of 254 Mr. Justice Rehnquist, 19 counties have been got and four them have been exploded, cut into three pieces in the defiance of the Texas supreme court mandate the in Smith v. Craddick. Speaker: How many counties in Texas? Thomas Gibbs Gee: 224 obviously your honor. Potter Stewart: The statement is that, that only one small county has been invaded and either that?s threw me off too it means that only one of the 19 counties that was invaded was the small one? Thomas Gibbs Gee: I think that?s what it must be, or it sometimes described in the brief as as rural by Mr. Justice Stewart. Warren E. Burger: Thank you Mr. Gee. Mr. Jaworski, you have some time left. Leon Jaworski: Mr. Chief Justice may it please the court. On the jurisdictional question I think it perhaps the questions that have been asked by a members of the court who have brought out the basis on which we argued the matter of jurisdiction and I would merely say to the court that we have cited in our brief that the cases that are applicable, we also have undertaken to show to the court that the cases on which the appellees rely are not applicable. Actually, what has been done here has a state wide impact. Byron R. White: Does the state take the appeal from the Court of Appeals? Leon Jaworski: No sir, no sir. What happened was that a part of the appeal, you may recall, this court entered a judgment, the appeal that came from Harris County and they remembered that the court entered a judgment dismissing that part, not for lack of jurisdiction but for other reasons. In any event, this has been fully briefed, I don?t think that I need to take the time of the court. Actually, I did not see because the rule first that this actually had a state wide impact but secondly, also the pendant jurisdiction rule; I had not taken the time to really argue that for the court and the original argument. Now, passing on to something else and Mr. Justice Stewart did ask me about the history with respect to Harris County and it was that history with respect to Houston, Harris County that I undertook to say I was not fully familiar with. The history as to Dallas County has been one consistently of multimember districts but as far Harris County is concerned, I answer that they were floterial districts in 1965; there were three multimember districts in 1966, five multimember districts in 1971. Now, this is the history as the record shows it to be. I merely pointed out because Harris County did have some history of some multimember districts. But it also has a history that really shows more that there has been a division and when we speak of polls, for instance, in Dallas County in connection with the matter of polls, I think we get into some difficulty because the polls as we know, if they are going to be polls relate to how well a candidate is running, they may have some inaccuracy but I wasn?t referring to polls, I was referring to what had actually been requested to all of the representatives of the people and the record shows this. The legislators had been known the wishes with respect to what they wanted in Harris County and also what the situation was as desired in the other counties. Now, with respect to the matter of policy, actually I don?t know where the idea got into the record that there had been any state policy with respect to the matter, Mr. Justice Stewart, that was raised a question you referred to where 15 district matters arose. What actually happened was that the limitation was never offered in a state policy at one time, the House committee on congressional and legislative districts had felt that multimember district should be somewhat limited in size because of the voting machine problem. Now these changes in the voting machines and the difficulty of getting them and the difficulty of their cost and placing so many of them did raise a question but this was largely done to accommodate a new change that had been made in the voting machines. The limitation was never offered as a state policy as this record will show and there is no indication as I read the Kilgarlin case that the court assured or was assured that the limitation would be continued in future apportionment plans. This is just simply something that we find unable to follow completely. Then when we speak of single-member and multimember districts or single-member districts throughout the state, there?s an interesting Texas Supreme Court case which we have referred to in our brief. It?s the Mauzy case as we also referred to it and they are in the Texas Supreme Court refuge to grant the relator?s request that the board be ordered to use single-member districts throughout the state. And you?ll also find in the Smith versus Craddick case decided by the Supreme Court of Texas that there is absolutely nothing found, and this is the Texas Supreme Court talking about multimember districts itself as they found that in any part of the state, there was an unfairness with respect to the matter of multimember districts, I think they would have said so. Consistently, there has been nothing along that line intimated. Now, on Bexar County I just want to again say this, may it please the court that what the court said in effect of the trial court is we are condemning it not because it operated to dilute or cancel the votes cast by the Mexicans-Americans which I think is the test that we all want to apply. Here what the court said in effect is we believe that this way, in the hypothesis and the reasoning of the court applied, we believe this will encourage more Mexican-Americans to vote. Well, of course, we cannot accept this in the test as a fact theory and then determining the constitutional issues that are before the court here. Yes sir. Thurgood Marshall: I still have problem between Dallas and Harris County as what I want is single and one of the most ? I still have trouble with it. Leon Jaworski: Well, I can just say this to you. If I saw anything in the record at all, anything that showed that it was done as a result of doing more than just seeking to comply, with what the legislators had said they thought was appropriate in those districts, then I would have some trouble with it too. But I find nothing. Thurgood Marshall: They could have just as easily tell Dallas single-member district, just as easy because of it? Leon Jaworski: They could have, yes. I mean except, unless you get on some very (Inaudible) some very great refinements which very frankly I would not even suggest although you do have a difference in size. You do have some difference. You would find it perhaps more acceptable in Houston than you would in Dallas County. There is a considerable difference in the size of the two. There is a considerable difference in the way the two metropolitan areas actually lie. One is much more compact than the other one. But all I just have to frankly say that if there were anything here that suggested that it had been done for the purpose of diluting or canceling strength of any group, I would immediately say that there was a serious question with respect to it but you just will not find that in the record. This is why I say that there is nothing, absent something that cast down upon it or that shows that it was done for some ulterior purpose or that there is some lack of good faith involved. I would say that there is nothing to keep state from having both multimember and single-member districts and some of its localities. I thank the court. Warren E. Burger: Thank you Mr. Jaworski. Thank you gentlemen. The case is submitted.

Earl Warren: Number 6, Oleta O'Connor Yates, Henry Steinberg, Loretta Starvus Stack, et al., versus United States of America. Mr. Margolis. I beg your pardon. Yes. These -- these three cases are all together, Number 6, 7 and 8, that's -- Ben Margolis: That is correct, Your Honor. Earl Warren: -- insinuation with Mr. Margolis. Felix Frankfurter: May I ask you? Whether you're alone or your associate -- your associate will argue? Ben Margolis: No, each of the cases will be argued separately but they are consolidated. They have been consolidated by the Court for a single -- appearing a single argument, as I understand it. Earl Warren: Yes, that's correct Mr. Margolis. Felix Frankfurter: How many arguments? Three, four, how many? Ben Margolis: We will have myself, Mr. Kenny, and Mr. Donovan. I am arguing case Number 6, which involved 11 of the petitioners in the case. If the Court please, this -- Felix Frankfurter: Let me get around this early, would you mind stating what identity, what differences there are in the three cases that are consolidated that you're arguing, when you get around this Mr. Margolis for overtime. Ben Margolis: There are no -- I will state right at the outset, Your Honor that aside from some evidence with respect to individual acts or statements of individual petitioners and aside from differences with respect to their position in the Communist Party, there are no substantial differences among these petitioners. Felix Frankfurter: The only difference is of the (Inaudible) Ben Margolis: Aside from (Voice Overlap) -- Felix Frankfurter: -- (Voice Overlap) this argument, that those -- Ben Margolis: -- aside -- aside from the fact that there are differences as to individual statements attributed to the petitioners, differences as to their positions held within the Communist Party. Felix Frankfurter: But the main attacks or common attacks? Ben Margolis: I believe that is correct, Your Honor. However, counsel may disagree. This is the first Smith Act case of course since Dennis that this Court has agreed to hear. I think that the Court should know at the outset that the indictment in this case, names all of the defendants in the Dennis case as co-conspirators with the defendants in this case. The theory of the respondent has been at all stages of this case that the conspiracy charged in this case is identical with the one in Dennis sustained by the decision of this Court. It might be wrong then at the outset to consider to what extent the facts in this case and those in the Dennis case are similar than to what extent they're differ. There are, in my opinion, only two facts common to both cases, two general facts.One is that in both cases all of the defendants were admittedly members of the Communist Party. No issue in Dennis about that and no issue here. The second is, that in both cases essentially the same books, the so-called “Marxist-Leninist” books were introduced into evidence and essentially the same passages from those books are relied upon by the respondent. I believe that there is no other fact of consequence that is the same in the two cases. The differences are numerous as a comparison of the findings in Dennis remembering that the Court did not pass upon the sufficiency of the events on that case, but accepted the findings of the Court of Appeals and acted upon them. So we take a comparison of the findings in Dennis with the record in this case where the Court has agreed to review the sufficiency of the evidence. In Dennis, it was found, and may I say at the outset that the Court said in Dennis that these findings were essential to its decision to the finding that the statute as applied was constitutional. The first finding is that the petitioners were the leaders of the Communist Party of the United States. That they were all members of a small, compact, top governing body. This was charged in the indictment. This was the undisputed evidence. This -- they were all members of the group known as the National Board of the Party. None of the defendants, none of the petitioners in this case are or ever were members of that body. During the period within the statute of limitations of the 11 petitioners who I represent, only four -- first of all not a single one of them held any national position, not one. Only four held positions as officials of the state organization, the California State Organization of the Communist Party and they were members of the state committee of that Party. Of the remaining six, there is evidence that two others, on some occasions, attended meetings of that state committee. Of the remaining petitioners, five held offices and the highest level of which was the county. They were county officials in the County of Los Angeles or County of San Franscisco. Two never held any officers above a city level. And whereas in Dennis, there was the common relationship between all of the defendants in that case by reason not only of their common membership on the National Board but by reason of their acts as found, as members of the National Board. In this record, there is nothing showing common activity on the part of these petitioners at least in the same sense, unless that common activity be that they were all members of the Communist Party and as members of the Communist Party independently within the Communist Party carried on certain activities. The Dennis case proceeds also upon the finding that the petitioners on that case, and I believe these are the words used by the Court, were unwilling to work within the framework of democracy. I am not here discussing the sufficiency of the findings in Dennis, this Court didn't. We must assume for the purpose of the argument that they were supported by the record and this Court did. Here, the record is replete with statements of support for, and work, and plans all within the framework about democratic process relating to legislation, relating to running for office, relating to discussion of various issues which were current controversial issues being decided within the framework of our democratic process with these petitioners taking their part in making that decision, small, minority, and popularism might be. As a matter of fact, a great deal of this evidence. In fact perhaps a major portion of this evidence with respect to the almost total preoccupation of these defendants with their activities within the framework of our democratic process, came from respondent's witnesses and as a result of their direct examination, because of the theory which respondent proceeds on in this case, and that is, that any activity within the Communist Party, according to the respondent, is evidence of participation in the conspiracy. This is a subject that I'll come back to a number of times during the course of my argument. Next, there was a finding in the Dennis case that the defendants there intended to initiate a violent revolution whenever the propitious occasion occurred. Now that finding did not result from independent evidence of intent, but as the decision indicates was a finding which arose out of the other findings of the activities of the petitioners in that case of the Dennis defendants, that is their activities as members of the National Board, their advocacy and the other findings that I referred to here. In other words, intent came as a direct result there of findings of fact, none of which are present in this case, none of which can be supported by the record in this case. Moreover, concededly that intent could be deduced from findings of activities other than those which it was found the Dennis defendants' engagement. But I believe we will demonstrate, I believe -- I believe our brief demonstrates that there is no basis for any finding with respect to anyone of these petitioners resulting from their activities, resulting from their knowledge as shown by the evidence to support a finding of this kind of intent. Next was probably the most important single finding made in Dennis. In Dennis, this Court may remember, the indictment was returned, I believe, some three days short or three years after the reconstitution of the Communist Party just barely in time to bring that reconstitution within the limits of the statute of limitations if in fact the Government intended to rely probably on that. And the finding that was made with respect to these laws, that these defendants, these members of the top governing board, use their control of the Communist Political Association, which has been organized in 1944 some 13 or 14 months earlier as a result of the dissolution of the Communist Party. That they had used their control of the Communist Political Association to change it from an organization which had a policy of peaceful cooperation with the Government of the United States and a peaceful change within the democratic framework of the United States to one which worked for the overthrow of the Government of the United States by force and violence. In other words what they said, this Court said here, here are the small group of men who set down, they control the Communist Political Association, this was a lawful organization engaging in rights, in activities protected by the Constitution of the United States and by their control, they changed it to an organization the object of which was to accomplish the forceful overthrow of our Government. How about the record here? First of all, there is not one word of evidence to indicate that anyone of the petitioners in this case exercised to any extent the kind of control that the petitioners in Dennis were found to have exercised. There is no evidence in this case that anyone of them had anything to do with bringing about such a change. There is no evidence that they denied it. As a matter of fact as I have pointed out, only four of the individuals were even members of the state committee, of the 11 I represent. And there is no evidence that the state committee of the Communist Party did anything to change the Communist Political Association from an organization which believe in peaceful advocacy, of peaceful change to one which worked for the overthrow of the Government by force and violence. Next and this is rather interesting point although I have sometimes been in doubt about its full significance. The Dennis indictment, the Dennis findings were, that the conspiracy was initiated in 1945 with the reconstitution of the Communist Party. I want the finding that the Communist Political Association that fourteenth-month period was not a period when any conspiracy as far as that organization was concerned or anything in relation to it was in action. And as a matter of fact, as I pointed out, that reconstitution of the Communist Party was the key evidence in Dennis. Here, when the original indictment was returned, it was alleged that the conspiracy began in 1945 on the same date that was alleged in the Dennis case. That indictment was dismissed because of the failure to allege intent, and a new indictment was returned some months later. And in that indictment, it was alleged that the conspiracy began in 1940, I don't recall the exact date but it was the date when the Smith Act became effective. The theory of the respondent apparently be, that the conspiracy was in existence for sometime prior to that date but that it became unlawful upon the Smith Act becoming effective. In the Dennis case, it was found that Communist Party was a highly disciplined organization. That the Dennis defendants controlled it and that they would tolerate no dissension from the policies laid down by them, but instead that they insisted that the program be slavishly followed. I say that there is just no proof of that in this record, just no evidence of it. As a matter of fact, from respondent's own witnesses, there appears a tremendous amount of evidence concerning many differences of opinion among members of the Communist Parties, considerable dissension on various issues. It is true that there is evidence showing that the Communist Party exercised this right to expel certain persons from its organization just trade unions and other organizations from time to time exercise the right to expel some of their members. But the significant thing is the basis for the expulsion. They were of three kinds. They were those who wanted to advocate socialism that socialism be established now when a majority of the people was opposed to it, instead of indicating a willingness to wait for advocating the establishment of socialism until such time as it was believed that the American people would want by a majority, by an overwhelming majority to have socialism established. These people who didn't want to wait were the ones who were expelled. Then there were certain informers and spies and their character, I think, has been evidenced by some recent developments before this Court. There were certain informers and spies. They were expelled from this organization as I think they would be expelled from any organization. And finally, there was the expulsion of a person who carried a gun, and who discriminated against Negroes and those were the charges they give. Now if that indicates iron control, then it also indicates the character of the iron control exercise within the Communist Party in California. It was found in Dennis that the petitioners in that case were adept at infiltration into strategic positions. There just no evidence of that here, just none of any adeptness, of any willful infiltration into strategic positions. It was found in Dennis that the petitioners there used aliases in order to cover up their work. There is no such evidence here. It was found in Dennis and this I think is a matter of very great importance. That the petitioners in that case used double meaning language. Now that was predicated upon the testimony of one (Inaudible), who testified that on the basis of his association with the petitioners in that case, he knew that when they talk in favor of peaceful change, they didn't mean it. They meant violence instead. He said he knew them. This was a very important bit of testimony in the reason that it was so important in that case, is that in 1945 when the Communist Party was reconstituted, in 1945 when the Communist Party was reconstituted, it adopted a constitution and that constitution stated that the Party predicated itself upon Marxism-Leninism. And it also stated that it favored the achievement of socialism in the United States through winning a majority of the people to that end. It also adopted provisions for the expulsion from the organization of advocates of force and violence. Now (Inaudible) explained all of these away. He said that was protective coverage. Whether his testimony was truthful or not, it's not before us, but he said this is protective coverage. This people who whined didn't mean this. Marxism-Leninism is the key there. He says, “I know when they used the word Marxism-Leninism, they meant overthrow the Government by force and violence.” And this other language was just been put in there to fool people. There is no such evidence in this case, none whatsoever. There is no evidence insofar as this case is concerned that the Constitution of the Communist Party, when it said that it favored the achievement of socialism by winning the majority to that end, when it indicated, it's our position to advocate force and violence meant anything else to the petitioners than what it said, not one word of evidence. Finally, there was a finding in Dennis that the defendants in that case advocated force and violence by statements and activities of the leaders and by literature. Now, as I will show a little more detail here as much detailed if time will allow, there were no such statements here by any of the petitioners. It is true that the essentially the same Marxist-Leninist books and passages are relied upon in the two cases and to that extent, the two cases are similar. But it is also true that in this case, there is literature of the Communist Party introduced both by the respondent itself and by the defendants in the case indicating that the American Communist Party or at least indicating a position from which it would be possible to conclude very reasonably that the American Communist Party does not favor in fact disposed to the use of force and violence as long as democratic processes are open and as long as our present form of Government exists. And there was an article by Mrs.Yates, the defendant whose name leads all the rest in this case. In which she took issue with a group who recalled the (Inaudible) who were expelled who said, “We want to fight for socialism now”, and in which he said, “No, you can't educate the majority of the American people for socialism. You've got to win them to that.” There was -- excuse me. Speaker: I want to ask you a question. Do you dispute that on the issue of whether the purposes of the Communist Party of California were within the purview of the Smith Act? Do you dispute there was enough evidence to go to the -- to raise a jury question on that fragment of the case? Ben Margolis: Strongly as I possibly -- Speaker: You do. Ben Margolis: -- can, Your Honor. But just was no evidence and I intend to discuss the respondent's theory in connection with that we do dispute. There was much other material of the Party there which indicated men of these petitioners, which indicated their view that they favored peaceful change, that they favored socialism, is -- is on question. But that they favored peaceful changes a method of achieving it is what we contend the record shows and what the respondent disputes.For example, there is evidence that when the Schneiderman decision came down, one of the defendants here being the Schneiderman, being Mr. Schneiderman, this was welcomed. And what was stated as a tenable conclusion there was stated by petitioners here to be their own view of what Marxism-Leninism meant. There are many other instances of this kind which time does not permit me to go into. It is my position in short that not a single one of the basic facts which this Court found were essential to the sustaining of the convictions in the Dennis case in holding the statute constitutional as applied, not one of those facts has been proved here. But there are also additional factors that were not present in Dennis. For example, at the time that the Dennis case was tried, the conspiracy section was a part of the Smith Act itself. Subsequently, prior to the time of the trial in this case, that was amended out of the Smith Act and the general conspiracy section was applied in this case. The Smith Act conspiracy section required no proof of an overt act in furtherance of the conspiracy. The general conspiracy section which is applicable here, as the Court I'm sure know, does require a proof of an overt act and in furtherance of the conspiracy. There was no issue in Dennis as to whether such an overt act had been committed. Here, there is such an issue. And here the issue is this, I believe. I think that respondent takes the position that any act committed by any petitioner which in any way helps the Communist Party, not helps it towards its illegal objective, but helps it in any way, is an overt act in furtherance of the conspiracy. And I believe that this presents a new and an important constitutional question of construction and application of this statute both under the First Amendment under due process and simply as a matter of statutory construction. Felix Frankfurter: Would you enlighten me on a point that you (Inaudible). In the Dennis case, there were in fact over that place whether or not there's indictment? Ben Margolis: No sir. My recollection is that there were not. Felix Frankfurter: I mean that's what the individual -- Ben Margolis: My recollection is that -- Felix Frankfurter: I'm not speaking whether it's necessary (Voice Overlap) -- Ben Margolis: My -- I understand your question, I maybe wrong, Mr. Justice Frankfurter, but my recollection is that no overt acts as such were charged. Hugo L. Black: Do you -- do you -- Felix Frankfurter: I didn't mean to say if I -- pardon me. That was finally here. I just wondered what the situation -- Ben Margolis: That's my recollection. Felix Frankfurter: All right. Speaker: Do you assume this case that there may have been or there was a policy of the Communist Party of United States? They would use force to bring about their -- I know you said there's no evidence of that in here, what about teachings of the Party itself. Ben Margolis: I say that there's no evidence -- evidence so far as the teachings of the Party are concerned, but there just no evidence of it, that is. Speaker: So that there is either -- Ben Margolis: That there is no evidence. Let me make my -- I'm sorry sir. Speaker: There is no complicity -- on part of these defendants and no statement -- of no evidence as to the Party itself as to whether -- Ben Margolis: But let me -- let me say this. What I am -- my point is that there is not here clear, convincing, and unequivocal evidence, meeting the standards of the First Amendment from which it can be found that anyone of these petitioners, either by virtue of their membership in the Communist Party of the United States, the Communist Party of California or any other subdivision thereof or by virtue of any other fact adhered to a conspiracy as charged, just no evidence. That's our position. Felix Frankfurter: Let's -- Speaker: That includes the fact that there is no evidence Communist Party of California had such policy as said. Ben Margolis: That is our position. Felix Frankfurter: If I get the convention on making part of the overt act, am I right in (Inaudible) in what you say that you address yourself to the proposition the requirement of overt act going back to the origin of the general conspiracy statute would be to satisfy as an overt act anything and any other conspiracy, conspiracy before the revenue, conspiracy to violate the opposing laws, has a different greatest question by virtue of the First Amendment consideration, different from overt acts and other conspiracy (Inaudible). Ben Margolis: It is my position, Mr. Justice Frankfurter that wherever the First Amendment is involved it has to be given consideration of interpreting the law. Felix Frankfurter: Would you mind stating that argument, just stating the proposition what the content or what the significance, what kind of significance that was demanded from overt act in relation to the Smith Act in the present steps of the judicial code. Ben Margolis: Well, I would say first of all, Mr. Justice Frankfurter that the overt act in accordance with the ordinary requirements would be -- have to be a step toward the completion, a step moving toward the consummation of the conspiracy. Felix Frankfurter: So all of that have to be further required -- Ben Margolis: Yes, yes. But that -- that -- but in addition it is my position that advocacy protected under the First Amendment that is speech which is not lawful but which were false completely 100% within the framework of our democratic processes cannot consistently with the First Amendment be an overt act and a conspiracy to overthrow the Government by force and violence without returning the doctrine of seditious conspiracy which I think the First Amendment was intended to terminate in this country forever. Felix Frankfurter: Well then this is here, but then you would say speech can never be a stuff of a substantive violation of the Smith Act. Ben Margolis: I said lawful speech, which speech expressing ideas which are fully protected by the Constitution cannot be. I am not talking now about advocacy of the overthrow of the Government by force and violence under certain circumstances. I'm talking about lawful speech. I'm talking about speaking for FPPC. I'm talking even about opposing this Court's decision in Dennis which I think there is a right to do. Felix Frankfurter: Do I gather from the proposition that you intended a while ago that the Act must satisfy the requirement for the overt act, must have a particular characteristic different from overt act in search of further evidence. (Inaudible) why did your argument -- you deal with it as it has a requirement (Inaudible) why should the argument of its freedom of speech is protected not applied to on overt acts that involves what you call lawful speech in the conspiracy before the Government anymore or any less than a conspiracy to violate the Smith Act. Ben Margolis: The difference is this. If I do not believe -- Felix Frankfurter: Lawful speech is protected, not to protect it, in whatever situation you use it. Ben Margolis: I believe, Mr. Justice Frankfurter, that where the lawful, where the speech is merely the conveyance of an idea rather than part of a course of conduct that it cannot be an overt act in any kind of conspiracy case. Speaker: Well, that -- is that saying or do you intend to say that incitement to overthrow the Government with force and violence would not be an overt act? Ben Margolis: No, I'm not saying that, Your Honor. I'm not taking about that. I'm not talking about incitement. Speaker: Nearly discussion. Ben Margolis: I'm talking about or advocacy of ideas -- Speaker: Yes. Ben Margolis: Supportive ideas -- vigorous supportive ideas. Speaker: Criticism of the Dennis case. Ben Margolis: Yes and it isn't limited to just sort of a yes, but discussion, you can be strong in your discussion as you want to be. And it's the First Amendment protects, I can't be an overt act in any kind of a crime as long as the First Amendment stands in my opinion. Speaker: But if -- but if there is an incitement. Ben Margolis: That's a different point. I -- I -- an incitement -- Speaker: Within the terms of the Dennis case, incitement is when it's read to be practical to bring it about. Ben Margolis: Well, I -- I am not -- I think the Dennis case -- well I think the Dennis case was wrongly decided there, but I don't want to argue that point because it isn't necessary, you might have been -- Speaker: You're -- you're assuming that for this case. Ben Margolis: For the purpose of this case, although, I don't want to be understood as agreeing with that. Aside from the overt act point, there are -- there are three other or two other respects, important respects in which this case raises very serious legal problems, constitutional problems which are not present in Dennis. One is, that the organized term, the organized section of the conspiracy the conspiracy charges to -- charges an agreement to organize as the Communist Party of United States an organization which advocates the overthrow of the Government by force and violence. That in Dennis, there was no problem about the meaning of the term “organize”. Because as used in Dennis and in accordance with the Court's findings there, the word “organize” was applied to the reconstitution of the Communist Party to in effect the creation of a new organization and to giving it the attributes of an organization which advocated the overthrow of the Government by force and violence. Therefore there was no question in that case, about what the word “organize” meant as a matter of statutory construction or what the word “organize” meant or could mean consistently with the requirements of our Constitution. Here there is such a question. Because here again, under the instructions of the trial judge, virtually any act of a communist which on the any act which gave any assistance for the Communist Party regardless of its purpose, regardless of its mode constituted organization of the Communist Party. I think that raises serious constitutional statutory question. Then of course there's the question I hope to discuss at some length that the instruction which was quoted in the Dennis case, the one dealing with the incitement was refused in this case although it was proper both by the Government and by the defendant and no similar instruction was given. Finally, the Court construed clear and present danger differently in my opinion in this case than it was construed in Dennis. In Dennis, as I understand it, the Court said that in considering whether or not there is a clear and present danger even as they're limited said, you have to look at the nature of the activities of the defendants, their power to bring about the evil, and the objective conditions in the world and the circumstances of the conspiracy. All of these things had to be considered together as I understand Dennis in determining whether or not a clear and present danger existed. The trial judge in this case ruled that a finding of intent to overthrow the Government by force and violence, plus a finding of an agreement to advocate such overthrow in and of itself and then without regard to anything else, any of the factors, conditions of the world, nature of the activities, power to bring about evil, created a clear and present danger. I believed these two raises most serious questions with respect to the First Amendment on the construction of the statute. Now the respondent in this case has two theories which it urges support the verdicts of the jury and the judgment of the Court. Neither of these theories, I submit, find any support in Dennis. And in order to sustain here these theories, it is going to be necessary for this Court or would be necessary for this Court to go far beyond Dennis in the limitations placed upon the right to speak or in the rights given to the Government to punish for the exercise of free speech. Now, here's the first theory. They say the Communist Party basis itself of Marxism-Leninism. And this where it is not in dispute because the Constitution so said the Marxist-Leninist party. It circulates Marxist-Leninist literature because of this, says the respondent, inferences establishing every element of the offense from connection with the conspiracy to the proscribe contempt can be drawn from leadership in the Communist Party and activity therein regardless of the character of that activity. This was not the Dennis theory, but this is the theory here. Second, it is argued that certain disconnected oral declarations made by or supposedly made by several of the petitioners, are also sufficient to establish every element of the offense and I want to spend a few minutes -- well, I'm not going to spend a few minutes discussing those because of the time -- well because I want to get on to other things. Let me just simply say that they are discussed in the brief that there isn't one of them that is a clear statement as testified to by an informer and each of them came from the lips of an informer. There isn't anyone of them that is an unequivocal statement. There isn't any one of them which isn't contradicted by other evidence in the record and each of them constitute and involved a question of interpreting words. As for example, just to take one of them. Well one of the defendants is supposed to have said, I want to see the overthrow of this lousy system as badly as anyone else, but the time for militant action has not yet arrived. Now, this particular petitioner to indicate the strength or the weakness of the respondent's case was a long time member of the Communist Party. He has been a member of the Communist Party since 1935. Fifteen years during which time the Party was riddled with informers and people who later testified against their former associates, who had every opportunity to observe what this defendant and every other defendant in this case said. And during the entire fifteen-year period they come up with this one equivocal sentence which says “The time for militant action has not yet arrived” and the use of this word “militant” incidentally by a man whose main activity was in the trade union where the word “militant” as anyone who knows anything about trade union activity is a common word which has no necessary association with force and violence. If things of this kind as loose, as weak, as inferior in quality of evidence because they consist entirely of all declaration. And incidentally, there is not a single one of such declaration within the period of the statute of limitations except as to one defendant and the evidence was limited as to him, that's the defendant -- the petitioner Lambert. So that during the entire period the statute of limitations among all of these people, these eleven people that I represent. There is this one equivocal statement. Felix Frankfurter: These evidentiary matters which you just adverted are not -- do not raise the question allegedly improper admission but merely go to their significance in ways, is that right? Ben Margolis: That's right. They don't and we are not raising as the respondent would have the Court believe simply questions of credibility. We say take a look of these things to see what -- what stuff they're made off. They're the weakest kind of evidence, they're inconsistent within themselves, they're just not solid convincing evidence. That's what we say. And it isn't believe or disbelieve the witness. Although I don't believe that when you get through looking at the evidence of anyone of these witnesses that it is possible to have much confidence in the truth of anything that they say. Felix Frankfurter: Why do you -- why do you round me out. I'd like to ask another question (Inaudible). Several of your questions relate to the charge of the Court, is it not? Ben Margolis: Yes, Your Honor. Felix Frankfurter: Both the granting and the denial? Ben Margolis: Yes, Your Honor. Felix Frankfurter: May I ask you, you are at the trial, are you not? Ben Margolis: Yes, I participate in the trial. Felix Frankfurter: Would you be good enough not tell me what the course in the procedure was in the giving of the charge specifically, the -- or request the charge submitted in advance to the Court -- Ben Margolis: Yes, Your Honor. Felix Frankfurter: -- the denials thereof indicated before he charged that you then accept to some of his charges, would you mind (Voice Overlap) -- Ben Margolis: Yes. Felix Frankfurter: For one, the manner in which the jury charges for me, one of the most important thing about it was in the trial. Ben Margolis: Yes. Well as I recall at this moment, full charges -- proposed charges were submitted by the Government and by the defendants. That was then I think -- Felix Frankfurter: Well in advance. Ben Margolis: Well in advance of it. They were then -- I think we had the jury dismissed for a day or two, I don't recall how long and we argue those and the judge indicated “I will give this, I will give that” and before the instructions were given, we have in our hands a modified set of the instructions as the judge intended to give that. We had also indicated -- Felix Frankfurter: He gave some and denied others and modified further. Ben Margolis: Yes. Yes, Your Honor. And he -- we knew in advance of our argument what he was going to give with -- as a matter of fact, we have stated our objections to them so fully that after the charge, I believe that for the most part we simply referred back to objections which had been previously made, everybody agreed that that procedure would be acceptable in order to save time. Felix Frankfurter: But you didn't have to know what he was going to charge on his own until you've heard it and you then took exceptions within the charges? Ben Margolis: No, Your Honor we knew everything that he was going to charge before he charge it. Felix Frankfurter: Well then, just to the doctrine, did he indicate what he was going to charge? Ben Margolis: Fully. Felix Frankfurter: In his own -- in his own language? The language of this matter (Voice Overlap) -- Ben Margolis: He gave us a written document. Felix Frankfurter: But even of that purpose. Ben Margolis: Setting forth what he was going to charge. We -- we incidentally make no -- we -- out complaint is about the content. Felix Frankfurter: Well I -- I'm not -- I'm not suggesting any basis for criticism. I just want to know that then upon the -- the way in which a denial of a charge or a granting of it, may or may not have extra weight in the disposition of -- Ben Margolis: Well, it was very thoroughly considered. Felix Frankfurter: Is that (Inaudible) for a judge to -- discharge him a grant. Ben Margolis: For most of the judges, yes. Felix Frankfurter: Really? Ben Margolis: For most of the judges or to indicate fairly specifically what he's going to -- what he's going to say. Felix Frankfurter: Suppose in your -- the request and he's granting a denial would indicate that but it seems to me that the man (Inaudible) I'm not suggesting this is the way I can do it. Ben Margolis: Well, lawyers that tried cases think it is a wise thing. Felix Frankfurter: Think it is? Ben Margolis: Think it is? Felix Frankfurter: Yes. Ben Margolis: Think it is. Well, I -- I -- sorry I would like to discuss the specific incidents, but only time prevents me from doing so, they're fully covered in the brief. Now, I want to turn to -- I want to say this before leaving these specific incidents. These specific incidents involved only five of the petitioners and are in no way tied up to the other six unless any statement made by any communist is -- by virtue of the fact that was made by communist attributable to any other communist. It's -- it's tied in to the other six in no way whatsoever. It has not shown that they knew of them, it has not shown that they approved of them. It is not shown that they had anything whatsoever to do with these statements. And with respect to the six of the petitioners, it is our position that there is absolutely nothing in the record other than evidence of party membership, the holding of a kind of offices that I have indicated to you prior and innocent activities within the Party such as supporting certain types of legislation and it is true in some instances distributing Marxist-Leninist books but never with any advocacy or any interpretation of them has advocated the overthrow of the Government by force and violence. Now, even as to these six, the respondent's position is that the evidence is ample. It is our position however, that unless the nature of petitioner's activities is given no weight than they were given weight in Dennis that unless Section 4 (f) of the Internal Security Act which is a new provision since Dennis and which provides that membership per se is not criminal, membership of a Communist Party per se is not criminal unless that proposition and the proposition of guilt is personal or both abandoned, unless the requirement of clear and unequivocal proof where First Amendment rights are involved is discarded unless the clear presentation of rule is completely abolished and unless a presumption of guilt is substituted for a presumption of innocence so far as communists are concerned, there is nothing in this record to support the conviction. The membership in a conspiracy consists of adherents to an agreement, to a common agreement here to an agreement to advocate the overthrow of the Government by force and violence. Membership and officership in the Communist Party is not the equivalent of although the respondent treats it as the equivalent of adherents to an agreement to violate the law in that respect or in any other respect. Nor is leadership. Some point is made in the reply brief of these people weren't merely members and officers. They were leaders of the Party. Well they were leaders I suppose in a small way, but at least absent evidence of use of that leadership towards the forbidden objective the fact that they were leaders lends not one iota of support to the respondent case. Because our position is that if membership in the Communist Party is per se lawful and if the activities which are engaged in are per se lawful, you cannot by combining the two create some kind of a chemical reaction which imposes criminology upon the compound resulting from innocent membership plus innocent activities, but this is precisely the Government's theory here. Now, I think it is fair to say that the main basis for the respondent's position is to follow. These people were long time members, officers of the Communist Party. Communist Party adheres to Marxism-Leninism reasonable to infer that they knew about the Party adheres from Marxism-Leninism and they wouldn't have remained long time members and officers of the Communist Party unless they agree with that adherence, the Marxism-Leninism. Next, they say, “Take all of these Marxist-Leninist words.” None of them say directly and this is an important point I believe, none of them say directly that the Communist Party or that Marxist-Leninist theory is, that the Government of the United States should be overthrown by force and violence. No such statement can be found in any of these books. But they say that when you read these books, this is the only possible interest. This is only thing that Marxism-Leninism can possibly mean and therefore by remaining long time members, officers and leaders of a Communist Party these -- they can be inferred that they agreed with Marxism-Leninism and interpreted in this way, became part of a conspiracy they have in their requisite intent, all of that series of inferences drawn from their continued membership in the Communist Party and its distribution of and support of Marxist-Leninist works. Well, I think one problem with this theory is that actually it broadens the conspiracy beyond the Communist Party. If under it, if it is accepted anybody who admits adherents to Marxism-Leninism, thereby labels himself a criminal and there many besides Communist both in the United States and throughout the world who claim to be adherence of Marxism-Leninism and who fact say that the Communist have started Marxism-Leninism. But if there's only one possible meaning to Marxism-Leninism that anybody who says, “I am a Marxist-Leninist”, is thereby rendered a criminal. But it is also contrary to the law and to facts. It forces the respondent to say Schneiderman is of yesterday. Schneiderman when which it was held that a tenable conclusion is that Marxism-Leninism does not stand for this forbidden advocacy. And there's much evidence in the record to support a similar finding. But I like to spend the moment or two on just the basic theory that of the respondent's case. If you will examine the kind of passages that have been introduced into evidence here, you will find that they are one of two kinds. Either they refer to force and violence in a specific situation having no relationship to United States where there is a tyrannical form of Government, where there are different historical conditions, whether is no opportunity for changes of the democratic process or they consist of the broadest kind of generalities, talking about the capitalism. Now it is our position that you cannot form such generalities draw a conclusion, that they have only one meaning. Certainly, the First Amendment is such a generality. Congress shall make no law abridging freedom of speech and there are some with whom this Court is familiar who have said that can only mean one thing. Congress shall make no law abridging freedom of speech. But this Court said in Dennis that the right to free speech is not an unlimited, unqualified right, but must on occasion be subordinated to other values and considerations. Yet the respondent here insist that as far as these petitioners are concerned only one in construction and that the construction of the petitioners, from selected passages, from selected books must be the one which the petitioners adopted even though there is in the record here a great deal of testimony, a great deal of evidence in the form of exhibits and a great deal of testimony form witnesses including their own witnesses indicating the Marxism-Leninism can be and has been interpreted differently. One of their principle witnesses, the man by the name of Honig said that when he was a member of the Communist Party and he was a high official in the Communist Party, he believed that there was a 75% chance and he hoped 100% for -- for peaceful changes to socialism. He believed that violence would only come if a minority started against the majority when they wanted socialism. And that he had talked to many leaders of the Party and that they had agreed with him. If there is one -- one thing that has never been explained here, if the respondent's witnesses could have so believe, why is it that the petitioners must be assumed arbitrarily to believe otherwise when there is absolutely no evidence to support it. I want to turn for a moment to the instruction on sight that my time is just about up, and I think this is one of the most important thing. Both the Government and the defendants in this case asked an instruction be given. That the law punishes only advocacy or conspiracy to advocate action for the accomplishment of the overthrow of the Government of the United States by force and violence by language reasonably and ordinarily calculated to incite persons to such action. Now this is -- this is the instruction that was given in Dennis. This was refused. Not only was this refused, instructions to the same effect in various other forms were submitted. And the trial judge refused to give any instruction which indicated that advocacy of action as distinguished from advocacy of abstract doctrine and advocacy of ideas was the kind of advocacy of which the statute was asked. Not a single instruction that he gave. I call -- I want to call the Court's attention to the fact that at pages and I hope to read it but I won't. At pages 69 and 70 of the respondent's reply in the Mesarosh, which will be argued shortly, 69 and 70. This same respondent in another case in which the issue was a different one, the issue there is sufficiency of the evidence that show incitement concedes, it seems to me that the kind of instruction that we ask for -- what the respondent asked for, was essential to a proper construction of the statute by the Court. Because what this -- what the Court left in the minds of the jury was, that they could find these defendants guilty even though all that they advocated were ideas which could be answered by ideas. Nowhere did he make it clear that -- Speaker: Have you printed that instruction in your brief? Ben Margolis: Yes. I -- I can give it to you, you want the page? Speaker: I was just thinking, having in front of me was -- Ben Margolis: The one that was given or the one that was refused? Speaker: Well, I suppose they're both be together, wouldn't it? Ben Margolis: Well, the most convenient place for finding them is in the printed appendix, and Your Honor will find them -- the ones that were given, Your Honor will find at pages 33 to 36 of the appendix, the printed appendix, to appellants' brief in the court below, it's a green volume -- yes, the -- William O. Douglas: What's the page number? Ben Margolis: The ones that were given appear at pages 33 to 36. There's some -- not all of them at those pages deal with this but on those pages appear all that were given on the subject. And also the ones that were refused appear in the same document at pages 73, 74 and 76. Felix Frankfurter: Before you sit down Mr. Margolis, with the Chief Justice's permission, I'd like to ask a question -- Ben Margolis: Yes sir. Felix Frankfurter: -- to make sure I followed the (Inaudible). I understood that the during the early part of your argument, all of the questions relate to -- in relation to this case, generally with Schneiderman (Inaudible) and I would like to ask three questions in relation to this. I understood that burden of -- the fore part of your argument was that the relation of these defendants to the Communist Party is of a very different order of condition in what the relation of Dennis and company, the Dennis case. Ben Margolis: As found by the Court as the basis -- Felix Frankfurter: (Voice Overlap) -- Ben Margolis: -- for its decision on that case, yes. Felix Frankfurter: Technically, unless they are not in here, (Inaudible) you express the nature, and the direction, and the purpose of the Communist Party disregarding for the moment individual relation, the perfectness and effort on that part. In that -- in that part of your argument, are you questioning a conclusion in the inference of illegality or criminality brief, with reference to the Party, never mind the individual which was one of the essential conclusions of the Dennis case. Ben Margolis: I -- Felix Frankfurter: If so, is the evidence in this case different from the evidence that there's a basis of the decision of the Dennis case on that point. Ben Margolis: I think that -- maybe I understand Dennis a little differently. I understand this case a little differently and I'm taking a moment or two if I may have it to -- to answer Your Honor's argument. Felix Frankfurter: I didn't mean to be objective or to prove any legal arguments. I just want to -- Ben Margolis: I think there are some -- some factors that they require answer in respect to your question. My position is this. Dennis did not find and did not hold that the Communist Party was a conspiracy. That wasn't the charge. The charge there was that these individuals engaged in a conspiracy to make out of the Communist Party a certain kind of a thing. Felix Frankfurter: And to utilize? Ben Margolis: And to utilize it for that purpose. That was -- now incidentally, the charge here is not that the Communist Party is a conspiracy. The charge here is the same insofar as that goes as dense. Our position is as follow. Number one, the charge not being that the Communist Party is a conspiracy, it makes no different what findings there were or could be about the Communist Party and number two, that the evidence in this case is different from Dennis and does not support a finding from -- it's different from Dennis and does not support a finding that the Communist Party if that were material, is that kind of an organization and I want -- I must say this first. I may find the thing that perhaps, if the Court had reviewed the record in Dennis, it might have had doubts about the sufficiency of the showing in Dennis. But in any event, the showing here is not the same. Felix Frankfurter: On the question of the connection between the individuals and the Communist Party which therefore brings significance of the Communist Party of the functioning effort which has a necessary consideration by the Court. We're not asking anything as I followed but all or a departure from anything that goes offensive in search of the Dennis case. I'm not saying you shouldn't. I just want to know -- Ben Margolis: I -- I would very much like to see this Court reconsider Dennis. Felix Frankfurter: Well, if that is (Voice Overlap) -- Ben Margolis: But I say that simply by following the limitation which Dennis imposed upon any further breach of the First Amendment -- Fifth Amendment because Dennis frankly say that the -- the First Amendment has been impaired to some extent as a result of this decision, simply by saying, “Alright, the line which we drew in Dennis is the one which we're going to observe in this case requires the reversal of this case upon the grounds of the insufficiency of the evidence and upon a half-a-dozen other independent grounds. Felix Frankfurter: Thirdly, you mentioned the Schneiderman case, rather than glancing -- Ben Margolis: My associate -- Felix Frankfurter: That can be argued? Very well. Ben Margolis: That will be argued. Felix Frankfurter: All right, no more. Ben Margolis: Thank you. Earl Warren: Judge Kenny. Robert W. Kenny: The Court please. I'm the man who argue Steinberg. And it has been said it's well-known that Mr. Schneiderman was here before and the last time he was here, he was represented by Mr. Wendell Willkie. History treated me rather gently because back in 1940, I lost the case of Schneiderman in the trial court and Mr. Willkie took it one in this Court. But Mr. Schneiderman is good enough to let me have one more chance and he's let me argue it this time. I don't know but he may have somebody warming up in case the case comes here the third time but I am going to discuss particularly the res judicata or to be more specifically the collateral estoppel point. Let's think first what was litigated before in the Schneiderman case, that is the Schneiderman denaturalization case before this Court in 1943. The thing that was litigated before was Schneiderman's beliefs on the crucial issue of the advocacy of force and violence and issues before were did Communist Party membership equal to such advocacy into that this Court said no. The Court said they could still be a member of the Communist Party and could still be attach to the Constitution. Well the issue was could he advocate the doctrines of Marxist-Leninist, Marxism-Leninism according to his interpretation of them as still not be advocating force and violence. And to that this Court said, “Yes, he could advocate Marxism-Leninism according his interpretation and he could be still be attach to the Constitution.” And now it's because this Court said and there this is the language of the tenable conclusion language has been cited so many times thereafter. This Court held then a tenable conclusion is that the part -- that the Party in 1927 desired to achieve its purpose by peaceful and democratic means and as a theoretical matter justified the use of force and violence only as a method of preventing an attempted forcible counter overthrow once the Party had obtained control in a peaceful manner or as a matter -- as a method last resort to enforce the majority will if at some indefinite time in the future because peculiar circumstances, constitutional or peaceful can't offer no longer open. This is the tenable conclusion the Court said, could we reach out. The last thing is what was the evidence in the first Schneiderman case. Well it was the same Marxist-Leninist classics that the Government has relied upon the present case. And it was from those same books which were quoted at length by this Court in footnotes in the original Schneiderman case that this Court was able to adjudicate this tenable conclusion that I've just read. In other words that a tenable conclusion that Schneiderman was not advocating force and violence could be derived from these -- these -- the same books which were the evidence again in this case. Now as what was litigated this time. This time, Schneiderman's intent is litigate as against belief, they're both states in mind. And it was his intent again on this same crucial issue of the advocacy of force and violence. The issues this time where did his membership and officership in the Communist Party provide, prove ipso facto that he intended to advocate force and violence, and did his advocacy of Marxism-Leninism prove that he indented to advocate force and violence. Now our point on this collateral estoppels as we say that on those issues, Schneiderman was protected from a relitigation by his Government unless the Government produced proof this time of some different interpretation by him, of the same mold Marxist-Leninist books. The matter that was litigated before and on which point Schneiderman won before was that his circulation of these books would not have advocacy of overthrow by force and violence. And thereafter we contend that as long as he merely repeated his formal conduct, that is the conduct which has been adjudicated lawful by this Court as long as he repeated that merely repeated that conduct he was protected by the formal decision. However, the evidence this time that same -- same old books, and the books which have been litigated once. It's true in the Government's brief they talk of new books but they're glossed over and they're not cited because the really violent language, it was ever to be found were these old European classics and the books that have been written since 1927, are more on the side of the tenable conclusion and then the -- than the earlier works which were -- Felix Frankfurter: Indeed -- indeed hundreds and hundreds of pages of briefs are in front of these because any of them give me a list of what would be left of this record in relation to Schneiderman if you cut out everything that is before us in the naturalization case? Robert W. Kenny: That's what I -- it didn't occur to us. It might be an interesting -- Felix Frankfurter: The heart of the business. Robert W. Kenny: I think that's right. I don't -- Felix Frankfurter: I don't want to ask it. Now can you tell us what your knowledge here is? Robert W. Kenny: I can't -- Felix Frankfurter: What would be left if you cut out of, for instance, these what, thousands, how many volumes we've got here, (Inaudible) What would be -- what would be left if you physically cut out, have to legally cut out everything in these green volume page, I don't know how many there are -- Robert W. Kenny: Yes. Felix Frankfurter: -- but the volume is quite thick. Robert W. Kenny: I thought -- that I just find in the record the original finding. Robert W. Kenny: Well, we -- we would contend that there would be nothing left of the so-called theoretical discussion of the use of force and violence. Felix Frankfurter: I'm talking about -- Robert W. Kenny: Yes. Felix Frankfurter: (Inaudible) Robert W. Kenny: Yes. That -- Felix Frankfurter: (Inaudible) Robert W. Kenny: We contend that all -- that there wouldn't be any -- anything left that is if you cut out, what has been litigated before in Schneiderman. Felix Frankfurter: Now, that was essential of that case, the fact that there maybe other issues but not two or one, unless it's a brand new thing, unless something has happened, unless the Communist Party -- what was the date of that, 1942? 1943? Robert W. Kenny: 1943, yes. Felix Frankfurter: Unless the Communist Party in those days as speaking for purpose for this case anything -- innocent in relation to the Government of the United States but it hasn't now as it perhaps shows in that has to relate the climate of opinion and in that period, was the climate of opinion in the (Inaudible) wouldn't you? Robert W. Kenny: As we see it, Mr. Schneiderman is like the man who was discharged in the insane asylum. He had a -- said -- this says I am sane and then he goes on and say, “I've got -- I've got a certificate, it says, I'm sane, where is yours?” In this way, the way we feel Schneiderman, he was -- his conduct, his interpretation, and those books were adjudicated. There's been nothing shown in this record that he has ever changed his position. The record actually show things like this that one man, a Government witness, name Sander, this attempt that was produced, produced by the Government and he said, “Yes I quit the Communist Party”, he says because Schneiderman was watering down Marxism-Leninism and that I want to bring socialism about right now, and Schneiderman is ordering it down I quit. The Government also introduced a -- an exhibit that showed that Schneiderman -- Felix Frankfurter: Schneiderman was sought on communism, is that the idea? Robert W. Kenny: He fairly saw some communism. Yes, he wanted it down in a proper figure. And other time -- another exhibit that the Government has used this trial is where Schneiderman and Mrs.Yates were preparing some syllabus for class studies in 1949 and they quote again this tenable conclusion language quoted with approval, and this is the language they were using to indoctrinate. This very thing -- this is the Government producing against it, and there again they quote the language of this Court. Now I think in -- Speaker: Mr. Kenny, I maybe mistaken, but I thought that Schneiderman -- in Schneiderman, the Court expressly disclaimed any need for determining what the Communist Party represented. Robert W. Kenny: That's right. They did. Speaker: And that all they decided in that case was that the Government had not met its burden of proof in showing that Schneiderman had advocated what the Government had said. Robert W. Kenny: That's right. Speaker: Therefore, how does any adjudication as to the -- either Schneiderman state of mind or as to the nature of the Communist Party operate here as a collateral estoppel. Robert W. Kenny: Well, the first part of your question, Mr. Justice Harlan is this. The -- the -- we don't contend that this Court ever did, ever make any finding one way or the other and hasn't yet as to a connection between either the Government. I think the various times would like to contend and lower courts have at various times and said we'll take judicial notice that the Communist Party over quote advocates force and violence. We don't contend that that was decided in favor of the Communist Party in the Schneiderman case or that it has ever been decided by this Court the other way. That -- that question is on the Court. But as to Schneiderman, his -- the question was, could he, by his interpretation on these books, the same books that are used against him here, same books were used before, could he by his -- did he by his interpretation on those books then had that his -- was his state of mind demonstrative of the belief that he was not attached to the Constitution, that was on denaturalization. On this trial, the question was, what was he -- did he have the necessary intent to overthrow Government by force and violence. And we say that as to Schneiderman, he has this personal relationship. He's been -- he was told by this Court. I think it was excellent language of -- quote. Quoted many times about how the change of the political temper is not to -- not to affect his -- his conduct. And incidentally, what we're confronted with now, we say that Schneiderman, the time may have changed, it may have changed back and forth and they have changed for perhaps quite violently in the Communist Party itself. The time may changed, have changed but there's never shown the Government has never shown anything that Schneiderman changed. And we say that Schneiderman is entitled to that repost, that the adjudication gave him once, until such time, and there's evidence showing new condition or so on, he has got his certificate that as long as he conducted himself in the way he had conducted himself when the Court approved of his conduct, that until The Government shows a change in condition, that is what we say is the collateral estoppel. Felix Frankfurter: Mr. Judge Kenny, I think I must agree with you on the first part that you would have the case. The Communist Party is of course not a party before this Court. This Court of course could make an adjudication with reference to that Party. But in terms of estoppel like this one has to see what the issues were before the Court. I holding that's concede, what is it that you are worrying about in that case? It would be if you fight to argue. Except that it was charged, that Schneiderman, because of his allegiance to promotion of official responsibility or an organization which have these and these or believing that the overthrow of this Government by force and violence and therefore could not, in good faith take a note that he support the Constitution of the United States. As to me, what Schneiderman case has decided if he decided anything? Robert W. Kenny: Yes. Felix Frankfurter: Those were the issues. I don't stand by this and precisely some occasion to this case, namely, whether believe this, allegiance to promotion of it is that you can call the Communist Party of the doctrine, that kind of views and towards all the older government. And if it is, the fact that the Communist Party happens to be, for these are personalities which were not before us in which we're involved to it, it seems to me the period of what was adjudicated eventually. Unless to you, unless you're insane or insane fellow. I think the case is held against him because a man maybe certified an insane person in 1924, 1942, (Inaudible) you and are take conviction of that point. Robert W. Kenny: Well my point was that he had a certificate and the rest of us don't. That Schneiderman had -- did litigate his question of his advocacy of force and violence. That is -- Hugo L. Black: Could you have done better if you use the fact that he had a certificate when his appendix was out? Robert W. Kenny: Well, that might be a little -- Hugo L. Black: He might -- he might be insane -- he might be sane 20 years ago and might be insane now. His certificate that you're saying -- that he was saying 20 years ago would be binding now, would it? Robert W. Kenny: No. Well, in the absence of change -- Hugo L. Black: Well, in adding dependency, aren't you -- its hard to suspect that you'd draw another one. Felix Frankfurter: And if Dennis applies to this case at the -- Robert W. Kenny: -- Yes. Felix Frankfurter: -- verdict analysis because on concept before the 1943 it was adjudicated that his belief and action for -- against the -- not violate the Constitution of United States because to contemplates -- contemplated force and violence to be overthrown. Now on concept that the -- that was so 13 years ago, it is so now. And so, I could take, no matter what was litigated there is open to the Government to make a new showing -- to make a new showing that there was contribution to further imply. So I ask, what there is, that they could put out what they were that they were reviewing about the certificate. Robert W. Kenny: Well, we agree that the opportunity, it was open in the Government to make that new showing, and the Government did not take that opportunity because it failed to make that kind of a showing. Speaker: What -- what you are saying is -- or am I correct in this, that there is no evidence here in regard to Schneiderman's participation and the effort to overthrow the Government, other than his membership in the Communist Party. Robert W. Kenny: That is correct. There is -- William J. Brennan, Jr.: And you -- you're arguing that the Government has undertaken which say that mere membership is sufficient to justify the conviction. Robert W. Kenny: Mere membership clause advocacy of Marxist-Leninist doctrine to lines that is the old advocacy in circulation of the old classics, plus membership and officership over a long period of time. These are the inferences which we say the Government appeared on this to reach the conclusion of guilt. And we say that in the First Amendment case, I can present them. Speaker: (Inaudible) Robert W. Kenny: I didn't get the correct -- Hugo L. Black: That is membership belong, the acceptance of the classical books of the Marxist-Leninist theory. Robert W. Kenny: Oh, I think they are -- they could be different. That is you could have membership and still not read their advocate or read the books. So, I think it -- William J. Brennan, Jr.: You could have a knowing membership or an understanding membership. Robert W. Kenny: I think that is right. I think that The Government, and that's why the Government, I think makes that as a second half of its proposition. That is A, membership and officership, and then B, the reading of the books and advocacy of them. Hugo L. Black: We had a case a few years ago from California as I recall it on collateral estoppel and the Taxi case. Have you decided that case? Robert W. Kenny: The last collateral estoppel case. I remember was Paramount Pictures. Hugo L. Black: This was a criminal -- this was a criminal case. Robert W. Kenny: Well that -- that one I -- Hugo L. Black: Or tax case. Robert W. Kenny: This -- this I couldn't help the Court on. Thank you. Ben Margolis: Mr. Donovan. Augustin Donovan: Your Honors please. In our opening brief and prior thereto on over a period of months, we made a very, very meticulous examination of this record, last came. Each and every possible bit of evidence in a voluminous record that it could or did by inference or otherwise applied to our particular petitioners, Richmond and Connelly. Richmond was the editor in San Francisco of the Daily People's World and Connelly the editor of the Daily People's World in Los Angeles. They are members of the Communist Party and have been for many years. And they as such have been minor officials here and there. The newspaper, both editions are the sponsored papers of the Communist Party in California. Now, we did in our opening brief, set forth everything that we could possibly find in this record and I'm sure we got it all because the Government found no difficulty except the few cases, where few spots where we will show that, a sort of it reflects more the other way, that we stated and discuss in detail, all of the possible and tenable inferences that might come or arise, or would have attack or approach any legal mind from the evidence of what they said, did or wrote. It is admitted by the Government, on page 112 of its brief, did not one word in the newspaper ever advocated or innovated any advocacy of violence whatsoever. We contend that not one bid evidence will respect to these two many in anyway, in first, violence or advocacy. The only thing you can say about these men is, they are members of the Communist Party, they have been members of the Communist Party for many years. There is not one item or evidence in these whole records, showing any act, deed, word written or spoken by them in any manner, shape or form can be labored into an advocacy of violence. On the contrary, on the contrary, they wrote in their newspaper matters concerning the Taft-Hartley Act, labored bills, the recognition of colored people's rights, the recognition of Mexican-Americans, the things that are matters of public consequence and interest. Sometimes they are on the minor side. I do not believe that is a crime to be on the short side of the things and be a sorry day in America when the only safe place in the world is on bandwagon. And it seems to me, that outside of the general idea that they were members of the Communist Party. And that the Communist Party proclaimed that was based on Marxism-Leninism, there is literally nothing in this record with respect to these defendant. Now then, Communism as to be a member of the party, I assumed from the discussion is not primeval. Now then, the question then becomes, if you construed Marxism-Leninism, in what way did you construe it? It is capable as the record shows of many types of construction. Some of them innocents and void of any invalidity or any force of violence, you might say that when you take these books applying to another country, in another year, almost a century ago, that could be interpretative in various ways, to select from that and take all of its context certain thoughts and ignore others, and put them in the United States of 50 or 60 years later and put them in the mind of somebody who said nothing and does nothing to in the case interpretation, you are going along way to create a case. You are making a criminal case, you are not insisting on the tenable evidence rule. That if rule is consider -- that rule should be, I believe that is, we have discussed that fully in our brief, that if the evidences consisted with innocence or are tenable inference of innocence, can be drawn from the evidence as you go from once place along when the guy got county, testing it out, here then and the other. If inferences of innocence can be interpreted in to each act, then you should never give in that case to jury for a guessing contest in these inflammatory times, in the case of that time, with all the atmosphere that existed at the time. It seems to me that this record shows that these two petitioners, as we analyze it tonight, would do wish a very careful reading about briefs because we have intended to analyze every conceivable inference that could be drawn from the various testimony. And in any matter either, directly or indirectly reflects upon our two defendants. And I believe you will ask to change and come to the conclusion, that from that record, and in each instance and each reference to us, the tenable inference of innocence from any sort of things such as the conspiracy, can be concluded. And having that in mind, it seems to me it was the duty of the trial Court, not to present this to a jury of the law under any conditions. And to permit them to speculate on a set of facts or set of evidence of that kind of character. Now then, there is no evidence in the record of this case, that either petitioner Richmond, petitioner Connelly, and were expressly advocated violent overthrow of our government. There is no evidence of either of them ever said anything construable as advocacy of violent overthrow. Putting aside the question, whether doctrine or Marxism-Leninism or in any sense equitable with advocacy of force and violence, there is no evidence connecting either petitioner with the study, teaching or advocacy of Marxism-Leninism. There is no evidence in this case that either petitioner was present at any meeting or anyone else expressly advocated forceful overthrow of the Government, or said anything interpretable as so advocating or thought studied or are advocated the doctrines of Marxism-Leninism. There is no evidence that the Daily People's World, the newspaper would which petition were connected, ever contained one word, either express or implied advocating brought of revolution. Of that, if this record is carefully analyzed, with respect to the fact, that this is a criminal procedure. And this is a type of a case, that all know it, we have no such thing as a changer, it is a changer. And finding of guilt goes to the third generation of this type of case. No case requires greater chair, with respect to the evidence. And no case requires a higher responsibility to keep from a jury, possible going to speculate on the set of facts, if the facts are such that tenable inferences of innocence can be drawn. There are as the great duty of the trial judge. This case should never have gone to this jury, particularly under those particular circumstances. In the 1945, and again in ‘48, and I believe, clearly within the statute or beyond the statutes limitations, because it was not ‘48 indictment here with brought in about the last day of two of 730, 51. So, we assume it was in '48 prior to the beginning of the three year period. The constitutional of the party of the Communist Party was adopted in 1945. Section 2 whereas follows, inherence two of participation in the activity as if any click groups circle faction of party, was conscribes to subverts under mind, weaken or overdue any role of the institutions of America, American democracy whereby the majority the American people can maintain their right to determine their destinies in any degree shall be punished by means of expulsion. Again in '48, something along the same line, again two, Section 3 and Section 9, can be found on page 47 of Mr. Margolis brief, it negates in to this case. Now, there is nothing here in this record, to show that Richmond and Connelly, did not accept that on its based value. There is no evidence here if that was me or sham or pre chance, nothing of the kind. It almost have to go to the same sort of reasoning that the boss had when he called Perkins in. Perkins came in to the boss's big office. The carpets were very deep. But Perkins walked there and very subserviently stood at the desk. The boss says, Perkins, you have been with us 30 years. You have done everything perfectly. You have never been late. You have never asked for overtime. You even come here on your vacations and works. You are accounts are perfect. Perkins, what in the world are you up to anything? And that sort of mind, and that sort of attempt, that viewing this evidence, that brings these laborite conclusions. These conclusions are equally text out of the air. To say that, this man intended certain things particularly with the limitation was placed in the Dennis Case as speedily as circumstances would permit, is just to walk the evidence out of all recognition. It is a labored attempt to merely say, Communist Party, Marxism-Leninism, you are guilty. There isn't anything else here if you guilt the real responsible, cheerful, scrutinizing, screaming in the -- check up on what is the rule in criminal cases for the accomplishment of a house of guilt. This is a house of guilt fills on the foundation of sand. It is a series of continuous, tenuous, constructions built one up on the other. Assuming certain things in fair or facts, which are merely inferences from no facts and going round and round and round as our brief well outlined? These men surely our members of the party. Surely, the party was for Marxism-Leninism, but there you stop too also surely, Marxism-Leninism has many constructions. As to place, geography, type, kind, what happen? You betake the file if you want to, and you can find plenty of things from the Bible too. And if you want to state it because of man, believes in the Bible, that you could not narrow that context, take a war or attempted war, or the various thing the Bible tells us practically everything, you could do equally well. But when you are dealing with the security, the liberty, the life, the status, the condition of these men and all the children relations and -- what have you? We have to get to a pretty serious test of what is the criminal will claim for good evidence. And where is the Judge of the trial Court, stepping and prevent the juries to go above the matter of pure speculations. I have some time later for a bottom, I believe I have covered most of the matter I had in mind. There was -- we were criticized some what in the brief of the respondents, with respect having overlooked or insinuated. There is something with respect to the evidence. We find an examination that, one of our insinuations was a very unfortunate one. We call attention to the fact, that one of the informal witnesses of the prosecution, have testified -- I think it was Connelly was present at the witness, we just call attention to the fact, that Connelly's record showed he was in Europe at the time. He is a certified before the (Inaudible) Another was that apparently Connelly, it was testified that Connelly had gone up in an elevator. About half a dozen times in three years of the seventh floor, where there was a headquarters of the Communist Party in San Francisco. At then -- from that testimony alone, we have The Government saying, that he went there at night, that he went at the night some particular means. And it was on the list, there is no such evidence whatsoever of any one of those evidence. So, we do fill that, probably we are appropriate in making our allusions to the insufficiencies of the evidence. Now, The Government has answered here some four pages with the respect of Richmond and Connelly, nothing more than a recitation of generally, the same old generally. It was the member of the party, it was there three years, he belongs at the party, he was an officer here, he was an officer there. But not one word, have may admit that not one word of advocacy of violence ever appeared on the newspaper of these two editors. All that could be so in firm. And they admit also, by their fail, to state in anyway, any portion of the evidence that would indicate either that we intended to be violent, advocated violence, ever said anything or did anything of a violent character or could be so construed. It seems to me Your Honors that the question of the character, the texture, the substance of this particular record, with respect to these particular petitioners, is of such character that it should never have gone to the jury. Earl Warren: Mr. Monahan. Philip R. Monahan: May it please the Court. The question arose as to the relationship between these petitioners, and the Senate petitioners. While I believe that relationship will come out in more detail a little later, I think I can recapitulate all of the evidence in one sentence by saying that the Dennis defendants with a full star and the Five Star Generals, and these petitioners were the Lieutenant Generals and the Major Generals, with Brigadier of two. But they are all in the same army, and they were all engaged in the same mission. Earl Warren: Mr. Monahan, would you mind referring to what Mr. Margolis said about, I believe you said four of them were -- had held national office, few of them had held state office and a few of them had held county office, and a few of them had held no office. Would you mind relating those -- in according to those classifications with the Dennis group as long as you start along those lines. Philip R. Monahan: I would -- I would differ Mr. Margolis in a couple of respect. One of the petitioners whom he represents, petitioner Lima, has been a member of the National Committee. Another one, petitioner Yates, has been an ultimate member. Do you want me to take the -- Earl Warren: Well, I thought so because -- Philip R. Monahan: -- the petitioners that Mr. Margolis does not represent, there are three that he does not represent. Earl Warren: Well, I like to get all of them -- Philip R. Monahan: All of them? Earl Warren: -- because you said some of them were Four Star Generals, Lieutenant Generals -- Philip R. Monahan: Yes, sir. Earl Warren: -- and some Brigadiers. And I just like to know who the Brigadiers were -- Philip R. Monahan: I'm on it -- Earl Warren: -- and who the Lieutenant Generals? Philip R. Monahan: I wanted -- I should really qualify what I said a minute ago. There is one exception, petitioner Schneiderman I think is a Four Star General at least in any man's language. Earl Warren: Yes. Philip R. Monahan: I just thought -- Earl Warren: I just -- I just want to know what their importance is. Philip R. Monahan: Petitioner Schneiderman is or has been -- I don't know what he is now, but at the time of the trial or sometime shortly before them, a member of the National Committee of the Communist Party. And also a member of the inner group, known as the National Board, in addition of course to being, for some 15 or 20 years, the leader of the party in California. Earl Warren: That's all in the record of course. Robert W. Kenny: Yes, sir. Earl Warren: Yes. Philip R. Monahan: He is the National -- I mean the state chairman in California, in addition to those National Officers that I have mentioned. Petitioner Yates, as I have mentioned, has been an ultimate member of National Committee. And is or has been until recently, the organizational secretary, which is the number two office, the second in command right under Schneiderman. Petitioner -- Speaker: (Inaudible) Philip R. Monahan: State officer. Petitioner Stack formally occupied the position which petitioner Yates occupied now namely, the Organizational Secretary of the Communist Party in California, the number two official of California. Lima, as I mentioned, was formally a member of the National Committee, and is or has been a member of the California State Committee. Lambert is a member of the California State Committee and holds the very or has held the -- until recently, the very important position of the state security head. He is the man, he is -- I might say the (Inaudible) of the Communist Party. He is the man whose duty it is to find out what they refer to as stool pigeons in the party and get rid of them. Petitioner Carlson was one time the organizer of the Wisconsin Communist Party. And is or has been until recently, the organizer of the Los Angeles County of the Communist Party. He was shifted suddenly on orders from the National Committee, he left California, went to Wisconsin for a few years to give the party a shot in the arm as one of the witnesses testified. And then suddenly was transferred back to California. As happened with so many of these persons who I believe, most or all or most whom are classified as professional revolutionists, which I will define a little bit later on from their -- from party sources. Petitioner Dorothy Healey Connelly whom incidentally I shall refer to by her maiden name Healey, to distinguish her from Phillip Connelly and because she was referred to by the name Healey throughout the trial, he is or has been until recently, the county chairman of Los Angeles County. Petitioner Dobbs is or has been until recently, the organizational secretary, that is to say the number two official of the Communist Party of Los Angeles. Petitioner Steinberg is or has been until recently the educational director, that highly important job of organizing the study groups for the Los Angeles County. Petitioner Spector is or has been the division organizer of the Southern division of Los Angeles County. I should explain that the division is the next level below the county. Hugo L. Black: That of a precinct? Philip R. Monahan: I think slightly more important than a precinct, sir. In fact -- Hugo L. Black: A little bit more important than a precinct permitted neither one of the big parties. Philip R. Monahan: There are two lower levels in the division, there's the section and there are clubs. Petitioner Kusnitz is or has been the division organizational secretary of the Midtown division of Los Angeles County. In other words, at the same level as Spector, except he was second command of the third division. Petitioner Fox is or has been the leader, the chairman of the highly important San Francisco Maritime Section. Richmond -- Earl Warren: Is that the head of the Party in San Francisco or is that -- Philip R. Monahan: No, he's -- he is the head of the Maritime Section in San Francisco County. Earl Warren: How does that compare in hierarchy in -- Philip R. Monahan: The -- the section is below the division. Earl Warren: Section is below the division. Philip R. Monahan: Now, I speak generally, there -- there are some counties in which there are no divisions. The division is an intermediate level between the county and the section for certain counties only, the more populous counties. Richmond is the editor in chief of the West Coast communist paper. The paper that corresponds the Daily Worker except it's the West Coast, named, the Daily People's World. And petitioner Connelly is the Los Angeles editor of the People's World. That covers -- Earl Warren: That's all there is. Philip R. Monahan: Yes, sir. Earl Warren: Yes. Thank you. Hugo L. Black: May I ask you -- Philip R. Monahan: Yes, sir. Hugo L. Black: -- assuming that the same charges were made against others, were made in these indictments. And the others, you'd have to define as privates in the rear ranks. Could there be anymore -- any reason why they couldn't be convicted besides that these are what we call Generals and sub-Generals? Philip R. Monahan: Well, if I were to pursue my figure sir, I would say that a newly -- a newly inducted member would be a private. Hugo L. Black: But suppose -- suppose one have been a member for five or 10 years involved in the Communist ticket -- Philip R. Monahan: Just a -- Hugo L. Black: Just a common ordinary everyday member. Philip R. Monahan: Just -- would he be -- would he be an officer? Hugo L. Black: Is there any reason why he wouldn't be convicted under this kind of charge the same as these? Philip R. Monahan: It would depend upon the evidence, sir. Hugo L. Black: Sure. Philip R. Monahan: But -- but briefly, there -- there'd be the club -- there's a club in the section.

William H. Rehnquist: We'll hear argument now in Number 99-830, Don Stenberg v. Leroy Carhart. Mr. Stenberg. Donald B. Stenberg: Mr. Chief Justice, and may it please the Court: In Roe v. Wade, this Court said that there is no absolute right to terminate a pregnancy at whatever time, in whatever way, and for whatever reason a woman chooses. With that legal principle, and the Casey undue burden test in mind, the issue here today is whether a State may prohibit a little-used form of abortion that borders on infanticide when safe, alternative forms of abortion remain available to women who seek abortions. Clearly, the State can constitutionally ban some abortion procedures. For example, the State can unquestionably prohibit an abortion procedure that is unsafe for the woman's health. Ruth Bader Ginsburg: General Stenberg, I just would like to clarify one thing. You say, borders on infanticide. I thought that this case related only to pre-viability. Is that not so? Donald B. Stenberg: Well, that... the statute would cover both pre-viability and post viability, Your Honor, but I believe it was the legislature's observation that, whether viable or not, that it's important-- Ruth Bader Ginsburg: This case concerns only the pre-viable stage, is that not so? Donald B. Stenberg: --Yes. That's because the district judge... because Dr. Carhart testified that he did not perform post viability partial birth abortions, and therefore the Federal judge did not need to rule on the post-viability aspect of the statute. The statute itself covers-- David H. Souter: I take it-- Donald B. Stenberg: --Covers both, Your Honor. David H. Souter: --I take it that save with respect to a... an exception to save the woman's life, and so on, that post viability abortions are generally precluded, by the State. Donald B. Stenberg: I'm sorry, Your Honor. David H. Souter: Post viability abortions are generally prohibited, I assume, by separate statute. Donald B. Stenberg: Yes. There is a separate statute that prohibits all post viability abortions except to save the life or for the health of the mother. That is under another statute. But I believe, Your Honor, Justice Ginsburg, that the State interest here is drawing a bright line between infanticide and abortion, and that's such a strong State interest that 30 States in our Nation have addressed this issue and have voted to ban that procedure. In fact, in Nebraska the sentiment was so strong on the State interest to draw a bright line between infanticide-- John Paul Stevens: But General, isn't the bright line between infanticide and abortion at the... a claim of viability? Isn't that the statute that draws that bright line? Donald B. Stenberg: --I think that 30 States-- John Paul Stevens: It does draw that bright line, doesn't it? Donald B. Stenberg: --Well, that would be a line. That's not the bright line, however, that the legislature drew in this instance, Your Honor. John Paul Stevens: No, but that is a bright line that separates post viability from pre-viability abortions, since one is legal and the other is illegal, under Nebraska law? Donald B. Stenberg: Well, that is under one Nebraska statute, that's correct, Your Honor, but the legislature has also been concerned about the partial birth abortion procedure which led to the passage of this particular statute. Antonin Scalia: General Stenberg, I took it that what you meant when you said it bordered on infanticide had nothing to do with the viability of the fetus, but that the procedure looks more like infanticide-- Donald B. Stenberg: Yes. Antonin Scalia: --when the child is killed outside the womb than when it is killed inside the womb, and therefore it can coarsen public perception to other forms of killing fetuses or children outside the womb. Is that not what the legislature was concerned about? Donald B. Stenberg: That is precisely the point, Your Honor, and that is precisely what motivated the legislature of the State of Nebraska in this case. In fact, the State interest here was so strong that the statute passed the Nebraska legislature with only one dissenting vote, with many pro-choice State legislators voting in favor of this ban on partial birth abortion. Now, the respondent argues that drawing a bright line between abortion and infanticide is not a valid State interest. The respondent argues that there are only two valid State interests, one being maternal health and the other essentially discouraging abortions. However, Casey specifically recognized that other State interests could be weighed as part of the undue burden test, and at 505 U.S. 877 the Court said, quote, a statute which, while furthering this interest in potential life or some other valid State interest, and then goes on to describe the substantial obstacle test, so the Court recognized that there could be other State interests besides merely maternal health and discouraging abortions. Now, the respondent next argues that even if there is a valid State interest, that it can only be asserted if it creates no burden on a woman's right to have an abortion. The respondent implicitly asks this Court to adopt a no-burden test, or perhaps reestablish a strict scrutiny test in place of Casey. The respondent argues that, under the no-burden test that any State regulation which increases the health risk to a woman by even the slightest amount is unconstitutional. This is contrary to Casey, which held... which upheld the 24-hour waiting period because it did not create, quote, a real health risk, unquote, or a, quote, a significant threat, unquote, to the health of a woman. The respondent also asks this Court to in effect adopt an all-or-nothing test in place of the large fraction test to judge the facial constitutionality of abortion restrictions. In other words, the respondent argues that unless a statute is constitutional in every conceivable application, it must be struck down as facially unconstitutional. William H. Rehnquist: Was this a facial challenge, General Stenberg? Donald B. Stenberg: This was pled as a facial challenge. There's some language in the district court decision as being applied. However, the State has never applied this statute. This lawsuit was filed within 2 or 3 or 4 days after the statute took effect. The State has never had a chance to attempt to apply the statute. John Paul Stevens: But General Stenberg, in the very first paragraph of the Judge's opinion it says, I do not reach the question of whether the law is facially invalid. Donald B. Stenberg: Well, I understand... and I mention-- John Paul Stevens: He held it invalid as to this doctor. Donald B. Stenberg: --And frankly I think, Your Honor, that the district court was simply wrong in its characterization of this case. The State has not had an opportunity to apply the statute to-- John Paul Stevens: Well, the injunction is just limited to against this doctor and his patients, isn't it? Donald B. Stenberg: --I think what the district court may have had in mind-- John Paul Stevens: Well, am I correct in that? Donald B. Stenberg: --I'm sorry, Your Honor? John Paul Stevens: Am I correct that the injunction only applies to this doctor and his patients? Donald B. Stenberg: And similarly situated individuals, is the way I believe the court's order read, Your Honor. William H. Rehnquist: How did the court of appeals... did the court of appeals say whether it was treating this as a facial challenge, or an as-applied challenge? Donald B. Stenberg: It seems... my reading of the circuit court was that they viewed it as an applied... or, excuse me, as a facial challenge. I think what the district judge may have thought when he said, as applied, he may have meant as applied to pre-viability abortions, drawing the distinction that Dr. Carhart testified that he doesn't do post viability abortions. Sandra Day O'Connor: Mr. Stenberg, do you take the position that the State of Nebraska could also prohibit the dilation and evacuation procedure for pre-viability abortions? Donald B. Stenberg: Well, under... under Danforth, Your Honor, that was still-- Sandra Day O'Connor: Well, I just wanted your position. Yes or no? Donald B. Stenberg: --For purposes of this case, the State's position would be that the State could not prohibit the D&E procedure, but also the State has not attempted to prohibit the D&E procedure. Sandra Day O'Connor: I know that's the position you take, but it is difficult to read the statute and be certain that that is so. They're both rather gruesome procedures, but in fact one may be very similar to the other-- Donald B. Stenberg: I think-- Sandra Day O'Connor: --and I'm not certain whether the statute might not prohibit the D&E procedure as well. Donald B. Stenberg: --It's our position, Your Honor, that it does not prohibit the D&E procedure, and I'd like to address that question first from a, kind of an institutional standpoint and then turn specifically to the language of the statute. In the absence of a decision interpreting this law by our State supreme court, the foremost legal authority on the proper interpretation of State law is the Office of the State Attorney General. The Attorney General interprets the law, gives legal advice to State agencies, the Governor, our administrative agencies, appears in State court every week, appears before the Nebraska supreme court virtually every time that it's in session interpreting and arguing points of State law. A U.S. district court, by comparison, spends most of its time dealing with issues of Federal constitutional law and Federal statutory interpretation. Anthony M. Kennedy: Does the Attorney General in the State of Nebraska issue rulings or opinion letters? Donald B. Stenberg: We do, Your Honor. We did not have the opportunity to do that. We were not asked, while this statute was in the legislative process, to issue an interpretation. But the point I want to make here is that there are approximately 20 of these cases in various stages in various Federal courts throughout the Nation and, at least so far as my staff can determine, no State Attorney General has interpreted this law or similar laws in their own States to ban the D&E procedure. Speaker: General Stenberg, one of the authorities that you cited for deference was the Arizonan's case where there was a formal opinion of the State Attorney General, and yet when that case was ultimately decided by the State's own supreme court, the Arizona supreme court, they rejected the formal opinion of the State Attorney General, so I think you can say that you deserve respectful consideration, but no more than that. Ruth Bader Ginsburg: We don't know what the supreme court of your State would say about a position that you're taking in litigation. Donald B. Stenberg: Well, I understand that, Your Honor. I guess my point is, is that for the Court to do that, this Court would have to essentially tell the Attorneys General of approximately 20 States that each and every one of them misunderstood and misinterpreted their own State law, even though that is their principal business day-in and day-out, year-in and year-out. Anthony M. Kennedy: Well, outside of this litigation, has your office or the Attorney General's office in Nebraska taken a formal position that this statute does not apply to the D&E procedure? Donald B. Stenberg: Well, our formal position was taken in the context of this litigation, Your Honor. Anthony M. Kennedy: Of this litigation, but not... in no other form and in no other venue have you made that statement or that representation? Donald B. Stenberg: No, Your Honor, but I would strongly recommend to this Court-- Sandra Day O'Connor: Mr. Stenberg, let me ask you another question. There is no exception under this statute, as I read it, for exceptions for the health of the woman, is that correct? Donald B. Stenberg: --That is correct, Your Honor, and it's not necessary here because the D&E procedure remains available any time there is a health problem, and that procedure is available to-- Sandra Day O'Connor: Was there no testimony to the effect that there might be circumstances in which the health of the woman required D&X versus D&E? Donald B. Stenberg: --There was... there was testimony that I would regard as speculation, Your Honor, but both the American Medical Association and the American College of Obstetricians and Gynecologists have studied this issue and said that they could not identify a single circumstance when a... in which a partial birth abortion, or a D&X abortion would be the only procedure available to save the life-- Ruth Bader Ginsburg: Then why did you need an exception for life, because if you say the D&X procedure is never medically necessary, then what you're saying about no need for a health exception would seem to apply as well to a life exception. Donald B. Stenberg: --I think from a legal standpoint it does apply. I think the legislature acted, as legislative bodies do, as part of a political compromise, as part of a, perhaps an effort to be particularly careful when the life of the woman was involved, but I don't believe that it would have been necessary in order to have a constitutional statute. Stephen G. Breyer: If I read these correctly, and I'm not a doctor, it seems to me a lot of the amici on the other side representing medical organizations say that there could be circumstances where this D&E procedure is more risky for the health of the woman. For example, hurting the womb so perhaps the woman couldn't have children in the future, and there are a whole lot of circumstances where labor-induced abortion... you know, induced labor can be more dangerous. At least they list quite a few. So what are we supposed to do where the medical opinion seems at least divided? Donald B. Stenberg: Oh, I think the medical opinion is divided, Your Honor, and I think what this Court should do when the medical opinion is divided is defer to the judgment of the State legislative body, which is the proper fact-finder when we're dealing with-- Stephen G. Breyer: All right. Well, if the medical opinion is divided, and then if there are doctors who feel it is necessary for the health of the mother, then what is the excuse for the legislature not putting in an exception for health, since, after all, if you're right on the facts, it would make no difference, and if you're wrong on the facts it would violate Roe and Casey? Donald B. Stenberg: --Well, Your Honor, the fact is, is that the... even the experts who testified for Dr. Carhart here, that of the 60 or so doctors who have testified in these partial-birth abortion cases all across the country, only about three could be identified as actually performing this procedure themselves. I don't think that we can conclude, as a legislative policy matter, that there are only... that almost 60 of these doctors are not properly caring, or significantly creating a health risk for their women who are patients. This is a practice that is not used even by most abortionists in the United States, and so it's very difficult to conclude that there is any health risk when both ACOG and the American Medical Association specifically found that there are always alternatives available to a woman in need of abortion if there is a health concern. But to return briefly to the overall picture of statutory construction, I would strongly recommend that this Court adopt the corollary proposed in the Friend of the Court brief authored by the State of Virginia, which basically says that when a Federal court is faced with a State statute that has not been construed by the State's highest court, that the Federal court either defer to the opinion of the Attorney General or... of the State, or, if the Court is unwilling, or finds that that would not be a correct interpretation of the law, to certify the question to the State supreme court, because that way-- Ruth Bader Ginsburg: Did you ask the district court to do that? Donald B. Stenberg: --Pardon me, Your Honor? Ruth Bader Ginsburg: Did you ask the district court to certify the question? Donald B. Stenberg: In our answer we... no, we did not. We did ask the court in our answer to the complaint to abstain so that the State courts could hear the case. Ruth Bader Ginsburg: If you didn't suggest it at the district court level, did you suggest it at the Eighth Circuit level? Donald B. Stenberg: No, Your Honor, we did not. There was a conversation-- Ruth Bader Ginsburg: You know, that's one of the notable differences between Arizonans and this case, is they had the Attorney General from day 1 say to the district court, please certify it to our State supreme court. They said the same thing to the Ninth Circuit. Sandra Day O'Connor: But you're saying it for the first time to this Court. Donald B. Stenberg: --Well, yes, Your Honor, we did ask for abstention, but I suppose that-- Antonin Scalia: Did the other side ask for it to be certified? Donald B. Stenberg: --Not to my knowledge. There was a discussion, Your Honor, in closing arguments between Mr. Heller, counsel for Dr. Carhart, and the district judge, closing arguments on the preliminary injunction, and Judge Kopf brought up the issue of certification, and Mr. Heller did not strongly object, but his argument was that that would not resolve the controversy, that even if the State supreme court would narrow the construction to D&X the statute was still unconstitutional, and that therefore the controversy would not be resolved by referring it to the State supreme court and in essence suggested, therefore, that the district court proceed. Antonin Scalia: Of course, if a court was going to reach that resolution it wouldn't make any sense for a court to certify it, would it? Donald B. Stenberg: If it was going to decide that the D&X was unconstitutional there would be no reason-- Antonin Scalia: Even interpreted the way you say it should be interpreted, it would be wrong, I think, for the court to ask for certification. Donald B. Stenberg: --Well, precisely right, and in essence Judge Kopf commented, not in those words, but generally to that effect. Ruth Bader Ginsburg: So that it would be no more appropriate for us to certify it. The same reasons would apply, but you've just asked us to do that. Donald B. Stenberg: Well, no, Your Honor. If this Court is going to construe Nebraska's statute contrary to the opinion of the Attorney General that it is limited to D&X... or, excuse me, that it includes D&E, then you should certify it, but if-- Antonin Scalia: Should certify it only if that makes a difference to us. Donald B. Stenberg: --Only if it makes a difference. If this-- Antonin Scalia: You would acknowledge that we also should not certify if, even, we agree with your interpretation of the statute, we think it's unconstitutional. Donald B. Stenberg: --Yes, that's correct. If-- Antonin Scalia: I mean, if we interpret it that way. Donald B. Stenberg: --Yes. The State's position is, this statute bans the D&X procedure. If this Court feels that ban is unconstitutional, then there would be no need to certify that question. But if the question is, does this statute ban the D&E procedure or not, and this Court is uncertain on that, then it should certify that question to the State supreme court, rather than, in my opinion at least, incorrectly interpret Nebraska's own statute. David H. Souter: Is it your position that the language of the statute itself is incapable of covering D&E perhaps because of the intent requirement, or is it your position that there is a gray area, and the better interpretation is the one in accordance with the legislative intent, which was simply to get to the D&X abortion? Which is your position? Donald B. Stenberg: I think it's fair to say the statute might be amenable to more than one construction, but we believe that the State's construction is a reasonable one. It's one that would uphold, hopefully uphold the cons-- William H. Rehnquist: Well, and we have held, have we not, that a Federal court in construing a State statute is obligated to, if there's constitutional doubt to construe in a reasonable way that will avoid the constitutional doubt? Donald B. Stenberg: --Yes, that is exactly right, Your Honor, and that's of course the rule that is followed by the Nebraska supreme court as well. Ruth Bader Ginsburg: Why is it, of course, because it wasn't in Arizonans. In Arizonans, the State Attorney General had offered a limited construction that would remain within constitutional bounds, and then the Arizona supreme court said no, we can't read the statute that way. We read the statute as, in covering much more than the Attorney General is arguing, and therefore it's unconstitutional. So whatever we say about our accounting with respect to Federal legislation, certainly we can't say what the State can do with its own legislation. Donald B. Stenberg: That's true, Your Honor, and that's why I think the State certification rule offered by the State of Virginia removes the Federal court from a source of friction with the States by either accepting the interpretation placed on the statute by the Attorney General, or certifying to the State supreme-- Antonin Scalia: We don't always certify State questions to the State courts, especially when there's only one interpretation that would render the statute constitutional and another one to render it unconstitutional. It isn't the Federal law that we must certify to State courts, is it? Donald B. Stenberg: --No, Your Honor, and I'm not suggesting that. I only suggest certification if the Court places... it would place a different interpretation on the statute than placed on it by the State Attorney General. John Paul Stevens: General, may I ask you this question: let's assume your construction of the statute is correct, and then the question is whether, could the State ban just D&X, and I understood you to say earlier that the American College of Obstetricians and Gynecologists said you don't need this procedure in substance. But I notice in their brief they have a sentence, depending on the physician's skill and experience, the D&X procedure can be the most appropriate abortion procedure for some women in some circumstances, and then they have a footnote to the... a finding of the district court that there are at least 10 to 20 Nebraska women each year for whom the D&X is the most appropriate procedure. Now, do we have to disagree with that finding to hold this statute valid? Donald B. Stenberg: No, I don't believe so, Your Honor. I think you need to accept that the legislature could consider all of the competing-- John Paul Stevens: And it can ban the most appropriate procedure for a small number of women? Donald B. Stenberg: --Well, I don't... I believe that the district court was simply erroneous-- John Paul Stevens: Well, that's what I'm asking you. Do we have to find that finding erroneous in order to sustain your position? Donald B. Stenberg: --I don't believe so, Your Honor. Dr. Carhart testified that he attempts approximately 200 D&X abortions a year, but only successfully completes 10 or 20 of them, and a procedure that is completed so rarely, and that is practiced so rarely across the United States, even by persons in the practice of abortion, simply prohibiting that procedure can simply not be considered to present any significant threat to a woman's health if that procedure's not available. David H. Souter: Well, but I mean, you could make the same argument about the exception to save life. There are very rarely instances, probably, in the whole spectrum of abortion practice in which the life exception is necessary, but you can't thereby simply say, well, we're going to allow the legislature to ignore those cases and eliminate a life exception even in your later term prohibition, so why, I guess, should the legislature be more cavalier in overruling medical judgment in this circumstance? Donald B. Stenberg: Well, I think the overwhelming weight of medical judgment, as opposed to the district court judge's view, comes from the American Medical Association and ACOG that this particular procedure is never necessary to save the life or preserve the health of the woman. David H. Souter: Well, I think when we're talking about most appropriate procedure, as Justice Stevens is quoting their brief as doing, I think normally we take... at least I take that to mean the procedure which is most conducive to an uncomplicated abortion and hence one that does not present any health risks that can be avoided, so I find your assumption hard to accept if we are entitled to take into consideration the position stated in the OB-GYN brief. Donald B. Stenberg: Well, under Casey, Your Honor, if the test were a no-burden test, or if there could be not even the smallest possible health consideration, then Casey would have come out differently on the 24-hour waiting period. The whole concept of undue burden is the word, undue, and it seems the respondent wants to argue here for a no-burden test, so the-- Ruth Bader Ginsburg: General Stenberg, I thought that Casey indicated that there were two interests throughout pregnancy, and one is the health of the woman and the other is the potential life of the fetus. And whatever this particular ban does, it certainly can't be urged that it is passed in the interests of the health of the woman, and it doesn't serve the interests of the potential life of the fetus, because it just says, as you said, there's always another way to do it. So it doesn't serve either of the purposes that we recognized in Casey as central, and therefore seems to be out of the balance that this Court set for legitimate pre-viability regulation. Donald B. Stenberg: --Well, as I mentioned earlier in my argument when I quoted from Casey, the Court in very general terms recognized other State interests, presumably to be recognized and defined in subsequent case law, and I believe that case is now here. Mr. Chief Justice, if I might reserve the remainder of my-- Antonin Scalia: Just, what does a waiting... a 24-hour waiting period, how does that affect either of those two interests? Donald B. Stenberg: --Well, there was-- Antonin Scalia: Either the health of the... you know, the potential viability of the fetus or the health of the mother? Doesn't that have another interest in-- Donald B. Stenberg: --There was testimony in the Casey decision, recorded in the Casey decision about, that the 24-hour waiting period might require more travel. It might, in fact, lead to delays of more than 24 hours, that any delay leads to some theoretical increase, the passage of each day-- Antonin Scalia: --The State interest that it protects is certainly not a State interest in either the health of the mother or the viability, the potential viability of the fetus, is it, the 24-hour wait? Donald B. Stenberg: --No. That was... that-- Antonin Scalia: It's a totally different State interest. Donald B. Stenberg: --That's correct, Your Honor. David H. Souter: You don't think the waiting period, the object behind the waiting period is its tendency to induce second thoughts about having the abortion? Donald B. Stenberg: Yes, that is... that is... or, I think... I would... yes, Your Honor, I would think it-- David H. Souter: So I think that does go to the potential life involved in the viability of the fetus, when the fetus, at the stage it would become viable and hence subject to full protection. Donald B. Stenberg: --Yes. It could lead the mother to decide-- Ruth Bader Ginsburg: And indeed wasn't that the purpose that the State put forward, that by giving an interval, the woman might change her mind? Donald B. Stenberg: --Yes. Ruth Bader Ginsburg: So it quite clearly was intended to serve the... what the Court described as the interest in the potential life of the fetus. Donald B. Stenberg: Yes, that's correct, Your Honor. If I might reserve the rest of my time. Speaker: Very well, General Stenberg. Mr. Heller, we'll hear from you. Simon Heller: Mr. Chief Justice, and may it please the Court: The Nebraska statute before this Court aims to eliminate the two central principles of Roe v. Wade and Planned Parenthood v. Casey. It seeks to reverse the supremacy of women's health over fetal interests throughout pregnancy, and it seeks to replace the viability line established in this Court's jurisprudence with a new line, one based on the location of the fetus inside the woman's body. I want to focus on three main reasons that the Nebraska ban is unconstitutional. First, it's so broadly written that it could prohibit most second trimester abortions as they are performed in Nebraska today. William H. Rehnquist: Well, but are... are you defending the court of appeals' construction of the statute here? Simon Heller: Yes. William H. Rehnquist: Do you think the court of appeals followed our admonition that when you have two plausible constructions available and one would avoid constitutional difficulty, you should follow that, even though it's a State statute? Simon Heller: Absolutely, Your Honor. That principle is... only holds where the two alternative constructions are both reasonable. In this case, the standard canons of statutory construction, those applied by the Nebraska Supreme Court and this Court, all indicate that the Nebraska statute is much broader than a prohibition just on the D&X technique. First, its plain language describes the elements of most second trimester abortion procedures, in particular the dilation and evacuation method, as both the district court and the court of appeals found. And they found that based not simply on this text of the statute, but the text of the statute interpreted in light of the testimony of the witnesses, both the witnesses for Dr. Carhart and the State's own witnesses who acknowledged that this statute could be broad enough to prohibit-- William H. Rehnquist: Do we ordinarily go into the testimony of witnesses? These were witnesses at a trial? Simon Heller: --That's correct. William H. Rehnquist: And what... what authority do they have to speak to the construction of a statute? Simon Heller: No, I'm not talking about their authority to speak to the construction of the statute, but describing how abortion procedures actually occur and how they are performed and then comparing that to the language of the statute to see if the steps that occur in abortion-- William H. Rehnquist: These witnesses compared it to the language of the statute? Simon Heller: --No. The... the court did. The court relied on the descriptions of abortion procedures by the witnesses. Antonin Scalia: Well, I... I must say I don't understand... I don't understand that conclusion. The statute prohibits a procedure in which the person performing the abortion partially delivers vaginally a living, unborn child before killing the unborn child and completing the delivery. Now, how does that occur in D&E? As I understand what happens in D&E sometimes is that they... is that they... is your argument that in breaking off a leg and dismembering the fetus inside the womb, when you... when you pull the leg out of the womb, that amounts to delivering, partially delivering a living, unborn child? Pulling out a... a torn-off leg is... is delivering a living, unborn child? Simon Heller: The factual findings of the district court are quite clear that the way the D&E typically occurs is that the physician partially delivers the intact, living fetus into the vagina while it... before fetal demise has occurred, so that there is a living, unborn child partially in the uterus and partially outside the uterus. Antonin Scalia: But in order to... for the purpose of killing it, partially delivers... the term partially delivers a living... the unborn child means deliberately and intentionally delivering into the vagina a living, unborn child. Now, in... in a D&E, does... is that what the... is that what the physician tries to do, tries to intentionally deliver into the vagina a living, unborn child for the purpose of... of then killing it? Simon Heller: Yes. Antonin Scalia: Yes? Simon Heller: In every pre-viability-- Antonin Scalia: That's not my understanding of the D&E at all. My understanding is that... that you... you try to dismember it if possible before the delivery. Simon Heller: --That's not what the district court found. All the expert testimony shows that to... if the physician were to attempt to induce fetal demise while the fetus is still in the uterus, that would impose increased health risks on the woman. And that's really what this case is about. It's about shifting the location of the abortion procedure into the uterus at the expense of women's health. Stephen G. Breyer: You mean that some of the time D&E could be that, or all the time? My impression in reading it was that some significant part of the time this could... this statutory wording would be satisfied with the D&E. Simon Heller: That's right. In fact, in the majority of the cases-- Stephen G. Breyer: The majority? Simon Heller: --That's right. That... that the way a D&E is performed matches the statutory elements. In fact, the Attorney General of Nebraska told the district court that anytime a living fetus is brought part way into the vagina, before fetal demise has occurred, and is then killed by some step, that that constitutes a-- Antonin Scalia: No, but it has to be more than just bringing it. It has to be the object of the physician to do it that way. And I do not understand it to be the case that this is what you set out to do when you do a D&E. Simon Heller: --Actually Dr. Carhart, in each second trimester abortion by D&E that he performs, sets out to bring as much of the fetus out of the uterus at once as possible because it reduces risks to... to the women. It reduces the risks of uterine perforation and infection. Anthony M. Kennedy: Well-- Simon Heller: So, his intention is always to do that, if possible. Anthony M. Kennedy: --As you describe these two procedures, which in your view seem to come close together, the American Medical Association and the Association of American Physicians and Surgeons are just confused on this point? Simon Heller: Well, the American Medical Association described the D&X technique as a form of D&E. It is in the record in their report on abortion that's in the record. They describe the D&X technique as a form of D&E, and that's because it basically involves the same steps as a D&E. It involves the same procedure of delivering the fetus vaginally. And pre-viability, that inevitably results in fetal demise. Antonin Scalia: Where... where is that? Will you give us the citation in the record? I did not understand that to be the case. Simon Heller: Certainly. The citation occurs in exhibit 7, which is on pages 482 through 500 of the joint appendix. In particular, on page 492 of the joint appendix, the AMA report calls the D&X method a form of D&E and, in fact, goes on to state... the AMA states further that the D&X technique may be preferred by some physicians precisely because it reduces risks to the woman. That's the opinion of the American Medical Association, consistent with the opinion of the specialty group, the American College of Obstetricians and Gynecologists. Antonin Scalia: Well, they... they describe it as a form of DE... D&E not in that, like D&E, it involves partial birth of the child. That isn't the respect in which they say it's a form of D&E. Simon Heller: Well, the factual findings of the district court established that in all D&E's the fetus is brought through the vagina and out of the woman's body. That's how the abortion-- Antonin Scalia: Ultimately, yes, but not... not always intact and not always alive. Simon Heller: --Typically intact and alive. Those are the findings in the district court, and that's what Dr. Carhart does in most of the D&E abortions he performs, including those in which he's able to perform the D&X technique. So, that's one reason that we believe the statute encompasses the D&E method. Antonin Scalia: Why... why would you be able to do a D&E and... as I understand it, the... the D&X is only possible 90 to 95 percent of the time that he attempts it. Right? Simon Heller: Well, it's possible about... he is able to do it about 10 percent of the time. Antonin Scalia: Yes. He's... I'm sorry. Just the opposite. It's not possible to do it 90 to 95. Simon Heller: Right. Antonin Scalia: What makes it impossible? Speaker: I thought what made it impossible is the inability to take out the... the fetus from the vagina intact and still alive. Simon Heller: Well-- Antonin Scalia: And if... if you can do it and if that... if that's the same thing you do for D&E, then I don't understand any difference at all between the two procedures. Simon Heller: --There are a variety of factors that determine how exactly a physician, whether it's Dr. Carhart of any other physician, performs the D&E when you... if you were to measure what parts are delivered and so forth. Antonin Scalia: I mean, just... just tell me what it means to say that... that 90 percent of the time he can't do a D&X, but he can do a D&E? What does that mean? Simon Heller: For example, insufficient cervical dilation may exist so that... that the D&X is not possible because there's not sufficient cervical dilation to perform it. Antonin Scalia: Which would mean he cannot get out a substantial portion of the living fetus. Simon Heller: Well, he-- Antonin Scalia: I can understand that, but if it means something other than that, then I... it doesn't mean anything to me. He can say that he can do a D&X only 10 percent of the time. Simon Heller: --He nevertheless is able to, in almost all D&E's, bring a substantial portion of the living fetus into the vagina before any step is taken that causes fetal demise. And it's very clear from the legislative history here that substantial portion was intended to be very broad by the legislature. The chief sponsor wanted to accord legal protection to the fetus anytime more than a little bit of the fetus was brought into the vagina. Antonin Scalia: But the medical testimony certainly acknowledges a general understanding of a difference between D&X and D&E. Isn't that right? Simon Heller: The medical testimony shows that they are... that the D&X is a form of D&E. It has certain specific elements, the same way as... as any particular type of surgery might-- Antonin Scalia: Let me put the question differently. The medical testimony certainly establishes that there is a distinctive form of procedure known as D&X. Correct? Simon Heller: --There's a distinctive variation of the D&E that's called D&X. Antonin Scalia: Well, call it a variation, whatever. It's a distinctive procedure. People talk about D&X. We've been talking about it today-- Simon Heller: That's right. Antonin Scalia: --as though it is something distinctive. It is. Simon Heller: Yes, it is. Antonin Scalia: So, the only question is whether this statute covers only that distinctive procedure or something beyond that. Simon Heller: That's one of the questions-- Antonin Scalia: Can we agree that that distinctive procedure is also generally called partial-birth abortion-- Simon Heller: --Well-- Antonin Scalia: --and that that term is not normally applied to D&E? Simon Heller: --No. There is no... first, again the district court found that there was no medical definition of partial-birth abortion. Antonin Scalia: I'm not asking whether there's a medical definition. Is... is the term partial-birth abortion not normally applied to what we've been discussing as D&X? Simon Heller: No, it's not normally applied. Antonin Scalia: You don't think so. Simon Heller: No. Antonin Scalia: If I find to the contrary, would... would you lose? Simon Heller: No-- Antonin Scalia: Because the statute does begin partial-birth abortion means an abortion procedure in which, and then goes on, blah, blah, blah. Simon Heller: --No, of course, because the title of the statute doesn't control its meaning in... in the case of the definition-- Antonin Scalia: It isn't the title. It's part of the text. Simon Heller: --or in case of the legislative history. Ruth Bader Ginsburg: Mr. Heller, what isn't part of this statute... all of this dispute would be out of the case if the legislature had simply said, we ban D&X and not D&E. And to me it's... it's... that's just glaring here that they could have reduced all question of ambiguity if they had simply said we ban a term that the doctors call D&X and we don't ban D&E. Is there any explanation why they didn't simply say if they meant to cut out D&X, D&X is banned? Simon Heller: Well, there is. First, they... they rejected an amendment that would have done just that. Secondly, throughout the legislative history, it's apparent that what they wanted to do was prohibit the D&X technique, but also to prohibit many other forms of abortion in which the living fetus was brought into the vagina before demise was caused. That was their intention. Indeed, that's the purpose that Mr. Stenberg acknowledged today, that the purpose of the statute is to accord legal protection to the fetus once it's emerged from the womb. But even if this statute were limited to the D&X technique by some replacement of the existing definition with, say, the ACOG definition of the D&X technique, it's nevertheless unconstitutional under this Court's precedents. First, under both Casey and Roe, the State must show that any regulation of abortions serves one of the two recognized interests, maternal health or potential life. There's no evidence before this Court-- William H. Rehnquist: Your... your opponent argues the language in Casey suggests that those are not the only two. You disagree with that, I take it. Simon Heller: --Well, there is language in Casey that suggests that other valid State interests could justify regulation of abortion. That's absolutely correct. What I'm suggesting is that the two recognized interests are not served. I'll turn briefly to the... the new interests that are proposed. There's a sort of a laundry list of about seven or eight new interests that the State suggests could justify a prohibition on the D&X technique. We believe none of those is sufficient to override the woman's health. For example, beginning with Roe and on through Casey, this Court has consistently held that the woman's interest in her health and in her bodily integrity overrides the State interests in the fetus even after viability. So, it follows from that some... the subsidiary interests suggested by Nebraska showing concern for potential life, showing respect for potential life... they certainly can't overcome the woman's health interests and the woman's interest in her own bodily integrity. Antonin Scalia: Certainly it depends upon how significant the health interest is. If... if there is an insignificant difference between... between using D&X and using D&E, which... which some of the medical testimony seems to indicate, you're saying that there's no interest whatever in... in the State in... in preventing the coarsening of manners from... from having the doctor and those in attendance and those who know what goes on witnessing the... the destruction of a... of a live human creature outside the womb? There's no State interest in that at all? Simon Heller: Well, first, the district court found that a prohibition on the D&X technique would impose appreciable risks on women, and that follows from the very common sense findings of the district court that the D&X technique reduces instrumentation in the uterus and reduces, therefore, the risk of uterine perforation and infection. But even if the risks were less than appreciable, anytime a State prohibits a safe abortion technique, it is prohibiting a technique that will be the safest for some women. And in this case, we have coupled with that the very strong interests the woman has in literally declining to have additional intrusions into her body of surgical instruments. This is the sort of interest that this Court in Glucksberg recognized as having special protection under the Fourteenth Amendment. So, we have a... a conjunction of strong rights here-- Antonin Scalia: You can't destroy the fetus after it's born if it's viable. Right? We... we do make the... the distinction at that point. Simon Heller: --That's correct, and that's a distinction that this Court made in Roe for the very good reason that once the fetus is outside the woman's body, her right to control her own body is no longer at issue. So, here... but here what we're talking about is her right to have an abortion by the safest possible means. And there's... there's nothing in this Court's precedents that suggests that that right can be overridden by any sort of fetal interest. Let me just add that many of the other interests suggested by the State have no support in the record. And it would... we believe it's appropriate that if the State is going to ask this Court to recognize new valid interests that can override constitutional rights, that the State provide some evidence at least that one of those interests is actually promoted by the statute. Let me take one example, if I may, the interest in the integrity of the medical profession. Quite to the contrary, all the evidence suggests that the integrity of the medical profession is promoted when physicians are able to treat their patients in the most appropriate and safest possible manner. So-- Anthony M. Kennedy: As... as determined by the individual physician. Simon Heller: --As determined by the individual physician in light of medical standards and the standards of the medical community. Anthony M. Kennedy: Well, there are certain objective standards that the profession as a whole can adopt and... and recommend to the courts. Is that not true? Simon Heller: That is true, and in... in this instance, both the specialty group of American College of Obstetricians and Gynecologists and the AMA have recognized the D&X technique is the most appropriate procedure in some circumstances. So, with the weight of that professional support behind it, we believe it's... it undermines the integrity of the medical profession to take away the most appropriate procedure in a particular case. In fact, most of the evolution in safety of abortion since Roe has been due to the protection that's been accorded to the physician's judgment about how to carry out the abortion prior to viability. Antonin Scalia: Roe... Roe... neither Roe nor Casey are written in the Constitution. They may not have mentioned all of the... all of the appropriate interests that may be taken into account. Why is it not an appropriate interest that the State is worried about rendering society callous to infanticide? There were very many highly civilized societies, including the Ancient Greeks, who permitted infanticide, who said that the right of parents included the right not to be burdened with a child they didn't want, especially a deformed child. And therefore, in order to prevent other societies descending into that degree of callousness, the... the numerous States that have enacted these laws... I don't think it's so much a concern with... with medical matters. I think it's a concern with the horror of seeing, you know, a... a live human creature outside the womb dismembered. Simon Heller: Well, again, let me start by saying that-- Antonin Scalia: Why can't that be a valid societal interest-- Simon Heller: --There's certainly-- Antonin Scalia: --whether it's expressed in Roe and Casey or not? Simon Heller: --There's certainly a valid State interest in preventing or prohibiting infanticide. And of course, Nebraska, like virtually every other State, already does so through its general homicide statutes, so that Nebraska protects the fetus, even the pre-viable fetus, if it has an independent existence from the woman. But to say that an abortion procedure that is safest for the woman, a pre-viability abortion procedure, is so horrific and so like infanticide, any of the... any of the abortion procedures... that could be said about any abortion procedure because every abortion procedure pre-viability involves fetal demise. They all do. This is an interest which, if recognized and if it could override the woman's right to... to health and bodily integrity, would authorize States to prohibit any abortion method and prohibit, indeed, all abortions. So that it's irreconcilable ultimately with the right recognized in Roe and Casey. I want to turn also to... to a second reason that the D&X... prohibition on the D&X technique is invalid if, indeed, the statute could be so limited. And that is the recognition in Casey that a statute which has the purpose of imposing an undue burden on the woman's right to obtain a pre-viability abortion is also invalid. Here the only purpose suggested, indeed, the primary purpose identified by the Attorney General of Nebraska, is precisely to elevate the status of the fetus based on its location within the woman's body, not in its location once it's born, not on viability. And this is an interest. If this elevation were permitted, it would authorize States to prohibit all abortions. That's an impermissible purpose under Casey. Coupled with this impermissible effect of effectively depriving women in Nebraska of the safest and most medically appropriate method of second trimester abortion, the statute simply can't survive under this Court's decisions. Indeed, when you... when you consider the State interests there... some of the other State interests that are proposed, not even they are served by the statute. The interest in, for example, cruelty to the fetus. There's no evidence that that interest is served here. In fact, the statute doesn't say anything about cruelty to the fetus at all. So, we're looking at a statute that doesn't serve either of the recognized State interests. It doesn't... there's no evidence that it serves any of the proposed new State interests by permissible means, and at the same time, it imposes some health risks on women. That sort of statute... the balancing in that sort of statute is decisively against the constitutionality of the statute under any interpretation, whether broad or narrow. For example, again, if... if the State... if the State couldn't really prohibit a more dangerous procedure for abortions such as hysterotomy because those methods are most medically appropriate for some women. And to take one method like the D&X technique out of the hands of physicians performing pre-viability abortions inevitably makes abortion more dangerous for women. So, when this Court, for example, in Danforth struck down the... Missouri's prohibition on saline abortions, it took a step that enabled physicians to continue to develop newer, safer methods of abortion. That really relates to one of the points made by Mr. Stenberg in his opening, which is that, well, why aren't all these other physicians around the country doing this if it's so safe? The reason is that it's new. Any new surgical technique, any new medical technique is at the beginning going to be used only in a scattered way. Antonin Scalia: So, we can look forward to this being more widespread in the years to come. Is that right? Simon Heller: We don't know and that's because we don't know whether in the future even new methods will replace this method as the safest for women. But this Court's jurisprudence has always pushed in the direction of allowing physicians to exercise judgment so that they could determine the safest possible means of performing abortion not State legislators. It should be the doctor deciding how surgery is performed, not the Nebraska Senators. So, with the improper purpose and with the lack of service of any State interest, we believe the statute is unconstitutional. But I want to turn to yet an additional problem with the statute which is... which is its lack of any health exception. This is a problem which even the Attorney General doesn't suggest, well, go ahead, we think it should be interpreted to have a health exception. They don't want it to have a health exception. They resist that interpretation which could ameliorate one of the constitutional problems with the statute. William H. Rehnquist: Well, but hasn't there been some criticism of the health exception as it has been used in some circumstances as a way of simply avoiding the prohibition entirely by a doctor who says there's always a health exception? Simon Heller: Well, there... there has certainly been criticism of that, of course. But considering, for example, Nebraska's post-viability abortion prohibition, which has exceptions for the life and health of the woman without restriction, there's... there's no evidence, for example, that that statute has ever been misapplied by a physician in Nebraska. Nor is there a suggestion that similar statutes have ever been misapplied by physicians in other States. So that this sort of health exception which-- William H. Rehnquist: Well, then whence the criticism? Is it just totally based on no evidence whatever? Simon Heller: --Well, I think there's criticism, for example, from some who oppose abortion entirely. William H. Rehnquist: But how about... are you saying that there's simply no basis for saying that a health exception could be used by doctors who wish to avoid the general prohibition to get out of it in more cases than they should? Simon Heller: I think there is no basis for that... that claim. A physician who used a different abortion technique for a woman who was sick or dying and not because it was the most appropriate technique would already be subject to malpractice penalties and penalties for unprofessional conduct. So, if this was going on, we would see evidence of it. But in fact, what we see is just increasing safety of abortion for women in the United States. The lack of a health exception is also one that could not be, in our view, cured by any sort of certification process, which has been suggested, because it would really require just rewriting the statute, and... and we believe the Nebraska Supreme Court would not do that, nor would the Nebraska Attorney General want them to. Antonin Scalia: Do you think when you have a... a fully viable fetus that no State restrictions upon... upon the woman's right to abort could involve any risk whatever to the woman's health? There has to be a health exception? Simon Heller: Well, in... in Thornburgh, this Court required that a choice of methods statute not impose risks on the woman's health-- Antonin Scalia: Any... any risk whatever. Simon Heller: --Well-- Antonin Scalia: If there's the slightest risk whatever, the... the State must allow the woman to dispose of a fully viable fetus. Simon Heller: --I don't think Thornburgh says that. I think Thornburgh says that the State-- Speaker: Do you think that that's the rule? Simon Heller: --I think the rule is under Thornburgh that the State cannot impose significant risks on women's health after viability. Before viability where the State interest in the fetus is much less than after-- Antonin Scalia: I understand that, but it... it's possible that there is a similar rule applicable here, that the State may not impose significant health risks upon the woman. But that doesn't mean that there can't be, you know, a minimal, virtually nonexistent health risk, which is what your argument assumes, that you cannot have any... any risk whatever. Simon Heller: --First, again the district court findings say that there is an appreciable health risk from prohibiting the D&X technique. But secondly, again part of this calculus is looking at the State interests, and the State... there are no State interests served by this statute, unlike the post-viability statute which serves a very compelling interest. Antonin Scalia: What if another district court makes a different finding? I mean, do... do we accept the district court's findings on these general medical questions as binding? Is it... is it binding just in this case? Or if we have another abortion case from another... from another circuit where the district judge makes a different conclusion, the... the nonmedical district judge, do... do we then accept that other conclusion too? Simon Heller: We believe that the conclusion here must be drawn from much of the evidence that could not be disputed in any case around the country, which is that the AMA and the... and ACOG both recognize that this, the D&X procedure-- Stephen G. Breyer: Is it... is it the case that the risk... I thought the risks being insubstantial was of a kind where we say one in a million. But once we've identified the woman, for that woman it's no longer insubstantial, is it? Simon Heller: --That's absolutely correct. The risks-- Stephen G. Breyer: And... and therefore a health exception or a life exception helps that single woman. Simon Heller: --Absolutely. And so, it helps the 10 to 20 women, for example, for whom Dr. Carhart is able to perform the D&X technique. William H. Rehnquist: Thank you, Mr. Heller. General Stenberg, you have 3 minutes left. Donald B. Stenberg: Thank you, Your Honor. First of all, on May 20th, 1997, the Nebraska legislature adopted an amendment that was proposed to Congress by the American Medical Association for the purpose of making clear that the statute did not prohibit the D&E procedure. And the best discussion of that can be found on page 418 of the joint appendix. Ruth Bader Ginsburg: Why didn't they just say that, General Stenberg? Why didn't they just... I mean, that was proposed, Mr. Heller told us... say that what's banned is D&X, what's not banned is D&E? That was such a simple way of clarifying it. Why didn't they do that? Donald B. Stenberg: Because the Nebraska legislature was relying on the American Medical Association and the Congress of the United States and patterned their legislation on that. And they felt that if this gained the support of the American Medical Association and Congress, which it did for the 1997 law, that they wanted to pattern that and rely on the American Medical Association and their lawyers and congressional lawyers. Ruth Bader Ginsburg: Did the medical... American Medical Association recommend this text or did they simply say, in our judgment, it's okay to ban D&X? Donald B. Stenberg: No. They did... they did both. They... they... what they said is if the Congress would adopt these amendments, which were the same as... as what Nebraska adopted, that they would then support the ban on D&X abortion. Ruth Bader Ginsburg: Well, is there any question that they would have supported a ban that simply said what you tell me the legislature meant, that is, we ban D&X and nothing else? Donald B. Stenberg: There's... of course, there's more than one way to achieve the same result, Your Honor. The Nebraska legislature chose to-- Ruth Bader Ginsburg: You would just be saying that the AMA liked this other text. Is there anything in the world to indicate that they wouldn't have preferred the clarity that we ban D&X would have brought? Donald B. Stenberg: --Well, of course, viewed from, I think, the standpoint of a State Senator in... in the State of Nebraska, they're not really in a position to go to the AMA and say, well, is there some other language that might be just as good? They just took what was given to them. Ruth Bader Ginsburg: But there was a medical term. Is there any reasonable doubt that a doctor would say... a medical term is what doctors use. Are you suggesting that any legislator in... in the State was genuinely in doubt, whether if he had used D&X, the medical association would have disapproved? Donald B. Stenberg: Well, there was some doubt because in 1997 there were several terms used to describe this procedure, the D&X, the intact D&E, the intact D&X, and the Haskell D&X. So, there were several different, quote, medical terms that were being applied in 1997, and the legislature chose to attack it by... by describing the procedure rather than using a medical term, which I believe the legislature is free to do. On this question of what is a D&E, Dr. Carhart addressed that in his complaint on paragraph 30 in which he pled, the intact removal of the fetus-- William H. Rehnquist: Thank you, General Stenberg. The case is submitted.

John G. Roberts, Jr.: We'll hear argument next today in Case No. 14-103, Baker Botts v. ASARCO. Mr. Streett. Aaron M. Streett: Mr. Chief Justice, and may it please the Court: At the end of a bankruptcy case, a professional must file a detailed fee application. Numerous interested parties may object and the court must hold a hearing to resolve those objections and make an independent assessment of reasonable compensation. Each of those steps is indispensable to accurately determining the professional's core fees and the estate's administrative expenses, allowing the trustee to close the case and ultimately pay the estate's creditors. Everyone agrees that preparing the application is compensable as reflected by Section 330(a)(6)'s guidance for determining the amount of that compensation. Defending the application against objections is an inseparable part of that same code-mandated process. There is no principle basis and certainly no textual basis for categorically banning compensation for that next step. To the contrary -- Antonin Scalia: Well, the principle basis, as I understand it, is that when you prepare it, you're -- you're serving the -- the trustee. You're serving his needs but, you know, if he's disallowing it, you're, to the contrary, acting against the trustee's interest. Isn't that a principle distinction? Aaron M. Streett: It would certainly not be in the vast majority of cases. For example, in the typical Chapter 7 case the trustee hires a professional, the trustee wishes to pay the professional fully for his good work, and the debtor comes in and objects. By defending that application against the debtor's objections, the professional is serving the trustee. The same thing happened here where the debtor -- Antonin Scalia: So you'd acknowledge it's okay if the trustee objects, then he doesn't have to pay, right? Aaron M. Streett: I would not acknowledge that, Your Honor, but -- Antonin Scalia: I didn't think you would. Aaron M. Streett: But that is the reason there should not be a categorical -- Sonia Sotomayor: But the trustee is not the estate. Aaron M. Streett: That's correct, and there's no -- Sonia Sotomayor: The estate wants to keep as much money as it can to give to the creditors. That's the purpose, right? Aaron M. Streett: Well, in this case, for example, the estate paid all of Baker Botts's core fees and wanted to pay all those fees, and you had ASARCO coming in as the reorganized company and objecting. So, again, I don't think that is true in the vast -- in many, many cases. And typically it's not the case in the Chapter 7 case. As the National Association of Bankruptcy Trustees point out as amicus, a trustee is not going to be able to retain competent and skilled counsel if the debtor is going to dilute that. Sonia Sotomayor: If you hired another law firm to fight this objection, would that other law firm have been entitled to fees too? Aaron M. Streett: It would possibly be entitled to fees through 330(a)(1)(b) I think in your hypothetical you're assuming that the other law firm would not be approved by the trustee as an estate professional. So that's the on/off switch for compensation under 330(a), a compensation as a service rendered. So the only possible way they could be compensated would be as an expense for rendering a service to the estate professional. Sonia Sotomayor: I just want to understand your rule completely. Anybody who prepares a fee application -- an accountant, an expert -- the bankruptcy court can pay all of their legal fees, if the trustee has hired their lawyer? Aaron M. Streett: Yes. Sonia Sotomayor: Approved their lawyer? But if the trustee hasn't, then they have to assume the costs of fighting -- Aaron M. Streett: No, your Honor, that's not our position for two reasons. First of all, there's two ways to get compensated under 330(a) There's (a)(1)(a), which is compensation for services rendered by a professional hired by the estate. And then there's (a)(1)(b) which is expenses, and that's things like experts, outside contractors that the estate professionals hires to help him or her do the services. So in the context of an accountant who hired a law firm to prepare and defend its fee application -- it happens all the time; accountants can't do it themselves -- that outside law firm would be compensable as an expense to the accountant. Now, of course, ASARCO's position would categorically ban all compensation for law firms, even those retained by the trustee that defend their fee application; it would categorically ban compensation by the accountants. And the problem with ASARCO's position is that everything you can say about defending a fee application is also true about preparing fee application in the context of the statute. They both are paid out of the estate. They both diminish the estate in that way. They're both something that the code requires -- Anthony M. Kennedy: I take it you -- excuse me. If the trustee objects and there's a lengthy hearing, I take it you would still say that you get fees for participating in that hearing. Aaron M. Streett: Yes, that's correct. Anthony M. Kennedy: All right. So the fact that ASARCO came in is really irrelevant to the -- to this case. Aaron M. Streett: I don't think it's irrelevant because it shows the error of the Fifth Circuit's way in adopting a categorical rule that prohibits compensation, even when the trustee wants to pay the professional the full amount. That's the only reason I really made that particular point. And that's the only argument that's before this Court, is a categorical ban under the statute on compensating the professional for defending his fee application regardless of who objects. And I think this Court has already rejected the distinction that Justice Scalia suggested between preparing and defending the fee application. In its opinion in Jean, where the Court said there's, quote, no textual or logical argument for treating so differently a party's preparation of a fee application and its ensuing efforts to support that application. And the Court -- Sonia Sotomayor: That was in the context of a fee splitting statute though. Aaron M. Streett: That's correct. And the fee shifting context is the proper analogy here. Of course we don't claim 330(a) is formally a fee shifting statute. We're seeking payment from the estate for work that the code requires us to do as part of our work. But the fee shifting analogy is accurate for a couple reasons. First of all, in the fee shifting statute and in the bankruptcy statute, the professional must file an application and have his fees approved by the court. And as in the fee-shifting regime, the bankruptcy professional's application is opened up to a wide range of objectors who are not the professional's client. So all of this leads to, in both the fee-shifting and the bankruptcy regime, a concern that the professional's fees for his core work will be diluted by the professional being forced to defend those core fees. And, in fact, those concerns are heightened much more in the bankruptcy context for a few reasons, because in bankruptcy, the fee application is far more detailed and gives far more opportunity to -- to pick and -- and object and a far greater range of objectors are available, the U.S. trustee, the court itself, the creditors, the creditors committees. All of those can come in and object that do not exist in the fee-shifting context. And Congress recognized this concern in Section 330(a)(3)(f) by codifying the factor that bankruptcy officials be compensated at parity with non-bankruptcy professionals. John G. Roberts, Jr.: Well, but just -- on the parity point, if you're not doing bankruptcy work and you send the client a bill and they don't pay it, if you've got to take litigation action or whatever, you don't get paid -- you don't get those fees back. We follow the normal American rule and you pay your own fees and if you win, good; if not, you don't. Aaron M. Streett: That's right. And that would, of course, also be true of preparing the bill or the invoice which is compensable under bankruptcy. So Congress departed from that regime and, again, it gets back to the two reasons the fee-shifting cases are analogous because, outside of bankruptcy, a professional doesn't have to go to the court to have his fees approved. It's a structural parity difference. Outside of bankruptcy, the professional doesn't submit his application to -- to a gallery of potential objectors, and that's why bankruptcy is structurally different. And that's why Congress recognized in Section 330(a)(4)(A)(ii) that services necessary to case administration do fall within the bankruptcy court's discretion to compensate. And when you read Section 330(a)(6)'s reflection that preparing the fee application is compensable, it's clearly not authorizing compensation for preparing it, as ASARCO concedes that, it's authorized under Section 330(a)(1)(A) as a service rendered, and it's most naturally falls within Section 330(a)(4)(A)(ii) as a service necessary to case administration. And that's because it assists the trustees. The trustee has to see the case all the way through to its completion. It has to make a final accounting of the case. It has to administer and close the case. And none of those things can happen until the fee application is not just prepared, but litigated. Section 330(a)(1)(A) reflects that not only the application must be prepared but there may be objections by either of the parties in interest, the trustees, or the court itself, and then the court must hold a hearing. That's all -- those are all textual bases for compensating the defense of the fee application. Those are things that the code requires, and they're all compensable for the same reasons as compensating the preparation of the application. Ruth Bader Ginsburg: Mr. Streett, do you have a position on enhancements? If -- if the creditors say that enhancement is -- you did a good job but it's not worth the enhancement, is defending the enhancement also, under your rule, compensable? Aaron M. Streett: We believe it would be compensable, in the sense that it passes by the minimal compensability threshold that puts it into the bankruptcy court discretion. Now, bankruptcy courts must consider the (a)(3) factors in determining whether that will be actually compensated and the amount. And courts consider, for example, the nature and value of the service. And a court could reasonably conclude in its discretion that the nature and value of seeking an enhancement is not the same as the nature and value of defending the core fee application. Many courts have reached that conclusion. At the end of the day, that's where the courts came out here, and we didn't -- we didn't challenge that on appeal. Stephen G. Breyer: You practice in bankruptcy. I mean, you know it pretty well because what I was trying to think of, which is really balancing on the side, but the phrase "likely to benefit," it has -- it says "likely to benefit." Now, it seems to me there must be instances where you, representing the -- the debtor, hire accountants or various others to do technical work, conveying and where -- where, in fact, it's quite clear that it won't mean more money for the debtor. It will mean less money for the debtor, because it will discover all kinds of assets it didn't even think the debtor had, but that's part of your job. Aaron M. Streett: Correct. Stephen G. Breyer: And you do it and it benefits only the creditor. And I take it, it's rather clear, you get compensated for that. Aaron M. Streett: Yes, and that -- Stephen G. Breyer: Is that right? Am I just -- Aaron M. Streett: That's absolutely correct, Your Honor, and that's why there are two prongs within Section 330(a)(4)(A)(ii) Congress recognized that not everything the professional does is going to produce an immediate, direct benefit to the estate. In the legislative history we discuss at pages 37 and 38 shows that Congress add the prong compensating tasks that were necessary to case administration. Stephen G. Breyer: Well, then you're in trouble, because if -- if all those things -- I mean, there are a set of things, such that when you carry them out through accountants or conveyers or others, will in fact cost the estate a lot of money. Possibly more than they ever dreamt. And yet it's part of your job. Now, if that's not considered as being a benefit to the estate, but rather, part of the administration of the estate, then I don't see how this falls within benefit to the estate. I mean, if you're really making that distinction. Aaron M. Streett: The way -- Stephen G. Breyer: That's administration of the estate, then this would have to be administration of the estate. But this isn't administration of the estate, and therefore, it's left out. Aaron M. Streett: We agree that this is administration of the case for the -- Stephen G. Breyer: Oh, you're saying this is administration. In other words, you're not saying it falls within (a) You're saying it falls within (b). Aaron M. Streett: It falls within either one. We think the most natural home for it is necessary to the administration of the case. And Congress -- the structure of section 330(a)(4)(A)(ii) reflects that the professional's service need only be necessary to the administration -- Stephen G. Breyer: I see. Aaron M. Streett: -- of the case or beneficial to the estate, because Congress recognized there are going to be a lot of things that a professional has to do, as Justice Breyer said, that may cost money in the short run. But they're necessary to carry out the administration of the case. We think that's where preparing the fee application comes in, under (a)1 and (a)(4)(A)(ii), and the very next inseparable step is defending the fee application. Sonia Sotomayor: You're ignoring one important aspect of difference which is in everything else, you're acting for the estate. When you're defending fees, you're acting for yourself. There is a self-interest involved because you could just give up on the objections and walk away. The only reason you're fighting them is because it puts more money in your pocket. Aaron M. Streett: I don't think -- Sonia Sotomayor: Not because it puts more money in the estate's pocket. Aaron M. Streett: Yes. But all of those things would be equally true of preparing the fee application. The professional could just work pro bono or could decide to discount 20 percent of its rights on the -- on the fee application. All of those things are -- ASARCO has tried to say that preparing and defending the fee application are adverse to the estate because it takes money out of the estate. Well, that cannot be the test. Anthony M. Kennedy: Well, except that preparing the fee application: A, it's specifically allowed by statute; and B, if they compensate you for that, there's -- then you'll do a very careful job, and there will be less necessity to have to defend it. So it -- so there -- there is certainly a rational reason for the distinction. Aaron M. Streett: Well, let me take that question in two parts, because I think if Congress drafted the statute to say preparing the fee application is compensable, then we would have a very different case. But it didn't say that. It said any compensation awarded for preparing the fee application shall be awarded at this rate. So it presupposed that preparing the fee application was authorized under Section 330(a)(4) -- (a)(1)(A) as ASARCO even concedes on 12 -- on page 12 of its brief. So you can't draw any negative inference from the fact that it's mentioned for the purpose of limiting it, that defending a fee application would not also be compensable. But to your second point, Your Honor, we agree Congress wanted to encourage people to do a careful job preparing the fee application. Baker Botts did that here. But that did not stop ASARCO from coming in and -- and mounting a barrage of objections that eat up professional fees. So just the careful preparation of the application doesn't solve the question. And that's why Congress codified Section 330(a)(3)(F) and the parity factor, and that's why bankruptcy courts for decades have been responsibly exercising the discretion that Section 330(a)(1) gives them. Congress could have enumerated all of the tasks that are compensable in bankruptcy, but it didn't do that. It's -- John G. Roberts, Jr.: But people know -- I mean, the American rule in the legal area is very fundamental, and it strikes me bankruptcy is one of those areas where they go into considerable detail telling you who pays what and when you can get it, just like you say here. You get compensation for preparing the fee at this particular level. And to say that somewhere in -- in all this, you sort of cut and paste these things together and you say, oh, there it shows that they meant fees on fees to be awarded. It seems to me that if they wanted to go against the basic American rule -- it's the American rule, patriotic -- they would have -- they would have spelled that out a little more clearly. Aaron M. Streett: Congress certainly could have done that, but that's simply not the way it wrote 330(a) You're right, Your Honor, it listed in many other statutes nine options for things, but in this, it just said, courts may award reasonable compensation for services rendered with very narrow and express prohibitions. The Fifth Circuit erred by superimposing a categorical ban on that flexible statute. And if I could reserve the remainder of my time. John G. Roberts, Jr.: Thank you, counsel. Mr. Fletcher. Brian H. Fletcher: Thank you, Mr. Chief Justice, and may it please the Court: We agree with Petitioners that when a bankruptcy professional is seeking compensation under Section 330(a) successfully defends its fee application, the bankruptcy court may increase the amount of the award to compensate for the time it reasonably spent on the fee defense. But we reach that result for a somewhat different reason. In our view, preparing and defending a fee application are not themselves services rendered for a client within the meaning of Section 330(a)(1)(A) And they are not independent grounds for compensation. Instead, compensation for the successful defense of a fee application may be appropriate because it ensures that the professional receives the statutorily prescribed reasonable compensation for the services it rendered in the underlying bankruptcy case. Stephen G. Breyer: Where does it fall within the (4)(A)? Brian H. Fletcher: Justice Breyer, we don't think it's viewed as being subject to the (4)(A) at all. (4)(A) -- Stephen G. Breyer: If it's not subject to (4)(A) at all -- I mean, (4)(A) forbids certain -- it says you can't -- cannot allow compensation for, and then, you know, it has the list there. So -- so how do you -- where do you find the authority to give this to them? Brian H. Fletcher: Justice Breyer, (4) -- (4)(A), which appears on page 3(a) of the record of appendix, it describes limits on compensation for services. Our view is that when you are preparing and defending your own fee application, that does not fall within the category of services at all. Stephen G. Breyer: So where -- where is the authorization to give it? Brian H. Fletcher: In the authorization in Section 330(a)(1)(A) that says you can allow reasonable compensation for the underlying service that the bankruptcy professional has rendered in the bankruptcy case. So here, for example, Baker Botts prosecuted the -- the fraudulent conveyance action, among many other things. And the bankruptcy court applied the lodestar method and it determined that reasonable hours times reasonable rates required a certain amount of compensation in order to make Baker Botts -- Stephen G. Breyer: Where does it say that you can get the money that's necessary for you to get the -- the money you pay to get the reasonable compensation. Where does it say you get that? Brian H. Fletcher: There's no explicit provision. Stephen G. Breyer: All right. Well, then, I mean, suppose that you had to go through enormous trouble to get what they paid you. They paid you and you -- you know, some kind of Voltavian bonds or something -- you know, you can imagine all kinds of circumstances where it costs a lot of money to get the money they paid you, and I just wonder where does it say you can do that. Brian H. Fletcher: Well, Justice Breyer, what I think is different about this is that the things that you have to do to get paid when you're a bankruptcy professional that we're here concerned with here are things that are creatures of the bankruptcy system itself and 330(a) itself. Section 330(a) says if you're a professional and you want to get paid reasonable compensation, you have to submit a very detailed fee application. And then in order to ensure that that application meets the statutory requirements, we're going to open it to scrutiny by the judge, by the U.S. Trustee, and by the parties in interest, and allow them to raise objections. And all of that -- Sonia Sotomayor: So why isn't that in the administration? Brian H. Fletcher: I'm sorry, Justice Sotomayor. Aaron M. Streett: Well, he claims that it could be on either a service, or a benefit, or a need in the administration of the estate. Brian H. Fletcher: So our view is that the problem with it is that sort of Section 330(a)(1)(A) is the sort of starting point, and it says reasonable compensation for actual necessary services rendered. And then (a)(4) limits which services are compensable. It says in order to be compensable, you either have to be necessary to the administration of the case or for the benefit of the debtor. We don't think that preparing and defending your own fee application is a service rendered at all. And so we don't think it's subject to the (a)(4) limits. Samuel A. Alito, Jr.: Why -- I'm sorry. Go ahead. Brian H. Fletcher: I was just going to say, instead, we think the question that the bankruptcy court should be asking is, do we need to provide some additional award to make the professional whole for the extra time and costs that they had to go through to vindicate their right to get their award of compensation for the underlying services that they -- Sonia Sotomayor: Sounds like a policy judgment. You're basically saying it's not in the statute, but this is how we do it and as Justice -- as the Chief Justice pointed out, normal attorneys outside the bankruptcy court don't get compensated for fee disputes. Brian H. Fletcher: Well, we -- we do think it makes a good sense, the rule that we're advocating, but we also think it's grounded in the statute and in the way that this Court has addressed other statutes that also provide for awards of reasonable attorneys fees. Samuel A. Alito, Jr.: Why isn't the problem here better dealt with by sanctions? If a party like ASARCO makes frivolous objections, then they -- then sanctions can be imposed on them. And the -- the fees fall on the party that caused the problem rather than on the estate. Brian H. Fletcher: I absolutely agree, Justice Alito. And we argue in our brief that if a bankruptcy court is in a situation where the objections that were raised are not merely meritless, but actually sanctionable, the better course would be to impose sanctions, precisely because that puts the burden of the litigation on the party that raised the frivolous objection, rather than on the estate. But we think that there can be a broad range of objections that while not frivolous or not sanctionable are still found to be meritless, and that unless the professional is compensated for the time it has to spend in responding to those objections, it's underlying -- its award of compensation for its underlying services is going to be diluted to an unreasonable -- Antonin Scalia: No more so than -- than the -- the lawyer who submits a bill outside of bankruptcy to a client, and the client objects, and the lawyer has to -- has to litigate. Would you say that dilutes the lawyer's recovery? No, I assume that the lawyer's fees are set at a high enough level that it -- that they take into account the fact that sometimes you will have to litigate to get the fees. Brian H. Fletcher: That's true. Antonin Scalia: And why can't bankruptcy lawyers do the same thing? Brian H. Fletcher: Well, I think that would be contrary to the policy of the -- of the bankruptcy statute and the Section 330(a) in particular. Antonin Scalia: Why? Brian H. Fletcher: Because the -- the problem that we're dealing with here is that it's true that litigation can arise between lawyers and clients over fee issues. Antonin Scalia: Right. Brian H. Fletcher: But the Section 330(a) creates a structure where it's not just your client that you have to please, and the showing that you have to make isn't just that I perform services that are within the terms of our contract. You have to satisfy the bankruptcy judge and are subject to objections, not just from your client, but also from the U.S. Trustee and from lots of other parties in interest. And they can object not just on the grounds that you didn't perform within the meaning of the contract, but also on the grounds that you didn't satisfy any of the many requirements of the Section 330(a). And we think that because that imposes extra costs on bankruptcy professionals, the reasonable approach, and the approach that's consistent with the way that this Court handles and others have handled the same sorts of costs that are imposed on attorneys seeking fees under fee-shifting statutes, is to say that when you successfully defend your fee application, this doesn't apply when you fail, we don't -- we very strongly believe that if you are unsuccessful in defending your fee application, you should not receive an additional award. Stephen G. Breyer: What was your reason for not going with the administration of the estate? And my intuitive judgment of it, which is pretty not totally informed, of course, is there -- there are loads of things that -- that -- that lawyers do who represent a trustee -- who represent debtors, that it will cost the estate a lot of money. And you can't say all of them are for the benefit of the estate. And there are loads of things they do to help administer the estate and hire all kinds of people. And -- and paying their fees is part of the administration, I would think, normally. Why don't you see the paying of the lawyer as part of the administration of the estate? And if you see the part -- that part as part of the administration of the estate, then you'd see that the administrative expenses necessary to secure that payment are part of the administration. I mean, so you had some reason over there in the Justice Department of saying, no, we don't follow that route, and -- and I'm not. And so that -- of course, that creates a difficulty because I think, well, if your judgment is don't follow that route, then I -- I better be careful about following it myself. And -- and you know more about it in a sense, so -- so explain that to me. Brian H. Fletcher: Well, Justice Breyer, we -- we basically take an earlier term. In -- in our view, you don't get to (a)(4) in asking about the preparation of defense of a fee application because (a)(4) tells you which services are compensable. Stephen G. Breyer: No. Brian H. Fletcher: Right. Stephen G. Breyer: No, I understand your argument, and all know that's true about it. I just wonder you're -- you're studying this. You're trying to develop a position. And for some reason or other, you rejected what the -- what they started out with that this falls within 4(A)(ii) -- (i) or (ii), and I wondered why. Brian H. Fletcher: So I -- I think if you were going to -- you disagree with our position and your view is that this is a service, and so the question is, Does it fall within either of the categories under Section 4 that make it compensable. We think -- agree with Petitioners that the stronger basis is to say, as you say, that it's administration. Stephen G. Breyer: Yes. Brian H. Fletcher: It's not for the benefit of the estate. Stephen G. Breyer: I know that. I already knew -- can see that. I just wondered why -- Brian H. Fletcher: Because -- Stephen G. Breyer: -- you -- you rejected. You had a reason for not doing what seems linguistically the simplest thing and say it is part of the administration. And you had a reason, and I want to know what the reason is, if you can tell us. Brian H. Fletcher: Well, it's because linguistically -- I don't want to belabor the point -- but just linguistically, we don't think it's reasonable to describe this as a service rendered, and so we -- we don't get to the -- Stephen G. Breyer: The administration of the case. Brian H. Fletcher: But you only ask about administration of the case if you decide that it's a service rendered, right? Section (a)(4)(A) says, "The court shall not allow compensation for services that were not reasonably likely to benefit the estate or that were not necessary to the administration of the case." Our view is that defending your fee application -- Stephen G. Breyer: Service. Brian H. Fletcher: -- isn't a service that you're rendering to the client at all, and so you don't ask these questions. Stephen G. Breyer: Ah. Brian H. Fletcher: But -- but I can also answer because if you disagree with us about that and you think it is a service and you think it is subject to the -- Stephen G. Breyer: Is -- is there another part that says it's service to the estate rather than service to the case or something like that? Brian H. Fletcher: It's -- it's -- the term is used in 330(a) -- (a)(1)(A), which describes compensation for -- reasonable compensation for actual and necessary services rendered by a trustee and examiner or a professional person. Stephen G. Breyer: Render -- Brian H. Fletcher: I think the most natural read -- Stephen G. Breyer: Okay. I see. Right. Brian H. Fletcher: But -- but just to answer the -- the question that you were posing before, you know, why did we -- why are we hesitant to say that this is a service that can be compensable if it's reasonable or necessary? It's, frankly, because ordinarily, services are compensable whether the attorney wins or loses, and we are very concerned about making sure that people don't get paid for unsuccessfully defending their fee applications, and that's what's led us to this interpretation. John G. Roberts, Jr.: Thank you, counsel. Mr. Oldham. Jeffrey L. Oldham: Mr. Chief Justice, and may it please the Court: Section 330(a) of the bankruptcy code compensates all types of professionals for their services rendered for the estate under Section 327(a). But when adversarial fee litigation arises and a professional either hires a lawyer or just happens to be a lawyer and engages in purely self-interested fee litigation work at the expense of the estate, that is not a service rendered on behalf of the estate within the meaning of Section 330(a) There is simply nothing in the statute that authorizes estate funds for a professional to engage in self-interested litigation, particularly in light of the American Rule, which requires, and for 200 years plus, has required that Congress speak clearly when it wants to reallocate the costs of litigation. And I'd like to -- Sonia Sotomayor: So how does the fee fit into this? Jeffrey L. Oldham: I'm sorry? Sonia Sotomayor: The -- the fee, the fee -- the fee preparation fee. Jeffrey L. Oldham: And I want to go straight to that question. Justice Sotomayor and Justice Kennedy also put their finger on exactly the fundamental distinction between preparing a fee application and litigating over a fee application. And it's that when an accountant, for example, goes and hire -- excuse me, does accounting services and then provides an itemized bill to explain to the -- to their client why they are charging what they're charging, that is a benefit to the trustee. The -- the "please remit to" line may not be a benefit, but certainly the itemized -- itemization in that bill is a benefit to the trustee and to the estate. And at that point, they're still on the same team. But when an accountant then gets into a fee dispute and has to go hire his or her own lawyer and is in litigation against the estate, they're not on the same team anymore. There is no sense in which, at that point in time, the accountant is serving the estate. And I think that fundamental difference matters textually under Section 330(a), and it's very significant under the American Rule because -- Ruth Bader Ginsburg: Mr. Oldham, why aren't they all tied together so you recognize that the application for the fee is compensable? Jeffrey L. Oldham: Correct. Ruth Bader Ginsburg: It's like the opening pleading. Then the objection is the answer to the application, and then the response to the objection is the -- the defense of it. It seems to me it's -- it's all one package, that it -- the application, and there's an answer to the application, and then there's a reply. It -- why don't those three things go together? Jeffrey L. Oldham: Well, I don't think they go together because Congress didn't put them together. What Congress authorized under Section 330(a)(1), especially when read together with Section 327(a), is that professionals are entitled to compensation when they're working for the estate. But when -- when professionals have hired their own lawyers or happen to be lawyers and are litigating adverse to the estate, that is not -- they're not on the same team anymore. And so under 330(a)(1) and 327(a), Congress has just simply not allowed compensation for that, which is the same as it would be outside of bankruptcy. And all we're asking for in this case is the same rule that generally applies outside of bankruptcy. Because outside of bankruptcy the American Rule controls and says that if you get into a fee litigation dispute with your client, then you pay your own way. And so the same rule should apply in bankruptcy. And I want to address why Congress might have authorized compensation for preparation services inside the bankruptcy context when that also is not compensable outside of the bankruptcy context. And that is because certainly in 1994, when Congress enacted Section (a)(6), there's a vast difference in the amount of time and the amount of effort that goes into putting together a fee application in bankruptcy and putting together a bill for the client. Now, certainly, it's -- as time has gone on, clients require more and more detail in bills and that -- that difference might be diminished. But there is -- because in bankruptcy a fee application is required to be filed, it made perfect sense for Congress to come in in (a)(6) and say you get compensated for that. But what's not different between bankruptcy practice and outside of bankruptcy practice is fee litigation. When fee litigation arises, the American Rule applies and says inside or outside of bankruptcy, you pay your own way. And so Congress did not need to say anything different about that in Section A -- in Section (A)(i). John G. Roberts, Jr.: Do lawyers these days actually charge private clients for fee preparation? Jeffrey L. Oldham: No. Well, there might be some extent to which overhead accounts for things like that, but certainly, no lawyer is going to put on a bill, you know, time spent preparing this bill, but the fact that they're not charging for it doesn't mean that it's not a benefit to the client because, again, when the -- I think most clients, when they get a bill and see that they have to pay, say, $100,000, it's a pretty good benefit to them to know why they have to pay $100,000, and to be able to object if they feel that there's, you know, an objection warranted to that bill for $100,000. Anthony M. Kennedy: Well, I've -- I've been out of practice for half a century, but my -- my -- my thought was that -- that -- that lawyers do -- do charge for the amount of time preparing the bill. Maybe I'm wrong about that. Jeffrey L. Oldham: Well, again, I -- Anthony M. Kennedy: We can -- we can check it out. Jeffrey L. Oldham: I think the only sense in which lawyers do that is to the extent that -- that it's built into overhead. But I don't think that generally, as a practice, otherwise, of lawyers marking down their time for it, and I think that would probably be a shock to most clients to hear that you -- John G. Roberts, Jr.: You ought to think -- might want to think about it. (Laughter.) Anthony M. Kennedy: Is -- is there any writing that says that when lawyers, outside bankruptcy, determine their -- their fee structures, that they include reimbursement for the risk that they might have to go into court to defend it? I've never heard that. Jeffrey L. Oldham: Well -- and we -- we cite the Gibbons-Grable case in our brief, but there's -- there's a number of things that go into, you know, rate setting of for law firms and one of them certainly is a risk of nonpayment. Another one is a risk of collections. If you -- if you have a particular client where you're afraid of collections, you might also have -- want a retainer and things like that. But, yeah, rates account for a variety of things like risk of nonpayment and risk of collection. And I think that goes to an important point about bankruptcy practice, which is that bankruptcy lawyers use non-bankruptcy market rates. And so, to the extent that they are using a non-bankruptcy market rate, they're already getting some -- you know, some amount in their rates that accounts for the risk of dilution. Stephen G. Breyer: On that theory, if -- I mean, if -- if you're supposed to get some fees -- say, $100,000 -- and in that fee is -- is various risks of the extra money it'll cost to collect or the extra risk of you won't get it, you'll only get half and -- and you -- you set the rate at 100,000. And so now a different risk is eventuated -- namely, you had to go to litigation -- and that wasn't in the 100,000. Well, then, if it's reasonable and everything, why shouldn't it be? I mean, why is -- you're -- you're trying to, in that 100,000, give the employer something for their -- for their time and their effort and also compensate certain risks. And here was one that wasn't in the 100,00. It turned up later. But how would you draw a line between some and the other? I think that's the government's theory. Jeffrey L. Oldham: That's right, Your Honor. And I think the American Rule draws the line, because if -- if it were the case that anytime a damages award or anytime a fee award had to be defended, therefore, we need to give them more, the American Rule wouldn't exist. Stephen G. Breyer: Well, no, of course, it doesn't exist -- you're quite right -- outside of bankruptcy. But now you're saying that the 100,000 does include all kinds of -- for various payments for things that might make it more expensive to get the money. And then what I don't see is saying some and not others. Jeffrey L. Oldham: Well, I think -- Stephen G. Breyer: And this is just one of them, I mean, the -- that you have to go into court and litigate, is just one of them. You wouldn't object, for example, if the fee -- the judge says, look. We're going to give the firm 120, why not 100? Well, you know, there are risks in this; and one of the risks is they're going to have to go to court and somebody will sue them and they have to go litigate that. So we'll give it to them upfront to pay for the risk, just as you pay for the risk of nonpayment. Jeffrey L. Oldham: Well, I think we would object to that, Your Honor, and I -- Stephen G. Breyer: Because? Jeffrey L. Oldham: Because if -- if -- if the conscious decision is made that $100,000 is reasonable compensation for the services they're about to render -- Stephen G. Breyer: No, no. It's -- it's not. Only -- actually, only 90 is. But it's reasonable compensation because 10 compensates for risks such as risks of nonpayment. Am I being clear? Do you see where I'm going? Jeffrey L. Oldham: I do, Your Honor. If I can make two responses: The first is that, you know, building in for certain risks in a rate is one thing and the way that the bankruptcy system accounts for that is it looks to non-market -- Stephen G. Breyer: All right. Jeffrey L. Oldham: -- non-bankruptcy market. Stephen G. Breyer: Maybe this is not worth pursuing. Anthony M. Kennedy: And that was -- that was my question. Can you tell me, if -- if a distinguished law firm represents a trustee in bankruptcy, does the law firm charge its regular rate? Jeffrey L. Oldham: Yes. Generally speaking, they will -- they will -- they will -- Anthony M. Kennedy: The same rate that it would charge to a -- to a non-bankruptcy client. Jeffrey L. Oldham: That's correct. I mean, Congress, you know, wanted parity in Section -- in -- in Section 330(a) And so, generally speaking, what -- what Congress effected in 1978 was to make clear that bankruptcy lawyers can get the same market rates that they would get outside of bankruptcy. Sonia Sotomayor: In the papers -- Elena Kagan: Mr. Oldham, you -- you agree, don't you, that in this system, the court can do enhancements? Yes. Jeffrey L. Oldham: Yeah, that's correct. Well, that -- that's not been -- certainly disputed in this case. Yes, that's -- Elena Kagan: Yeah. So some of the things that we've said are permissible for enhancements are exceptional delays in payment, extraordinary outlays of expenses, and unusually protracted litigation -- okay? -- that those count as enhancements. We said that in Perdue v. Kenny A. Why isn't this just like that? Jeffrey L. Oldham: Well, there's -- I guess there's two responses to that. One is that when you're looking at enhancements and the -- the question when that was litigated below is not whether enhancements could be authorized, but instead, what the proper test was for enhancements in the bankruptcy context. Here, the whole question is under Section 330(a)(1), has Congress even authorized a district court -- Elena Kagan: No, no, no. But I'm proceeding on the assumption of -- on the SG's assumption that what we're trying to do is to get a reasonable rate for the services that clearly have been authorized. And the question is: What's a reasonable rate? And it seems to me that what this statute does is to say "reasonable" can include, like, lots of things. It's highly discretionary. Right? And then on top of that, you know, it -- included in "what is reasonable" is this idea of sometimes you can do performance enhancements, but we haven't said performance enhancements are just for super-duper work. We've actually said performance enhancements are for things like unusually protracted litigation and lots of expenses and exceptional delays, sort of like this. You know, this is just an expense of your work, is having to go after the fees. So why doesn't that get into the mix, too? Jeffrey L. Oldham: Well, I would agree with your characterization of the government's position that it is effectively authorizing a broad scope for -- for bankruptcy courts to just give enhancements. That is effectively what they're arguing for. And if I could respond to the government's position, because I think there's at least three things wrong with it. First is textually, the text simply will not permit their position. Elena Kagan: No, it does, because the text just says "reasonable." And then the question is what's reasonable? And "reasonable" can include, you know, you're getting the same hourly rate as some other lawyer, but "reasonable" is, also, you had to do this over a very extended period of time and "reasonable" is, also, boy, you had to spend a lot of money in order to get them to pay you anything at all. All of those things count as what's part of "reasonable." Jeffrey L. Oldham: Well -- and if I could make one more point on the text. Section 330(a)(1), if it just said "reasonable," that might be the right answer; but it says "reasonable compensation for services rendered." The government agrees with us that fee litigation work is not a service rendered. So when Congress says -- Elena Kagan: Yeah, it's reasonable for all the other work you're doing. But then everything else goes into this question of reasonable, right? Is -- you know, I'll give you a hypothetical. Suppose I hire somebody to shovel my driveway, and I say, I'm going to give you reasonable compensation. And everybody knows that it's $10 an hour to hire my driveway, right? That's the going rate. But then I say, oh, did I not tell you -- did I not tell you I'm going to make you go down -- come down to the court so that I can pay you the $10? And that costs another $5. All right? Now, it strikes me that if somebody said, what's reasonable compensation now, it would be $15. It wouldn't be $10. And it's the exact same thing here. It's like by the time you go through all this stuff that you have to go through to get paid, you should get paid more. Jeffrey L. Oldham: Well -- and to respond to that hypothetical, I think the difference is under -- in your hypothetical, to apply to 330(a)(1), would be Congress came in and said, you're going to get -- or you -- you told your -- you know, whoever is helping you, I will not pay you for bringing it to the courthouse. That is not something I pay for, but then turning around and nonetheless saying but you can get paid for it anyway. That's effectively -- Elena Kagan: But it doesn't say you can't get paid for it. There's no exclusion. All, you know -- you know, I think you and the SG agree, it's -- we're not counting this as the service. What we're saying is you have to be reasonably paid for the obvious services that you have performed, shoveling my driveway. And in my -- in my hypothetical, that means you also have to be paid for the cab fare. And similarly, here, it means you also have to be paid for the cost of, like, making them sign a check to you. Jeffrey L. Oldham: Well -- and, again, textually -- I won't belabor -- but textually, I think it disassociates reasonable compensation for services rendered. I don't think textually that that works under a fair reading of the statute. But just to go beyond the text, the argument -- Elena Kagan: Well, it doesn't have to go be- -- I mean, I just don't understand what that means. It's this -- it's the clear service rendered, it's shoveling my driveway, it's doing the work for the estate. What counts as reasonable? What counts as reasonable is not just the hourly rate, but all the things I've put you through to get the hourly rate. Jeffrey L. Oldham: And let me give you two other responses to that. One is that that argument is really just a straight shot at the American Rule, because it's true whenever there's a damages award, that if a damages award is given for, say, $1,000,000 and you have to spend a $100,000 going to defend that, every damages award will be diluted by that $100,000. But this Court has said -- Elena Kagan: But here's the problem, I think, with that response. It's a reasonable response, but we're already out of the American rule here. I mean, the bankruptcy system puts you in a different universe than a statutory universe, and the question is what do those words of the statute say? It's not what would exist if the statute didn't exist. Jeffrey L. Oldham: Well, the American rule applies to litigation, and so obviously, in bankruptcy, you have some litigation, you have some non-litigation. But when you have a fee litigation matter arise, the American rule certainly applies, and Section 330, doesn't -- because it exists, doesn't mean the American rule, you know, is tossed out the window. The American rule still controls and you have to look at what Congress actually authorized. And so I think, for example, the Court's decision in Cooter and Gell -- Elena Kagan: Well, the American rule can't trump the statute. The statute has to trump the American rule. And if the statute says reasonable compensation for services rendered -- the obvious services rendered, and -- and the only thing that counts as reasonable is taking into account things like how protracted the litigation is and how much risk you've had and the exceptional delay, and the fact that you've had to contest a lot, a lot, a lot of meritless objections, all of those things make for something -- go into the question of what's reasonable. They don't have to. I mean, in 90 percent of the cases, it might be that it's like, no, that's just a normal part of the process. But in that other 10 percent, where it's not a normal part of the process and you wouldn't be reasonably paid unless they were included, it seems to me the word reasonable demands that they be included. Jeffrey L. Oldham: Well, and I think if that's the rationale then this Court's decision in Cooter and Gell would have come out the other way. That case dealt with whether, under Rule 11, an award for a reasonable attorney's fee -- or under Rule 11, whether you can get the cost for defending that on appeal. And the Court said no in determining that statute and -- Antonin Scalia: What about other statutes? I was thinking the same thing, there are other statutes that provide -- that undo the American rule, and they say you're entitled, if you're victorious, to reasonable attorney's fees. Do they usually include fees for getting the fees? Jeffrey L. Oldham: Under -- under classics fee-shifting statutes where Congress -- the answer is yes, in a number of those cases, courts have said you get your fees on fees, but those statutes are very different textually, and, I think, in their rationale. Those statutes say that you get your reasonable attorney's fee incurred in an action. And so, fees on fees, when you have a dispute in that action fit within that express authorization by Congress, it is fees incurred in that action. So textually, that's very different from Section 330, but I also think it's very, very different when you're thinking about the purpose of those fee-shifting statutes. In the fee-shifting context what you have is an award to a private party who has vindicated their statutory rights. And the award is to that party, there's an award of attorney's fees on top of that, and throughout that process the award comes from the opponent. And so you never have the dynamic that you have in the bankruptcy context, where the lawyer and the -- and the client get on opposite teams. They're always on the same team. They're fighting for an award, they're fighting for fees on fees, and they both benefit by the more, you know, fees that they get. That's fundamentally different from Section 330, which is a very limited authorization which says, it doesn't depend on success in litigation, because that's not the rationale for compensation. The rationale for compensation is that you provide services that benefit the estate or that re on behalf of the estate. But because the estate is going to pay no matter what, you have this dynamic where, when fee litigation arises, the professional is suddenly on the opposite team of the estate, because it's always going to be at the expense of the estate. And I also want -- Sonia Sotomayor: Do you practice in bankruptcy? Jeffrey L. Oldham: I'm sorry? Sonia Sotomayor: Do you practice in bankruptcy? Jeffrey L. Oldham: Yes, Your Honor. Sonia Sotomayor: And do you happen to know whether fee litigation is more common in bankruptcy than in other fields? Jeffrey L. Oldham: Well, there have been some studies that have tried to address that and see -- Sonia Sotomayor: Okay. Jeffrey L. Oldham: -- whether -- I mean, I think the argument that we have seen is more of a logical one, that there are more potential objectors in bankruptcy because a -- a party has to file their fee application, and theoretically more people get to review it, but I think there's a very strong argument that some courts have accepted that, outside of bankruptcy practice, there's a paying client in every single case who has the full incentive, because they're footing the bill, to study and object and litigate if they want. And I think it's the rare case outside of bankruptcy and it's probably the rare case inside of bankruptcy, where you have full-blown litigation, but it certainly happens in both contexts and outside of litigation. And all we're asking for is for the same rule to be in bankruptcy as is out of bankruptcy. Stephen G. Breyer: Well, all right, but if you look at the fee-shifting statutes, we looked up a lot, we found quite a few which say that the court can award a reasonable attorney's fee. Jeffrey L. Oldham: Correct. Stephen G. Breyer: It's broader than here. But the words, basic active words are reasonable attorney's fees, and almost all of them have been interpreted to allow compensation for the reasonable fee. So they throw that in. And so, they're counting it as part of the reason -- they're counting it as part of a reasonable attorney's fees. And here, reasonable attorney's fee is the same. That language is the same. Jeffrey L. Oldham: Well, it's reasonable -- Stephen G. Breyer: A reasonable compensation. Jeffrey L. Oldham: For services rendered, Your Honor. Stephen G. Breyer: There is a reasonable attorney's fee. But it's hard to make a lot out of that. Jeffrey L. Oldham: Well, when you excerpt just those parts, I agree with you, but I think you have to look at the full language -- Stephen G. Breyer: Yeah. Jeffrey L. Oldham: -- which is in the fee-shifting context, it is reasonable attorney's fees and then usually it says, incurred, and then it talks about a civil action, like in the Jean case, the Equal Access to Justice Act. It says fees incurred in a civil action. Well, it's within the express authorization to get fees on fees there because in that civil action, if there is a fee fight, fees were incurred in that civil action. So if Congress, in Section 330, had said -- instead of what it did say, if it had said professionals shall get reasonable attorney's fees in the bankruptcy proceeding, then that might be a different case, because there you're saying anything that happens in the bankruptcy proceeding you get compensation for. Congress didn't say -- Stephen G. Breyer: But that happens later, everything's closed and they discover that through some odd thing they have to spend $10,000 to get the $90,000 that was awarded to them. Any authority on that? You go back to court and say, Judge, I want $10,000 more. He says, But the case was closed. He says, Yeah, but I but to spend the $10,000 to get the $90,000. If there were such a case, one of you would have found it. Or somebody would have, I guess. Jeffrey L. Oldham: Well, if you're asking -- I mean, certainly the -- the bankruptcy court maintains some jurisdiction for a party to go back. Stephen G. Breyer: But there's no -- just under all these other statutes, there is so many attorney's fees statutes that -- Jeffrey L. Oldham: There are, and let me just say that if we're going to, you know, sort of think about what rule might make sense, I think it's important to remember that the -- the fee-shifting statutes, just like Your Honors talked about, where it's true fee shifting, that is, there's a dispute that arises, the loser has to pay the, you know, the attorney's fees for the winner, Congress used that in the bankruptcy code. For example, if there's an automatic stay. If there's somebody that commits a willful violation of the automatic stay, Congress identified that particular dispute and said that the loser in that particular case should have to pay it to the winner. And so if we're thinking about what rule makes sense, I think the government put their finger on it in their brief and talking about it today -- and this goes to a question that Justice Alito asked about sanctions -- what would make far more sense is for Congress to have come in and created a true fee shifting in which it said that if there's going to a be dispute over a -- you know, over a fee application, then maybe the, you know, the prevailing party should have to -- should get the attorney's fees from the loser. Congress didn't do that here. There's nothing like that under Section 330 or any other statute. Instead, what Congress did is it authorized compensation to a professional for the work that they do for the estate. And I just want to emphasize too, because I've -- I've heard today that -- the suggestion that our rule is a per se rule, and that's not at all true. We're not saying that professionals can never get their fees and we embrace the discretion of bankruptcy courts to authorize fees under the long-standing exceptions to the American rule for sanctions such as for frivolous conduct or for bad-faith litigation misconduct. The argument has been made that those are, you know, two exceptional, but outside of the bankruptcy context, those longstanding exceptions to the American rule have stood alone as the only exceptions to the American rule. And there's never been any suggestion at all that those are not -- those are not sufficient outside of the bankruptcy context. And so I don't think there's any reason for a special rule just in the bankruptcy context. I think it's also really important to keep in mind that Section 330(a) is not just for attorneys. It's for all professionals. And so in the context of, say, an accountant that has to go hire their own lawyer, this Court's decision in Lamie made very clear that you can only get compensation under Section 330(a) if you're approved under Section 327(a) for employment. It would -- it would candidly just go straight through that decision if it was okay for a Section 327(a) professional, to nonetheless go hire somebody, have them do professional services, and then just count it as, you know, the accountant's own professional services, or, as was suggested today, to simply call professional services necessary expense. Which goes against what Congress said in Section 330(a)(1)(A), where it -- and (B), where it made a very distinction difference between a necessary expense and a professional services. And so, there -- there's -- the cases that have talked about this issue, about whether an accountant can hire a lawyer and get paid, have -- have -- more of them have said exactly what this Court said in Lamie, that you can't do that. Section 327(a) is the sole gateway to compensation for those professionals under 330(a). The only exception has been -- that some courts have identified, which we think would be inconsistent with Lamie and with Section 327(a), is where there's an engagement letter between the Section 327(a) professional and the debtor, where the debtor has agreed that the Section 327(a) professional is allowed to go and hire others to do particular work. But that, again, we don't think is sufficient, but that is a different context than -- than this case. If there's no further questions, thank you. John G. Roberts, Jr.: Thank you, counsel. Mr. Streett, four minutes. Aaron M. Streett: Thank you. The bankruptcy code uses broad, open-ended language and commits these questions to bankruptcy court discretion, and that's no different than the fee shifting statutes. We've said -- we've heard from my friend on the other side that this is a direct shot -- Antonin Scalia: Will you answer his last point? Why does it make any sense to say that the lawyer can get -- make his fee reasonable by getting his litigation expenses, but the accountant, who's also entitled to reasonable fees, cannot? If he has to sue, he has to pay his own lawyer, and you don't assert that that -- that that is compensable, do you? Aaron M. Streett: We -- we do assert that would be compensable, either as an expense to the accountant or it could be included as part of the accountant's reasonable compensation for his underlying services on the bankruptcy, as the government argues. Antonin Scalia: Oh, you do? Okay. I didn't realize you -- Aaron M. Streett: Yes, we -- Sonia Sotomayor: I thought you said earlier the trustee had to approve it. And I'm wondering how the trustee could approve that, because it's for the benefit of the accountant, and not the trust. Aaron M. Streett: The trustee would have to approve if those services were to be directly compensable, not if they were to be compensated as expenses or as part of the underlying reasonable compensation of the accountant. I think the hypothetical was, you have an accountant who is already a 327(a) professional, and it has to hire a lawyer. ASARCO wants to force that accountant to eat those costs. Anthony M. Kennedy: Are there case authorities supporting the answers you gave? Antonin Scalia: It does eat those costs. Aaron M. Streett: Yes, we cite one that surveys the entire case law on this point in our reply brief, I believe it's footnote 4. To get back to Justice Breyer's question, you cannot read "services" in isolation. You can't read "services rendered" in isolation from the rest of the statute. (a)(4) recognizes that there are services necessary to case administration, and (a)(3)(C) recognizes there are services that are beneficial toward the completion of the case. My friend on the other side read in a word, he said "services to the estate." It doesn't say that anywhere in the statute. It could be a service to the court, it could be a service to the trustee, which must administer and finally close the case. Sonia Sotomayor: Except -- except that in Woods, looking at the predecessor statute, which also talked about services rendered, we held that the phrase "reasonable compensation for services rendered," quote, this is us, "necessarily implies loyal and disinterested service in the interest of those for whom the claimant purported to act." Aaron M. Streett: And I'm glad Your Honor brought this up, because the idea that litigating a fee application is adverse to the estate, cannot be right. The code requires you to litigate the fee application if it's challenged. Now, think about what happens if we file an interim fee application under Section 331. We can do that four months into the bankruptcy. The second somebody objects and we have to respond to that objection, ASARCO's position is, we're immediately adverse to the estate and we're disqualified. But I did want to mention that all of the National Associations of Trustees support Baker Botts position on this point, because it's not just a small expense that can be counted as overhead. In Section -- Chapter 7 and Chapter 13 cases, these National Associations of Trustees point out that the litigation costs will frequently eat up the entire core fee, because it's a modest core fee and all it takes is one debtor rendering an objection or the Chapter 13 trustee rendering an objection. Ruth Bader Ginsburg: How do you answer the question about suppose the objection to the fee is sustained? Does the lawyer, nonetheless, get the work? Aaron M. Streett: It would pass the minimal compensability threshold, but courts have consistently exercised their discretion for decades to deny that compensation, because the nature and value of unsuccessful defense is very different from that of a successful defense. And ASARCO is the one asking this Court to make a major change from the status quo that has prevailed across this country in the overwhelming majority of jurisdictions where courts have wisely and responsibly exercised their discretion to award fees where they are necessary to make the underlying fee reasonable, and to deny fees where the defense is unsuccessful or otherwise wasteful. Baker Botts is just asking this Court to allow the status quo to continue playing out in a way that's been effective for the bankruptcy system. John G. Roberts, Jr.: Thank you, counsel. The case is submitted.

William H. Rehnquist: We'll hear argument now on No. 89-5120, Michael Owen Perry v. Louisiana. Mr. Nordyke, you may proceed whenever you're ready. Keith B. Nordyre: Thank you. Mr. Chief Justice, and may it please the Court: The question before the Court today is whether or not the State of Louisiana may, for the sole purpose of executing an inmate, forcibly medicate a mentally ill inmate with psychotropic drugs. The Louisiana Supreme Court, confirming conviction and sentence on direct appeal, restated that Louisiana does not execute the insane, and invited inquiry as to competency to be executed. The trial court on its own motion determined that Mr. Perry has met the threshold test of Ford v. Wainwright as adopted by Louisiana and held a hearing to determine competency to be executed. The result of that hearing was an order which we contend is without any limits, without any exercise of medical judgment, without review, without any ability to terminate medication, that is, without the medical approach that this Court has previously used. That order said that the medical staff of the Louisiana State Penitentiary should medicate Mr. Perry with the drug Haldol solely for the purpose of preparing him for execution. Mr. Perry has schizoaffective disorder, which is a major mental illness that is incurable. There are two major components to this disorder, the first of which is a mood component... we commonly think of it as a bipolar disorder or manic depressive... and the second is a psychotic component where Mr. Perry has delusions, has auditory hallucinations, and very often does not know where he is. It's also marked by very strong ambivalence, meaning that he cannot say consistently and know consistently from one minute to the next the same thing. The classic example that appears throughout the record is Mr. Perry on the one hand will say, I killed my mother and my father, and within the same sentence will say, for $20,000 I'll tell you who killed my mother and my father. The Louisiana Supreme Court initially stayed the forcible medication order in this case and then denied writ. Under Louisiana law a writ denial is not to be considered an expression of the law. The tension in this case as Petitioner sees it is the pitting of the... the medication model of treatment versus the punitive model of treatment. Sandra Day O'Connor: Mr. Nordyke, there is a Louisiana statute, is there not, that deals with forcible medication of prisoners? Keith B. Nordyre: Yes, ma'am, title XV, section 830.1. Sandra Day O'Connor: Was that section called to the attention of the trial court? Keith B. Nordyre: Your Honor, we briefed that section consistently throughout and the only time the trial court used the word was in an August 26th hearing where he ordered forcible medication and he just simply said, in accordance with 830.1, I order the forcible medication. The problem with him simply doing that is that 830.1 sets up a whole panoply of due process protections virtually similar to the Harper decision last year. Sandra Day O'Connor: Well, do you take the position that that statute governs in this situation, or should govern? Keith B. Nordyre: Your Honor, from day 1 in this case we have taken that precise position. Anthony M. Kennedy: Your position being that medication is not permitted under the statute because he's not a danger to himself or others? Keith B. Nordyre: Your Honor, I think there are two prongs to that and it's the same two prongs that Your Honor wrote about in Harper last term. First, we have the best interest component and secondly, the danger to self and others component. The record in our case is absolutely barren of either. There is no finding of best interest and no finding of danger to self or others by the trial court. It's simply an order that calls for punishment. Anthony M. Kennedy: And you took this position consistently throughout all the proceedings to this Court? Keith B. Nordyre: Yes, Your Honor. William H. Rehnquist: Well, is it your contention that the Louisiana trial court which authorized the medication is acting in violation of Louisiana law? Keith B. Nordyre: Your Honor, it's-- William H. Rehnquist: That's not one we would be likely to entertain. Keith B. Nordyre: --If we're asking about the Pennhurst problem, the answer is no. What I am saying is that Louisiana has set up a statutory scheme in title XV 830.1 and title XXVIII, section 59, which is a companion statute to 830.1, that specifically deal with the forcible medication of prisoners in the event that they refuse and that those statutes set up a liberty interest that's protective-- William H. Rehnquist: Did you argue that in the trial court? Keith B. Nordyre: --Yes, Your Honor, we have briefed those issues-- William H. Rehnquist: You briefed the argument that the Louisiana statute set up a liberty interest which gave you a right under the due process clause of the Fourteenth Amendment? Keith B. Nordyre: --I believe we did, Your Honor. William H. Rehnquist: You say you believe we did. Are you uncertain about it? Keith B. Nordyre: I am, Your Honor. I don't remember the first brief, but I am almost certain... I know that we briefed 830.1. William H. Rehnquist: Yes, but that's quite different than briefing the argument that 830.1 creates a liberty interest which would in turn give you a right under the Fourteenth Amendment. Could you supply us with a transcript citation? Not at this moment, but after the argument? Keith B. Nordyre: We will file that with the Court, Your Honor. Byron R. White: And I would like to know if you... if the issue came up before the supreme court. Keith B. Nordyre: Definitely it came up before the Supreme Court of Louisiana, Your Honor. We briefed... the brief that we filed in this Court is very similar to the brief that we filed in the Louisiana Supreme Court and has virtually all the same arguments, including the due process argument, the State created liberty interest. We take the position that the order's sole purpose is for purposes of punishment. The sole reason that the trial court ordered this medication is to attempt to change the man, to change the mind of this individual for the Government's purposes. The injections that the State wants to give Mr. Perry are for no other purpose than to execute Mr. Perry and, therefore, become a step in his punishment and part of the execution that, to our mind, are not part of the Louisiana law, not authorized by Louisiana law. The second major point that we want to make in terms of showing its sole purpose is for punishment is that no prison physicians have ordered this. As was pointed out a second ago, Louisiana does have a statute which we claim sets up a liberty interest, and that statute sets up the medical model that this Court has consistently set up in Vitek and Harper and Youngberg and-- William H. Rehnquist: And you're arguing that the Louisiana court did not follow the Louisiana law? Is that what you're arguing? Keith B. Nordyre: No, Your Honor. We're saying we were denied the expectation that the Louisiana statute gave us. William H. Rehnquist: You're talking now about some sort of a liberty interest? Keith B. Nordyre: --Yes, Your Honor. Yes, Your Honor. I may... I may be saying it incorrectly. I may be using the shorthand of talking about Louisiana law, but when I say that, what I'm discussing is the liberty interest. William H. Rehnquist: You're not making any argument that we should review this as a decision based on Louisiana law, that the court interpreted the statute incorrectly? Keith B. Nordyre: Oh, no, Your Honor, not at all. Not at all. Byron R. White: Well, the predicate for your argument, though, is what Louisiana does. Louisiana does... you claim Louisiana set up a liberty interest and you claim that the trial court didn't follow it. Keith B. Nordyre: That's correct, Your Honor. But that's no different than the liberty interest that was set up in Harper last term or set up in many of the due process cases that involve State statutes as long as it has the mandatory language in the... in the predicates. Byron R. White: Did the trial court enter more than... what was its very final order about medication? Keith B. Nordyre: The precise wording, Your Honor, was-- Byron R. White: I mean one of the orders was stayed, but-- Keith B. Nordyre: --Okay, Your Honor. Yes, Your Honor. There were two orders entered. Byron R. White: --What does the last one say? Keith B. Nordyre: The last order is fairly lengthy. Byron R. White: Right at the end it says about... doesn't it say that-- Keith B. Nordyre: To be prescribed by the medical staff-- Byron R. White: --It says this order, the one that stayed in existence... to maintain treatment as prescribed by medical staff. Keith B. Nordyre: --Yes, Your Honor. But I think that's... I don't think that solves the problem by any stretch of the-- Byron R. White: Oh, I didn't... do you think that requires a medical staff to prescribe treatment? Keith B. Nordyre: --I think it orders them to prescribe treatment as opposed to use medical judgment. Byron R. White: Well, I know, but they wouldn't be in violation of the order if they said... if they decided that the patient didn't need it. Keith B. Nordyre: I'm not sure, Your Honor, because the preceding two sentences-- Byron R. White: Well, it doesn't say so. It just says that whatever treatment the medical staff wants to prescribe, they are supposed to go ahead and do it. That's just sort of-- Keith B. Nordyre: --Well, that still denies the liberty interest that the statute that we've been discussing sets up. The statute sets up, basically, the involuntary commitment statute that Justice Blackmun discussed last term in his concurring opinion in Harper as being sort of a cure-all to this problem of forcible medication. And that's what this statute for criminals... the inmates does. It sets up basically first an emergency procedure for the first 15 days and after that it sets up basically an involuntary commitment process. Antonin Scalia: --Is it clear on the face of this statute that there's no exception to that when a prisoner has been condemned to execution-- Keith B. Nordyre: None whatsoever, Your Honor. Antonin Scalia: --and which exception can be made by the State's supreme court? Keith B. Nordyre: There is no exception whatsoever on the face of the statute. And in addition, both 830.1 and title XXVIII, section 59, were amended subsequent to Ford v. Wainwright. Antonin Scalia: But, you know, we have interpreted Federal statutes to permit some exceptions. The case that we heard argued today urges exceptions from what is normally a general rule. Why can't the State say that this statute which prohibits involuntary treatment except where the person is a danger to himself or others, why can't the State court say, well, as we interpret it it's not meant to apply to the case of a condemned prisoner, who so long as the treatment does not harm him and improves his condition is not entitled to refuse it simply because he doesn't want to be made healthy, because if he's made healthy, he'll be executed. Seems a perfectly reasonable exception. Why can't the State supreme court make it? Keith B. Nordyre: The State supreme court perhaps could, but they have not. The Louisiana Supreme Court has never spoken on this statute. They perhaps could make such an exception, but they haven't. And the fact that they denied writs in this case means nothing. They are completely a discretionary court. Antonin Scalia: I don't-- Keith B. Nordyre: A writ denial under Louisiana law has no-- Antonin Scalia: --What... the court of appeals couldn't make it? The intermediate court couldn't or the trial court couldn't? Keith B. Nordyre: --Your Honor, I guess they could say that, but I'm not sure that it would be a valid expression of Louisiana law particularly coming out of the trial court. The court of appeals perhaps could. But this sort of case would not go to the court of appeals. It goes on direct writs to the Louisiana Supreme Court. Antonin Scalia: Well, why couldn't the trial court make it and the supreme court agree with it and simply turn down the appeal? Keith B. Nordyre: Because Louisiana law, as I say, Your Honor, does not consider a writ denial to be an expression of the law at all. Antonin Scalia: And district courts in Louisiana have no power to pronounce the law? Keith B. Nordyre: Your Honor, under our civilian system of law in Louisiana... and I realize this is a criminal constitutional issue... but under our general proposition of how courts make law in Louisiana, we are a civilian system and we generally follow statutes, and if there is no statute, the court generally does not go forth and make law on it. They have to usually go from a statute and analogize from a statute. You know, what Your Honor I think says is interesting and this is that if the court were to say the statute is silent and we're going to go ahead and allow this as an exception, then what it does, I think, is clearly make part of the punishment this medication. And what we are doing is we are at this point adding a punishment not authorized by statute. Antonin Scalia: It depends upon your reading of the court's order... what Justice White was asking you about as prescribed. I don't think that must be read to say, you're going to get this treatment even if it isn't in your medical interest. I read it as saying, if it's in your medical interest, you will get this treatment even though you want to turn it down because you know that if you get better you'll be executed. I think it's perfectly reasonable, don't you, to read it the other way when it says as prescribed. Keith B. Nordyre: No, Your Honor, I don't, because the preceding two paragraphs... I guess two paragraphs back in the order... the trial court said that he doesn't waive Mr. Perry's interest, doesn't look at Mr. Perry's interest. He says, whatever interests Mr. Perry has I find they are outweighed by the right of Louisiana to effectuate its jury verdict. Antonin Scalia: I think he's talking about what Mr. Perry was arguing, and that is a right to turn down even beneficial treatment because he didn't want to get well. That's what the issue, as I understood it, before the court was, and it's what you're arguing here that he has a right to turn down even beneficial treatment because he doesn't want to get well. Don't you support that position that even if it is in his medical interest to get the treatment, he has a right to turn it down? Is that not your position here? Keith B. Nordyre: Yes, sir, it is. Antonin Scalia: And I think... and I understood it to be the position below and I understood that to be what the district judge was addressing. Keith B. Nordyre: But I have to qualify that. As long as it's in his medical best interest and there's... showing that he's dangerous to self or others, then of course the State can do that under the statute and under Harper. There's no showing-- Byron R. White: Well, there's no indication of any finding that he would be of danger to himself or others? Keith B. Nordyre: --The record is barren of that, Your Honor. The record... the trial court's ruling is barren of that, of course. And we think the record is barren of that also. Byron R. White: So you think... why don't you win the case just on that basis, that the judge ordered treatment which was against his will without the proper findings? Keith B. Nordyre: Your Honor, we could. We could under the liberty-- Byron R. White: Well, you just... forget about the State statute. Keith B. Nordyre: --If you're talking about the substantive Fourteenth Amendment due process, absolutely we could. Byron R. White: Well, do you? Have you? Keith B. Nordyre: I think so, Your Honor. We've argued in brief that we certainly have under the Fourteenth Amendment substantive due process problem. Byron R. White: Do you think there was a duty under Louisiana law or any other law, including the constitutional law, for the doctors to treat this man? Keith B. Nordyre: If Your Honor is asking about what the State has raised, the Estelle v. Gamble 1983 problem, I think that there is a statutory duty under Louisiana revised statutes where physicians... for the State Penitentiary to provide proper care for Mr. Perry. But there is a concomitant ability of Mr. Perry to turn down that treatment if he wishes to under the same statutes, under the same statutory scheme. Anthony M. Kennedy: Isn't it a fair... Isn't it a fair inference from the record that the only reason the medication was turned down was so that he could not be well enough to be executed? Keith B. Nordyre: Your Honor-- Anthony M. Kennedy: In fact, isn't that the reason that counsel ordered him not to take the medication? Keith B. Nordyre: --Not the first time, Your Honor. The first time that I wrote the letter to request that he not take medication, which was in March of 1988, the reason that was done was that Mr. Perry was having discomfort. He was feeling really bad on the medication. The first time that I ever met this client was in January of 1988, and he was agitated and having the side effect of... the intense agitation of this medication and I looked at the statute and found 830.1 and wrote a letter saying, let's discontinue him from the medication. The second time I didn't discontinue him from the medication. I wrote a letter to the State Penitentiary asking that they not medicate him absent compliance with 830.1. And the final time that Your Honor might be talking about is when there was a last hearing, I believe, and one of the doctors made some comment about what I said. I didn't say that. That may be Mr. Perry's auditory delusions, but I didn't say that. Anthony M. Kennedy: Well, there's nothing in this record to indicate that medication is against his medical best interest, is there? Keith B. Nordyre: Yes, there... well, yes, there is, if you consider the fact that if he takes the medication under the trial court's findings, that it will kill him, that will inevitably and inexorably lead to his death. Anthony M. Kennedy: I'm talking about his condition prior to his execution. Keith B. Nordyre: We don't know, because his best interests were not a focus of any of the hearings. None of the hearings that we had focused on what Mr. Perry... what was good for Mr. Perry, what was bad for Mr. Perry, how much was good, how much was bad. The problem is that we didn't use the medical model throughout. As Your Honor knows from the Harper case last term, this sort of medication has got problems with it. It's got side effects. It's got dangers. And the use of these medications, as dangerous as they are, may be good for inmates under some circumstances. But it's a constant push and pull and a tension, a medical risk reward analysis, that the physicians need to undertake and that wasn't done. Antonin Scalia: Do you think under this order, the physician said, boy, we have to pump the medication into this fellow no matter what it does to him? Keith B. Nordyre: I think-- Antonin Scalia: Do you really think that that's how that order would have read by a medical doctor? Keith B. Nordyre: --Your Honor, I don't know how a medical doctor would have read it, but the import of the order-- Antonin Scalia: But don't you have to know to base your argument on that, and to assert as you've asserted in your brief that the whole purpose of treatment was not at all to make him well, although that would kill him as you say, because if he got well, he could be executed. But that wasn't the purpose. The purpose was simply to have him, even if it hurt him enormously, to have him rational for one brief instance so he could be executed. I don't see anything in the record that justifies that. Mr. Nordyke, in that respect there has been discussion up here about the wording of the order. It is the order of October 21, '88, isn't it? Keith B. Nordyre: --Yes, Your Honor. Harry A. Blackmun: Well, I don't see that it reads, "as prescribed by the medical staff. " It reads, "as to be prescribed by the medical staff. " I think that's susceptible of a very different connotation. Keith B. Nordyre: I agree, Your Honor. I think it is. And I think, Justice Scalia, the answer is basically what was just proposed. The order, as I understand it and reading it as a whole in pari materia, basically says they go forth and medicate him. Antonin Scalia: To be... as to be prescribed means as to be prescribed contrary to all sound medical practice if necessary. That's... do you thing a reasonable-- Keith B. Nordyre: I can't read it any other way simply because the trial court, knowing about 830.1, having had it briefed to him, didn't go through any of the things that one needs to go through under 830.1. He didn't look at any of the issues. This simply wasn't that sort of hearing. Antonin Scalia: --Was there testimony that any doctor treating him interpreted the order that way? Keith B. Nordyre: Well, Your Honor, the trial court... excuse me, the trial court stayed his order after entry, so we don't know. Now, Mr. Perry has been medicated since then, but under whose authority or why, I don't know. But theoretically this order is stayed even through today. Byron R. White: So the medical staff is probably doing what they thought they should be doing to him. Keith B. Nordyre: I don't know. As of 2 weeks ago-- Byron R. White: And he hasn't been refusing them? Keith B. Nordyre: --They are forcibly injecting him, we understand. Harry A. Blackmun: Of course, Mr. Nordyke, it never really makes much sense, does it, in some respects, to cure a man only to execute him. Keith B. Nordyre: Your Honor, we claim it's fundamentally wrong. Harry A. Blackmun: And the problem, of course, is the old rule that you don't execute a man when he's incompetent. Keith B. Nordyre: It goes back to Ford. It goes back to Ford in the common law rule. And the same reasons that this Court decided in Ford are equally applicable here. The medicines don't cure Mr. Perry. They may mask his insanity for a short period of time so that we may feel better about executing Mr. Perry, but they don't cure Mr. Perry. And the insanity that underlies those medications is still there. You would still be sending-- Harry A. Blackmun: The trouble may be with the old rule. But there it is, engraved in stone, I suppose. Why shouldn't we execute a man when he's incompetent? Keith B. Nordyre: --Well, the answers to that are varied. First of all, under Ford v. Wainwright, Your Honor, we constitutionally don't do so. And secondly, under Louisiana law, perhaps even more importantly if Ford were to disappear, under Louisiana law there's a liberty interest that has been created both by State v. Allen a number of years ago and State v. Perry where, in the Perry case itself, the Louisiana Supreme Court said that Louisiana does not execute the insane. They cited Ford v. Wainwright further down in the opinion, but that was not the basis for which they made the decision that Louisiana does not execute the insane. Byron R. White: When a case comes to us, don't we judge it on the basis that this treatment would make him at least temporarily competent? I know you challenge that. But as the case comes to us, isn't that-- Keith B. Nordyre: Your Honor, I agree that we have to pay due deference to the findings of fact to the trial court and I cannot tell you that's not the law. That is the law. Byron R. White: --But that's just the beginning of the argument. Keith B. Nordyre: The very, very beginning. And I had a question from you and I got pulled aside. I'm sorry. In addition to the Fourteenth Amendment argument that we have been discussing here, we believe that it's unconstitutional under the Eighth that Mr. Perry be executed. We also believe that it's fundamentally wrong to do so. John Paul Stevens: Mr. Nordyke, before you go to the Eighth Amendment-- Keith B. Nordyre: Yes, Your Honor. John Paul Stevens: --I want to be sure I understand your position. You contend that there's a liberty interest created by Louisiana law, I understand. Do you also contend independently of Louisiana law that there's a liberty interest in not being subjected to this medication? Keith B. Nordyre: Absolutely, Your Honor. We think it's the Harper interest of last term. John Paul Stevens: You didn't seem to mention it and I was-- Keith B. Nordyre: I apologize, but we do believe it's the Harper interest of last term. William H. Rehnquist: --Did you make that argument in the trial court? Keith B. Nordyre: Harper was not decided at the time. William H. Rehnquist: Did you make the argument even though Harper was not decided? Keith B. Nordyre: Yes, Your Honor. William H. Rehnquist: And will you furnish us a transcript? Keith B. Nordyre: We'll furnish it. We believe it's fundamentally wrong under the Eighth and that the Eighth prohibits this sort of use of forcible medication. We also think that there's a consensus against the use of forcible medication that is created by the States. No State has authorized the use of this medication for purposes of punishment. And we think that the fact that no State has authorized it is important. Secondly, the amicus in this case, the American Medical Association and the American Psychiatric Association, have filed a brief saying that from their perspective it's fundamentally wrong and ethically wrong. And I think that that second element of a consensus starts with those two organizations. They are the organizations that will have to carry out this order and they have to know more about this sort of thing than any other group. Antonin Scalia: You know, there's a consensus against killing people, too. But when a State has authorized capital punishment, why is it so outrageous as to be unconstitutional to say an individual may not turn down normal treatment that he would otherwise receive? Not treatment that wouldn't otherwise be justified but treatment which doctors would normally recommend. A person may not turn that down solely in order to escape the electric chair. Why is that so outrageous? Keith B. Nordyre: Your Honor, I'm not sure it is outrageous and my position is not as far as the amicus position on this point. The amicus claim that it is unconstitutional under all circumstances. The position that we have taken in this case and taken in brief is that first we believe it unconstitutional under the Eighth. But if it's not, then under the Fourteenth, then, there is a possibility that if this case is handled under the medical model and this competency is some byproduct, then there may be... the State may extract its retribution. Antonin Scalia: Well, what do you mean by handled under the medical model? Do you mean that the State would have to adopt a rule that all prisoners, and not merely those who have been condemned to death, can be forcibly medicated? Keith B. Nordyre: I may have missed your hypothet, Your Honor, but the hypothet that I understood you to give me was that we not medicate him outside of the realm of the Harper best interest-- Antonin Scalia: I'm saying that if the State makes a determination on the basis of expert medical advice that it is in the interest of this patient because of his mental condition to be medicated, and that they would normally advise an individual in private life outside of prison to obtain medication, that thereafter that medication may be forcibly administered to someone who is under sentence of death, whether or not he wants to turn it down. Just as a normal citizen acting reasonably would take the medication, he should have to take it and not be able to avoid it merely in order to avoid the death penalty that's been duly imposed. Keith B. Nordyre: --Your Honor, that would make the medicine, then, effectually working towards the purposes of punishment. And this-- Antonin Scalia: Of course, but he's been condemned to punishment. I mean-- Keith B. Nordyre: --That's right. But the fact that a person has been condemned to punishment does not justify anything that the State may in its imagination might wish to do to them. Antonin Scalia: --It's not doing to him anything except what normal medical advice would justify being done. Keith B. Nordyre: And people ignore medical advice all day. It's not-- Antonin Scalia: I guess the issue is whether someone who's been condemned to death continues to have that luxury. Keith B. Nordyre: --I think that's probably the bottom issue in this case. Antonin Scalia: Do you agree it's a luxury? Keith B. Nordyre: Do I agree it's a luxury to be able to refuse medication? No, Your Honor, I think it's an absolute fundamental right that bottoms out in human dignity. Antonin Scalia: Refuse healthful medication? I mean that's the condition on all my questions. That it's indeed in his good and it would be recommended to the normal patient. Keith B. Nordyre: My answer remains the same. I'd like to reserve my time. William H. Rehnquist: Very well, Mr. Nordyke. Mr. Salomon, we'll hear now from you. Rene' I. Salomon: Chief Justice Rehnquist, and may it please the Court: I'd like to begin first by making note in response to a few questions tendered to my colleague in this case in regard to Justice White's question about what does the order in this case say, it's very clear that the order says, as to be prescribed by the physicians of the medical staff of the Department of Public Safety and Corrections. Simply put, those words have to mean something, and we suggest that the court in this matter chose those words to afford to the physicians the opportunity to determine what is in the medical interests of this particular inmate. Harry A. Blackmun: Did you draw the order? Rene' I. Salomon: No, sir, I did not. Harry A. Blackmun: Who did? Rene' I. Salomon: Pardon me? Harry A. Blackmun: Who did? Rene' I. Salomon: The court. Harry A. Blackmun: Himself? Rene' I. Salomon: The judge himself. Judge Emil-- Harry A. Blackmun: That is your Louisiana practice? Rene' I. Salomon: --Yes, it is, Your Honor. Harry A. Blackmun: Attorneys never draw an order? Rene' I. Salomon: On criminal cases they occasionally do, but it was not done on this particular case. Harry A. Blackmun: You know that of your own knowledge? Rene' I. Salomon: Certainly. I represented the State not only at the trial in this matter, but in the hearing on competency of this matter also. Sandra Day O'Connor: Was there ever a finding here that the forcible medication was in the best interest of the prisoner, and was there ever a finding here to the effect that the prisoner would be a danger to himself or others without it? Rene' I. Salomon: The court did specifically find, by asking questions of the individual doctors, whether this medication was good for him. The doctors, including Cox, Jimenez, and Vincent collectively said, this medication is in his medical interest because it is one, rational. Two, it is appropriate. And three, it is beneficial. Sandra Day O'Connor: Where do I find the court's determination? Rene' I. Salomon: I think that it would be found in the court's order itself where the judge recognizes that Mr. Perry has an interest in refusing the medication. Sandra Day O'Connor: You can't point to any specific language? Rene' I. Salomon: It would be the language on the second-to-last page of the court's order where the court recognized-- Sandra Day O'Connor: Second order? Rene' I. Salomon: --The order of October 21st, 1988, where the court basically found an interest of the inmate, an interest of the State, and the inmate's interest was overridden. Sandra Day O'Connor: And it's the finding that the defendant would be a danger to himself or others without the medication? Rene' I. Salomon: I don't think there was a finding that he will be a danger without the medication. But the State's position in this case is when you examine this title XV, section 830.1, the State need not prove that he is dangerous to himself in order to justify medication in this particular example. What we respond to my colleague's argument here is that 830.1 is not the particular statute that governs this particular case, as was in the case of, I believe, Kentucky v. Thompson in dealing with visitation privileges. We have a scenario where a State statute specifically says, you can do medication where the inmate is dangerous, and that is a sufficient condition on which the State may choose to exercise its ability to medicate. Sandra Day O'Connor: So it is your position that the statute 830.1 is inapplicable? Rene' I. Salomon: That's correct, Your Honor. Sandra Day O'Connor: Is it your position also that the court's findings in all respects comply with the case handed down by this Court last term, the Harper case? Rene' I. Salomon: Well, I believe that it does comply with Harper and in the State's view, Harper indicates the appropriate result in this case. If, for example in Harper, mental illness can justify involuntary medical treatment in order to prevent dangerousness to the individual, to others, or to even their property, then certainly the State's interest in this case is at least that great if not greater. That is-- Byron R. White: But there's no specific finding that he would be dangerous to himself or others? Rene' I. Salomon: --That's correct, Your Honor, there is not-- Byron R. White: But you are saying that even if there isn't, the State's interest in executing him is sufficient to override his denial of the medication? Rene' I. Salomon: --That's correct. Byron R. White: That's certainly what the judge said, isn't it? Rene' I. Salomon: Absolutely. That is correct what the judge said. And what we are saying, Justice O'Connor, is basically that Harper, once again, if you can medicate a person who's mentally ill to protect property, you certainly should be able to do it to enforce the court's interest in its laws and in obtaining its punishment. To respond to a point made by Mr. Nordyke also, we believe that in this particular case there is less of an interest on behalf of the inmate for the simple reason in Harper there was an individual who one day was going to get out of jail, who had a long-term interest of the effects that might result from the administration of the medication. In this particular case, because this man is sentenced to death, his opportunity to live the number of years in which he will be alive are limited, not as if the matter in Harper, where we have an infinite number of years where the individual may stay alive. Antonin Scalia: Mr. Salomon, did the court specifically hold that as a matter of Louisiana law, 830.1 was inapplicable? Rene' I. Salomon: It did not. And I don't think that the court was clear to be very frank that it did or it did not apply. The court was somewhat in a vague area whether or not this statute, 830.1, applied in this particular case. As Mr. Nordyke said, at one juncture he used a part of 830.1 to stay the medication. At another juncture he said, no, my interests are different and conducted a somewhat different analysis. Thurgood Marshall: Do you appoint that the only purpose of this medication is to put him in condition to be killed? Rene' I. Salomon: I would say there are two purposes. One is that as you state, basically, so that the State can satisfy its interest, and, number two, because the State has a duty to provide treatment to a person that needs treatment. And in this particular case, if this man is truly incompetent, then he's not in a position to know to refuse medicine and make that decision competently. And for the State to deny him that treatment-- Thurgood Marshall: But the primary purpose is to kill him? Rene' I. Salomon: --I would say, yes sir, that's correct. It is basically to execute him, in this case because the State has an interest. John Paul Stevens: In your second purpose, let me be sure I have it correct. Is it not correct that when he is receiving the medication, he is competent to make a decision? Rene' I. Salomon: That's correct. John Paul Stevens: And that while he was competent he did indicate a desire not to receive further medication? Rene' I. Salomon: That is in dispute. It depends on where you can draw the line as to he has a blood serum level that allows him the opportunity to make such a decision. Some of the doctors have said that it will take 3 months of consistent treatment, that is, one injection every 4 weeks, for him to reach a plateau where he would be able to act as if he were not hallucinating or having delusions or showing symptoms of psychosis. John Paul Stevens: The finding in October of whatever it was, the 18th or 21st, that he was competent to understand the punishment, of course, execution, is not equivalent of a finding he was competent to decide whether or not he wanted further treatment in your view? Rene' I. Salomon: Perhaps I'm misunderstanding. Would you repeat it? John Paul Stevens: Well, I had the impression that there were times when he was competent to make rational decisions. And one of which would be to understand the execution. The other would be whether or not he wanted further treatment or to object to it. And I thought that the finding by the judge that he was competent for execution would implicitly indicate that he also found him competent to decide whether he wanted further treatment or not. Rene' I. Salomon: I think in some circumstances that's correct. The judge did find that he's competent to be executed when maintained on the regimen of medication, and so that would lead to your result-- John Paul Stevens: But is it not correct that during one of these periods of competency under medication, he made it clear that he did not want further medication? Rene' I. Salomon: --I'm not certain of that. I don't think the record exactly states through any doctor or any medical record that he was competent as a determination at the moment that he decided that he didn't want-- Byron R. White: I don't know. I can't imagine why the judge would go to the trouble of saying that the State's interest overrode his decision, his interest in refusing treatment, if that weren't the case. Rene' I. Salomon: --Well, I agree with you in basic-- Byron R. White: At least I would think that's the way we would judge this case. Rene' I. Salomon: --I think you're correct, Justice White. I'm not trying to quibble with you, Justice Stevens. But it's just you're asking specifically about the record and it doesn't so clearly demonstrate as you're asking me for, but I'm willing to state for you that definitely that he's got... he might have a lucid moment where he can decide that he does not want the medication. And I think in this case the judge recognized that fact and then conducted this sort of weighing and balancing-- John Paul Stevens: If we assume that we take the case as we've discussed in acknowledging that maybe the record isn't as clear as it should be, would it be your view that at that time he had the kind of liberty interest independent of Louisiana law that was discussed in Harper to say no unless sufficient overriding State interests are present? Rene' I. Salomon: --I believe that he does. And our brief acknowledges such and makes two arguments to that effect. And in this particular case, we feel that an examination of the facts and the law according to Turner v. Safley, as was applied in Washington v. Harper, is appropriate. And if you do this testing a standard of reasonableness, that is, whether the court's order is reasonably related to a legitimate penalogical interest, the State of Louisiana submits that this court order is appropriate in this case, because it is related to a legitimate penalogical interest. John Paul Stevens: So you're prepared, really, to have us judge the case on the assumption that there is a constitutionally protected liberty interest at stake, but that it's overcome by the countervailing interest that you rely on? Rene' I. Salomon: That's correct, Your Honor. Now, there was also-- Byron R. White: Then why do you say 830.1 isn't applicable? I didn't quite get it. Rene' I. Salomon: --Well, basically for the same reason that the statute in Kentucky v. Thompson didn't mandate that visitation privileges were some protected liberty interest. My point is that 830.1 does not apply to a scenario where the State of Louisiana seeks to involuntarily medicate an inmate for the purpose of establishing competency to carry out its punishment. Now, it says-- Byron R. White: But the 830.1 sort of conditions involuntary treatment on-- Rene' I. Salomon: --dangerousness. Byron R. White: --the basis of dangerousness. Rene' I. Salomon: Well, I would suggest to you that that-- Byron R. White: And is quite consistent with the constitutional rule. Rene' I. Salomon: --And I think that is correct to the extent that 830.1 is a statutory expression of what the State can do and that is a sufficient basis on which the State may involuntarily treat. But it is not the sole or only basis is what the State now contends. Byron R. White: At least that's your submission? Rene' I. Salomon: That's my submission, Your Honor. Now there were some other statements to the effect that treatment in this case is not in his medical interest, and I have already suggested and would further state that it is an appropriate, beneficial, rational course of action. Three doctors have stated such in the record of this particular case. Thurgood Marshall: Mr. Attorney General, is this medicine given by injection or by the mouth? Rene' I. Salomon: Both. In this particular case, Mr. Perry-- Thurgood Marshall: Well, if all you say is true in the interest of Louisiana, while you're giving him the injection, why don't give him enough to kill him then? Rene' I. Salomon: --Well, because I think-- Thurgood Marshall: It would be cheaper for the State. Rene' I. Salomon: --Right, but I think the State of Louisiana is limited by the Eighth Amendment and other provisions that we can't do things that are cruel or unusual or excessive in nature. And I think that we have to meet some minimal due process guidelines here procedurally in what we can and cannot do. Now this particular inmate has previously to go to trial been treated. And he has been medicated at the forensic facility in order to establish competency for trial. Louisiana, like several other States, does allow for the treatment of incompetent defendants in order to establish competency for trial. We submit that if Louisiana can establish competency for a defendant to go to trial when that individual's presumption of innocence and other rights are at its zenith, then the State of Louisiana should be allowed to establish competency in order to carry out its sentence in this particular case. Thurgood Marshall: You say that a prisoner who isn't dangerous involuntarily be treated in order to make him competent to go to trial? Rene' I. Salomon: I have no cases, but I think Appendix J, which sets forth the statutes of 20-some-odd States, does indicate that at least in Louisiana you don't need the element of dangerousness in order to treat someone to establish competency to go trial. Byron R. White: Well, are there any decisions under Federal law that... are there any decisions saying that this is consistent with Federal and constitutional law? Rene' I. Salomon: I'm not able to answer your question, because I have not researched the Federal aspect of what a Federal court could order an incompetent defendant to undergo. But I would pleased to submit something, if that would be your desire. Sandra Day O'Connor: You don't think that the Harper case is applicable in the pretrial situation? Rene' I. Salomon: I don't think Harper said that it is applicable in the pretrial situation. Sandra Day O'Connor: You don't think it is logically? Rene' I. Salomon: Well, I think that it may be, to be very candid, Justice O'Connor, but I don't think that you always have to establish dangerousness in order to justify the involuntary or some other administration of medication in order to establish competency. I think the statutes that are set forth in Appendix J reveal that some States do require dangerousness in order to justify the involuntary administration. And there are some States that do not. And Louisiana is one of a handful that do. John Paul Stevens: Isn't it true that in that situation one of the factors that would be considered would be, if appropriate in the case, the potential permanent side effects of the first medication? I guess these things affect different people in different ways. And if the doctors felt it would cause permanent side effects, you wouldn't then argue that the mere fact they wanted to make him competent to stand trial would necessarily overcome his liberty interest, would you? Rene' I. Salomon: Well, I think as it stands in Louisiana you can make that argument. And whether there is dangerousness or not, you can. John Paul Stevens: Right. Rene' I. Salomon: And that is not the case here, but I'm citing it as a premise of sorts to say that we have done it in this particular case, and because we have done it... that is, an involuntary administration of medication to establish competency to go to trial... we can do it for competency to exact our sentence. That is a validly obtained matter. The trial court in this matter in basic terms identified-- Antonin Scalia: In a way competency to go to trial is harder, isn't it. I mean here you have a person who has not been convicted of anything, and you're enforcing involuntary medication. In the other case, you have someone who's already been convicted of a crime and thereby loses some of his liberties, including physical liberty to move about. Rene' I. Salomon: --Absolutely, I mean because the punishment... the whether determination has already been made what his sentence will be. Many of his rights are greatly diminished, his freedom from confinement. We know that his freedom from bodily restraint to be physically strapped into that electric chair is reduced as well as his ability to determine his fate. Antonin Scalia: Saying, likewise is reduced his ability to turn down beneficial medical treatment. Rene' I. Salomon: That's exactly right. Many of his rights, as I have said, have been limited, and that includes, for example, his right to life and his right to self-determination of sorts. To honor Mr. Perry's request in this case, that is his refusal of medication and beneficial medical treatment, I might add, would be to be contrary to several valid interests. First, I think that it's correct to say that the inmate's right to some sort of self-determination has been greatly diminished by the fact that he has been convicted of a capital murder and that he has been sentenced to death. And I think also that once that right of the State to impose punishment is established, that we recognize in some sort of inferential way that the State is the entity that chooses what a punishment shall be. And if we in this case honor Mr. Perry's right to refuse medical treatment as indicated in the record, then I think we give, in a way, to Perry the opportunity to choose his punishment. John Paul Stevens: Let me just interrupt, if I may. Rene' I. Salomon: Fine. John Paul Stevens: You seem to make a point earlier that it was relevant that this treatment was beneficial to him. What if it wasn't beneficial? You'd have the same State interest in carrying out the punishment. Rene' I. Salomon: Right. But I still think that that interest would not be, then, legitimate, possibly under a Turner v. Safley analysis, or potentially it could walk into the prohibition on cruel and unusual punishment. John Paul Stevens: I can understand your argument if you don't rely on the benefit. But it's a rather strange sort of benefit to say the benefit is you may now be executed. Rene' I. Salomon: Well, but there are medical benefits. John Paul Stevens: He's not particularly interested in those when he is weighing the various alternatives. [Laughter] Rene' I. Salomon: I understand that. But there are other rights that he has. For instance, this freedom from confinement and these other steps like medicating him to establish the competency to go to trial, which are basically steps on the road to execution which are not beneficial to him-- John Paul Stevens: I know medication to go to trial, Justice Scalia has already demonstrated, that's a harder case than this one. Rene' I. Salomon: --Correct. John Paul Stevens: You're relying on one that hasn't been decided yet, at least by this Court. Rene' I. Salomon: That's true, but I still say that even though the State might have an interest in seeing its penalty satisfied, that a Turner v. Safley analysis says that you have to have a legitimate penalogical interest. And possibly in your hypothetical, the State's interest would be reduced if there is not beneficial medication. Because there's a benefit to the individual. There is an interest of the State to carry out its punishment bottom line. But it's limited. And it's limited by things like what's legitimate and what's going to be cruel and unusual. John Paul Stevens: It isn't the State's interest is heightened. It's that his interest is. The interest in turning down harmful medication is certainly something much greater than the interest in turning down otherwise beneficial medication, and as... the punishment authorized by this judgment against the defendant was execution, right? Rene' I. Salomon: Correct. Antonin Scalia: And not any other physical torture or harm beyond execution or prior to execution. Correct? Rene' I. Salomon: That's correct, Justice Scalia. Antonin Scalia: And if you medicated him against his will in a way that was harmful to him that could be considered to be something beyond the judgment of execution that had been pronounced. Rene' I. Salomon: That is correct. Thurgood Marshall: The State's sole interest was to kill him? Rene' I. Salomon: Well, the State's primary interest is just that. Thurgood Marshall: Well, it seems... for example, if he had been sentenced to life, the State wouldn't be interested, would they? Rene' I. Salomon: Well, the State would still be interested to the extent of providing beneficial medical treatment to a person that's ill. Thurgood Marshall: They would? They would insist on it? Rene' I. Salomon: Well, I think that the State could insist on it if you-- Thurgood Marshall: Do you think they would? Rene' I. Salomon: --Well, you asked me to predict, and I think that they may. And the reason-- Thurgood Marshall: In this case it's solely to kill him? Rene' I. Salomon: --That's correct. Now, beyond the trial court's analysis in this particular case-- John Paul Stevens: I don't mean to be a pest here. I really don't. But I want to be sure I have got a thought in mind. Reading the trial court's order, there has been a lot of discussion of as to be prescribed by the medical. We're talking about the order of page 148 I think of the-- Rene' I. Salomon: --October 21, '88. John Paul Stevens: --October 21. And it says the Department of Public Safety and Corrections is further ordered to maintain the defendant on the above medication as to be prescribed by the medical staff of the Department of if necessary administers that medication forcibly to defendant over his objection. Are you arguing that as to be prescribed means if the medical staff thinks it's beneficial? Rene' I. Salomon: Yes, sir. That's correct. John Paul Stevens: You think that's implicit in the order? Rene' I. Salomon: Yes, sir, I do. John Paul Stevens: Thank you. Rene' I. Salomon: Beyond the trial court's analysis in this particular case, the trial court did not conduct any national consensus search, but we submit to this Court today that there is no State legislation that exists anywhere prohibiting involuntary medication for a competency to execute. In fact we suggest that one State, the State of Maryland, does specifically allow competency to be based on the involuntary administration of medication. In fact, of 37 States which have the death penalty, 24 of those States contemplate in one fashion or another that treatment can occur. And it's basically premised upon a finding that executions cannot be carried out until competency is established, restored, or regained. If on the one hand, we know that we can't or cannot execute those who are incompetent and on the other hand, we can, if they are restored to sanity, the State suggests something happens between those two points. And the something that happens is these 24 States basically permit the administration of medication to establish competency for execution. Byron R. White: You don't really know that. You don't really know that those laws apply when the patient refuses and he's not dangerous. Rene' I. Salomon: No, I do not. My colleague in this case has spent some time in his brief talking in terms of procedural due process was violated in this matter and we would submit to the Court again that the court, the trial court, utilized far beyond the procedures required in Ford v. Wainwright to determine the interests of Mr. Perry, the interests of the State, and whether the State's interests would supersede. In Ford, the court was basically required to afford an opportunity to be heard, a neutral decision maker, and those things were in fact provided to Mr. Perry, in addition to many other matters. If the Court would have any further questions on any of these matters, I'd be pleased to answer them. Sandra Day O'Connor: Is the defendant being forcibly medicated now, Mr. Salomon? Rene' I. Salomon: Difficult question. I checked as recently as yesterday and it depends how you define what is forcible medication. The scenario that has occurred as of June the 20th or so of 1990 was that the doctors determined that Mr. Perry was in some kind of episode where he was dangerous and they said to him, we want to give you medicine. Are you willing to take it? And if you're not willing to take it, we're going to make you take it and basically he said, yes, I'll take it. And he has taken the medicine in June, August, and September, and as recently as a week ago, one of the supervising physicians did in fact enter another standing order for 3 months' worth of treatment, which would be one injection every 4 weeks of approximately 200 milligrams of the medication known as Haldoldeconate, which is a long-acting and lasting medication. William H. Rehnquist: Thank you, Mr. Salomon. Mr. Nordyke, you have rebuttal. You have 2 minutes remaining. Keith B. Nordyre: First let me address the Maryland statute that counsel addressed. The Maryland statute, if one would examine the legislative history of that statute, as we have, would indicate that the Maryland legislature was very concerned about the ethics of doctors. They adopted exactly the approach that the AMA would suggest in this case. There is a legislative task force history of that statute that is available and subsequent to Ford v. Wainwright, that statute was reenacted and they commute after one opportunity at a hearing. The statute does say that a person is not incompetent merely because of the continued administration of psychotropic medication. But what I suggest that suggests is somebody that would otherwise be sane even without the medication. Secondly, turning to the Turner v. Safley analysis that counsel suggested, Turner simply doesn't apply. Turner is a method of analysis that applies to a prison regulation. This is a statute that we're talking about. And if it's not a statute it's certainly the Eighth Amendment. Justice Marshall asked about the injections. They are in fact injections and the Haldoldeconate is a large enough injection where they have to be broken down into several shots each time in order to give them. The question of whether it was good for him and it doesn't appear anywhere in the record. I still think it doesn't. And the reason that I think counsel says that it appears in the record is that the questions that were posed were, can you make him competent to be executed? The questions that were directed to the physicians on the witness stand had to do with competency to be executed and not whether or not any of these medications were in Mr. Perry's best interest. We likewise have spoken to Mr. Perry, not the physicians, in the last 2 weeks. He believes that the monthly shots he's getting are lethal injections. Thank you. William H. Rehnquist: Thank you, Mr. Nordyke. The case is submitted. Speaker: The Honorable Court is now adjourned until tommorow at ten o'clock.

Speaker: The Colorado Anti-Discrimination Commission et al., petitioners, versus Continental Air Lines, Incorporated and Number 492, Marlon D. Green, petitioner versus Continental Air Lines, Incorporated. Mr. Taylor. T. Raber Taylor: Mr. Chief Justice and may it please the Court. Floyd B. Engeman, the Assistant Attorney General for the State of Colorado will share the argument with me. I am going to open and I hope that I would be able to reserve time for rebuttal. May I first review with the Court, the facts relating to Marlon D. Green and Continental Air Lines? Marlon D. Green was a United States Air Force officer serving in the orient. He had worked in air-sea rescue and he had over 3,000 flight hours in the Armed Forces. Like many, a United States airline pilot, before his discharge, he had the ambition to become an airline pilot. Accordingly, before his discharge, he sent applications to large and to small airlines in the United States. In April of 1957, from the sales office of Continental Air Lines in San Francisco, he obtained an application form which was filed with the headquarters office of Continental Air Lines on April 30th, 1957. The application of Mr. Green appears in the record at page 211. Mr. Green's application, as originally filed, required a statement of descent and race as well as a photograph. Neither his descent nor his race nor the photographs were supplied. Later, the race was supplied at the direction of the checking out Officer, Captain Kramm when he was finally called to Denver. In June of 19 -- Arthur J. Goldberg: [Inaudible] T. Raber Taylor: That is right, Your Honor. Arthur J. Goldberg: [Inaudible] T. Raber Taylor: That is correct, Your Honor. In fact, it was -- Continental Air Lines had no knowledge that Mr. Green was a Negro until after he had been ordered into Denver. In June of 1957, Continental Air Lines was seeking to hire 14 or 15 pilots and they ordered into Denver, Marlon D. Green. He was met and given a link trainer test and found qualified. The applicants who were also found qualified were five in number, the other applicants. On page 7 of the white brief of Marlon D. Green, we have given a summary of the qualifications of the six applicants who were found qualified. The application blank for Continental Air Lines specifically required that anyone to be considered would have to have minimum flight time of 2,000 hours and be not over 30 years of age. Mr. Green had more than 3,000 flight hours and was 27 years of age. At that time, he was fully licensed as an airline pilot by the Civil Aeronautics Authority and Continental does not dispute that he was so licensed, nor does Continental dispute that he was qualified. In connection with the interview at Denver, the personnel office of Continental Air Lines was the place where other -- where employees would normally be sent, Mr. Green was not sent to that office, but he was interviewed at the air base at Stapleton Field. He was under the impression -- Speaker: He wasn't in service at that time, was he? T. Raber Taylor: Mr. Chief Justice -- Speaker: At the time of this interview, he had been discharged? T. Raber Taylor: He was discharged as of May 8, 1957, Mr. Chief Justice. Speaker: Yes, yes. T. Raber Taylor: It was in June of 1957 when he was being interviewed in Denver. There was a July 1957 class, the other men were found qualified and ordered to that class. Mr. Green was not ordered to that class because he was under the impression that he would be pulled one way or the other, and not have receiving word, he called Continental Air Lines and was told that he was still being considered. However, he was not accepted for the July class, and in August 1957, he filed a complaint with the Colorado Anti-Discrimination Commission. I think here it is important to point to the record as to the reason why or one of the reasons why Continental says that Mr. Green was not employed. In the record at page 183 is a newspaper article from the state journal of Lansing, Michigan dated August 4th, 1957 entitled, “Job as Airline Pilot Eludes Lansing Negro, Blames Racial Bias”. I think it's important to also point out that in the record at page 120 in folio on 359, an official of Continental said that the reason that Mr. Green was not selected for the July class was happenstance. And at page 123, in answer to questions from the Commissioner, it has said, “We didn't need that number of pilots.” And at folio 183, they discussed the article in the newspaper telling that Mr. Green's qualifications and difficulties trying to get the job. At Record 134, there is a stipulation that the article appearing in the Lansing, Michigan Journal is substantially identical to a news release which was seen by a Continental official in an Albuquerque newspaper. This case came on for hearing before the Colorado Anti-Discrimination Commission. Before the Commission hearing, counsel for Continental argued that the Colorado Anti-Discrimination Commission did not have jurisdiction because Continental was under the provisions of the Railway Labor Act and was also a certified air carrier by the Civil Aeronautics Board authorized to transport persons, property and United States mail. Now, that argument was made in advance to the hearing and it appears an answer. However, I think we are here today confined to the facts which were put into the record. Continental's evidence established that its headquarters offices, its personnel office, treasurer's office were all located at Denver, Colorado, that in Denver, Colorado it had 800 employees and that it was certified by the CAB. But for an airline to carry any United States mail to fly in the airs over the State of Colorado even if the flights were only from Denver to Pueblo or to Denver to Colorado Springs, they would have to have certification by the CAB. Continental did introduce into the record evidence that they were engaged in business in eight states and the “in eight states” is significant because they did not introduce any evidence that they were engaged in interstate commerce or in commerce between the states. The record clearly shows that they had bases at Dallas and El Paso, Texas, that is at page 109. But Texas is a large enough state to adequately take care of intrastate transportation. They also show in the record at page 107 that there was a sales office at San Francisco. Now, whether or not there was any activity of an intrastate agent in any of the other states or in any of the states, no evidence was offered. They did state that they did business in New Mexico, Oklahoma, Kansas, Missouri and Illinois but whether that was just fly over or whether it was sales or what they did, we do not know from the record. But it's more important, especially in view of the decision of the Colorado Supreme Court that the respondent, Continental, did not introduce any evidence of any law of any other state, any of the other seven states. The only law which was before the Colorado Anti-Discrimination Commission, the only law which was before the Denver District Court, and the only law which has been before the Colorado Supreme Court, has been the Colorado Anti-Discrimination Act and the federal laws which had been introduced in the record by reason of the pleadings and the statements. It is important, I think, also to bear in mind that the record shows at page 125 and 129 that under the collective bargaining contract with the American Pilots Association, Continental had the right to hire whomever it pleased on a one year probationary basis and during that one year probationary basis, they had the right to discharge without any question. Arthur J. Goldberg: Mr. Taylor [Inaudible] T. Raber Taylor: If Your Honor please, that question we stipulated to after the first appeal of the Colorado Supreme Court, but it was not in the record until 22 months after the Commission's order. Arthur J. Goldberg: [Inaudible] could you cite what state it involves? T. Raber Taylor: The states which were involved were Colorado, New Mexico, Oklahoma, Kansas, Mississippi and Illinois, or pardon me Missouri and Illinois. Arthur J. Goldberg: [Inaudible] T. Raber Taylor: If Your Honor please, answering from the record, there is no knowledge. Arthur J. Goldberg: [Inaudible] T. Raber Taylor: On the basis of speaking as lawyer to lawyer, Illinois does have one, so does California, but I feel this record was kept lily-white from any knowledge and therefore, I think that we are bound by the record. Arthur J. Goldberg: [Inaudible] T. Raber Taylor: The decisions of this Court, Your Honor, and the decisions of the Colorado Supreme Court, I think clearly say that the Court cannot. The decisions are set forth in my brief. First of all, under the Colorado Administrative Procedure Act, if they aren't introduced there they couldn't be introduced later, at pages 28 and 29, Mr. Justice Goldberg, you would find the authorities which hold that any law of any other state would have to be pleaded or introduced in evidence, the same as any other evidence. At the bottom of page 28, we cite the Pando against Jasper in the Colorado Supreme Court and the case which I think is controlling in this Court is Hanley against Donoghue, 116 U.S. 1 at page 6. But here, in Lemon as Mr. Justice Frankfurter used to say, there was no evidence introduced in the record before the Commission and that was controlled by the Colorado Administrative Procedure Act. The -- there was also not introduced in the record before the Anti-Discrimination Commission and that's the only place for it to be introduced on any burd -- any evidence of any burden, or expense, or inefficiency, or delay, or change of pilots in flight, or confusion in interstate operations, or restriction of its right of free passage. Now, I think there is an important point which was introduced by the United States into the record before the Colorado Supreme Court. In the stipulation which was entered into before the Denver District Court, it was agreed that Continental was certified by the CAB to carry mail. One issue is whether or not they did carry mail and we do not dispute that they did carry mail, but insofar, as there was any contract with the United States to carry mail, there was no evidence of any such contract introduced in the record before the Commission. And before the Colorado Supreme Court, the Attorney General of United States, by affidavit, brought to the attention of the Colorado Supreme Court, the fact that there was no mail contract between Continental Air Lines and the United States, but they were -- there is no dispute that they didn't carry mail. Speaker: Was that a matter of any significance whether they did or not? T. Raber Taylor: I think it is not, Your Honor, but despite in all of these cases, it's hard to decide which is going to be the controlling one. One point after the carrying before the Colorado Anti-Discrimination Commission, the petitioner there responded here at Continental, appealed to the Denver District Court challenging the jurisdiction of the Commission. And at that juncture, Mr. Green introduced in the record, in his answer, a specific reference to the Enabling Act of the State of Colorado passed by the Congress of United States in 1875. This Act, which was the first Enabling Act of any state passed after the adoption of the Fourteenth Amendment, specifically provided that the Enabling Act of the State of Colorado by its Constitution and the State would make no distinction in civil or political rights on account of race or color. The Denver District Court after a hearing -- well, there were two hearings but -- and we went once to Colorado Supreme Court and back so I think we can elide that. But in the second hearing before Justice Black of the Denver District Court, he accepted the argument of Continental Air Lines and dismissed the complaint of Marlon D. Green on the ground of preemption and burden. On appeal to the Colorado Supreme Court, we obtained a four to three decision in which the Colorado Supreme Court has announced a novel principle that racial discrimination by interstate carrier is a subject which must be free from diverse regulation by the several states and governed uniformly, if that all, by the Congress of the United States. I think it is important to first view what federal laws are involved. First, I think we must point out that there has been no federal Fair Employment Practice Act passed involving either employers or employees engaged in interstate commerce. Since 1944, Congress has perennially considered Fair Employment Practice Act. I do not have in the brief, but since coming to Washington with better facilities, I have obtained the most recent statement from the congressional committee on House Committee on Education and Labor, Equal Employment Opportunity Act of 1962, HR or Court Number 1370 on the current and the last bill considered and I think this provision from that report is significant. In recommending a federal Equal Employment Opportunity Act, the report says, “The committee wishes to make quite clear its intention to respect the rights of states and municipalities which carry on effective anti-discrimination programs to eliminate and prohibit discrimination in employment.” This question of cooperation, I think, has to be reached with the question which Mr. Justice Goldberg addressed to me about the number of laws in the various states. There are 20 plus laws in the United States and in those states, there are roughly 63% of the population of the United States. I think we can appropriately take judicial notice that the majority of the employees in the 63% of our population are engaged in interstate commerce and yet to this day, we have not had a federal Fair Employment Practice Act. Now, the question as to when a Negro or when any minority person should be allowed the opportunity of work certainly goes back to the emancipation proclamation. And also to the -- to the laws which were enacted in fulfillment of the Thirteenth and Fourteenth and to an extent maybe the Fifteenth Amendment. The Congress of the United States when it was first considering the admission of Colorado to the union was confronted with the problem of Section 5 of the Fourteenth Amendment which provides that Congress shall have power to enforce by appropriate legislation, the provisions of this article. I submit that the legislative history recited on pages 17, 18, 19 and 20 of the brief for Marlon D. Green indicates that it was the intention of the members of the Senate of the United States to pass appropriate legislation when they passed the Enabling Act for the State of Colorado. In fact, it was the criticism of the dissenting voices that the bill as being introduced or being acted on by Congress would have the affect of enforcing into the Colorado Constitution and its organic law, a Civil Rights Bill. Now, it is my premise that even though the Congress of the United States said that there should be no distinction in civil or political rights and the Colorado Constitution implemented that concept in many details that there is still a residual of legislative authority in the State of Colorado and in its legislative body. Now, what is this residual of legislative authority which is now in the State of Colorado? Certainly, it is to fulfill the prohibition of the Fourteenth Amendment with regard to employees who are employed by the State of Colorado which the Fourteenth -- Byron R. White: Mr. Taylor, did the [Inaudible] T. Raber Taylor: They don't answer it in their brief, Mr. Justice White. Byron R. White: Yes [Inaudible] T. Raber Taylor: That is right, Mr. Justice. Byron R. White: [Inaudible] T. Raber Taylor: The exact provision which -- position which they take is reflected on page 19 of their brief, Your Honor. Byron R. White: Basically -- basically [Inaudible] T. Raber Taylor: They tell it -- Byron R. White: [Inaudible] T. Raber Taylor: They don't differ with this. They don't dispute the power. On page 19 of Continental's brief, they tell us, “Continental has not challenged the authority of Colorado under his police powers to enact fair employment legislation nor to apply such legislation to employees of interstate employers generally. Continental has and does contend that the flight crew members who operate interstate aircraft are a unique group already subject to all embracing federal control.” Now -- Potter Stewart: Continental's first position, as I understand it, is that there's an adequate state ground to support this judgment that the -- that your Colorado Courts have held that the legislation is not intended to apply the interstate commerce as a matter of the construction of the law, the state legislation, and if that's true, of course that's the end of the case. T. Raber Taylor: We would -- that would be true. That issue Mr. Justice Stewart came up before the Colorado Supreme Court. The opinion recited, and I quote from the Colorado Supreme Court opinion, this language negatives the idea that there was any attempt on the part of the legislature to legislate upon a matter invoking or involving interstate commerce. Now, that issue was raised on the -- on Continental's brief, in opposition to petition for cert. And on page 311 of the record is the petition for rehearing when this error made by the Colorado Supreme Court to inadvertence or otherwise, we do not know, was brought to their attention, they deleted the provision and let the federal ground as the only ground in the case. If I may -- Potter Stewart: I would certainly agree that if -- if the statute had explicitly said that it was to be inapplicable to interstate carriers by air that you couldn't possibly have any -- T. Raber Taylor: Oh I -- Potter Stewart: -- federal question here. T. Raber Taylor: Yes. We would never have been here. Potter Stewart: Right. And it's the -- Continental still makes the claim that that's the way the Supreme Court of Colorado has construed the statute. T. Raber Taylor: Well, I admit that is their argument. Potter Stewart: There's nothing or whatever to it? T. Raber Taylor: That is correct, Your Honor. I think the petition for rehearing and the deletion by the Colorado Supreme Court makes very clear that the only grounds in the opinion of the Colorado Supreme Court are all federal. Byron R. White: [Inaudible] T. Raber Taylor: Well, there is -- they are in opposite there and inexplicit as to exactly -- their major ground and their major thrust is very clearly in the one statement that you have a subject matter which requires national uniformity. Now I -- they did affirm the action of the Denver District Court. They did say that they might adopt the rationale of the Denver District Court. Therefore, it leads us, I think, to the necessity of facing the issue squarely and with that, I face it with the case of Corsi, Railway Mail Association against Corsi which I submit is the controlling decision. The -- neither Mr. Westfeldt nor I had access to the briefs which are in this Court in the Corsi case and they state that the issues relating to interstate commerce were neither raised, nor discussed, nor decided. I submit that the briefs and the record in the Corsi case abundantly show that the issues in that case parallel the issues in this case. Before the New York Court of Appeals, it was very clear that they were claiming the preemption argument therewith under Article 1, Section 8 with regard to postal service employees. The employees in the Corsi case were U.S. Civil Service employees hired by the United States. All of their qualifications passed on and approved by the United States. And these employees were engaged in the business of writing the postal cards and engaged in interstate commerce. To the argument that the issue was not involved in that case, I have before me the appellant's brief which was the Association's brief where they raised, the issue of commerce was discussed at page 38. They also discussed the issue in the appellant's reply brief under 0.2 on the Interstate Commerce Clause. The brief for the Corsi appellee at pages 12 and 15 points out the fact that interstate commerce, not only the postal power but also the commerce power was being involved and was being invoked. Also, I think this is important. Here, Continental's position is that their employees, these flight crew personnel, are a unique group of professional people. The uniqueness is that they fly aircraft. The employees in the Corsi case which I submit is controlling were under the provisions of the Lloyd-La Follette Bill with regard to all types of working conditions, hours of employment but they did not have the right to strike. But we had an area of which under the Lloyd-La Follette Bill of 1912 closely parallels the statutes which Continental claims to be preempted. I will ask my associate, Mr. Engeman, to proceed with the argument. Speaker: Mr. Engeman. Floyd B. Engeman: Mr. Chief Justi -- Justice and members of the bench. I would like to explain briefly why I did not open this morning. Actually, Mr. Taylor's case is listed as the second case, but Mr. Taylor had the privilege of being connected with this case throughout its trial before the Commission in the District Court and both the times it was in our local Supreme Court. I was pleased to come into the case after it had been decided by our local Supreme Court. I thought for this reason that Mr. Taylor was much more familiar with the details of the facts on how this case actually got to this Court. I think that our local Supreme Court, either purposely or by inadvertence, jumped to a conclusion that was not warranted when they made the statement that Mr. Taylor has called to the Courts attention which is found in our Supreme Court decision and is recited in the record of page 294 that racial discrimination by interstate carrier is a subject which must be free from diverse regulation by the several states and govern uniformly, if at all, by the Congress of the United States. And then they say the opinions of the United States Supreme Court have established the rule. And they quote the famous case of Hall versus Decuir which was decided in 1877 and perhaps if we were in 1877, it might be that our Colorado statute would to some extent fall within that case. However, we're not in 1877, we're in 1963 and many things have changed since that time. The Court further relied upon the fact that Hall versus Decuir had been cited in the case of Morgan versus Virginia in 1946 and later in Portland Cement Company versus the City of Detroit that was decided in 1960 which I recall, Mr. Justice Stewart wrote the opinion. This case of Hall versus Decuir involved a statute which was passed in -- shortly after the Civil War wherein a person in Louisiana had the right to share space with a person of another race. And this Court decided at that time that this indeed would cause a burden upon interstate commerce because at that time, Mississippi could have legislation that did in fact discriminated. So if you had a colored and a white person riding in the same passage, same cabin, when it came to Mississippi, they would have to change their cabin space or this was a possibility. However, when you get to the case of Morgan versus Virginia decided in 1946, you have the other side of the picture. Virginia at that time had a statute which provided that a bus traveling through Virginia had to separate the Negro and the white passengers, a completely opposite situation. And it's true that in that situation, this Court did strike down that segregation statute in Virginia which applied to interstate commerce. We think one of the things that our Supreme Court failed to recognize is that this was a discrimination statute which operated against the National Policy. In other words, this was before a period of time with our line of cases beginning with Shelley versus Kraemer, Brown versus the Board of Education, Barrows versus Jackson, all of which this Court is very familiar with. I think the important point in Hall versus Decuir which our Supreme Court seemed to refuse to recognize is a statement in that decision when, which this Court said after delineating certain rules concerning interstate commerce, the burden upon it and the sort of thing said that it is far better to leave a matter of such delicacy to be settled in each case upon the view of the particular rights involved. In other words, Hall versus Decuir doesn't per se say that discrimination or anti-discrimination is a no man's land that can't be touched by state legislation. It's only if the statute involved creates a burden and it has to be something more than just a slight inconvenience, there has to be a direct burden then the court, this Court, will look at that situation and at that time decide whether or not that statute should be stricken. I think another thing to keep in mind is that in 1877, it was permissible for a state to discriminate if this was the philosophy of the people of that state against a person of the colored race. In fact in 1883, the civil rights cases on page 25, we find comment along a line that certain privileges enjoyed by persons of the white race are not obtainable by persons of the colored race, paraphrasing that statement. However, time as changes as this Court is well aware, our philosophy changes and for this reason, I'm sure the Court has entered the decision to which I have referred previously, Shelley versus Kraemer and et cetera. I refer to those on page 12 of my brief. I think that our Supreme Court completely missed the point when they relied upon Morgan versus Virginia as supporting the Hall versus Decuir case. Now, I'm not saying that Morgan versus Virginia didn't agree with the principle involved in Hall versus Decuir, but that principle is not that discrimination is a no man's land. It merely says that, if there is a burden then we will look at it and perhaps strike the statute. And I agree that in Morgan versus Virginia, in view of this statute requiring the separation of the passengers, you do have a burden on interstate commerce. Another case they refer to is Boynton versus Virginia, again a case of a terminal facility, a Virginia statute requiring separation of people in their eating. Again, this Court struck that statute as being a burden on interstate commerce. I think that if one concludes that it is still lawful to discriminate against Negroes in this United States, you have to completely disregard the precedent setting cases which have clearly established that this is not possible. And I think this comes to the point that, as Mr. Taylor pointed out, there is absolutely no evidence in this record, and I think that's what this Court must consider, of any burden on interstate commerce. I ask myself in the brief and I ask the Court the question on page 14 but notwithstanding the fact that there is nothing in the record which would indicate a burden on interstate commerce Is it possible if there would be a burden on interstate commerce? I have struggled to find any sort of a situation that would in fact create this burden on interstate commerce. There was a bit of illusion in the record at page -- record 84 that because a Negro might fly an airplane that there would be disharmony in the cockpit and also at record 92 and 115, but actually these statements were never substantiated by any competent evidence. Arthur J. Goldberg: I presume that you [Inaudible] Floyd B. Engeman: Well, I'm sure they do. I -- Arthur J. Goldberg: There's no evidence in the record that [Inaudible] Floyd B. Engeman: There is none. Arthur J. Goldberg: [Inaudible] Floyd B. Engeman: In fact I -- I question if there wouldn't be less of a problem in having a Negro and a white pilot controlling this plane than there would be if you had a Negro passenger perhaps in Texas or someplace boarding the plane. Mr. Taylor has referred to the Enabling Act. I think that this to some extent is a delegation from Congress to Colorado to enact legislation that would prohibit discrimination against people because of race. Now, I think that the case is perhaps -- answers this question of whether there's a conflict with federal policy or with federal statute is the Huron Portland Cement Company case which I refer to on page 16 of my brief wherein you have the situation of a steamship that was licensed under federal statute and that license there authorized and went to the inspection of the boilers as to whether the boilers were safe or whether they were not safe. The City of Detroit had a -- an ordinance requiring certain precautions in view of the smoke that they emitted. And this Court there held that notwithstanding the fact that this boat was federally licensed instilled in the City of Detroit to make it change -- make it change its boilers so that it didn't emit the smoke. Now, this certainly raises two points. First of all, it seems to me there would very -- there would possibly be a direct burden on interstate commerce. And secondly, that you do have both state and federal legislation acting on almost the same thing, in other words, the boiler system of the steamship. I think that one reason the Huron Portland Cement Company case is important is the fact that on page 480 -- 448 of 362, United States border, the Court said there that the record contains nothing to suggest the existence of any such competing or conflicting local regulations. The point was raised that it might be possible that there would be more than one regulation and the steamship might have a boiler that would be alright say for the city of Detroit but if it went someplace else, it wouldn't be proper there. That's exactly the point that's been raised in our case and I think that in this Huron case, it was much more possible that you could have these conflicts. I don't believe that we have any such conflict in our -- in the case at bar. As it's not shown in the record and I seriously question whether any can be shown. Now, Mr. Taylor, I think, has covered quite adequately the Railway Mail Association versus Corsi. And I think that as this Court has now been refreshed by Mr. Taylor that the problem of the conflict with, and the question of interstate commerce was considered in those briefs and the Court rejected that argument. John M. Harlan II: You're going to comment on the conclusion of Pennsylvania against Nelson? Floyd B. Engeman: Your Honor, I'm afraid that at the moment, I do not have that decision in mind. A last case which I think is also in this area and of importance is the case of Bob-Lo Excursion Company which we -- I referred to on page 18 of brief. I must admit that this case to some extent is of limited application in view of the fact that this excursion boat in a true sense probably didn't operate in interstate commerce. It was operating in a very localized area. I would like to move on by my -- to the two questions that I think are of some importance that has been raised by respondent. I think this question was raised briefly from the bench by the Court this morning as to whether there is a state issue in the decision of the Colorado Supreme Court that would prohibit this Court from rendering a decision at this time. I think respondent's counsel would like for this Court to find that there is such issue and I feel quite confident on page 14 and 15, they have argued that point well to this Court. I think the -- the fact of that argument is that they are arguing the first decision, and I shouldn't say the first decision, I should say the preliminary decision in our Supreme Court in the case which is for review here. Mr. Taylor with design brought to the attention of our local Supreme Court in his petition for rehearing and pointed out that if the Colorado Supreme Court made the statement to which Continental has referred, and if that remained in the case then there was no need for four or five pages of argument or four or five pages of decision. That took care of it by itself and I think the Court realized that if they did retain this point of view that they were indeed making statements that were not necessary. And I am serious -- Potter Stewart: This wasn't even the first time the Court has done that, isn't it? Floyd B. Engeman: Well, I'm sure that they -- our local Supreme Court did not take that out of their decisions so that this case could be brought to this Court. Potter Stewart: But your court did continue to approve the findings and conclusions and reasoning of the -- what you call it? The -- Floyd B. Engeman: Of the District Court -- Potter Stewart: -- the District Court of Denver -- Floyd B. Engeman: Yes. Well, they did in a sense -- Potter Stewart: -- which explicitly did rely on the -- at least in part -- at least as one of the grounds for its decision on the fact that this legislation was not intended to apply to interstate carriers, if I -- am I correct? Floyd B. Engeman: This I must confess, they made statements. I have difficulty in arriving at a conclusion as to what they actually did decide. If this again were true, they could've affirmed our trial court's decision without written opinion. Potter Stewart: Well, they could have but -- Floyd B. Engeman: Yes, they did. Potter Stewart: -- and that wouldn't again be the first time of the Court which could've done one -- something one way actually did it another way. Floyd B. Engeman: This is true. I agree, Your Honor. But I believe that in reading our decision as a whole and particularly in view of the fact that it's a split decision, you do definitely have before this Court a federal issue. I think the thing they were really concerned about is can the statute of Colorado be applied to an interstate carrier? John M. Harlan II: But the question is not whether they have a federal reach because among the grounds of the state court's decision was an adequate state premise. Floyd B. Engeman: Well, I think in order -- John M. Harlan II: The state court goes on both grounds to choose as to some reason it will reach federal questions and also include state grounds because as our truly recognized state grounds. That should probably be the -- Floyd B. Engeman: This is true. I would I agree with this Your Honor but our statute is framed without any limitation. It says employer of six or more when it was called to the attention of our court that this is what the statute says, they agreed with the petition for rehearing. They agreed that it applied and then they took it out of their opinion. Potter Stewart: I -- I know that -- every -- all counsel agree that they took it out of their opinion. I can't quite find this in the record that made clear to this -- Floyd B. Engeman: Well, perhaps I'm the one that caused that error if it's an error. We just deliberated it, Your Honor. About including the opinion as originally written, it has been removed from the opinion and the opinion as it now stands and the reported decision does not include this language. Potter Stewart: So the opinion as we have it in the record beginning on page 290 or whatever it is -- the 288 -- Floyd B. Engeman: Yes. Potter Stewart: -- is the opinion as amended after the petition for rehearing. Floyd B. Engeman: That's right, Your Honor. Potter Stewart: I see. Floyd B. Engeman: That's right. Arthur J. Goldberg: [Inaudible] Floyd B. Engeman: That's right. That's right, Your Honor. Arthur J. Goldberg: [Inaudible] Floyd B. Engeman: That's right, this is a sort of -- I have trouble with this myself on our local court. The opinion always takes the date that it has when it was originally issued although they may have revised it and so forth. Well, I feel, Your Honors that beyond any doubt, this statute of Colorado does not create a burden on interstate commerce. There's been no showing that it does. There are no statutes that specifically apply and for this reason, I believe that the decision of our local Supreme Court should be reversed. Potter Stewart: The question of whether or not it's a burden on interstate commerce is quite a distinct and separate question from the one of whether or not federal legislation has preempted it. Floyd B. Engeman: Yes. Your Honor, I'm going to reserve that problem to be covered by counsel which will follow me. Potter Stewart: I see. Floyd B. Engeman: If it's all right with the Court, thank you. Speaker: Mr. Jewel. Howard H. Jewel: Mr. Chief Justice Warren and members of the Court. California is one of those states which has a Commission which varies in many respects with the Colorado Anti-Discrimination Commission. We call ours the Fair Employment Practice Commission but its duties and as I understand, the Colorado Commission, its jurisdictions are roughly comparable. When our legislature enacted the law creating our Fair Employment Practice Commission, it stated its policy which I would I like to read to this Court. It stated the policy to be as follows. “It is hereby declared as the public policy of this State that it is necessary to protect and safeguard the right and opportunity of all persons to seek, obtain, and hold employment without discrimination or abridgment on account of race, religious creed, color, national origin or ancestry. It is recognized that the practice of denying employment opportunity and discriminating in terms of employment for such reasons commence domestic strife and unrest, deprives the state of the fullest utilization of its capacities for development and advance, and substantially and adversely affects the interest of employees, employers and the public in general.” Now, it is in defense of this policy of California that we have asked leave of this Court to appear as amicus and it is in defense of this policy that I speak. As we understand this case, this case poses a rather grave threat to that policy for us here in California. I note that Continental in its petition states that on page 19 or in its brief states that they do not challenge the authority of Colorado under its police powers to enact fair employment legislation nor to apply such legislation to employees of interstate employers generally to employees of interstate employer. But I think it's unfortunately true that the admission of the -- of Continental in this case would not be binding upon the Court. And the burden which the -- which the Continental seeks to urge upon this Court is not a burden which goes only to airline pilots, unfortunately. As I make it out, the airline pilots are only distinguishable from other employees of interstate commerce carriers and in that, there is a -- a rather particular and specified group of federal regulations which have to do with safety and since Mr. Green in this case has been certificated by the federal authorities, and so far as I know, there has been no word in this record to the effect that Mr. Green was in any way an unsafe pilot or was in any way uncertificated. That issue so far as the -- as the limitation of this -- of this problem to airline pilots seems to be questionable because the burden as the respondents allege is not a burden which is limited only to airline pilots but it applies generally. The burden that they allege is one of multiplicity and they stated rather eloquently in their brief at pages 20, 21, 22, and 23. They point out at such things as a fact that the various commissions have various numbers of commissioners who receive various salaries and that they have different means of enforcing these procedures. Some by penal sanction, others simply by persuasion, et cetera and they document this more fully for the Court in their Appendix A of their brief which describes in some great detail the multiplicity of state and federal or of state commissions having to do with this subject. This applies not only if there's a burden in Continental with respect to airline pilots, but I would think there would be so far as multiplicity is concerned, the burden also with stewardesses, perhaps they'd burden also with other Continental employees who are required to physically be -- to physically go from state to state. And I suspect the number of employees in this respect would be considerable since Continental operates in many states, and I presume, they have occasion for example to send accountants from one of their offices to another. Well, there's any number of employees of Continental who must travel from state to state. Arthur J. Goldberg: [Inaudible] Howard H. Jewel: I was -- yes sir, I was going to come next to it. It would apply not only to airline employees but to all other employees who are actually in the business of transportation. And why not to other employees -- other employers who are actually engaged in interstate commerce, any manufacturer who sends employees from state to state might similarly make the same burdens or make the same argument with respect to the fact that the burden on the commerce here is the burden of multiplicity of state action. In addition, and I have been told that -- that up to approximately 48% of all California employees for one purpose or another -- or another might be considered to be within -- within interstate to be engaged in interstate commerce or in occupations which affect interstate commerce. Arthur J. Goldberg: What percentage? Howard H. Jewel: Up to 48% Mr. Justice Goldberg. Arthur J. Goldberg: [Inaudible] Howard H. Jewel: Well, it's a -- I agree with you, sir. It's a figure that is extremely difficult to come by. I put the question to our Bureau -- chief of our Bureau of Labor Statistics in California and he indicated great difficulty in doing anything that was precise and therefore, I didn't offer a precise figure and absolute numbers, but in any amount, we think it's substantial and we are concerned and that's why -- Arthur J. Goldberg: [Inaudible] Howard H. Jewel: So -- Potter Stewart: You're going to get to the preemption argument which -- Howard H. Jewel: Yes, sir -- Potter Stewart: -- [Inaudible] took part at all. Howard H. Jewel: Well -- then I'm going -- let me talk about -- we contend -- Potter Stewart: In your own -- Howard H. Jewel: Yes. Potter Stewart: I didn't want to interfere with your plan of argument, but I do hope somebody's going to get to that argument. Howard H. Jewel: We contend sir that the governing law of this case is the law of Cooley versus Board of Wardens. We think that this -- this is an elderly doctrine of law which has been employed by this Court invariably in these matters and not to be employed again in this situation. As I understand the doctrine of that case, it is simply that this Court will -- will look and any time a piece of state legislation is challenged, as being in conflict with or in opposition to the federal right to -- the congressional right to regulate the commerce, this Court will take a close look. And to that purpose, it will consider such matters as the pervasiveness of the state legislation, a subject to be involved the need for uniformity versus the right of the state -- of the individual state to legislative matters to protect its own or in accordance with its own police powers. We think that the whole case is simply a manifestation of the application of this doctrine. We think that the Morgan case is an application of this doctrine. We think that the Bob-Lo Excursion case is another application. In each one of these cases, the Court considered the relative merits of the -- of the commerce on the one side and the right of the State on the other to regulate for its police power. I think although it's on a different subject matter that Pennsylvania versus Nelson that Mr. Justice Harlan raised was a -- is another example of that situation that had to do with the problem of Communism. I think that, if I'm not mistaken -- John M. Harlan II: Well, that's preemption, isn't it? Howard H. Jewel: Yes. Well, it's a preemption but the -- if I'm not mistaken, the Court considered very carefully and recorded in its report the testimony of Mr. J. Edgar Hoover who discussed the fact that this was a nationwide conspiracy that we were dealing with -- John M. Harlan II: This was Commerce Clause preemption? Howard H. Jewel: For the pre -- yes. If I said commerce -- it was not a commerce -- John M. Harlan II: You're talking about the burden -- Howard H. Jewel: Burden and -- John M. Harlan II: I think somebody on your side address yourself on preemption. Howard H. Jewel: Well, the questions of preemption as I make them out here have to do with -- with the Railway -- the Railway Labor Act and that -- or rather let me take the commerce -- the Federal Communication Act first. In the preamble to that Act, there's mentioned in there the word “discrimination”. The Act was passed sometime, I think originally in the 1920s, I maybe mistaken on the date. There has never been in California, so far as I know, and I have been -- my attention has never been drawn to -- in any other jurisdiction for any of these federal -- federal acts which are urged upon this Court as preempt in this area have ever in any way been applied to anybody who applied -- who applied for a job and was refused because of his race. Now, there have been one or two cases in which these Acts were extended to cover passengers, the Fitzgerald case was one example of that. Whether or not, the Congress had in mind the protection of passengers from racial discrimination in the enactment of those laws, I have no idea, but they -- whether they did or not, I shouldn't think that whether they cover passengers who have any significance as precedent in this case which has to do only with employment -- with discrimination in employment. I can say to the members of this Court that there is no -- there is no such thing in California that there never has been practically any such thing in California as the use of either the Railway Labor Act or the Federal Aviation Act by anybody who claimed he was being discriminated against -- because of his race by an employer who is -- who is subject to one of these acts. It's a brand new concept that if it exists, it exists in a vacuum so far as I know. And there are cases to which I can't immediately point on by this Court wherein the Court has stated that unless there'd be some conflict shown with respect to the preemption or unless the subject matter be such so as to indicate that the Congress itself has wanted to exert 100% of its jurisdiction that the Court will not -- will not use or will not hold that the state act is -- has been preempted. This is a -- this is a completely -- a completely new concept to us and I wonder what would have been the case for example if Mr. Green in this situation had made application to the Federal Commerce Commission or to -- to his -- exert some rights under the -- under the Railway Labor Act. Certainly, he would have been operating in a brand new area for them because no case has ever come to my attention and I think the Court will hear of none. There have been none any of the briefs where any of these agencies of the Federal Government who are responsible for the administration of these acts have ever ruled one way or another with respect to this question. I don't think the matter has ever -- has ever been brought up to them. Potter Stewart: I have in mind, particularly Section 404 (b) of the Civil Aeronautics Act of 1938 which was in effect at the time that this arose. I realize that statute has now been replaced by the Federal Aviation Act. Howard H. Jewel: This is the act which contains the single word of -- Potter Stewart: It contains different languages. Howard H. Jewel: Yes. It includes the word, if I recall it correctly, discrimination and refers to service in the act. Potter Stewart: It requires every other carrier not to subject any particular person to any unjust discrimination or any undue or unreasonable prejudice or disadvantage in any respect, whatsoever. Howard H. Jewel: In the -- well, Mr. Justice Stewart, I can only respond to you that -- that if that section gives a right to people in Mr. Green's situation, it has never been exercised in the State of California. We have no -- we have no knowledge of the existence of any -- of any right. Now, conceivably it could but the case has -- the case has -- has never a reason in which it has and there had been -- even when there had been attempts to apply this kind of language to passengers, they have been -- there have been resistant -- there has been resistance to this doctrine. It has simply never been -- never been attempted anywhere. Therefore, I would urge upon the Court, no semblance of any conflict between the Federal Act and then Section 404 (b) and the activities of the State Anti-Discrimination Commission. The worst that could be said in such an instance is that the Colorado Anti-Discrimination Commission is simply carrying out the intendments of Section 404 (b) of the Federal Act. Potter Stewart: Then you get very close to Smith -- to Nelson against Pennsylvania, don't you? Howard H. Jewel: Well I -- Potter Stewart: In which there was a parity of interest of state legislation of federal law. Howard H. Jewel: There is a -- there is a parity of interest there, sir, but if I'm not mistaken, it was the -- it was the position of the Federal Government in Pennsylvania versus Nelson that there needed definitely to be a federal preemption in this area in order that we may come back what was in essence, what is in essence a federal conspiracy. Potter Stewart: Wouldn't you -- wouldn't you as a representative of California think that you would be happy if your state policy were enforced nationally? Howard H. Jewel: No sir. Potter Stewart: You think it's a good policy, don't you? Howard H. Jewel: Well, I was going to come to that. We're in a strange situation in this case. Those of us who are advocating in behalf of civil rights measure because we do not ask in this particular case that the policies and experience of California should be translated to the other 49 states, rather the reverse. We only ask that this Court enable us in California to maintain the policies which our experience, in our state and have led us to believe our wise policies for us. We are not asking this Court to spread our California law to other states. We're only asking this Court to maintain our California law in our state. Potter Stewart: My suggestion is and that the suggestion of the respondent would be that the deed has already have been done. Section 404 (b) for example does require exactly what you say California requires, but in this case, Colorado says it require and at the field is therefore been preempted. Howard H. Jewel: If this -- if this is the situation sir, then I for one, I'm learning it for the first time. Potter Stewart: Well, nobody said -- Howard H. Jewel: I'm not complaining about that doctrine certainly and if this Court wishes -- wish to announce that doctrine, I'm sure representing the State of California in our interest in the matter, we would be very gratified. Arthur J. Goldberg: General, you're saying it another way, [Inaudible], isn't that correct? It has never been applied to employees, isn't it? Howard H. Jewel: That is true, sir. But -- Arthur J. Goldberg: [Inaudible] Howard H. Jewel: I believe that so, sir. We would have then -- if that were the situation, all employees in California would be treated equally regardless of whether they were subject to federal or state law. But if the Colorado, the doctrine as announced by the Colorado Court is reaffirmed, then we will have two classes of employees in California; those who have the protection of FPP and those who have the protection of some federal law, which to date has never been -- has never been -- Potter Stewart: We are talking about a specific industry and specific regulation of a specific industry. We are not talking about federal law generally. We are talking about the airline industry in United States and the very pervasive federal regulation over it. We're not talking about generalities. We are talking about preemption in this field. Howard H. Jewel: But -- Potter Stewart: I hope you'll address yourself to that. I've been talking about it, but it but I haven't heard very much about it from you. Howard H. Jewel: Well, sorry. I tried to express my concern that it would be very hard for us to specifically delimit this on any ground that I know of to one particular class of employees. Maybe your own is in my assumption, but -- John M. Harlan II: Put that thing in other way if you're representing an institution itself and the construction of the statute of the state is that it would be segregated and the opposite of the matter is I suppose the first thing you'd be arguing is the federal acts preempt the state [Inaudible] Howard H. Jewel: That -- John M. Harlan II: -- that would be a [Inaudible] Howard H. Jewel: -- that might conceivably be so sir in a diff -- John M. Harlan II: [Inaudible] Howard H. Jewel: Well, I have no -- as I say, I would agree that it ought to work both ways and -- but I just have not known of the existence of this doctrine. John M. Harlan II: With reference to the evidence of this case. Byron R. White: Would you -- would you apply that [Inaudible] Howard H. Jewel: Yes sir, we would and we do up to -- and have. We have -- we have always felt that we had jurisdiction over these kinds of employees. Byron R. White: [Inaudible] Howard H. Jewel: No sir, there is none and none according to age. Byron R. White: Age? Howard H. Jewel: But there is one about business establishments. All people are entitled of the equal services of business establishments with respect to it. I would have. Speaker: Mrs. Siegel. Shirley Adelson Siegel: Mr. Chief Justice, members of the Court, and may it please the Court. I want to get to this burning question of preemption. But first, I wish to state very vigorously that I am here today in behalf of the State of New York which sets the standard for these state laws. We're the Granddaddy State from which all the others followed and I represent also a group of -- well over a dozen other states that have that have high discrimination agencies and they are vitally concerned with the outcome of this case. Not out of any petty jealousy for their jurisdiction, but they are vitally concerned that a verdict for the respondent here might create a very serious vacuum in the matter of protections against racial discrimination in employment and also unsettle the foundations of our jurisdiction because -- William O. Douglas: Wasn't -- wasn't New Jersey a quote “Granddaddy”? Shirley Adelson Siegel: New Jersey, very quickly followed in our heels made its law effective the same date [Attempt to Laughter] but we had -- it developed the law as the result of a traveling commissions holding hearings and presenting proposed bills from one of the state to the other period of year or so, and so we think that -- John M. Harlan II: [Inaudible] Shirley Adelson Siegel: They may have done that too, but I believe that New Jersey would be the first to yield to us the honor as the -- a private jurisdiction in this area. They certainly are in touch with us for advice in our administrative construction often enough. I am sorry, Mr. Justice Brennan. I guess I regret that my valuable time may be slipping in this give and take. We've have lot of experience in New York. We've had thousands of cases involving this racial discrimination in employment. And approximately 7% of these have involved interstate carriers. In the early years, there were many railroad cases and in these many dozens and dozens, in fact, a couple of hundred railroad cases, the railroads perhaps they squirmed. I don't know what went on behind their common experience, but they accepted the conciliation procedures of the state commission, the first Negro brakeman was put on in one railroad and so on. And these breakthroughs, each of them, although maybe only a handful of persons were concerned had an enormous significance. As I'm sure, this Court will appreciate. I need not belabor the point here. In the case of the airlines, we have had to date done business with 25 airlines all of an interstate in New York alone. Now, these airlines haven't gone screaming to the Civil Aeronautics Board to give them the statement of preemption to bail them out. I might mention it has been suggested to me about the colloquy here this morning that the Arabian-American Oil Company didn't hesitate to go screaming to the Secretary of State when our state commission against discrimination was asserting jurisdiction over their employment practices in New York, and get a letter which stayed the hand of a commission for a time, made it hesitate, the matter had to go through the courts until that proceeding was settled. Not only in our experience was close to a hundred cases involving airlines, almost half of those involving flight crew of pilots, as well as hostesses and we had perhaps the dubious honor of having been responsible for the first Negro hostesses, Negro stewardesses on airlines in our region. Potter Stewart: Was that Mohawk? Shirley Adelson Siegel: The Mohawk, right. Not one of these airlines has gone to court about this. We've had no litigation on the question of our jurisdiction over interstate employers of any kind and no litigation over the question of preemption in the case of carriers. Now, on the preemption point, I'm sure that it's in the -- a back of the minds of a -- of all of you, but I feel that I must state again and that is that even if the Civil Aeronautics Act or the Railway Labor Act which was -- has also then brought to question here should create a right in this field and we think that's pretty doubtful, but even if it should, that wouldn't close our question because there certainly is a great deal of precedent in this Court for permitting state regulation which does not burden commerce and is in harmony with the national policy to proceed. In fact, in one of those cases, California v. Zook, there was some language, which we found particularly interesting for this case that we cite at the page in our brief and that was that -- sorry. I'm sorry I've been unable to put my hand, oh yes, it is difficult to believe that the Interstate Commerce Commission intended to deprive itself of effective aid from local officer's experienced in a kind of enforcement necessary to combat this evil, aid a particular importance in view of the ICC's small stock than citing some other reports of the ICC, that's California v. Zook, 336 U.S. 725. Now -- Arthur J. Goldberg: Mrs. Siegel. Shirley Adelson Siegel: Yes. Arthur J. Goldberg: [Inaudible] Shirley Adelson Siegel: Yes, I would like to. Arthur J. Goldberg: [Inaudible] Shirley Adelson Siegel: Before every Congress since 1942. Arthur J. Goldberg: [Inaudible] Shirley Adelson Siegel: I thank you for making that point and because it's certainly our belief -- Potter Stewart: Just on that point. Shirley Adelson Siegel: -- that it wouldn't have in this area a fair employment. Experience has shown that the only effective approach is a rather elaborate administrative procedure which includes a provision for conciliation and so on. Now, this language about discrimination in the Civil Aeronautics Act is -- it reflects in our opinion, a time worn common law right of equality of opportunity for service. It's an integral part of our tradition going way back before there was a statute that common carriers should not discriminate and I think basically that's the throb, the heartbeat before the word discrimination and the language in air transportation, the language in service appears everywhere in the Civil Aeronautics Act where you have language about discrimination. Section 402 (c) declares that a policy of the Act, the promotion of adequate, economical and efficient service by air carriers without unjust discriminations. Section 484 (b) provides, no air carriers shall subject any particular person in air transportation to any unjust discrimination. Byron R. White: [Inaudible] Shirley Adelson Siegel: I am a liberal constructionist that I would personally and I believe that I may say for the State of New York that it wouldn't make us unhappy if this language were extended to cover that, but candidly, we don't think it does. If it is, that's fine because we believe that it would certainly not displace our jurisdiction in any event. Byron R. White: This isn't fatal -- Shirley Adelson Siegel: It is not fatal and of course in an area like this where this police power of the state has such a strong interest in the enforcement of the regulation, unless there's a clear congressional indication, a clear congressional indication that our jurisdiction has to be displaced, such displacements would not take place and on the contrary, there's perfect harmony here. Burden hasn't been shown and it's very similar I believe to the railroad cases. A man, a locomotive engineer who drives in interstate railroad has the nation's safety in his hand and in the same way as an airline pilot. It just translates in different terms. The railroads are very heavily regulated by the national government and yet this Court again and again has sustained local regulations enacted under the police power which for example required all locomotive engineers to take an eye examination or said that men who were driving trains would have to have an examination and if they were -- if intemperate habits, they would be disqualified, state rules that require full train cruise, state rules for adding a caboose to the train for the comfort of the railroad employees, these had been sustained. Potter Stewart: Others however have been stricken down, have they not? Shirley Adelson Siegel: Well, if you examine those, for example, Southern Pacific against Arizona, a case -- Potter Stewart: Well, that's the -- is that the length of the train? Shirley Adelson Siegel: That was the length of the train. It was a dramatic case and there it was said like these passengers in Hall v. Decuir every time you came to a state boundary, you have to stop and change the length of your train and so on. There was an element of burden there too. But -- Potter Stewart: How about the -- Shirley Adelson Siegel: If you will note, Mr. Justice Stewart in the opinion of the Court in that case that it was not so clear as the majority recorded there that this statute really was necessary for safety. They said that statistics have shown that because the length of the train was limited you therefore had to have more trains that maybe in the long run, you ended up with just as many accidents, and so the statute itself was of some questionable value. We don't have any such problems here. Potter Stewart: And there was that Curtain case, I can't even remember the caption of the case, Curtain, do you know that? Shirley Adelson Siegel: I'm sorry, I'm not -- Potter Stewart: Well, I don't either but there is such a case on which I think they struck down the state legislation. I think, Curtain [Inaudible] locomotive -- Shirley Adelson Siegel: I would just like to say in closing that so far as we're concerned, we are dealing here with an enormous problem and we in New York, I think, know more than anybody the kind of consistent attention that a problem like this requires to bring about results and of the -- John M. Harlan II: You're not suggesting that New York was preemptable? Shirley Adelson Siegel: [Attempt to Laughter] New York has some useful experience on the basis of which -- John M. Harlan II: What year was the -- Shirley Adelson Siegel: 1945. John M. Harlan II: In 19 what? Shirley Adelson Siegel: 45. John M. Harlan II: 45. Shirley Adelson Siegel: New York law became effective. And we say only that it's not the issue here that the federal government has acted in such a clear way and so demonstrated it so unmistakably it's a right to preempt this field. We have a going pattern of state laws which are doing a job. They have not resulted in turmoil in interstate transportation. On the contrary, they have been doing an effective job and have worked in accordance with the highest national policy and we earnestly urge this Court to reverse the decision of the Colorado Supreme Court. Thank you. Speaker: Mr. Westfeldt. Patrick M. Westfeldt: Mr. Chief Justice, may it please the Court. I believe that it's inescapable and it's not disputed that in this case we have an order of a state commission which is unskilled in the field of aviation that has ordered a federally certificated commercial airline to hire a particular person as a pilot to fly its aircraft. This is the fact and tenor and meaning of the order. Now, how did the Commission get to that point? The Commission got to that point by acting as it is required to act under the Colorado statute in any case over which it has jurisdiction. The Colorado prohibition against discrimination is against discrimination in many facets of an employer-employee relationship where the employer-employee, I beg your pardon is and I quote “otherwise qualified.” Now -- Arthur J. Goldberg: Mr. Westfeldt, can you tell us [Inaudible] Patrick M. Westfeldt: Yes I will, Mr. Justice Goldberg. Mr. Green arrived in Denver on June 24th. He was there for the 25th and 26th, and he took a link trainer check test and he had an interview and he had a flight test. Continental's decision after that action was that Green was eligible and was qualified. He was wired by another one of the supervisory people Wyler on July 5th that he hadn't been included in the July class. That wire went to his old home address in Arkansas instead of his Michigan address. So Mr. Green on the 8th called Continental, talked to Mr. Bell, Vice President of Personnel. Mr. Bell told him that he was eligible and was qualified, but he hadn't been included in the July class. The record in the case shows that there was a particular file where all of the eligible and qualified pilots named and applications were kept. On August 6th, right about August 6th which is a month later, the Associated Press news story which Continental saw from an Albuquerque newspaper, but which it described at some length in the record and the source of it of course was Mr. Green's discussion with the reporter in Lansing, Michigan and they picked up there. At that point, Continental, Mr. Bell exercising its judgment said, “Here's the man with not only nationwide notoriety, but he also has a fair employment practice cases pending against other aviation employer -- employers seeking a job. We don't like this notoriety. I don't know if it's good for him or not, but we don't like it if he is going to follow ahead with those cases it will interrupt this training and service in Colorado.” So, it was at that point and upon receipt of that information that the company decided that Green wasn't qualified for the position. There is no question about his being able to apply. We never said that. Arthur J. Goldberg: [Inaudible] Patrick M. Westfeldt: That's right. Arthur J. Goldberg: [Inaudible] Patrick M. Westfeldt: Well that -- Arthur J. Goldberg: [Inaudible] Patrick M. Westfeldt: Mr. Justice Goldberg -- Arthur J. Goldberg: [Inaudible] Patrick M. Westfeldt: No, the record does not show specifically or really even indirectly. It shows that the Continental people and the investigators had not been able to determine a specific reason. But the point -- Arthur J. Goldberg: Well, what would you say [Inaudible] Patrick M. Westfeldt: Yes, I'd say that the reason were -- I would say that the reasons were that there were at least six and maybe more by that time named in the file and the first four that came off the top were employed and put into the regular program which first includes pilot training and then during the first year means probationary employee. Potter Stewart: Well, Mr. Westfeldt, in the posture of the case as it is here now before us, don't we have to assume that he was refused employment by your company on the basis of his race. Whether or not this turns out to be true as a matter for the -- for your unemployment or made for your non -- whatever this Commission is called as reviewed by your state courts, but as the case is presented to us now, there's no issue at all, is there, unless the only basis on which he was refused employment was because he was a Negro. Byron R. White: You mean it had to be [Inaudible] Potter Stewart: That's what I mean? Patrick M. Westfeldt: Your Honors let me say that I do not believe if that is entirely necessary. We do have a commission finding here. The commission finding is clear. It says it's conclusive that Continental discriminated on account of race, but there is no court decision in Colorado either in the trial court or in the Supreme Court -- Byron R. White: One way or another isn't the [Inaudible] Patrick M. Westfeldt: Not by this Court. That's correct, Mr. Justice White. But even proceeding from that point, and I don't see any point spending any more time on it, the basis or one of the necessary elements in the conclusion of the Commission that Continental discriminated on account of race was its decision as to pilot qualifications which not only made a decision that he was qualified, but that he was better qualified than any of the other applicants. This notwithstanding the fact that the only evidence in the record was that when the check pilot, he didn't grade according to different standards of qualification. He just said okay and not okay. Now, it is true that this Commission -- Potter Stewart: He did -- he did say okay on this man, did he not? Patrick M. Westfeldt: Correct. It is true. Speaker: Was there any contention on the part of the Continental that the others were better qualified than this man? Patrick M. Westfeldt: The contention, Mr. Chief Justice, was that no rating was made as to who was better qualified and who wasn't better qualified. I really believe that that goes to the heart of the matter because I don't believe that if the policy of Continental Air Lines or any other airline to really grade finally on initial pilot flight checks. John M. Harlan II: For sure, they were not trying out that issue. Patrick M. Westfeldt: No, we're not. John M. Harlan II: This case is here on findings of the Commission that this man was excluded solely on the grounds of race. You're not -- your state court didn't disturb those findings, you're not contesting them here and that's the platform that we've got to start from. Isn't that all there is to it? Patrick M. Westfeldt: Well -- John M. Harlan II: Why do we get into these collateral issues with this -- this case is here in that posture? Patrick M. Westfeldt: I think it is here in that posture, Mr. Justice Harlan, but I also think that in considering this statute and the order of the Commission that is before the Court, the fact that the statute confers upon the Commission a duty to pass upon employee qualifications is important and should be brought out to the Court because in that argument on the diversity of state regulation, this is another area of discretion and judgment and decision by the particular commission that has to be exercised and which we think was -- would result in inconsistent and conflicting result. John M. Harlan II: Yes but if you've been able to show the Commission here that this man apart from his color was not a qualified pilot, the commission would have had no other -- no interest in it, I take it. Patrick M. Westfeldt: And that would have been the end of the case. John M. Harlan II: Why shouldn't they? So -- why do -- why don't you get down to the question really -- the bottom of this case, questions of law. Patrick M. Westfeldt: I will proceed, Your Honor, first to the -- first point of -- part of our legal argument, the independent state ground. We know and we pointed out in our brief that the Colorado Supreme Court did delete one sentence from the opinion in its original form. The only order entered by the Colorado Supreme Court at that time is the order denying petitions for rehearing on page 314 of the record. Two petitions have been filed, one, by my brother Mr. Taylor for Mr. Green on another subject, and one by the Commission asking that the particular sentence be deleted. The order denying the petitions for rehearing makes no remark whatsoever about the sentence deleted. Potter Stewart: But the sentence was deleted. Patrick M. Westfeldt: The sentence was in fact deleted. Potter Stewart: And where is the sentence? Where is that in the record? Patrick M. Westfeldt: The only place where the actual language of the -- Potter Stewart: Page 311? Patrick M. Westfeldt: On 311, the second sentence in the second paragraph is the particular -- it should be in quotation marks or something like that on the record but that's the sentence that was stricken out of the Colorado Supreme Court's opinion and in the original opinion -- John M. Harlan II: It's just you quoted on page 15 of your brief, don't you? Byron R. White: [Inaudible] Potter Stewart: It begins with the -- this language negatives the idea -- is that -- is that it? Patrick M. Westfeldt: This language negative the idea that there was any attempt on the part of the legislature to legislate upon a matter involving interstate commerce. Potter Stewart: That's -- and that's the sentence. It was originally in and there was there -- thereafter taken out -- Patrick M. Westfeldt: That's correct. Potter Stewart: -- without comment. Patrick M. Westfeldt: Without comment and the order -- at least the language of the order is just a denial of the petitions for rehearing. It makes no reference to the modification of the opinion or any explanation thereof. Arthur J. Goldberg: But don't you have to delete the entire petition for rehearing when this thing was pointed out, that the reason why the petition [Inaudible] the elimination of this sentence is the [Inaudible] the decision was on the federal constitutional ground for the whole purpose of the petition for rehearing. Patrick M. Westfeldt: That's right, Mr. Justice Goldberg, but even the petition for rehearing doesn't go to any of the other things. It is in the opinion of the Colorado Supreme Court which I maintain, I argue, was still there and still controlling. Now, the particular items to which I refer are on the record at page 293 in the first full paragraph. The second sentence the Court said, “The only question resolved was that of jurisdiction.” Now, in that sentence they're talking about the trial court, and in the next sentence, “The trial court determined that the Act was inapplicable to employees of those engaged in interstate commerce and judgment was based exclusively on that ground.” Then further down the page is the strong approval of all of the findings and conclusions to the trial court saying that they might well be adopted in toto in the opinion of the Colorado Supreme Court and further saying that -- stating that the opinion of the Colorado Supreme Court was not exhaustive on the subject but just for the sake of brevity, he wouldn't say a few of the opinions that he considered controlling. Now, notwithstanding that fact, there is also in the opinion of the Colorado Supreme Court -- beginning at page 290 of the record. The applicable sections of the Aeronautics Act of Colorado passed in 1937 and the Colorado Supreme Court itself without changing any of that said, thus in 1937, the legislature gave recognition to laws, to federal laws and regulations in the realm of aeronautics. And in those particular statutes, the introduction to the navigation of aircraft and the license for navigation is the recognition by the Colorado State Legislature that the public safety requires and the advantages of uniform regulation made desirable. The federal control -- and the federal control on these particular points include qualifications and licensing of flyers. John M. Harlan II: You also got this statement of the -- next to the last paragraph of the opinion in which your court says the State of Colorado either does or does not have power to legislate concerning racial discrimination by employers engaged in interstate commerce and it goes on to conclude that there's no power. Patrick M. Westfeldt: On what page of the record? John M. Harlan II: Well, I'm using the opinion from -- Potter Stewart: It's page 296 of the record. John M. Harlan II: I'm using the petition for cert here which I find -- Potter Stewart: It's 296 of the record beginning in the State of Colorado. John M. Harlan II: The State of Colorado. Patrick M. Westfeldt: That's correct, Your Honor. John M. Harlan II: The question I'm putting to you is this. I'm wondering whether it's a fair reading of this opinion to say that what actually the Colorado Supreme Court did was to say that they had to include -- they had to construe -- they had to construe their statute as they did because of their views as to the constitutional question -- federal constitutional question. Patrick M. Westfeldt: Well -- John M. Harlan II: And if they did that that certainly would not be an adequate state ground. Patrick M. Westfeldt: If they did that that isn't an adequate state ground. As I read that opinion and compare it with the trial court's opinion and I see what seems to me to be the adoption of it and the actual construction of the trial court's opinion because they construe the trial court's opinion as saying the Act is not applicable. And with that construction, and that approval, and that adoption, I think that's the law in Colorado from the Colorado Supreme Court's opinion. Therefore, I do believe that there isn't inadequate independent ground. And I think it's adequate and dependent as I connect it with the burden of preemption questions. If the statute is construed as not applying then the Commission doesn't have jurisdiction. Byron R. White: [Inaudible] Patrick M. Westfeldt: Well, Mr. Justice White, many things were argued below and from the very beginning, those particular issues had been argued. They along with the others were an important element of the trial court's opinion. A lot of these other items, these state constitutional questions and things of that nature were not with the merits the question of discrimination, regulations of the Commission, none of those have ever been ruled on, but the Colorado Supreme Court in essence, I believe, ruled on the same grounds that the trial court did. The only one -- the one thing that it didn't mention in the Supreme Court opinion that the trial court did mention was a question that we've had urged and argued, the preemption by federal regulation under the government contract of executive orders. William J. Brennan, Jr.: [Inaudible] Patrick M. Westfeldt: That's correct, Mr. Justice Brennan. William J. Brennan, Jr.: [Inaudible] Patrick M. Westfeldt: Well, I don't recall any -- they certainly -- Mr. Justice Frankfurter's opinion really goes to those issues. I don't know that Mr. Justice Pringle's does. William J. Brennan, Jr.: On what ground the [Inaudible] Byron R. White: [Inaudible] Patrick M. Westfeldt: Well, Mr. Justice White, on that I can only say that this other issues were vigorously argued and briefed and there was a lot of opposition and conflict about them. And that the Department of Justice and others intervened as amici in the case in Colorado so that I would think that it would be perfectly logical for the Court to do what we believe they did hold no jurisdiction on three bases. The statute doesn't cover it and burden on commerce and preemption, but obviously there's an argument on the other side but I think it's a fair construction of the opinion of the Colorado Supreme Court. Now, I'd like to move, if the Court please, to the issue of preemption. So the discussion has already been had about Section 404 (b) of the Civil Aeronautics Act. The language of that particular provision of the statute is sweeping. Also that language in substance is identical to Sections 31 and 216 (d) of the Interstate Commerce Act. This Court has -- had the Commerce Act anti-discrimination provisions before it in many cases, particularly the Mitchell case, the Henderson case and the Boynton case. Now, those cases as you will recall barred racial discrimination among -- on passengers in interstate vehicles and persons using restaurant facilities at a bus terminal that was an integral part of the transportation system. And in Henderson, particularly, this Court pointed out that the material parts of Section 31 of the Commerce Act had been in that statute since 1887. And from the very beginning, the Interstate Commerce Commission had recognized its application to discriminations between white and Negro passengers. So from the very beginning, it was apparently upheld by the administrative agency that that anti-discrimination provision related to matters of racial discrimination. In Mitchell, the Court points out that there was no intent by the Congress to exempt any discrimination from the coverage of the Act. Now, following the lead of this Court, the Court of Appeals for the Second Circuit in 1956 ruled in the Ella Fitzgerald case against Pan American. It there held that 404 (b) prohibits discrimination against persons including passengers and that although agencies -- Potter Stewart: You have these citations in your brief? Patrick M. Westfeldt: Yes, Your Honor. Potter Stewart: I'm just trying to find the part of the brief which you're discussing, the practical identity with the language of the Civil Aeronautics Act to that of the Interstate Commerce Act. Patrick M. Westfeldt: Yes, Your Honor. It -- where we have the Mitchell and Henderson and Boynton cases. Potter Stewart: Around page 44. Patrick M. Westfeldt: Page 44. I believe we set forth the statute to -- Arthur J. Goldberg: 44. Patrick M. Westfeldt: The identity of a language is -- is I think unquestionable, but the -- Potter Stewart: Has this language -- this 1930 Act language survived in the new federal -- Patrick M. Westfeldt: It was reenacted in the 1958 Act. Potter Stewart: In haec verba (Voice Overlap). Patrick M. Westfeldt: It's verbatim. I know of no changes. Now, the -- Arthur J. Goldberg: [Inaudible] Patrick M. Westfeldt: I don't know whether it has or not, Mr. Justice Goldberg. I know of no case where it has been applied to an employee. However, in the Civil Aviation Act, the word “person”, this discrimination relates to a person and the definition of the word “person,” it just says it means an individual. So that it's in -- Arthur J. Goldberg: [Inaudible] Patrick M. Westfeldt: Yes, I have, Mr. Justice Goldberg, and I think that there's other federal legislation too, but on this particular point, I am taking that position. Arthur J. Goldberg: [Inaudible] Patrick M. Westfeldt: Yes on that basis and the broad statutory scheme. There's an agency procedure and what's more, this particular agency also has some expertise in light proof qualifications. Arthur J. Goldberg: [Inaudible] Patrick M. Westfeldt: Well, they -- when the Civil Aeronautics Act was passed in 1938, no action was taken. I don't believe until 1961 by the Board in relation -- of race relations matters. But beginning in 1961, when -- and 1962 when the Board under Section 1007 of the Act requested the Attorney General to proceed with the terminals in Montgomery and Birmingham, the three or fourth -- the actions were brought under 404 of the Act. Now, the argument certainly can be made as far as I know that nobody in Mr. Green's position or a comparable position to that has ever taken a case of this kind of Civil Aeronautics Board. I haven't seen that happen. Speaker: Do you believe that the -- that the federal law is sufficiently comprehensive to afford this man in these circumstances a remedy in the Federal Courts or before a Federal Agency? Patrick M. Westfeldt: Yes, Mr. Chief Justice, I do. And -- Speaker: You think -- you think there is such a proceeding. What kind of a proceeding would that be? Patrick M. Westfeldt: The agency proceeding in the first instance would be to file a complaint under 1002 (a) of the Civil Aeronautics Act with the Civil Aeronautics Board and assert violation of the Act under 404 (b). Under 1002 (c) of the Civil Aeronautics Act, the Board has power to issue an order to compel compliance with the Act. Speaker: So you ask us in this proceeding to hold that you do not have jurisdiction in the State of Colorado but that the federal -- that the Congress has given jurisdiction to the -- to the CAB and that this man does have a remedy in that -- through that agency. Patrick M. Westfeldt: That's correct, Mr. Chief Justice. I think that he also has some court remedies. Speaker: And court remedies independent of the CAB. Patrick M. Westfeldt: Even under the CAB, under the Fitzgerald case. Potter Stewart: Fitzgerald was a -- Patrick M. Westfeldt: Fitzgerald was a 404 (b) case -- Potter Stewart: But -- Patrick M. Westfeldt: -- and it was a damage suit and -- William J. Brennan, Jr.: A passenger? Patrick M. Westfeldt: A passenger, that's correct, that's correct. Potter Stewart: And brought directly in the Federal District Court, wasn't it? Patrick M. Westfeldt: Brought into the Federal District Court. Potter Stewart: But on the theory that 404 (b) conferred Federal District Court jurisdiction. Patrick M. Westfeldt: That's correct, Your Honor and in that particular case, Pan American Airways moved to dismiss the complaint saying there was no diversity of citizenship and no federal question because they said it was a simple contract question. But the Court overruled Pan American on that point and said this is a federal law question, it's under 404 (b). 404 (b) covered persons including passengers and there was a ruling of the Court. Speaker: This, I suppose, would apply to stewardesses the same as pilots in your opinion? Patrick M. Westfeldt: Oh, I think it would Mr. Chief Justice. I think it would and I think that the provision of 404 (b) is about as broad as it can be. Speaker: Yes. Do you have any response to what the Attorney General of New York, Mrs. Siegel, had to say about the way they have handled it with 25 different airlines in their state without any -- without a point of this kind being raised? You can answer that after -- after lunch. We'll recess now. Patrick M. Westfeldt: Thank you, Mr. Chief Justice.

Earl Warren: International Union, United Automobile -- Agricultural Implement Workers of America et al versus Paul S. Russell. Mr. Goldthwaite, you may proceed. J. R. Goldthwaite, Jr.: Thank you Your Honor. Mr. Chief Justice, Your Honors. In as much as Congress regulated the concerted activities and guaranteed the rights of employees in Section 7 of the act and provided that interference with those rights was an unfair labor practice for which the unions were responsible and gave a remedy which remedy we believe is adequate to redress the employee and back pay. In other words, it's our position and we think without question, that the National Labor Relations Board has the authority to grant to the employee, whose rights under the act are infringed, all of the remedial relief which was granted by the Supreme Court of Alabama. The Board could have ordered the union to give him the $450 back pay in remedial relief -- Speaker: Or it's held otherwise as -- J. R. Goldthwaite, Jr.: Yes sir. Speaker: -- in the Court of Appeals it's held otherwise? J. R. Goldthwaite, Jr.: I don't know that a Court of Appeals has held otherwise. Speaker: Particularly in one case in circuits -- J. R. Goldthwaite, Jr.: I didn't -- I am not familiar with a ruling by a Court of Appeals. The Board has held to the contrary but we think their ruling is clearly error and we cover that subject completely in our brief at pages 45 through 56. Speaker: I know where this case -- 187 Fd. 2nd I think held that -- J. R. Goldthwaite, Jr.: That's first time sir we've had that case brought to our attention at all and didn't find any so ruling. The House Bill 3020 in 1947 in Section 10A specifically provided that an individual, an employee whose right to work during a strike was infringed would have a right to bring a suit in a, any court of competent jurisdiction, as I recall, the words, venerated, provided a court remedy for interference with the right to work. The Conference Committee of the house and Senate specifically rejected the house proposed. And in lieu of the house proposal to provide a court remedy for the same type conducts involved in this case provided the amendment to Section 7 which guaranteed the right to work and provided Section 8 (b) (1), given the National Labor Relation Board jurisdiction. Therefore we think it's pretty, it's quite clear from the Congressional history that Congress specifically rejected the right to bring a legal action to enforce the rights involved in this case. Therefore, if we are correct and we are quite sure under the rulings of the Court which held that the board has the authority to grant any relief it deems necessary -- any remedial relief it deems necessary to effectuate the policies of the act, the board does have that power. Therefore, necessarily the remedy provided by the National Labor Relations Act is in direct conflict with the remedy provided by the state court in this case. And therein as Mr. Justice Douglas asked about the Laburnum case yesterday, therein lies the distinction we believe between this case and the Laburnum case. The Laburnum case was a case of an employer whose lawful right to conduct his business free from interference was interfered with by violent conduct. The Court there held that there was no parallel remedy provided by the National Labor Relations Act to redress the injury which was the subject matter of that suit and that of course is true. The National Labor Relations Act makes no attempt whatsoever to guarantee the right of an employee to conduct his business. There is no guarantees which parallel to the employer, the guarantees afforded to the right of an employee to work and that I think is a primary distinction between Laburnum and the present case. We do believe that the Laburnum case, if it were before the Court for decision again would probably be decided differently because the adjudication by the State Court in that case necessarily involves the adjudication of concerted -- of the right of employees to engage in concerted activity and the extent of the -- exercise of that right is a matter which has been given to the National Labor Relations Board. At any rate we think that the Laburnum case carries the, to the fullest extent the line of demarcation within which the state can act upon the subject matter which has been covered by the National Labor Relations Act. Mr. Justice Frankfurter in the Weber case I think very clearly pointed out that it was necessary that the National Labor Relations Act provide a damage suit remedy before the remedies would be in conflict but that -- he said that if there was an administrative remedy which is clearly provided in this case then the Weber case -- in the Weber case instead of the Laburnum case that the Court would have decided it different. Well here there is a remedy provided. Secondly, we do not think that a mere allegation of violence in State Court pleadings gives to the state a hunting license to use any regulatory or take any regulatory measure, measures that if it sees fit or that its courts see fit or that a state court jury shall see fit. In other words a mere allegation in pleadings that violence is being committed doesn't open the door for the court -- for the state to take any action it sees fit upon the subject matter. To the contrary this Court has pointed out repeatedly that the Congress intended and I think the Congressional history shows it, that Congress intended that within the sphere of the National Labor Relations Board's authority Congress intended to leave only to the states, the exercise of the function to maintain public peace and order. The Congressional history shows that pretty clearly. Senator Taft said that only insofar as the actual violence in the commission was concerned did the two -- did the act overlap state remedies. So we don't think, we don't contend that the act replaces the state's injunction power or its authority to regulate -- to enforce its criminal statutes. But there is a limit within which that power of the state to maintain public peace and order in an emergency maybe exercised. The decision of the Court we think illustrate that only to the extent it is necessary to maintain public peace and order may the power be exercised. The power may not be exercised beyond what is necessary to accomplish that purpose and Mr. Justice Brennan asked about the Rainfair case, I think the Rainfair case illustrates that exactly. There the court, the state enjoined all picketing and the court very clearly know that only to the extent that it was necessary to control the injunction -- the violence did -- could the state exercise the injunctive remedy. In the (Inaudible) case the same case was, the same thing was true. That was an exercise of the police power of the state to maintain public peace and order. Now beyond the necessity of that exercise, the Congressional history indicates that Congress' original intention to maintain uniformity of regulation would be carried forward and getting back to Mr. Justice Frankfurter's question of yesterday, which I'm afraid I misunderstood, with reference to the punitive damages, I understood him to ask as to whether we felt it was a federal question for -- here for the Court to decide whether those damages were excessive, but I'm advised that I misunderstood the question. The question at any rate I think possibly you asked if -- do we contend that whether or not the punitive damage feature raises a federal question, involves a federal question, we definitely do. The power to inflict enormous punitive damages is the power to prohibit, the power -- in a strike where several thousands workers are involved for instance, and say 200 suits of this character are filed. Harold Burton: Punitive damages were in the (Inaudible) case, weren't they? J. R. Goldthwaite, Jr.: Yes sir. But there, as I say the Court held there was no remedial relieve available before the Board. Here we say that here is remedial relief available. Felix Frankfurter: Are you implying that if the jury's verdict had been $1,000; that would not have raised the federal question? J. R. Goldthwaite, Jr.: No sir. Felix Frankfurter: But $10,000 would have? J. R. Goldthwaite, Jr.: No sir, we're not implying that. I think the remedial relief raises a federal question. There is a power in the board to grant remedial relief -- Felix Frankfurter: (Inaudible) 10000? J. R. Goldthwaite, Jr.: But the punitive damages, Your Honor, illustrate the power of the state to prohibit, if they can grant punitive damages, enormous punitive damages. Suppose a labor organization or local labor organization has a trade for $25,000, two of these suits would bankrupt by state court juries applying their standards of conduct which vary from the standards of conduct and the extent of permissible activity, protected activity, intended by the Congress in the National Labor Relations Act. Felix Frankfurter: (Inaudible) I can clarify? J. R. Goldthwaite, Jr.: Yes sir. Speaker: Suppose this very same action, the very same proceeding and the very same record had taken place in Georgia in Alabama in 1933 before there was a Wagner Act, later on the Taft-Hartley Act, what would be the federal question in the case that you would raise? J. R. Goldthwaite, Jr.: I wouldn't raise any federal question. Felix Frankfurter: There wouldn't be any, but it didn't, is that right? J. R. Goldthwaite, Jr.: This arose -- Felix Frankfurter: But I (Inaudible) time -- J. R. Goldthwaite, Jr.: Yes sir, no sir. Felix Frankfurter: There would be no federal question. J. R. Goldthwaite, Jr.: Because the federal statute had not been inactive, Congress hadn't entered the field and assumed jurisdiction over the conduct involved. Felix Frankfurter: Therefore, your federal question is merely a question of preemption, is it not? J. R. Goldthwaite, Jr.: Yes sir. Felix Frankfurter: So, I still don't see what the question of damages has to do with it, except as you just indicated, illustrative, if the state can do this, if the state has power, a jury can bring in a verdict for $1,000 or $10,000, but the fact of $10,000 is immaterial to the federal issue, is that right? J. R. Goldthwaite, Jr.: The amount is, except is illustrative of the fantastic damage -- Felix Frankfurter: But that doesn't in or itself raise the federal question, that's the short point. J. R. Goldthwaite, Jr.: No sir. Felix Frankfurter: This isn't a claim the amount is so excessive that it's a deprivation of due process. J. R. Goldthwaite, Jr.: No sir. Felix Frankfurter: All right. J. R. Goldthwaite, Jr.: Only that the power to impose punitive damages is regulation of the same conduct which Congress has regulated and given to the National Labor Relations Board to protect and redress. William J. Brennan, Jr.: Mr. Goldthwaite, what is the redress which this respondent would obtain before the Board if the case was sustained, that there had been a violation, a part of the union which I take it would be a finding of unfair labor practices. J. R. Goldthwaite, Jr.: I don't think the Board under the facts in this record and again the facts are put in for illustration. William J. Brennan, Jr.: I am assuming -- assume with me if you will that a case of violation of the act was proved on -- as a violation on the part of the union, now what would be the redress which the Board could give this respondent Russell in that situation? J. R. Goldthwaite, Jr.: We think they could -- assuming they found a violation, which we don't think they would on these facts, but assuming they did -- William J. Brennan, Jr.: I know that but please assume with -- J. R. Goldthwaite, Jr.: I'm -- assuming they did find the violation, they could order him to be given the pay which he lost because of the unfair labor practice. William J. Brennan, Jr.: Just back pay in other words. J. R. Goldthwaite, Jr.: The remedial portion of the relief I don't think they can -- the Court has held they can't give punitive damages, but that's a matter for Congress. William J. Brennan, Jr.: Yes, but you know -- are you -- are there any instances in which the Board has done that in cases of this kind? J. R. Goldthwaite, Jr.: The Board has specifically held in two cases and Mr. Justice Harlan mentioned one other. I'm not familiar with that, but it's held in two cases that it does have the power to award back pay in an 8 (b) (1) case, which – there is just no logic in that holding at all. It awards back pay under the same section, Section 10(c) which says it can give any remedial relief necessary to effectuate the policy -- William J. Brennan, Jr.: Well then as the law now stands at least in the Board, the redress that you suggest would not be available to Russell, would it? J. R. Goldthwaite, Jr.: Well of course it could be litigated before the Board and the question is raised here. I don't think the Court has to reach the question because irrespective of the extent of relief provided, the courts always held that in a quasi judicial tribunal, federal tribunal, the extent of relief Congress provided was deemed to be is -- all the relief, the Congress thought necessary, but the question is here and the Court can decide it, that in this case, it's a question of law, not of discretion under the facts in another case. It's question, whole question of law that can decide whether or not the Board was right, and it maybe necessary to decide, if the Court reaches it. Earl Warren: Mr. Harris. Norman W. Harris: Mr. Chief Justice may it please the Court. Before entering on the argument of this case, I would like to call the attention of the Court to an inaccurate statement at top of page 31 of our brief, in which we made the statement that Senator Ives was one of the opponents of the amendment which became Section 8(b)(1)(a) of the Act. At the time Senator Ives made the statement which we quoted, he was an opponent of that amendment, but later he secured the adoption of an amendment striking out the words interfere with and he said that, that removed most of his objections, so he then voted for the amendment. There is also an inaccurate -- William O. Douglas: What page is that? Norman W. Harris: That is at the top of page 31 of the respondent's brief. There is also an inaccurate statement involving Senator Ives in the reply brief of the petitioners. It's the last sentence in that reply brief on page 20 in which they refer to Senator Ives as one of the opponents of the Taft-Hartley Act. As a matter of fact Senator Ives voted for the Taft-Hartley Act, both when the conference committee report was adopted and when the bill was passed over the President's veto. So I would like to clear those inaccuracies up with reference to the voting record of Senator Ives on the bill. Earl Warren: Mr. Harris where was this last correction, at what page? Norman W. Harris: That's page 20 of the petitioner's reply brief. Earl Warren: Oh yes. Norman W. Harris: The last sentence in the brief. I get the impression from the argument yesterday that the Court does not care for me to discuss the facts of the case. I would like to say -- Felix Frankfurter: I don't know what that means because it seems to me that I can't understand this case without knowing what the facts are. Norman W. Harris: Well, the facts are these briefly. Felix Frankfurter: But I don't -- I'll leave you to decide that, but I don't see that we've got an abstract issue here, have we? I mean in generalizing -- Norman W. Harris: Well of course it's set on the background of the facts yes, the facts are -- Felix Frankfurter: Would you mind stating what do you conceive to be the issue in the case, and that will tell me -- Norman W. Harris: The plaintiff, his entire claim was based on the allegation that the defendants by force and violence and mass picketing and threats of violence prevented his entering the plant where he was employed, that for that reason he was unable to enter, he suffered a loss of wages, he suffered mental pain and anguish in addition and in addition to those two elements of damage he asked for punitive damages in his complaint to punish the defendants for their wrongful conduct and to set an example to deter that conduct in the future. William J. Brennan, Jr.: Well was it also part of this case that would have been work available had he been able to -- Norman W. Harris: It was alleged in the complaint that, that conduct prevented his earning wages which he would have earned otherwise if he had been permitted to enter the plant. That was one of the allegations in the complaint. Felix Frankfurter: Well that goes to the damages. Norman W. Harris: Yes sir. Felix Frankfurter: You stated, the cause of action was the employment of force and violence to interfere with his -- Norman W. Harris: Right to work. Felix Frankfurter: Attempt to go to work. Norman W. Harris: Yes. Felix Frankfurter: Now, did the case go to trial on that issue? Norman W. Harris: On that issue and that issue alone. Felix Frankfurter: Was the issue directed, was the evidence directed to that issue? Norman W. Harris: To that issue and that alone. Felix Frankfurter: Did the defendant ask that the case be dismissed for want of sufficient evidence to go to the jury on the question of force and violence? Norman W. Harris: They made motion. Felix Frankfurter: And the Court overruled it and said there was evidence of force or violence? Norman W. Harris: Yes that's right. Felix Frankfurter: And the jury found that there was? Norman W. Harris: That's right. Felix Frankfurter: And there was a motion to set it aside? Norman W. Harris: That's right. Felix Frankfurter: And it went up to the Supreme Court and they sustained the findings of the jury? Norman W. Harris: That's correct. Felix Frankfurter: And is there any -- is there a controversy here now that there wasn't enough evidence of force and violence to go to the jury? Norman W. Harris: As I understood Mr. Goldthwaite yesterday, no. Now that's -- Felix Frankfurter: Are you suggesting -- your answer to me carries the statement, that Mr. Goldthwaite, or that the petitioner here admits that there was an issue of force and violence which interfered with the plaintiff, to his loss monetarily determinable, that there was evidence of that to go to the jury. The jury found in favor of the plaintiff and that despite that which is controlling here, if there is evidence, as a matter of law, the state court had no jurisdiction. Norman W. Harris: I think that's correct. Earl Warren: Now I'd like to know what the facts are as you conceive? Norman W. Harris: All right the facts were these. This plaintiff was an electrician employed at a copper plant (Inaudible). It has about 550 employees, production employees. On the morning this particular strike began which was July the 18th 1951, the plaintiff left his home to go to work. He testified that he had no knowledge there was to be a strike. He took his lunch with him as was his custom to eat in the plant. He got to the vicinity of the plant, and saw a picket line there of some 25 or 30 men walking in a circle about three feet apart over the entire travel portion of the street, off to the south side of the street. Immediately adjacent to that picket line there was another group of strikers variously estimated at from 100 to 200 and over on the other side of the street, another group estimated to be about 50. There were people scattered along in the street. The plaintiff had to approach the picket line slowly on account of those small groups of persons in the street. As he neared the picket line one of the union members who happened to be a picket captain by the name of Hobes (Inaudible) grabbed his automobile and was dragged by it some 10 or 15 to 20 feet. The plaintiff stopped. The Regional Director of this union from Atlanta who was there supervising the picketing and both he was there, the Assistant Regional Director, an international representative from Birmingham, they were all there participating in the picketing and supervising. The Regional Director came up to the side of the plaintiff's car and said hourly or salary. Now we also had evidence of a man that attended the union meeting the day before when they were making the plans for this strike, that this international representative told them to let the salaried employees in but not to let the hourly paid production employees through the picket line. This Regional Director asked him as I said hourly or salary. The plaintiff replied what difference does it make? The Regional Director then identified himself as being the Regional Director and says if you are salaried you can go on in if you are hourly this is as far as you can go. The plaintiff remained there from an hour-and-a-half to two hours there with (Inaudible), with that picket line in front of him he tried to go through it, each time he did, they would stop right in front of his car and point their signs down towards his car. Once he tried to edge in behind an empty bus going into the plant to pick up some third shift employees, and as he did so, the pickets surged over in front of him, someone of them shouted it looks like we are going to have turn him over to get rid of him and from that group that was congregated at the south side of the picket line which was constantly replacing the pickets and reinforcing them, shouts came of turn him over. The plaintiff testified that there after remaining there that length of time he was satisfied that he couldn't get into the plant without running over somebody or else getting turned over, so he backed out and went home. Now a month later with 75 Alabama Highway Patrolmen and 20 city -- Earl Warren: Before we get to the month later, what happened in the plant, there was a plant operating this --? Norman W. Harris: The plant was operating on a three shift basis. The plaintiff was on the first shift. At the time this was happening to him, the third shift was still in the plant working, they were to get off at 8 o'clock. Earl Warren: What time was this? Norman W. Harris: This was about quarter to eight. Now the foremen of the I believe they called it the production department, testified that when he saw that picket line outside, that he gave instructions to start emptying one of the furnace in which they carry 142 I believe of these coupler pellets, they were heated to a very high degree of temperature and a pube extruded from it, and that furnace has to be emptied, if the plant is to close down. He said that under normal conditions if they were going to shut the plant down that they would start emptying that furnace some time around three or three-and-a-half hours before the shutdown. This morning they started emptying that furnace at 7:30 in the morning which was 30 minutes before the first shift was to get into work. He also testified that the draw benches and all the machinery of the plant were left in their normal and customary condition, the same they would be if the plant was to be operated. Now the union contended that they had an agreement with the management of the plant that if they had a strike the management would not allow the hourly paid employees in the plant. That was denied by the management representative and that was the main question argued and submitted to the jury and decided by the jury and there is no question in this record but what the case was submitted to the jury on that basis to determine the facts and that they were bound to have determined that force and violence prevented the plaintiff from earning wages and that he would have earned wages if he had been able to get in. Earl Warren: What did happen so far as the operation of the plant was concerned thereafter? Norman W. Harris: It seems they entered that furnace with supervisory employees and the plant was -- its operations ceased and did not resume again until a month later. Earl Warren: And did he get damages or did he get wages for this month? Norman W. Harris: Yes. Earl Warren: When the plant was closed? Norman W. Harris: Well, I assume he did, the jury just -- it didn't itemize its verdict, it return a lump sum verdict for $10,000, but the Court charged the jury that he could recover the wages that he had lost during that period. William J. Brennan, Jr.: (Inaudible) Norman W. Harris: No. He received no compensation during that time he was out of work, except by way of the verdict in this case. William J. Brennan, Jr.: Then the judgment, the punitive damages were not separately assessed? Norman W. Harris: No sir, it was a lump sum verdict for $10,000, could include loss of wages, mental pain and suffering and punitive damages, and of course we know about what the loss of wages was, it was about $500, so that leaves $9,500 attributable to mental pain and anguish and punitive damages. Charles E. Whittaker: (Inaudible) Norman W. Harris: No sir, just the general verdict in return. Earl Warren: How long did the strike last after they opened, reopened the plant? Norman W. Harris: I believe that would have showed that it -- the picket line was maintained down from September and they reopened in August, it was a little over a month, and they continued to work all during that time with the highway patrol and police protection. Earl Warren: Did this man work during that period, from June -- whatever day it was that the plant reopened until the strike was over? Norman W. Harris: Yes sir and still is. Earl Warren: So the only wages that he was entitled to under this verdict would have been the wages that he would have earned while the plant was closed. Norman W. Harris: Yes sir, which was a period of five weeks approximately. Earl Warren: Yes. Norman W. Harris: Now, are there any other questions -- Earl Warren: No I think that's sufficient. Norman W. Harris: As we contend in our brief, we contend that the Laburnum case is controlling here. The conduct involved here was of a similar nature to that involved in to the Laburnum case. It was preventing employees from working by threats of violence. The basis of the common law tort action here was the same as the basis of the common law tort action involved in the Laburnum case that was interfering with the right of a person to engage in a lawful business or occupation without interference. The unfair labor practice involved in the Laburnum case was the Section 8(b)(1)(A) violation, the same as it is here. Both cases were common law tort actions having the same foundation and involving the same type of conduct. The defendants here claim that there is a difference because here the plaintiff is an employee and there the plaintiff was an employer. Now exactly that contention was advanced by counsel for Laburnum Construction Company in that case. They were claiming that there was no preemption because the Act did not protect the rights of an employee and if the Court will examine the brief in the Laburnum case, the Court will find that it makes almost identically, the same contention that the defendants make here in trying to distinguish the Laburnum case, but the Court didn't accept that contention. Instead it placed the Laburnum case on the border ground that the Taft-Hartley Act did not operate to abolish common law tort actions, that they survived, and the Court mentioned that in passing it, Congress was insisting on increased responsibilities for labor organizations, and that it was inconsistent with the congressional intent, to say that by implication and without mentioning it, they abolished common law tort actions for damages. Now as I say I think the Laburnum case is controlling, the defendant said that Laburnum had no remedy, well Laburnum did have a remedy. Under the statute and the decisions of this Court, Laburnum Construction Company in that case could have gone before the National Labor Relations Board and have complained of that conduct and obtained a cease-and-desist order from the National Labor Relations Board requiring the labor organization to cease-and-desist from that unlawful practice. Earl Warren: Didn't Laburnum point out that there was no remedy to the employer? Norman W. Harris: That's right it did. It said that there is no compensatory remedy provided by the Labor Management Relations Act except I believe the wording was in such manner supplementary ways as reinstatement with back pay. Now I'm going to discuss that feature of the Laburnum case in just a few minutes. Before I get to that, I want to mention the Kohler case and the case of Youngdahl against Rainfair which the Court decided this week. They hold, the Kohler case in considerable detail that Congress intended to leave to the states, the matter of controlling and preventing of violence in labor relations matters. The Kohler case went so far as to hold that the Wisconsin Board and the Wisconsin courts could grant remedy, a preventive remedy that would duplicate that the board grants or could grant rather. So they established without any controversy that, that power is still inherent in the states that is the power the control force and violence in labor relations matters. Now, I think this action can be justified under that theory, that is under the power of the state to control force and violence. I'm afraid that the Chief Justice and Mr. Justice Douglas will not agree on this theory that I've advanced now in view of that dissent in the Rainfair case and in the Kohler case, but the Kohler case establishes as I said that the state does have power to prevent force and violence. Let's think of the ways in which they can do it. Of course the most obvious way is on the spot police protection; that is as was done in this case by the Alabama Highway Patrolmen and the city policemen that were there. Then the next way that the state can do it is by an injunction to enjoin the unlawful conduct, such as was granted in the Kohler case and such as was granted and sustained in the Rainfair case. As Mr. Justice Frankfurter said in the Metamora Dairies case, a state can places confidence in a Chancellor's decree rather than in a policemen's club. So under the Taft-Hartley Act, as well as under the Fourteenth Amendment, this Court has held that the state can place its confidence in Chancellor's decree and an injunction properly framed. Now another way that the state can prevent force and violence in such matters is by criminal prosection. In Alabama we have a criminal statute providing that it's a misdemeanor for any person or group of persons to assemble at or near the entrance of a place of business for the purpose of preventing anyone from engaging in a lawful occupation by force and violence. I think a number of states have similar laws, I know the Arkansas statute which was before this Court in the case of Cole against Arkansas, 338 U.S. 345, made it a felony for two or more persons to conspire to use force or violence to prevent employees from working, and this Court upheld the constitutionality of that statute, as I say it made it a felony. Well the legislative history of the Taft-Hartley Act makes it clear that Congress intended that the states retain that power. Now a criminal prosecution of course is -- serves or it operates in two ways; first it's for punishment and second it's to set an example, so as to prevent that unlawful conduct in the future. Now accumulative damages operate in the same way under our law and I think it's the law of practically all of the states, that allow punitive damages, they serve a two-fold purpose; one punishment, two to set an example, to deter similar conduct in the future. So I submit to the Court that the state has judicial power to allow the maintenance of an action such as this with the recovery of punitive damages, for punishment and to set that example in order to prevent that type of conduct and I submit this. It's a much more effective preventive remedy than a criminal prosecution of several hundred persons for misdemeanor. So we submit that under that power of the states that this action can be maintained. On that punitive damages there is one case decided by this Court that I didn't cite in my brief, I probably should have. In Alabama under Lord Campbell's Act otherwise known as the Alabama Homicide Act the only damages recoverable are punitive damages and no compensatory damages are recoverable on their law in a civil action for wrongful death, but it's solely punitive. In 1927 that statute was before this Court in the case of Louis Pizitz Dry Goods Company, Inc. versus Yeldell 274 U.S. 112. It was claimed that that statute violated the Due Process Clause. Mr. Justice Stone held otherwise and said that the punitive damage was reasonably related to preventing homicide and that the legislature of Alabama had the right to attempt to prevent homicide by making it expensive. We say that the state of Alabama has the right to prevent mass picketing and forcing violence by making it expensive as well as the right to prohibit it by its criminal laws and by its police officers and by the injunctive powers of the court. William J. Brennan, Jr.: Mr. Harris I don't know that if at all involved in this case but I am curious, either under your Taft Act or otherwise is a judgment for punitive damages reviewable at all under your practice? Norman W. Harris: Is it reviewable? William J. Brennan, Jr.: As to amounts? Norman W. Harris: Oh yes. William J. Brennan, Jr.: It is? Norman W. Harris: It is reviewable Your Honor on a motion for a new trial before the trial judge. William J. Brennan, Jr.: So that it may be attacked with successive? Norman W. Harris: Oh yes and this one was in this case. It was a motion for a new trial was filed and argued and passed on by the trial judge and one of the grounds of it was that the verdict was excessive. That same argument was advanced in the Supreme Court of Alabama and was passed on, you will find in the opinion of the Supreme Court of Alabama that since the purpose of punitive damages is punishment and prevention and since its discretionary with the jury, then the court can't say that too much was allowed that it's within the reasonable discretion of the jury to say how much is necessary to prevent certain types of conduct. William J. Brennan, Jr.: Well that -- tell me this could have easily been a 100,000 or million dollars as it was 10,000 -- Norman W. Harris: Well I don't know what the court, what the circuit judge would have gone in that event. I might say it's mentioned in the petitioner brief, it's out of the record but in one of these cases we got a verdict for $18,450 that's the biggest one we've got. And the trial judge in that opinion said that he thought the jury had been exceeding the liberal, but he couldn't say that it had been actuated by improper motives. Now I thought that he would have approved any more than that because he didn't seem to be too sure of that. Now to me the most difficult question in this case is what is the power of the National Labor Relations Board? The petitioners contend that they have power to require the union to reimburse Russell for the wages that he lost. I don't know whether they contend that they had power to compensate him for the mental anguish he suffered on that, they haven't said so. But certainly that is beyond the scope of the power of the board and the ordinary concept of that power. The basis of the power of the board of course is in the language of the act that it shall have power to require of a person to take such affirmative action as may effectuate the policy of the act. I believe that's the language of the statute. Now petitioners claim that it would effectuate the policy of the act to require the union to reimburse the man for the wages he lost. The board has held in at least four and I believe more cases that we cite in a footnote, footnote 23 on the bottom of page 47 of that brief that that they do not have that power, that there was no intention on the part of the Congress to have that power. Harold Burton: (Inaudible) the have the power (Inaudible) employer to say (Inaudible) but not somebody else? Norman W. Harris: That's right, that's what they hold and they mention the fact that under the 1935 act that it was held that they had the power to require the employer to pay back pay and that when the act was amended in 1947 that it used exactly the same language, but added the proviso that the board had power to require labor organization to pay back pay in cases of discrimination. And they said that adopting the language of the 35 act and adding that one thing showed that there was not a Congressional intent to give that power. Now I say that there is more evidence of Congressional intent that the board not have that power than appears from the language of the act and that is from what was said when this amendment was being considered in the Senate. We quote in our brief one illustration Senator Taft gave. He was asked by one of the senators what procedure the board would adopt on an unfair labor practice under Section 8(b)(1) and I read from what Senator Taft said, it's set out at the beginning at the bottom 49 of my brief. He said this, “There will be a hearing as to why they were doing these things and a cease-and-desist order maybe issued. So far as I know there is no other penalty. If they should disobey the cease-and-desist order, the board can obtain an injunction and if they violate the injunction they are liable for contempt. That is the only result” and I emphasis on it, that is the only result of this general charge of unfair labor practices. Now I have another instance during the debate on that, Senator Taft illustrated by supposing a case of mass picketing and he again mentions mass picketing that keeps office personnel out of the plant and he says that the board can call the union before it and issue a cease-and-desist order, but that is the only consequence. I believe that with Senator Taft's knowledge of this situation and with his candor and frankness that if there had been any intention on the part of the Senate to give the board that power that he would have so answered in response to those inquiries. I think secondly that it was never in his thought that board was being given that type of power. Now another indication is that when they were discussing Section 303 of the act which is the provision I believe allowing for secondary boycotts. Senator Taft says that it was discussed giving that power to the board, rather than for providing actions of law to recover damages, the secondary boycotts, but he said no one either side of the question thought that the board was a proper agency to have power to grant damages in a case like that. So I believe that the Congressional intent and I submit to this Court that the Congressional intent was that the board would not have power in such cases like this. There is another very strong evidence that Congress intended to leave that matter to court and that is this. My friend Mr. Goldthwaite has mentioned that in the house bill which was known HR 3020 Section 12 (a) of that bill authorized or provided rather that it was an unlawful concerted activity for a labor union by force or violence to prevent anyone from entering his place of employment. Subdivision (b) of Section 12 of that bill expressively provided that anyone injured by such an unlawful concerted activity would have the right to maintain a suit for damages in the United States District Court without regard to the amount in controversy or the citizenship of the parties. Now that was the house treatment of the matter. When the Senate disagreed and the matter got to the Conference Committee, they adopted the Senate version of the bill. They dropped Section 12 of the house bill. They explained why that was done and in the explanation, that is in the House Conference Report, in House Conference Report of 510 on page 42. It mentions the fact under the house bill suits could be brought to recover damages and -- in a case such as this, and then he says that the Conference Agreement did not take the -- did not deal with the matter in the same way the house bill was, but what they are saying in here is that while they didn't do it in exactly the same way, the effect of what they did was the same and here is what they say on this and I think this is very pertinent, the conference agreement while adopting -- Harold Burton: From which page are you reading from? Norman W. Harris: I am reading from page 35 of my brief and it's a part of the Conference Report. After referring to the treatment of such activities in Section 12 of the house bill, the report says this. And this is near the bottom of page 35 of my brief. The conference agreement while adopting Section 8(b)(1) of Senate Amendment does not by specific terms contain any of these sanctions, but an employee who is discharged for participating in them will not, as explained in the discussion of the Section 7, be entitled to reinstatement. Now here is the crux of the situation as I see it. Furthermore in Section 302(b) unions are made suable, unions that engage in these practices to the injury of another may subject themselves to liability under ordinary principles of law. Well ordinary principle of law is bound to be the common law. Now the report is an error in referring to Section 302(b) because 302(b) dealt with payments to agents of labor organizations by employers. I think what they meant was Section 301(b). It happened that 302(b) was the corresponding provision in the house bill and I think the (Inaudible) has confused on the section, but whether that is material or not at least what they are saying is then since unions are suable, they can be subjected to liability for common law torts such as this under ordinary principles of law and I submit to the court that that shows an intention on the part of Congress that actions such as these survive. Now my adversary in his reply brief says that statement of the Conference Report I just read as meaningless because of the reference to 302(b), and says that 301 of the act has reference to suits against labor organizations for violation of contracts. That's true of Section 301(a) but the conference report shows that the rest of Section 301 of the act was of general application. In the legislative history set out by Mr. Justice Frankfurter in his dissent in the Textile Workers Union case against Lincoln Mills of Alabama a part of the Conference Committee Report reads as follows, talking about Section 301 of the conference committee bill, “This subsection and the succeeding sub sections of the Section 301 of the conference agreement are generally in their application as distinguished from sub section (a), they are general in their application. Bearing that out Mr. Justice Frankfurter said in that dissent, and this is from page 933 of 77 Supreme Court of Florida, the statement in Section 301(b) that the acts of the agent of the union are to be regarded as binding upon the union maybe used in support of this conclusion. This provision not confined in its application to suits in the District Court under Section 301(a) was primarily directed to responsibility of the union for its agents actions in authorizing strikes or committing torts, recognizing that the other provisions of Section 301, the provision rather than (a), are of general application. Now going back to the Laburnum case, it was pointed out there that there was no compensatory remedy for the Laburnum Construction Corporation provided by the act. Now if the words giving the board power to require a person to take such a affirmative action as well effectuate the policies of the act, can be construed broadly enough to say that the board had power to require the union to compensate this plaintiff, for his loss of wages and for his mental suffering. Then by the same token in the Laburnum case, when the Laburnum Construction Corporation went to the board and asked that the union be restrained from preventing their employees from working, the board then could require the union to take affirmative action by paying Laburnum the damages they had sustained, but the Court didn't seem to think that board had such power and said, that it had compensatory power and only minor supplementary wages. Speaker: Supposing one came to conclusion that the board did have the power to avoid back pay to this man, what would be the consequence of this? Norman W. Harris: Your Honor –- Speaker: Not damages, but -- Norman W. Harris: But just back pay, frankly my position would be considerably weakened. I don't think it would -- I don't think it would be foreclosed, but it would be weakened. I must confess that it might be said out there if the board had that power that was all Congress intent, that's all the wrote, but now there -- Earl Warren: Would you have an answer to that? Norman W. Harris: Yes. Earl Warren: What would you answer? Norman W. Harris: The answer I have for that goes back to what I have been arguing that Congress intended that common law of tort action survives. Now – and in that connection I want to mention a line of cases that I probably should have, but haven't mentioned in my brief. They are referred to by the Supreme Court of Alabama in its original consideration of this jurisdictional question in 53 and that line of cases are the ones dealing with Railway Labor Act, Moore against Illinois Central Railway and Slocum against Delaware, and Lackawanna Railway Company. As I read those cases, the injured party has an election as to whether he will proceed before the board or whether he would proceed in a court and here is what was said in the Slocum against Delaware and Lackawanna Railway Company case which is quoted by the Supreme Court of Alabama and I'll read from page 6, 7, and 8 of the record. “Our holding here is not inconsistent with our holding in Moore against Illinois Central Railroad Company. Moore was discharged by the railroad. He could have challenged the validity of his discharge before the board, seeking reinstatement and back pay. Instead he chose to accept the railroad's action in discharging him as final, thereby ceasing to be an employee, and brought suit claiming damages for breach of contract. As we there held, the Railway Labor Act does not bar courts from adjudicating such cases. A common-law or statutory action for wrongful discharge differs from any remedy which the board has power to provide, and does not involve questions of future relations between the railroad and its other employees.” Now the effect of that is that a railroad worker who is discharged can go for the board and seek the reinstatement and back pay or he can file a suit for damages for wrongful discharge. Felix Frankfurter: Let me ask you this question if I may Mr. Harris? Norman W. Harris: Yes. Felix Frankfurter: Under Alabama law can you bring a cause of action in a situation like this, forget about ad hoc for the moment, can you bring a cause of action solely for punitive damage or a punitive damages (Inaudible) Norman W. Harris: No sir, you have to have some actual damage in order to recover anything. Felix Frankfurter: I am not saying you may not -- didn't require to be some action, my question was whether he could be bring a suit merely lay the ad damnum, allege actual damage –- Norman W. Harris: While your –- Felix Frankfurter: -- depravation of wages, would you bring the suit, the ad damnum would really be for the punitive damages. Let me put to you my whole -- the question in my mind. You answered Chief Justice that your answer would be that common law tort action survived to have tort damage. I suppose one would -- in construing these materials but they are not easy, the legislative statutory materials, the common law of the state et cetera, if those were to hold that Congress in disagreement with the Seventh Circuit in the case to which Justice Harlem referred, suppose one were to hold that in fact the court -- the board could give relief against a union by an employee and not merely where it settled everything (Inaudible) back pay against employer, suppose in other words your client could have gone or could go, putting the statute of limitation there, to the board for back pay, under Alabama law could that be split up assuming the statute would allow, so that he could, since he could go to the board for back pay, Congress has preempted that relief in the State Court, could he under state law, never mind federal law we have to decide that, say I want punitive damages for the tort for which the board patently cannot give relief? Have I put my -- Norman W. Harris: Well -- Felix Frankfurter: In other words your answer to Chief Justice was that either you can, you have the choice of going to the board or going to the court, both for back pay and for punitive debt and tort recovery. Assuming that you can't get tort recovery before the board as I assume because that's what Laburnum to me presupposed, assuming that you cannot go to the board ask a tort action but can go to the board for back pay, and then you go to the board for back pay and go to the State Court for the tort restricted to the punitive amount which the state allows? Norman W. Harris: Complaint of that kind would be demurer because under our law there has to be actual damage on which to hitch a claim for punitive damage. Felix Frankfurter: But if I were a pleader, I could draw such a complaint because I would say I had actual damages for which the board is giving me the relief that the board is giving me relief for the tort consequences for those I go to the State Court. Norman W. Harris: I haven't thought of that but I believe it would have to be on item of damages that were recoverable. Felix Frankfurter: All right, that sounds like to sense to me. Norman W. Harris: Now there is a possibility, I don't know this but I think there's line of case is holding that where a wrong is intentional and a person sustains mental anguish that he can recover that alone. Felix Frankfurter: I am suggesting that some of these questions may come to the circuits -- Norman W. Harris: Well I am sorry I haven't thought about it. Felix Frankfurter: If we have to reach the question and decide against you on the recoverability against back pay as against existing laws abide the board and lower courts have declared it. Norman W. Harris: Now let me say one other thing and I think I will be through. After all this thing boils down to what did Congress intend, that's the essence of the case and suppose there is a remedy with the board it's entirely discretionary with the general counsel of the board in the first place whether or not he would file a compliant -- Felix Frankfurter: That doesn't help me any because it's all discretionary as to an injection? Norman W. Harris: That's right, but here is what I was going to illustrate. It's discretionary with the general counsel as to whether he will file a compliant. It's discretionary with the board as I understand the case of Guss against Utah Labor Relations Board as to what fields it will take jurisdiction of. Now I say that Congress had no intention of substituting such a doubtful dubious remedy for a common law right which a man had to sustain to recover damages that he had sustained as result of the intentional wrongful, forceful and violent conduct. Felix Frankfurter: Mr. Harris, it's just confidential, do you think the Congress thought about these problems we have been discussing for the few minutes? Norman W. Harris: That I think they did in that conference report. Well because the house bill now they might not have thought this particular case I don't know whether they talked that. Felix Frankfurter: Well these problems. Norman W. Harris: But the house bill it had language which specifically covered this case just like (Inaudible) and the Conference Committee Report comes along and says while we are not using exactly that method of treatment, we have accomplished the same result by the conference committee bill then they certainly intended to preserve these common law actions. Mr. Justice Harlan, I believe there is one other case of a Court of Appeals on the power of the board to award back pay and not past in the list, but I think in the case of International Union, United Automobile Workers the same union against Hinz decided by the Sixth Circuit 218 F. 2nd 664, I believe in that case the court said that the board had no such problem. Felix Frankfurter: Has the board been consistent about this? Norman W. Harris: Yes. There is a very excellent discussion by the board in National Maritime case in 78 NLRB, it's cited in -- Felix Frankfurter: In your brief? Norman W. Harris: Sir? Felix Frankfurter: In your brief? Norman W. Harris: Yes sir, it's cited in footnote 23 of my brief on page 47, National Maritime Union of America, 17 NLRB. Felix Frankfurter: Page 23 of your brief Mr. Harris? Norman W. Harris: Sir, page 47. Felix Frankfurter: Oh page 47, I beg your pardon. Norman W. Harris: Foot note 23. Felix Frankfurter: Thank you. Here it is. Earl Warren: That was the page number 78 in NLRB please. Norman W. Harris: 78, NLRB, 971. Earl Warren: 971. Mr. Goldthwaite. J. R. Goldthwaite, Jr.: Your Honor I like to briefly call your attention to item one is that the provisions of 302, 301(b) refer merely to the fact that a labor organization can be sued as an entity in the court of United States. It creates no right of action and the fact as Mr. Harris said that Congress said they treated the subject matter covered by Section 12 of house bill 302(a) or 302(o) with reference to suits by employees effectively, well the treatment they did in that was effective was by putting the amendment to Section 7 and providing Section 8(b) indicating clearly their intention to divorce that power on the National Labor Relations Board. The many reports say that – well for one the house report says under this clause the board may also require a union to reimburse an employee who loses -- it causes to lose pay the amount that he loses. Now that was quote on house 302(o) on Section 8(b). So they said there that the board did have that power. Now I want to try to express an idea that a comment by justice -- Mr. Justice Frankfurter raised this and that is apparently the idea that I've heard other people express that the mere existence or well I say an allegation, but let's say the actual -- the existence of force and violence is itself the criterion or the determining factor as to whether the state can have jurisdiction or not. If it were the criterion, the sole criterion as Mr. Harris urges, that when that exists they can do anything, well then Rainfair would have been decided differently. If they could -- if the force and violence was there, it gave them (Inaudible) jurisdiction to do anything. They could have enjoined all of the victims. The same thing is true of the Garner case. If under that theory violence has been involved in the Garner case, then I think the Court -- and that was the criterion, then the Court would have said that the state could enjoin violations of Section 8(b)(4). Felix Frankfurter: Why do we have to choose one or the other? Just as merely because of -- there is violence it doesn't preclude peaceful activity so because those peaceful activities doesn't prohibit the inhibition, the prohibition of violence. J. R. Goldthwaite, Jr.: I think that's right sir. That proves the statement I was making I think sir that violence itself is not the criterion for opening the door for any state action in a case. Felix Frankfurter: But does it open the door (Inaudible) to establishing the fact that there was violence in a state court and if that is established, that damages maybe assessed by the state court according to its local procedure and measure -- and laws of damage whether punitive or not, some states have (Inaudible), doesn't it -- if there is violence open the door to a cause of action on the basis of violence. J. R. Goldthwaite, Jr.: I think it opens the door as the Court has held -- as congressional intent, plainly indicated to the control of violence in the interest of public peace and order in an emergency, but -- Felix Frankfurter: That is in Laburnum it is, is Laburnum an emergency? J. R. Goldthwaite, Jr.: No sir. But there, now there in the Laburnum, the Court -- Your Honor's distinction as pointed out in (Inaudible) is that there was no conflicting remedy provided by the Act, while here that is a conflict remedy. Felix Frankfurter: That is the back pay as you urge. J. R. Goldthwaite, Jr.: Yes sir. Well it's back pay and it's jurisdiction of the Board over all of the rights involved, the right of the employee to work during a strike, the right of the employee or the employees to engage in a strike and picketing the extent of which that is concerted activity, lies in the best of the Board to say what is federal protected activity, how far does it go? When are the limits of it then exceeded and when do the excesses cause a loss of pay to an employee? Thanks.

John G. Roberts, Jr.: We'll hear argument first this morning in Case 18-389, Parker Drilling Management Services versus Newton. Mr. Clement. Paul D. Clement: Mr. Chief Justice, and may it please the Court: California wage-and-hour law is neither applicable on the Outer Continental Shelf nor consistent with the federal Fair Labor Standards Act. The Ninth Circuit's contrary approach, which treats California as supplying the rule of decision whenever California law pertains to the subject matter at hand and is not preempted by federal law, is inconsistent with the text and context of the -- the -- of the Outer Continental Shelf Lands Act. More particularly, by treating state law as the default rule only -- and only to be displaced by inconsistent federal law, the Ninth Circuit effectively treats the Outer Continental Shelf no differently from the mainland, where California is sovereign, and contradicts the most basic -- Sonia Sotomayor: Not -- not quite. Paul D. Clement: -- judgments -- Sonia Sotomayor: Not quite. The Secretary could override the state law, which is not what generally happens in conflict preemption. Federal law -- federal agents have to enforce state law. There are substantial differences built into the Act. What I don't see is a clear statement that says something like you want the word "applicable" to mean, only if there's a gap or a void. Paul D. Clement: Well, Justice Sotomayor, I think some of the unusual characteristics about state law when it's borrowed and then sort of transformed into federal law on the shelf actually, I think, help provide the context that informs the meaning of the word "applicable." I -- I don't think there's any real doubt here that "applicable" means suitable or appropriate or fit for a purpose. So then the question really becomes, when is it appropriate to have state law be transformed into federal law for use on the shelf? And I think -- Sonia Sotomayor: But tell me why -- when it's not inconsistent. Meaning -- and that's my problem. It's suitable only -- and the language says, when it's inconsistent. But, here, federal law clearly states that state law can supplement federal law. So where's the inconsistency? Paul D. Clement: Well, to -- I want to answer your question, Justice Sotomayor, but I -- first, I do want to point out I view the statute as really having two requirements, that it has to be state law applies to the extent it is applicable and not inconsistent. Now, to talk to the non-inconsistent piece, here, I think the inconsistency is pretty glaring. In fact, the whole reason we're here is because California has a very different rule for addressing sleeping time on the employer's premises than the federal rule. And the federal regulators looked at this and they decided generally we're not going to have sleeping time be treated as work hours, and we're generally going to respect the agreements of the employer and the employee. California looked at that specifically and said: Well, we like that rule for healthcare workers and one or two others, but not for most other workers. We reject the federal analysis. Now, to me, that makes them pretty glaringly inconsistent. Now my friends on the other side, and I take the import of your question, would say: Ah, but there's the savings clause. Well, there's at least three problems I see with the savings clause. The first is the savings clause is not even implicated by its terms unless state law and federal law are inconsistent. If state law and federal law are consistent, you don't need the savings clause. You never get there. They don't -- when the savings clause applies, moreover, it doesn't make federal law and state law consistent. It basically tells the employer which of two inconsistent laws they need to follow, which I think is quite different. The second problem with the savings clause is I think you can't divorce the savings clause from the reason that it's in the FLSA and most statutes, which is to respect the fact that states are, and have been since the framing, the primary regulators of employment relationships and the like. And so, when a state is applying its law in its sovereign territory, I would say it's understandable and laudable that the federal government wants to say: Well, your state law can apply if it's more demanding. But that principle is completely out of place on the Outer Continental Shelf, where all law is federal law. We have a third reason, which I'm happy to get out, which is Congress also knows -- and we have some statutes collected at Footnote 3 of the blue brief -- Congress actually knows how to enact a -- call it a super-savings clause or a savings clause that's specific to federal enclaves. And with respect to certain state laws, state unemployment compensation laws, state workers' comp laws, Congress has said we want the state law to apply even on a federal enclave. But that's not what it did with the Fair Labor Standards Act. Elena Kagan: Mister -- Paul D. Clement: The Fair Labor Standards -- sorry. Elena Kagan: Finish your sentence. Paul D. Clement: The Fair Labor Standards Act is an ordinary savings clause which I think accommodates federalism but wouldn't apply in the -- a federal enclave. Elena Kagan: After all that, I'm going to take you back to the work -- word "applicable." The language here is clearly not the clearest way of expressing what you want to express, which is that state law applies when there's a gap in federal law. So you rightly say that we look to context as well. And as far as I can see -- and tell me if I'm wrong about this -- really, your main argument from context is the statement about enclaves, right, that these -- that this should be treated the same way as federal enclaves are, is that correct? Paul D. Clement: I would really say I have two principal arguments. One of them is the enclave point. But I think even before you get there, I mean, the -- the fact that 1333(a)(2) converts the state law into federal law to be applied by federal administrators seems to tell me that something odd is going on here. And then particularly, if you read that in conjunction with 1333(a)(1), which extends the whole body of federal law to the shelf, the way I think about it, just to put it simply, is even apart from federal enclave principles, like why would you create surrogate federal law, which is what 1333(a)(2) does, unless you had a gap in the actual federal law that was extended to the shelf by 1333(a)(1)? Elena Kagan: Well, possibly because you know that you want this to be administered by federal agents, and if it's going to be administered by federal agents, it should be federal law. So -- and let -- let's just go to the enclaves business -- Paul D. Clement: Sure. Elena Kagan: -- because I think that that's an important part of your argument, and -- and it's something on which people seem to disagree, and it seems as though it should have a clear answer, but I'm honestly not finding it. So, as I understand Mr. Frederick's position, he says that, apart from the ACA, the crimes act, that -- that, in fact, in federal enclaves, state civil law is applied. Do you think that that's wrong? Paul D. Clement: We do think that's wrong, and, you know, I think fortunately for me, the federal government agrees with me and has agreed with me in an unbroken chain at least since about 1958, when they put together that exhaustive survey, which the Solicitor General cites, which is roughly contemporaneous with OCSLA, and the Justice Department was up there testifying in front of Congress. So I tend to think that I'm in pretty good company on my understanding of federal enclave law, but I do understand federal enclave law very -- very succinctly as this, which is, when you have a new federal enclave, you don't borrow state law as a general matter and you specifically don't borrow state law when there's federal law on the same matters, which I think is the language right from McGlinn. Elena Kagan: Even as to preexisting state law? Paul D. Clement: Even as to preexisting state law. And the reason I think that makes -- Elena Kagan: And do -- how do we know that? Where do -- where is that coming from? Do we have cases that say that? Do we -- is there some like federal manual that says that? What -- what's -- Paul D. Clement: So -- Elena Kagan: I feel as though people -- this should be something with an answer, and all we have is sort of assertions on both sides. Paul D. Clement: So there's -- there's three places I would look. I would look to McGlinn. I would look to this comprehensive federal survey. I mean, my goodness, it's like 200 pages long, and it comes to the same collusion. And then the third place I would look to is the Assimilated Crimes Act, because I don't think the way to understand the Assimilated Crimes Act, which, as to criminal law, makes this point more specific, as being something unique to criminal law. It's really that the Congress in 1825 addressed criminal law because they had a particular problem that they didn't have with civil law, right? Which is the United States v. Hudson case, which says you can't have common law crimes. So Congress was forced to act with respect to criminal law, and when it acted, what I'd say it did with the Assimilated Crimes Act is it reflected the broader principle, which is it didn't say we're going to apply federal criminal law and state -- rather, borrow state criminal law even where we have an on-point federal criminal statute. It said, no, we're going to borrow it to fill the gaps. And if you take a step back, I think that is the basic problem that you have in a newly created federal enclave, which is, you know, the -- it's the same problem Congress had in enacting OCSLA, which is you -- you've made it a federal enclave, so you're not anxious to have a lot of state law applying there, but, you know, the law, like nature, abhors a vacuum, so you just don't want to have all sorts of, whether it's a cow wandering on to the railroad or whether it's people having a bet and, you know, no contract law, you just don't want there to be a vacuum. So you look -- Ruth Bader Ginsburg: Are there -- are there federal enclaves inside California? Paul D. Clement: There are. Ruth Bader Ginsburg: And what is the labor law regime there? Paul D. Clement: The -- the majority view is that the Fair Labor Standard Acts -- Act does not apply to the federal enclaves when they are within a state. My -- my friend has found an unpublished opinion that applies a different rule, but we found something like four or five or six opinions that go the other way. So there is -- I think the majority view is that even on land, the Fair Labor Standards Act doesn't apply on a federal enclave. You have one federal minimum wage. And, again, I think that's -- that that conclusion is probably buttressed by the example of state worker's comp law and state unemployment law, where you have specific federal statutes collected in Footnote 3 in our brief which make those laws applicable even on a federal enclave. So the law in California is that when Congress is specific that a federal employment statute applies to the enclave, it applies to the enclave, but otherwise, one federal minimum wage law is enough on the federal enclaves. So -- Ruth Bader Ginsburg: And it would be the state law? Paul D. Clement: No, no. It would be the federal law. One federal minimum wage is enough on the federal enclaves. It's the one provided by the FLSA. So the higher California minimum wage law does not apply on the federal enclaves. I mean, so I -- I think we have the much better view of the federal enclave law. If you're a little nervous, though, about making a definitive holding about federal enclave law, I suppose you really can get to the same conclusion just based on the structure of 1333 and the fact that (a)(1) extends the whole body of actual federal law to the shelf, and Congress even was clear that that meant the Fair Labor Standards Act, and then, when you get to (a)(2), you don't needlessly take state law and convert it into federal law to be administered by federal officials. Ruth Bader Ginsburg: Can we -- can we go back to something -- Paul D. Clement: Sure. Ruth Bader Ginsburg: -- Justice Sotomayor suggested, and I wonder if you agree with it, that there's no problem because the Secretary can knock out any state reg -- any state law it doesn't -- doesn't want by regulation. Paul D. Clement: We -- we don't agree with that, Justice Ginsburg. So I appreciate the opportunity to make that clear. As we read -- the provision that -- that I think my friend on the other side is relying on is 1334(a) of OCSLA, and that provision as I read it gives the Secretary of Interior the authority to promulgate regulations addressing leasing or leases on the Outer Continental Shelf. Now I suppose, if I lost this case, I might want to make an ambitious argument that working conditions has something to do with leases on the Outer Continental Shelf, but I don't think that's the better argument, and I don't think it's as simple as the Secretary of the Interior can trump anything he or she wants. I think that the regulatory authority is a little more modest under -- John G. Roberts, Jr.: Well, but isn't it that -- Sonia Sotomayor: Is there anything but leasing on the continental shelf? Paul D. Clement: I'm sorry? Sonia Sotomayor: Is there anything but leasing on the continental shelf? Nobody owns those operations. I thought they were fairly heavily regulated by the Secretary generally. Paul D. Clement: Sure, but -- but the specific term says the leases, not leasing. And, again, you know, I don't want to say that I couldn't make an argument, but I -- I would say based on the plain language of the regulatory authority, I don't think the Secretary of Interior has that authority, and I think it would be a little weird, frankly, for the Secretary of Interior to effectively have to take action to vindicate the judgment of the wage-and-hour division regulators, who looked at the specific issue of how to treat sleep time and came to a considered conclusion that sleep time, we don't want to make automatically part of hours worked. Sonia Sotomayor: One -- one of the difficulties I have here is, how do you define void or gap? So let's talk about that, because you can always define it broadly or narrowly. If there's a state law that says you can't fire somebody for going to jury service for a state calling, not a federal, is that a void or gap that the federal law doesn't do that? Paul D. Clement: I -- I -- I would probably say in that situation that there's not a gap in federal law because federal law addresses the general subject of sort of employment discrimination and the like. I -- I actually think that -- I mean, obviously, the jury service example's probably uniquely unlikely to arise directly on the Outer Continental Shelf and it also might be the kind of thing -- Sonia Sotomayor: Not quite. I mean, people can be called. They're given X number of extensions. And then they're told show up. Paul D. Clement: Yeah. And so I -- Sonia Sotomayor: And you go to your employer and you say, out on the shelf: I got to take a week because I've got to go serve. Paul D. Clement: And -- and -- well, and so there's a -- Sonia Sotomayor: And to you, that's not -- can you see the other side of that argument? Paul D. Clement: I -- I can see the other side of that argument and I can also see that that -- Sonia Sotomayor: So that -- that -- that begs the question, which is, I know conflict preemption and I know that some of my colleagues don't like it, but at least there's a well-defined body of law. Under your views, we're back to now defining a different kind of conflict preemption, one that has to do with voids and gaps. Paul D. Clement: Well, so, Justice Sotomayor, a couple -- Sonia Sotomayor: So why isn't a statute of limitations or a failure to have one not a void? There is a federal common law. We don't like to use it, but we have a case that said we're going to use Louisiana's statute of limitations. That wasn't a void or gap, even though we had federal law. Paul D. Clement: Well, specifically, in that case, you were -- you were looking at the question of whether you should borrow a statute of limitations from federal common law. And it seemed clear to this Court from the legislative history that federal common law was not what Congress wanted you to use for gap-filling. Sonia Sotomayor: How about the high seas -- Death on the High Seas Act? That was federal law. Paul D. Clement: That -- that's right. And -- and this -- Sonia Sotomayor: And we still borrowed state law. Paul D. Clement: Exactly. Because this Court found a gap, and I actually think that Rodrigue, which is the case where you look to state law borrowed through the lands act as opposed -- Sonia Sotomayor: But we had federal law that answered -- Paul D. Clement: -- to the Death on the High Seas Act -- Sonia Sotomayor: -- but we had federal law that answered the question. Paul D. Clement: Exactly. But it didn't answer the question on the platforms. It only answered the question on the seas. And this Court said -- and this was, you know, as I understand it, basically its holding, that, you know, since there was sort of no federal law that directly applied, there was a gap, and you borrowed state law. And I would only add before I sit down that the Fifth Circuit, and really every court that's wrestled with this question until the Ninth Circuit in the decision below, has been applying this Court's cases, which they understood as applying this gap-filling analysis, and none of them have had a real problem with that. And, certainly, I don't think any of them would identify a gap here, where the Fair Labor Standards Act comprehensively addresses issues of overtime and the like. Elena Kagan: Just on that, Mr. Clement, and I apologize, but I think people are a little bit overreading the Fifth Circuit decision or let me just put out the possibility that that's true. The Fifth Circuit decision, when it talks about these gaps, is really saying that there's a federal remedial scheme that covers a problem and so that there's no need to look for remedies anyplace else. And that's a very different kind of situation than the one we have here, isn't it? Paul D. Clement: No, I -- I think this is exactly the same situation, which is you do have a federal remedial regime that provides a remedy for overwork, and you don't need to look to state law to borrow a different regime that you would then make a second and duplicative and I think inconsistent federal minimum wage statute. John G. Roberts, Jr.: Thank you, counsel. Paul D. Clement: Thank you. John G. Roberts, Jr.: Mr. Michel. Christopher G. Michel: Mr. Chief Justice, and may it please the Court: More than 70 years ago, in United States versus California, this Court clarified the federal government's paramount sovereignty over the continental shelf. Congress reinforced that interest throughout OCSLA, including its choice of law provision. Now, unlike a typical choice of law provision, Section 1333 of OCSLA does not direct a choice between two bodies of law. Instead, it creates one body of law, a body of federal law, and it adopts state law as "the law of the United States" to the the extent it is applicable and not inconsistent with other federal law. Now, as this Court and virtually every other court has recognized for 50 years, those words refer to gap-filling in federal law. Respondent's position, by contrast, would essentially replicate the position on mainland California on the Outer Continental Shelf, with the small exception that federal officials would enforce the law, which we think is inconsistent with the text, the purpose, and the history of -- of OCSLA. John G. Roberts, Jr.: How would federal officials enforce the state law? Are there sort of administrative responsibilities with respect to the state employment law that the federal officials would have to undertake or -- Christopher G. Michel: That -- that is -- it's a -- that is a big concern that -- that -- that we have. You know, I think, if you look at this case in particular, it's actually state administrative law that's being construed by the California Supreme Court, I think it's Wage Order 16 that the Mendiola case is construing. So you do have federal officials sort of trying to interpret the -- the -- the work of state administrators, which is difficult. John G. Roberts, Jr.: But, I mean, I -- are they filling out forms, are they enforcing? I mean, I don't quite know what you're talking about when you say federal officials will have to administer. I mean, it -- are they just simply checking to make sure that they're being paid whatever it is, $12 or -- Christopher G. Michel: I see, yeah. I mean, it varies, obviously, depending on the regulation. With something like this, you know, presumably, it's the -- it would be the Wage-and-Hour Division of the Labor Department that ensures compliance with minimum wage laws in the same way that it does on the mainland, although, of course, it would have to adopt all of this state law where we already have a federal law. And as we reproduce in the appendix to our brief, you know, federal law, including Labor Department regulations, address a lot of these issues already. And I do think, you know, if you sort of picture page -- at page 8a of our -- our brief, for example, we have the statute on the minimum wage, which, at the bottom, says it's $7.25 an hour. Given this unique choice of law provision, what we're -- what Respondent is essentially saying is that you should adopt another sub-provision that has a different federal minimum wage. And I -- I do think it's just a very odd concept and one that has no support in -- in the statute's history to say we're going to have two federal minimum wages, where federal law has already answered this question. Stephen G. Breyer: The -- what -- one -- two questions, but one is minor. And if you don't know, just say. What percentage, rough guess, of Outer Continental Shelf activity takes place in the Fifth Circuit? Is it more like -- that's one question. And do you want -- if you have a quick answer, I have another question. Christopher G. Michel: I have a pretty quick answer. I think it's about 97 percent. Stephen G. Breyer: Ninety-seven percent, okay. Now my second question is this, that -- that has federal enclaves in mind. There are dozens and dozens of federal regulatory programs. They have to do with, you know, safety, OSHA, NHTSA, drugs, you name it. And in those thousands and thousands of federal regulations, there's quite a lot of room for state activity, even in tort law. We've had cases like that, the FDA. What's been the practice? That is to say, there is room in the sense that federal law does not preempt the state law, but it does lay down rules that generally apply. All right. In federal enclaves in general, can you shed any light on whether, with those thousands of other statutes and regulations, there has been a practice of just limiting it to preemption, otherwise state law applies, or a practice of looking for a gap? Christopher G. Michel: So I -- I think, to start, there is a default federal enclave rule. And I -- and I -- my friend is correct that you can customize enclaves in different ways. But the basic rule is pretty straightforward. On the criminal side, since 1825, it's been the Assimilated Crimes Act. Stephen G. Breyer: Yeah, yeah, but I'm thinking of civil and I'm thinking of regulatory. Christopher G. Michel: And -- and on the civil side, the -- the law, at least since 1885 in this Court's decision in McGlinn, is that federal law is exclusive in the enclave, with the exception of preexisting state law that is not in conflict with and not inconsistent with federal law. Elena Kagan: Oh, so I understand you and Mr. Clement to have a little bit of a gap there, because I understood Mr. Clement -- (Laughter.) Elena Kagan: I understood Mr. Clement to say that even as to preexisting state law, that that did not apply of its own force as the default rule. And you're saying preexisting civil, state law, does apply. Is that correct? Christopher G. Michel: I -- I think that's -- that's the rule of McGlinn. In an onshore enclave, of course, you know, the Court, as Mr. Clement suggested, doesn't need to confront that here because the one thing we know about the Outer Continental Shelf is that there was no preexisting state law. There was no -- Stephen G. Breyer: Yeah, but we do have to confront it, I think, because, after all, it -- there is a lot of preexisting state law in respect to many federal enclaves. And so, if the rule was no gap is necessary, all we look to see is preemption, then there was a vast amount of non-preempted state law that federal enclaves had to accept as theirs, namely, all preexisting. And so why would there be a different rule where the statute is different and the words don't require a gap -- they might -- why would you want to have, though, a different rule for a subsequent state law? I mean, of course, if it's preempted, it's out. Christopher G. Michel: Yes. Stephen G. Breyer: But I mean non-preempted. Christopher G. Michel: Right. So, to be clear, the -- preemption has never been the law on -- on federal enclaves. This preexisting -- the preexisting law rule is borrowed from an international law rule, as the Court explains in McGlinn. There's some hint at this in Chief Justice Marshall's opinion in the Canter case, that American territorial courts had applied a similar rule to the former territory when -- when the United States was there. But the basic federal enclave rule does not accommodate preemption. I think a -- an illustrative example are the two cases the Court issued on the same day in 1943, one in the Pacific Dairy case and the other in the Penn Dairy case. And the Pacific Dairy case was at Moffett Field in -- Stephen G. Breyer: My question is not about preemption. My question is about non-preempted state law. And to be very simple about it, my question is, if all non-preempted state law that was preexisting applied to federal enclaves, what practical reason would there be for having a different rule where the state law was passed subsequent to the territory becoming a federal enclave? Christopher G. Michel: Yeah, I -- I think it goes to -- to the core nature of a federal enclave, Justice Breyer. When -- when the United States takes exclusive jurisdiction, that's the word that the -- that the Constitution uses, it displaces federal -- it displaces state authority. The -- the preexisting rule is really sort of an emergency measure to, as the Court said in one of its cases, make sure that there's not an area that has an absolute law. Sonia Sotomayor: Could you address the -- the Secretary of the Interior's -- the extent of the power as you see it? Do you agree with Mr. Waxman that it's limited to just leasing or leases, or do you think it's a broader power? Christopher G. Michel: I think it's a little broader, but I'm relying on the same provision that my friend did, which is 1334(a). It's the next provision in the statute, and it provides regulatory authority over leasing, and it goes on to say also for -- to provide for the prevention of waste and conservation of natural resources and the protective -- protection of correlative rights. So that -- that we do think is broad authority, but I -- I do think it would be hard to get to wage-and-hour law from there. It is -- it is not -- although there was some versions of the statute that initially gave the Interior secretary sort of general preemptive authority over the entire OCS, that's not the statute that Congress ultimately adopted, and so we don't think -- although, of course, we don't think you need to get to the Interior secretary's authority here, but we don't think the Interior secretary could preempt a wage-and-hour law at the end of the day. As my friend suggested, that -- it would be within the Labor Department; it wouldn't be within the Interior secretary's authority under -- under OCSLA or under its organic statutes. Elena Kagan: Mr. Michel, if -- if you are right, what work is the word "inconsistent" doing? In other words, how can a state law be inconsistent with federal law if there's a total void in federal law? Christopher G. Michel: So I -- I agree with you that, you know, the -- the -- the two words shed a lot of light on each other, and -- and there may not be a huge gap, so to speak, between them, but I do think there are some examples. We cite some in our briefs. Another example that I think has come up in this Court's enclave cases is the general principle that when the federal government takes an enclave, state law, whatever else it does, cannot interfere with the federal government's use of the enclave for the purpose of the enclave. So, even if there was some gap in federal law and the state came along with a law that would, say, make it impossible or, not even that bad, interfere with the government's use of an enclave for a military base or a national park or something like that, even in the absence of federal -- of a -- of an on-point federal law, that -- it would still be inconsistent. Elena Kagan: I guess I'm having a little bit of a hard time -- sorry. John G. Roberts, Jr.: Go ahead. Elena Kagan: Well, just understanding that example and the ones in your brief. Are you saying that even if it's inconsistent with a federal law, it can be inconsistent with sort of broad-scale federal policy and that that's what the statute is looking towards? Christopher G. Michel: I think it's both. Federal law is the most obvious example, but the cases have also referred to federal policy. So inconsistency with either, we think, would be a reason not to assimilate the statute. John G. Roberts, Jr.: Thank you, counsel. Mr. Frederick. David C. Frederick: Thank you, Mr. Chief Justice, and may it please the Court: Our position is that the plain language of OCSLA and the Fair Labor Standards Act control this case and that the Ninth Circuit was correct in determining that the California Labor Code provisions at issue here are both applicable and not inconsistent with federal law. OCSLA, therefore, incorporates them as federal law. I'd like to -- Ruth Bader Ginsburg: How -- how close does your position come to the one thing we know Congress rejected; that is, direct application of state law? Instead, state law is incorporated as federal law. It's administered by federal officials. David C. Frederick: Yes. We -- we do know that OCSLA, however, was a compromise, and the compromise was between having state control over the law of the Outer Continental Shelf and federal law, but federal law did not encompass all of the legal relationships and matters that concern human endeavors. And that's why what Congress did was to incorporate state law as federal law, with federal law having supremacy and the Secretary having the authority to issue the appropriate regulations. And if I could just start there, the first sentence of Section 1334(a), in answer to your question, Justice Sotomayor, reads as follows: "The Secretary shall ... prescribe such rules and regulations as may be necessary to carry out such provisions." I'm astonished that the other side thinks that that language isn't broad enough to displace any state rule that gets in the way of what the federal government deems to be necessary. We know through practice that the EPA is regulating Outer Continental Shelf air emissions that are prescribed by California, and it is doing so pursuant to a memorandum of understanding. There are memorandum of understanding between the Secretary of Interior and the Coast Guard and the EPA and the National Park Service and the National Oceanic and Atmospheric Administration that concern the interrelationships of how law enforcement occurs with state law as the substance of what is being enforced. That happens every day in the National Park Service, where national park rangers are enforcing hunting and fishing rules that are prescribed by states. John G. Roberts, Jr.: Which -- which federal agency has Congress given preemptive authority with respect to the Outer Continental Shelf? David C. Frederick: The Interior Department. John G. Roberts, Jr.: So, even on a question of labor law, the Interior Department could issue regulations that of their own force would preempt the California rules? David C. Frederick: Yes, yes. And that's what 1334(a) stands for. And it is why in the way this is implemented the Interior Department has these memorandum of understanding with states and with other federal agencies in order to determine which laws are going to be applicable. Now, notably, this gap-filling notion on the other side is expressly written into two statutes that we cite in our brief: the Assimilative Crimes Act and the Civil Rights Attorney's Fees Awards Act. But Congress didn't choose to use those words in the OCSLA. Instead, what Congress did was to say that applicable and not inconsistent state law would be applied. Brett M. Kavanaugh: How -- how is a -- John G. Roberts, Jr.: On the consistence -- on the consistency point, I understand what -- I understand it to be our basic rule in preemption analysis that something like this would generally not be inconsistent. If the federal minimum wage is 7 and the California is 12, you can comply with both by paying 12. But, here, what's distinctive is that it's not a disagreement between federal and state law. This is -- both are federal law under operation of OCSLA. So, if you ask the question, what is the federal minimum wage, it is inconsistent, because, in one case, you would say: Well, it's $7 under the federal FLSA, but it's also -- but it's $12 under the federal law that's incorporated from California. So doesn't that make a difference in how you apply the inconsistency point? David C. Frederick: No. You decided -- John G. Roberts, Jr.: I thought you might say that. (Laughter.) David C. Frederick: Well, and let me refer you to one of your cases, Your Honor. It's the Powell case, and in that case, the Court had before it an application of the Fair Labor Standards Act minimum wage and a minimum -- minimum wage that was set higher by virtue of another federal statute that applied to certain federal operations. And this Court held in Powell that the higher standard applied, and it did so by looking at the plain language of the savings clause. And if I can refer you to page 9(a) -- John G. Roberts, Jr.: But was that a consistency analysis that -- of the sort that you would apply in -- it couldn't have been under the normal preemption cases, because it's two different sources of federal law, whether -- rather than federal or state. David C. Frederick: No, but let me refer you to the savings clause plain language, because, again, I think that the statute operates in our favor. At 9(a) of the gray brief, the government has set forth the language, and let me read it: "No provision of this chapter or any order thereunder shall excuse non-compliance with any federal or state law or municipal ordinance establishing a minimum wage higher than the minimum wage established under this chapter or maximum work week." And so the way the savings clause works in the federal, comparing federal law, if there's a higher federal law, the savings clause says apply the higher federal law. If there's a higher municipal ordinance or a higher state law, you apply the higher one. That's what the savings clause provides. And what the other side wants to do is to take one part of the Fair Labor Standards Act, the part that says $7.25 an hour, and ignore the words that come right before that, which read "not less than." And so -- Samuel A. Alito, Jr.: But how does that apply to this particular case? David C. Frederick: It applies to this particular case because California has issued wage orders that provide for more generous minimum wage per hour standards, as well as definition of what a work week is and the per hour -- Samuel A. Alito, Jr.: Well, I thought the dispute was about the definition of a work week. David C. Frederick: It is in part a dispute about the definition of a work week and in part a definition of whether or not certain things that are done within that work week, time spent, for instance, meal allowances, how sleep time is calculated, et cetera, are within the word -- within the limit. And so, to that extent, Your Honor, what we have in the Fair Labor Standards Act are some provisions that do speak to the question with the savings clause and some that do not speak at all. For instance, the Labor Department doesn't speak to issues of mealtime allowances and how pay stubs are to be done to inform workers. And what the Department of Labor has said in its regulatory guidance -- and we set this out, I think it's at page 8 of our brief -- is that where there is silence in the FLSA, a higher or more generous standard by the state shall prevail. And our position is that what Congress intended in OCSLA to do was to incorporate those as applicable and not inconsistent -- Brett M. Kavanaugh: If your -- David C. Frederick: -- with the standards. Ruth Bader Ginsburg: Mr. Frederick, on the savings clause, I thought the savings clause was meant to allow a state to apply its own more protective regime in a domain over which the state is sovereign, but a state is not sovereign over the Intercontinental Shelf. David C. Frederick: That's correct, but what -- in -- in the same way, Your Honor, that in Powell, this Court determined that one federal statute provided for a higher minimum wage than what the FLSA did, we're not arguing which sovereign gets to determine the rules. What we're saying is the content of those rules varies depending on the source. And, here, the source -- just because the source of that happens to be California law doesn't affect things. You asked earlier about enclaves in California, and let me give you a different answer than the one my colleagues on the other side gave. There is a district court decision called Korndobler which we cite in our brief and we discuss. That's a case in which the district court was looking at whether the Fair Labor Standards Act provisions for minimum wage predated the creation of Sequoia National Park. And the Court did a very extensive analysis to determine that, in fact, California, as of 1913, had established a minimum wage rule. And it applied this Court's decisions -- and I'll talk about those in just a second -- to say that, in fact, the preexisting state law of minimum wage was bought into the Sequoia National Park when Congress created that as a federal enclave. And so I do think that the other side is not consistent with each other as to what the standards are. And let me talk about this -- John G. Roberts, Jr.: That just -- before -- that's an awful lot of weight to place on one unpublished district court decision. David C. Frederick: Well, it was answering -- and the reason why the three cases that he cites are not apposite is because, there, the state law came into existence after the creation of the federal enclave. So the only case that's on point agrees with us. And let me talk about the two cases from this Court that actually give the standards. Justice Kagan, you were talking and asking about the standards. And there are two of them. One of them is called James Stewart, and the other is called Paul. In the James Stewart case, what this Court did was it took a personal injury that occurred in a federal enclave in New York, where, because there were no -- because there -- it adopted the general enclave principles, it incorporated state standards with respect to what steel beams needed to be used in construction. There, the worker was injured because of a violation of the state standard. And what this Court held was that that state standard had been incorporated into the federal enclave law and, therefore, was the law of the United States, I think was the phrase this Court used. So it was incorporated federal law, even though the source of the standard and the substance of the standard derived from state law. And that all happened prior to -- as the federal enclave was being created. Similarly, in this Court's decision in Paul versus United States, which was an early '60s decision, there, the Court applied exactly the same notion, which is that preexisting state law came into the law of the enclave and it was incorporated federal law to be applied as federal law. Neil Gorsuch: Mr. Frederick, can I take you back to a -- a question I think Justice Alito was pursuing a moment ago? And I understand one of the important parts of your case is the definition of the work week and whether stand-by hours should be incorporated. California's treatment of them is subject to the minimum wage requirement. But the savings -- the savings clause, at least as I understand it, and you can correct me if I'm wrong, while it preserves the ability of states to raise the minimum wage, it doesn't allow them to define the work week differently than federal law does. So how do we deal with that? Why isn't your client's claim at least inconsistent with federal law to that extent? David C. Frederick: Well, what the -- as the Seventh Circuit has held in terms of determining what is a minimum wage, you have to look at both the pay rate and what you're multiplying that pay rate by, which is what constitutes a working hour. And a working hour is what we're dealing with when we deal with situations like is the worker under the control of the employer, subject to the employer's call-back or emergency call, et cetera. And so the issue about the work week constitutes how you define what is a working hour. Neil Gorsuch: Do you agree that federal law and state law differ in how they define that? David C. Frederick: I -- they do differ, except insofar as what the Labor Department has determined is not a difference in work week. Just so we're clear about that, the 40 hours applies and the federal standard applies. Neil Gorsuch: Right. But how we -- David C. Frederick: But what constitutes a compensable hour? Neil Gorsuch: Yeah. David C. Frederick: And it's that hour and what the Department of Labor's regulations say is that there is a multi-factor test for determining when a worker is under the control of the employer. Neil Gorsuch: I -- I understand that. David C. Frederick: Yes. Neil Gorsuch: But I guess my question is still don't federal -- federal law and its definition is different than -- David C. Frederick: I don't -- Neil Gorsuch: -- state law? Is that -- is that not right? David C. Frederick: I -- I -- I -- I -- well, I would say two things about it, Justice Gorsuch. One is that the Labor Department's regulations give room for states to define what is a compensable hour. We're not talking about any difference in 40. We -- we all agree 40 is the -- Neil Gorsuch: I -- we're on the same page, right? David C. Frederick: Yeah, yeah. Neil Gorsuch: We are. David C. Frederick: Yeah, but -- but the issue is what constitutes a compensable hour. That actually is a fact question with -- Neil Gorsuch: I -- I understand that, but we have a federal law standard and we have a state law standard and they're different, arguably. David C. Frederick: Yes. Neil Gorsuch: And the savings clause doesn't speak to this particular issue, right? It speaks to what you multiply that by, $12 or 7, whatever. David C. Frederick: Right. Neil Gorsuch: It doesn't deal with this issue. So the savings clause can't help you with respect to this issue, it seems to me. David C. Frederick: It -- Neil Gorsuch: What -- what do we do about that? David C. Frederick: Well, what the Labor Department has done is issued regulations and guidance where there is silence in the FLSA, and what it says is where there's silence, you incorporate or you deal with the state law and how the state law applies. Sonia Sotomayor: Mr. Frederick, I have -- David C. Frederick: And we've got those regulations in our brief. Sonia Sotomayor: -- I have poor memory on this issue, but didn't the court below remand to see whether there were actual inconsistencies with certain of your claims? David C. Frederick: Yes. Sonia Sotomayor: Number one, which were they? And, secondly, how do you deal with Mr. Clement's point that your view basically makes this identical to normal state conflict preemption? What differences do you see in the two? David C. Frederick: Okay. Let me take the first one first. Sonia Sotomayor: Why would your reading still result in a difference between normal -- the normal conflict preemption situation? David C. Frederick: Well, let me start with the second one first then. In this Court's decision in Guerra, the Court construed the words "not inconsistent with" and it said that they had the same content as normal conflict preemption. Is there a difference that would make it akin to conflict preemption? And that was a statutory interpretation case. Our position is that the most coherent way to understand the words "not inconsistent with" is to apply the same standards that you have in the preemption canon, where you look at, is it impossible to comply? Does it stand as an obstacle? And -- and the like. Samuel A. Alito, Jr.: But that means that California then extends 200 miles out to sea. David C. Frederick: So -- Samuel A. Alito, Jr.: And Congress could have just said that and said California extends 200 miles out to sea; however, within this part of California, federal officials will enforce the law. David C. Frederick: So, remember, Justice Alito, that our client's shift begins and ends in California onshore in the uplands. The first two to three hours of every one of his shifts is exclusively within California, when he gets briefed for safety, when he gets the bus down to the port to take the -- the vessel out to the rig, and -- Brett M. Kavanaugh: But I -- I don't think -- David C. Frederick: -- and so -- Brett M. Kavanaugh: -- respectfully, that's responsive to the question, which is, if -- if your position were correct, then ordinary preemption principles would apply and this -- a lot of this language would seem pointless. David C. Frederick: Well, let me try to wrap it together in this way, Justice Kavanaugh, which is that if you're looking at the substance of the law, looking at whether there's conflict and inconsistency, the preemption cases give you an intellectual way to understand the substance of that. I'm not here to argue that California controls the outcome. The federal government does. And the Secretary has the authority to issue regulations if the Secretary perceives there to be a difference that would matter in the context of the Outer Continental Shelf. Elena Kagan: Is -- is that what you think the principal difference is? Because I have the same concern here. This is an awful lot of stuff to go through if all that Congress wanted to do was to essentially set up the regime that applies everywhere else, and especially in light of the fact that Congress seemed to have rejected a -- a -- a draft statute that said exactly that. So -- so -- so what is the difference as you see it between this statute and -- and one that would just say, you know, here on the Outer Continental Shelf, just as in California, preemption principles apply? David C. Frederick: Well, number one, who decides? That's a big difference in terms of what regulatory power is given to displace a state standard. Number two, you have a decision, and you talk about the compromise, but let me give you the other part of the compromise, which was that it was advocated to have federal admiralty law apply to the Outer Continental Shelf, and the Court -- Congress said no. And where they came in the middle was to create OCSLA, where they incorporated these state standards, as federal law, to be implemented in that manner. But please keep in mind that the development of the Outer Continental Shelf encompasses relationships with the state. And that's why this Court in Huson said that the special relationship between the adjacent state to the oil rig is important. Why? Because that's where the worker is coming from. That's where his lawyer can be expected to understand what the applicable standards are. That's why, if something happens to him, he's going to know where to look for a legal redress. And there are many oil rigs within the three-mile limit. And as this Court held in Valladolid, there is overlapping coverage between state workers' compensation and the Longshore/Harbor Workers' Compensation Act, and it discussed a case called Herb's Welding, which says that within the three-mile limit, state law controls completely. And so what we're talking about is a very fluid situation, if you will, between workers who might go to a rig within the three-mile limit and be governed exclusively by state law one shift, come back onshore, then go back out to a shift that would be on the Outer Continental Shelf. And the question is, what legal regime is going to cover those people? And it's quite -- quite sensible why Congress would have said, substantively, we think that the state law ought to apply, but, to the extent that the Secretary of Interior perceives there to be inconsistencies with the federal standard, we're going to give the Secretary the authority, regulatory authority, to displace that standard. Stephen G. Breyer: That makes sense. A difficult argument, both sides, and what's gnawing at me is the word "applicable," and the Fifth Circuit has for 50 years interpreted it to require a gap. And you heard the answer they gave to the question I asked, which was that 97 percent of those involved in this are in the Fifth Circuit. So I'm slightly worried. David C. Frederick: Yes. Stephen G. Breyer: I don't know if it's determinative, but I'm slightly worried about overturning a set of court of appeals decisions under which industry and labor and everyone have worked, 97 percent of them, for 50 years. David C. Frederick: Let me -- Stephen G. Breyer: All right. Now what -- David C. Frederick: Yeah. Stephen G. Breyer: I do want to hear what you have to say. David C. Frederick: I -- I do, and I have a number of things to say, Justice Breyer, and I appreciate you raising this so that I can address them orally. First, the Fifth Circuit decided that gap standard in a case called Continental Oil, which was a classic maritime law case. There, the vessel went and it collided into the offshore rig. And the court was faced with the question, what law applies? And what the Court said was maritime law applies, because there's no gap there. You know what happens with a marine casualty situation. The admiralty law will govern that situation. The same judge, Judge John R. Brown, who is one of the most distinguished admiralty law judges ever to serve in this Court, decided a case about 20 years -- or not in this Court, in the courts -- 20 years later decided a case called PLT. Now, if you want to look at what reliance interests are, you should look at that case, not the Continental Oil case, because, in PLT, Judge Brown's decision for the Fifth Circuit did not use gap-filling. Rather, he used a standard that is very much like what the Ninth Circuit did in this case. Moreover, the standards that you would be worried about applying here are not likely to arise in the Fifth Circuit cases because state law has already made an affirmative determination not to apply their state laws to the Outer Continental Shelf. Both Louisiana and Texas have, by statute, determined that their worker's compensation is not going to apply to the Outer Continental Shelf. And their state labor laws will not apply to the Outer Continental Shelf. So, to the extent that you perceive there to be a problem that would be unique in correcting the law in the Fifth Circuit, I don't think you have to have a similar type of worry as the kind of case that we have here, because neither Texas nor Louisiana have comparable state laws that seek to go above the federal floor in the FLSA. Now the word "applicable" I do think has meaning, and the other side fluctuates between it being surplusage or irrelevant or whatever, but I do want to point out that it's not just applicable state law that the federal -- that the Secretary is administering, it's also applicable federal law. So, if the word "applicable" really does mean gap-filling, you strain to wonder how is it that the Secretary is supposed to determine what applicable law is if you give it an authoritative construction that the word "applicable" means gap-filling, because then you have a complete contradiction and you have read the statute in a -- a very bizarre way, because, ordinarily, what the Secretary is doing is reading the word "applicable" federal law to decide does the Clean Air Act apply. Brett M. Kavanaugh: Why -- why doesn't "not inconsistent with" suggest gap-filling in this context, in this statute? David C. Frederick: Well, for the reason that this Court in Powell explained why and also why this Court in Guerra explained why. "Not inconsistent with" in its ordinary parlance would mean not incompatible with. And "incompatible" is a word that is stronger than simply the creation of a void or a gap. You would look at whether there is a conflict or inconsistency. So if you're looking at the words as -- Brett M. Kavanaugh: Well, I would say in ordinary parlance, two different requirements are not consistent with one another. David C. Frederick: Well, you look at whether or not the two requirements that may be different can be accommodated to each other. And that's why in -- Brett M. Kavanaugh: That sounds like impossibility. David C. Frederick: No, in -- in Guerra, the Court looked at the application of California's standards regarding pregnancy relief and discrimination and the federal standard for pregnancy and it determined that they were different, but the fact that the California standard was more protective meant that it was not inconsistent with what the federal law was. And so, for that reason, I think that case is the most closely on point to the actual words that we have to work with here. And so, rather than sort of conjure up some concepts that are not appropriate, as the other side is trying to weave, I think if you just read the statutes here, the statutes by their plain language give you the answer. We know -- Samuel A. Alito, Jr.: Well, if I think that not inconsistent is -- is consistent -- is -- can be interpreted either the way you interpret it or the way Mr. Clement interprets it, where do I go from there? David C. Frederick: Well, Mr. Clement doesn't give a definition in his opening brief. Samuel A. Alito, Jr.: All right. Well, let me amend -- David C. Frederick: In his open -- in his closing brief -- Samuel A. Alito, Jr.: Then I'll amend the question. So, if I think that "not inconsistent" can mean in conflict with, irreconcilable, but also simply different in an important way, where do I go from there? David C. Frederick: Well, I think then you look at the source of the law that's supposedly different. And, here, where I think that the statute is best understood is that the word "applicable" focuses on the state law and the phrase "not inconsistent with" focuses on the federal law. And if -- Samuel A. Alito, Jr.: I don't know what you can get out of "applicable." Is it -- can -- can you conceive a situation in which somebody is directed to apply law that is inapplicable? David C. Frederick: Well, the -- the best example that I could give, California in its public resources code has quite extensive rules concerning drilling and mining on land. And one could well conclude that the word "applicable" could be used to say those standards don't apply to the marine environment of drilling offshore. And so that would be an area of law that, if you looked at it, you might say those mining and drilling requirements would seem to be applicable. And then, if you thought a little harder about it and said: You know, actually, it's quite a different environment and quite a different situation, you might say that, in fact, they are not applicable. And I think that the -- the way you would judge the interplay of those standards through the "non-inconsistent with" is that if you then go to the text of the Fair Labor Standards Act and when it invites higher standards to be created by not just other state statutes or federal statutes but municipal ordinances, you are seeing Congress's pointer that we are not going to view these labor standards as something that's going to create the sort of conflicts or differences that would give rise, Justice Alito -- Brett M. Kavanaugh: But, if -- if there are -- David C. Frederick: -- to the concern that you're expressing. Brett M. Kavanaugh: -- to pick up on Justice Alito's question, if there are two different ways one could imagine interpreting "not inconsistent with," why isn't the better answer to look at the overall context here, which, as Justice Kagan said, the overall context is a clear preference, a clear congressional choice to make federal law the primary, and so that you would choose the interpretation of "not inconsistent with" that says different from? So what -- what's your response to that? David C. Frederick: Well, I think that this Court's cases have said otherwise, in both Powell and Guerra. I think the statute says otherwise. And I think that, ultimately, the trump card here is 1334(a), which says that the Secretary shall have the power to prescribe regulations. The fact that the Secretary here has chosen not to issue rules that would displace California's more-generous-to-worker provisions, I think, is indicative. Brett M. Kavanaugh: And you think the Secretary clearly has that authority under that language? David C. Frederick: That's -- under a plain reading of the statute, Justice Kavanaugh, the Secretary does have that. And that's why I was quite surprised to hear the other side disclaim a regulatory authority that is written in such plain English. I would like to point out one other thing, which is that because, in the state's territorial limits, we know that state law is going to apply, what the other side's provision does is to create a condition for the kind of labor disharmony that Congress surely was trying to legislate against. That labor disharmony would arise whenever a crew is assigned to an onshore or within state territorial waters rig, as opposed to one that goes out on the Outer Continental Shelf, because the worker who's assigned in-state knows he is going to get the benefit of the California State rules and he's going to get the benefit of state worker's compensation, whereas the worker who's assigned to a crew to go with the Outer Continental Shelf under their version is going to be given lower protections and lower wages. And so, because Congress in what -- Sonia Sotomayor: Do you know what happens now with worker's comp? David C. Frederick: Yes. Sonia Sotomayor: What -- what happens on the Outer Shelf with worker's comp? Because there's no FLSA rules related to that. David C. Frederick: Yes. Sonia Sotomayor: So how does it happen? David C. Frederick: In Valladolid, what this Court considered was the overlap between state worker's comp and the Longshore/Harbor Workers' Compensation Act as it was incorporated. The solicitor general at the oral argument -- and I invite you to look at the transcript -- said: Both state worker's compensation law and Longshore/Harbor apply and the worker can get the benefit of whichever one is more generous. And that's why there is an offset provision in 903(e) of the Longshore/Harbor Workers' Compensation Act. Thank you, Your Honor. John G. Roberts, Jr.: Thank you, counsel. Mr. Clement, you have three minutes remaining. Paul D. Clement: Thank you, Mr. Chief Justice. Just a few points in -- in rebuttal. First of all, my friend wants to draw something from the fact there are no on-point regulations here addressing this by the Secretary of the Interior. Well, the obvious two reasons why there are no regulations is that the United States Government agrees with us on the interpretation of the statute, and agrees with us and is doubtful on its authority to promulgate those regulations. As to the specific issue of workmen's comp, the reason that that can be -- state law can apply is because that's one of the places where Congress has said specifically that state law can apply even on a federal enclave. And that's 40 U.S.C. 3172. That's the kind of super -- Sonia Sotomayor: It begs the question, why is that a gap? Paul D. Clement: Well, they're -- they're -- Sonia Sotomayor: I -- I -- Paul D. Clement: No, they -- I think what that -- Sonia Sotomayor: You get paid for working. You don't get paid for not working. So if the federal law doesn't pay you for work -- not working, except under the long -- longshoreman's act, why would state law apply? Paul D. Clement: Because there's a specific federal statute that operates as a super-savings clause specific to federal enclaves, and that's what's missing in the A few other points just to make. My friend wants to say that you should interpret OCSLA differently from the Assimilated Crimes Act. It seems to me the much better course is to say that OCSLA is trying to get at the same thing and is trying to do gap-filling. If you don't adopt that rule, then you're going to be saying that there's a greater role for state law, criminal law, on the Outer Continental Shelf than on any other federal enclave. And keep in mind that OCSLA joins civil and criminal law at the hip. So the same regime on the Outer Continental Shelf applies to criminal law and civil law. And I suggest the way to harmonize all of those federal statutes is to require gap-filling in every instance. Also, in thinking about this case, do keep in mind that the Outer Continental Shelf is a super federal enclave in the sense that no other state was previously sovereign. So you don't have the issues where you have to go back to 1913 and look at what the conditions a state might have put on the grant of land to the federal government. None of that applies on the Outer Continental Shelf. My friend relies on Powell and Guerra as his two most apposite cases. So Powell is an apposite -- inapposite because, there, you have two separate congressional provisions, both of which go through bicameralism and presentment. And, of course, this Court is going to try to do anything it can to reconcile two federal statutes. You don't have that situation here. The second body of inconsistent law was the product of a Sacramento labor commission. It doesn't -- you don't apply that the same way. Guerra is equally inapposite because Guerra is just a plain old preemption case. And the problem my friend on the other side has -- has, as the Court has pointed out, is you just can't read the Outer Continental Shelf Lands Act and conclude that the Court -- that Congress wanted these preemption principles to work the same way onshore as in the Outer Continental Shelf. It's a federal enclave; all the law is federal law. Thank you. John G. Roberts, Jr.: Thank you, counsel. The case is submitted.

Earl Warren: Number 45, Beacon Theatres, Incorporated, Petitioner, versus The Honorable Harry C. Westover, Judge of the United States District Court of the Southern District of California, et al. Mr. Corinblit, you may proceed. Jack Corinblit: Mr. Chief Justice, Associate Justices, may it please this Honored Court. This case presents the issue as to whether the respondent in this case has improperly denied petitioner a jury trial as to issues related to violations of the antitrust laws. And whether the rules of law announced by the Court of Appeals to accomplish this result are or are not contrary to the Rules of Civil Procedure promulgated by this Court, adopted by the Congress and are contrary to the Seventh Amendment of the Constitution. The case briefly arose in the Southern District of California wherein a complaint was filed by Fox West Coast Theatres Corporation. The complaint was captioned, “Fox West Coast Theatres Corporation versus Beacon Theaters, Inc.” It was entitled a complaint for declaratory relief. After the petitioner here, was named defendant there, filed a motion to dismiss on the grounds of lack of jurisdiction and that was denied. Petitioner filed an answer in which he raised an affirmative -- filed an answer in affirmative defense, filed a counterclaim against the plaintiff and in other party and demanded jury trial as to the complaint, the answer and the counterclaim. The grounds upon which the petitioner argued that it was entitled to a jury trial as to the complaint -- as to the complaint standing alone were as follows. The first, that the Seventh Amendment guarantees a jury trial as to actions of law, actions of common law. This was an action for declaratory relief which is not an action at common law nor is it an action traditionally known as an action in equity. That the right to trial by jury and an action for declaratory relief turns upon the basic nature of the case and turns upon the -- the kind of the case for which the declaratory action is a substitute. That in this action, it was apparent from the face of the complaint, from the allegations contained therein that it was a substitute for an antitrust damage suit and that its basic issues were those issues. And that since under well-established rules, in antitrust damage suits, a -- the plaintiff and defendant are both entitled to a jury trial that therefore plaintiff or defendant -- petitioner here was entitled to a jury trial. The complaint to make this point was not a very lengthy one. It alleged, first, that -- it alleged, first, that it was brought under the declaratory relief provisions of the judicial code. As to page -- at page 10, the complaint appears in our record. It alleged, first, that it was brought under the Federal Declaratory Judgment Act. It was entitled, “Complaint for Declaratory Judgment”. But in the second paragraph of the complaint after the first, as one sentence, there was alleged that there was a controversy in excess of $3000. And that the matter in controversy arises under the law of the United States to which Sections 1 and 2 of the Act of Congress of July 2nd entitled, “An Act to protect trade and commerce against unlawful restraints and monopolies”, commonly known as the Sherman Act and the Section 4 of the Act of October 15, 1914, the amendatory thereof commonly known as the Clayton Act. That Section -- Section 4 of the Clayton Act is the statute which gives private persons who are injured, by violations of the antitrust laws, a right to sue. It is the damage provision of the antitrust laws relating to private individuals. So that in paragraph 2, there is a rather straightforward statement that the complaint arises under the antitrust laws and under the section of the Clayton Act which gives a private right to damages. The complaint then alleged that described the parties, the plaintiff, Fox West Coast Theatres Corporation as a company organized in -- operates in the neighborhood of 150 motion picture theatres primarily on the West Coast. The defendant, Beacon operated the theatre -- opened the theatre, a drive-in theatre just outside of San Bernardino, California where Fox West Coast had for many years, operated a conventional theater as a theater with four walls and a ceiling. The complaint alleged, then, that there were eight major companies in the United States that produced films. And these were these -- and the complaint expressly stated that they constituted in the aggregate, this is at page 13 of the record, constant in the aggregate, the major distributors of motion pictures in the United States. Thereafter, the complaint alleged that there had been a prior antitrust case between the Government and these major suppliers of motion pictures. It was the case known as United States against Paramount which -- which started with the District Court, came to this Court, went back to the District Court openly affirmed. It was then alleged that there was a dispute between the parties. The complaint alleged that the plaintiff, Fox West Coast Theatres Corporation had for many years operated a theatre in San Bernardino on what was known as a first-run in clearance basis. That is, Fox West Coast had for many years licensed from this major distributors, the privilege or whatever you will call it, or at least there was a practice at that time to license to it a first-run. This Court has reviewed that problem often. First-run is the right to exhibit a picture exclusively first and that license clearance. The clearance is an agreement that you'll find in the cases and recognize in the industry as an agreement between a distributor of motion pictures and the exhibitor. The two parties agree that during the time that that exhibitor will exhibit the motion picture, that no other theatre will be permitted to exhibit that picture for a given period. It's in the nature, it's been called, analogized to the common law agreements on not to compete. That is analogized to those cases where a seller of a business selling goodwill agreed with the buyer that he would not compete for a given period of time. The Court will recall those -- those agreements were held finally to be unlawful if unreasonable. That is, if extended it too far, too greater area or extended into a length of time. They were analogized -- they have been analogized by this Court to those common law, unreasonable restraints of trade. And the -- the courts have held, in the motion picture industry, this Court among them, that such clearances were lawful if reasonable, unlawful if unreasonable. One aspect of unreasonability, the courts have held, is whether the clearance is granted between theatres that are not substantially competitive. Again, analogizing it to the common law rules. For if an agreement by a seller of a business as to goodwill, that if there was an agreement that he would not compete within an area broader than it was -- than was necessary, such agreements were not enforced because they were unnecessary and because they were basically restraints of competition. And since they were unnecessary, they would not be enforced by the courts. For that they would then be unreasonable. That rule of law, namely, that the clearances between theatres which are not substantially competitive is an-- is an unreasonable restraint of trade as a proposition of law which I understand neither party to contest here based upon this Court's decisions on the recognized decisions in other courts. And so the complaint alleged that for many years, Fox West Coast had operated the -- its theatre on this basis, an exclusive running clearance over theatres in the area. And it -- it was alleged that a controversy had arisen because of the -- of the opening -- because a theatre -- a new theatre was about to come into existence, namely, petitioner's theatre here, a drive-in theater located some 11 miles from downtown San Bernardino. The allegation was that the petitioner, Beacon Theatres made this contention. It contended that its drive-in theater was not and would not be substantially competitive with the downtown San Bernardino theatre. And that it contended, therefore, that if any distributor granted clearance, entered into a restrictive agreement that I've described, such a -- such an agreement would be unlawful under the antitrust laws. The complaint alleged that Fox, on the other hand, took a contrary position. That it contended those two theatres were not or were substantially competitive. And that, therefore, if either of them licensed, they first run and either of them obtained an agreement, a clearance agreement, that such an agreement would not be unlawful within the meaning of the law. The complaint there, then alleged that in -- restated this proposition in terms of rights, that is to say, it stated that -- that the plaintiff, Fox West Coast, contends that it had an equal right with Beacon to negotiate with each distributor independently for that prior running for a clearances between the two theatres. The -- this was the end of this -- after the completion of this paragraph, there then was alleged a paragraph XII, which became of some importance to the Court of Appeals which is what I mentioned. It was alleged in this -- in the next paragraph that petitioner, Beacon Theatres had threatened Fox West Coast and had told Fox that it -- that it had threatened the distributors. That if any distributor granted clearance between these two theatres, that the petitioner, Beacon, would file an antitrust case, a damage antitrust case against -- against any distributor who so did. While its not alleged, if you will recall, that in the prior paragraph, it is alleged, but not in this paragraph that the -- the difference of opinion was as to whether these theatres were competitive such a clearance will be unlawful. And so it was alleged that petitioner told Fox and told Fox that it had told the distributors, that if any such contract was entered into, it would file a damage suit under the antitrust laws. It was then alleged that these threats which it has alleged in the complaint were made to Fox and Fox had been informed that we had threatened the distributor. It was alleged that these threats exercise a coercion upon the distributors and resulted in the fact -- and resulted in depriving Fox from obtaining first-run and clearance in that area. A complaint, then alleged, to follow. The plaintiff was without any speedy or adequate remedy at law and will be irreparably harmed unless and I'm quoting, “Defendants and its officers, agents and employees are restrained and enjoined from instituting any action under the antitrust laws against the plaintiff and said distributors or any of them based upon the facts hereinabove alleged, during the pendency of this action and until such time as the Court shall determine whether or not the plaintiff and defendant have an equal and correlative right to license a prior run with clearance on behalf of their respective theatres." This is the body of the complaint in which the allegation was made that -- that unless the plaintiff -- the petitioner here, Beacon, is restrained from suing for damages under the antitrust laws, during the pendency of the case that there will be irreparable injury. Thereafter, the complaint set forth its prayer, the prayer is a fairly simple. The first one, asked the Court, the word is used to decree that a grant of clearance between a first-run theatre in San Bernardino between the Fox Theatre and the petitioner's theatre is not a violation of the antitrust laws and is not a violation of the decree in the Paramount case. Secondly, that it be decreed that the distributors are each them entitled to negotiate with the plaintiff and defendant and other operators of theaters in the competitive area equally for a prior run in the said area. Third, that the Court declares such, otherwise, for that pending file decision of the Court herein defendant Beacon and its theatres and its officers, agents and employees be restrained and enjoined again from commencing any action under the antitrust laws against plaintiff and the distributors hereinabove named arising out of the facts or controversies. This was the complaint. And the petitioner here, Beacon, when it made its demand for jury trial, in the trial court, as to the complaint took a very simple position and stated that -- that this was a complaint for declaratory relief, and a complaint for declaratory -- in a complaint for declaratory relief if the action is a substitute, for a suit at law, namely, a suit for damages under the antitrust laws that the petitioner is entitled to a -- that the defendant, either side was entitled to a jury trial and that this was on the face of the complaint an action for declaratory relief brought under the section of the antitrust laws relating to private damages and was not -- and that therefore, we were entitled to a -- to a jury trial. I might point out that it may not be an important point. The complaint I might say was not verified. This maybe of some significance because Rule 65 of the Federal Rules provide that if you want a preliminary restraining order, you've got to verify or you've got to put in an affidavit that during the entire pendency of these proceedings, all the time the matter was in the trial court, no application was made for injunction to restrain us from filing the antitrust case or any other type and no pleading, no papers were filed which will sustain such a -- such a request. The argument that we're entitled to a jury trial on this -- on the complaints standing -- standing alone was based not only upon the -- these allegations which seem straightforward based upon the analogy of the common law, to the common law covenants not to compete, based -- based also upon the fact well known to these -- to Fox West Coast that these problems of -- of restraints of trade by clearances have long been litigated in damage cases. That is as a fairly common -- common matter that appears in case after case involving these -- involving Fox. Speaker: Can I ask you a question? Jack Corinblit: Yes, sir. Speaker: Was this application for a jury trial before you filed your counterclaim? Jack Corinblit: It was -- it was endorsed upon the same pleading, Your Honor. Speaker: Same pleading but this –- this demand for a jury trial was independently of the issues raised with the counterclaim. In other words, you said you were entitled -- Jack Corinblit: Yes. Speaker: -- to the jury trials just as if you'd filed no counterclaim -- Jack Corinblit: That's correct. Speaker: -- at all? Jack Corinblit: That's correct. Since the -- Speaker: Is that issue before us? Jack Corinblit: Yes, Your Honor, squarely. It was raised by -- the first issue was raised in our brief. The -- I was saying that the -- the matter of -- of the trial -- of issues of substantial competition and clearance had long for many years been part of the damage cases brought by litigants where they thought they had a right. A -- a typical case in this connection is one that we cited -- cited in our brief. It's the case of J&J. Theatres, Inc. a Second Circuit case, 212 F.2d 840 in which the -- in that case, the contention was by an individual theatre that it was unlawfully being deprived of the opportunity to play pictures on a given run by reason of unreasonable clearances and clearances over its theater which was not competitive. In that case, the instruction was given, as follows, which is of some interest as to demonstrate the way in which this issue arises. If you find that this -- there -- there was substantial competition between the two theatres, then plaintiff has failed to establish the element of te prior run and clearance in favor of the Park Plaza over the Luxor was unreasonable. And your verdict should be for the defendants. That is, the issue is one of unreasonable restraint of trade. If there is a conspiracy to impose clearance and the clearance is between theatres that were not competitive, you've got an unreasonable restraint of trade. That issue, I might say, goes not only to the unreasonable restraint of trade but, of course, to the issue of conspiracy itself because, if a court were to conclude or jury trial, if that were to conclude, that these clearances were unreasonable and that they were uniformly granted. A trier of fact would be entitled to infer, not required to infer, as this Court held, the Theatre Enterprises case. But entitled to infer, that it was pursuant to a conspiracy in the sense that you can infer from uniform unreasonable acts in a business circumstance. To put the -- the picture together, a jury is ordinarily permitted to make such -- such an inference. So, that this issue had been litigated and was regularly litigated as part of private treble damage cases in jury trials and known by the plaintiff, Fox West Coast to be -- to -- that that was known by them. Their company has been the defendant in a number of antitrust cases, as the major distributors have, arising out of this Court's -- out of the -- out of the Sherman Act as well as out of the Paramount case itself. When in a -- we made a demand for jury trial as to the complaint in the answer. In the answer, I might say, we raised the -- the fact that the plaintiffs were violating the antitrust laws. We filed an affirmative defense which said we thought that they were violating the antitrust laws and then we filed a counterclaim. It's one document, the answer from the defense in counterclaim and endorsed upon the document as request for jury trial as to the complaint, the answer in the counterclaim is expressed. The counterclaim raised the antitrust issues and sought damages as well as other conjunctive relief. The proceedings then took place as follows. The motion was filed to strike our demand for jury trial as to the complaint in the answer. The motion was granted. The motion was filed to strike our allegations and our answer in affirmative defense that the defendants were violating the antitrust laws. This motion was granted. A motion was filed to sever the complaint for the counterclaim and to try the complaint first, ahead of the counter claim. And this motion was granted. The -- upon these motions, I -- I've broken them up but of course the motions were in one and that there were three parts if I'd describe them independently. We filed a --a petition for writ of mandamus in the Court of Appeals. We based our request for mandamus upon this Court's seemingly long line of opinion, decisions which said -- and other Courts of Appeals including the Ninth Circuit which seemed to indicate that in jury trial matters, where a jury trial has been denied that that was one of those exceptional issues which Courts of Appeals should hear by way of mandamus. I like to say that the Court of Appeals never passed upon that question. That is when they ultimately -- Speaker: What decisions in this Court do you rely on for that proposition? Jack Corinblit: I rely primarily, Your Honor, on the line of cases beginning with -- with Ex parte Simons. Now, I will submit that that was mandamus out of this Court and not mandamus out of the Court of Appeals. There has not been any -- there have not been any law to the effect that really makes a distinction between the two and the Courts of Appeals, they have granted mandamus and jury trial. I have argued that there is not a distinction between the two. The point that I -- I wish to make is that I do -- don't believe that that question is before you here unless you conclude that this is a matter of jurisdiction of the Court of Appeals because there is no cross-petition of certiorari in this case. There is no issue raised that there was -- that the discretion was abused because the Court of Appeals distinctly refused to pass upon that. It went to the merits of the case without passing upon whether, in its discretion, it would or would not issue mandamus. And they said so in their opinion. And we didn't raise that question and when we raised our three questions in the petition for certiorari, no cross-petition was filed by the other side and if the matter was in -- and -- and therefore, no issue of the willingness or unwillingness to exercise discretion, is I believe, before this Court at this time. In the Court of Appeals, when we filed, I might say an application for leave to the file a writ of mandamus, the Court of Appeals for Ninth Circuit follows that practice. I -- I'm not sure that it's not filed -- followed everywhere but at least it is in the Ninth Circuit. You just can't file automatically and they -- they considered it and they decided we ought to be granted a leave. We were permitted to file a petition. And the respondent judge was ordered to show cause why -- why the petition shouldn't be granted. He filed a response. Potter Stewart: Hasn't the statute been changed since this Court decided Ex parte Simons? Jack Corinblit: Yes. The -- the statute -- the statute has been changed although the language of -- of present -- of the present mandamus statute, I don't think, changes the -- the ultimate result. At least I felt that La Buy versus Howes, although it was a subject to considerable argument, indicated that -- that there was at least a power in the Court of Appeals to act. But the question was to be one of discretion. And again, that issue of the exercise of the Court's discretion has not been brought here in my judgment in this case. The Court of Appeals, after I might say, keeping the matter under consideration for some time because I think the Court thought it was an important question, that rendered its opinion. And it -- it denied our petition for mandamus. What the Court did, was to say in the first place that we were right. If this complaint had only been a complaint for the declaratory relief, the Court said we were right. That is to say, you can't in the complaint for the Court declaratory relief, reverse positions and destroy the right of jury trial. You can't anticipate a case or -- and destroy the right of jury trial by suing declaratory relief. But the Court said that this really wasn't an action for declaratory relief. This was an action which it was not willing to label "In equity." And the basis for the contention that the -- that the whole case was in -- was in equity is the paragraph 12 in which the -- Charles E. Whittaker: May I ask you, do I understand that you argue by an action for declaratory relief may not be in equity? Jack Corinblit: No, sir. It may be in equity. Charles E. Whittaker: It maybe either. Jack Corinblit: Either in equity. Charles E. Whittaker: I -- I see. Jack Corinblit: Yes. The Court of Appeals held here that this action was in equity based upon the allegations of paragraph 12 of the complaint. That is to say, the allegations of the petitioner here threatened Fox with an antitrust case, that had interfered with their business. But the Court went further. In holding that was was in equity, the Court of Appeals did not say that the issue of the threats alleged, alone, would be tried by the Court. But all of the issues and the complaint would be tried with the Court without -- and no -- no jury. That is to say, the issues of unreasonable restraint of trade, the issue of substantial competition would be tried by the Court, as well as the question of the threats and whether some kind of an injunction should be issued. Now, I might point out that the Court ignored the fact that the only prayer in the complaint and the only substantive allegation in the complaint asked for an injunction, pendente lite. There was never a single prayer or a permanent or any permanent injunctive relief, just during the course of the proceedings. And yet the Court of Appeals used this paragraph of the complaint and that prayer unless it relied on a general prayer, to conclude that the whole case was thereby in equity. Charles E. Whittaker: You assume the fact that there might be problems (Inaudible) by this injunction to await the declaratory judgment. Jack Corinblit: Yes. Charles E. Whittaker: And hence no need for any kind of injunction if the judgment in the suit declared the rights of the party, is that it? Jack Corinblit: The purpose -- yes. The purpose of that pendente lite injunction would be to prevent us from filing an antitrust case, I might say. This is the prayer. This is what we will ask, not the threats. The Court later inferred that. But filing antitrust case, while will the declaratory relief suit was being tried? But what the Court did was to say that the declaratory relief issues would be tried to the Court and not to the jury and hang -- hung its hat on the proposition that the -- that the substantive allegation in that prayer made it a case in equity which -- which deprived us, which was permitted to deprive us of the right of jury trial. Charles E. Whittaker: As in any equity case. Jack Corinblit: As in equity case. But, Mr. Justice Whittaker, the Court was if you please -- here characterizing the whole complaint by reason of this pendente lite request because this is all the Court of Appeals used to find that this was an action in equity. This pendente lite request in the -- in the substantive paragraph and in the prayer. The -- we submit, of course, that the Court's action in finding that an action for declaratory relief or allegations of declaratory relief, which are substituted allegations for a suit at law, namely, suit for damages. That such an action is converted into an action in equity and all of the issues to be tried in equity by reason of an allegation of threats of litigation is not sound, is contrary to this Court's rules and is contrary to the spirit of the Federal Rules in uniting law and equity. We say it is not sound historically. Historically, the courts were always very careful to see to it that a complainant did not blend issues at law and issues in equity, possibly in equity, in the same complaint and thereby eliminate the right of jury trial. A case which -- which makes this statement directly is the case of Scott versus Neely which we cited in which the Court there, in that case, Mississippi had decided that you could sue in the state court in equity and become a creditor and get a lien executed on at the same time. And you do all that in equity. And a plaintiff tried to accomplish that result in the federal court. And the federal court said, “They may do that in the Mississippi state courts but the Seventh Amendment binds us here as -- and --and we cannot do it and they said -- Hugo L. Black: Did you say that case was cited in your brief? Jack Corinblit: Yes, sir. Hugo L. Black: Scott versus Neely? Jack Corinblit: Yes, sir. If I can finally -- oh, I'm sorry. It's -- it's in the reply -- in the reply, Your Honor. I beg your pardon. Scott versus Neely, 140 U.S. 106. And the Court in that case said, “In the federal courts, this right -- right of trial by a jury cannot be dispensed with except by the assent of parties entitled to it nor can it be impaired by any blending with the claim properly cognizable of law of a demand for equitable relief in aid of a legal action or during its pendency.” Now, of course, the Federal Rules of Civil Procedure has been designed precisely to blend, that is, in the sense of giving a litigant the right and the obligation to bring all his claims in at the same time. The whole purpose of the -- of the uniting the rules under the Federal Rules was to --to encourage that, to get it all settled at one time. And so, whether you got an action at law or equity, you bring it in. As a matter of fact, if you don't, you're barred. But, when this Court -- when Congress passed the enabling statute which sure led to the adoption of this rule, Congress said that in adopting these rules, you shall not incur the right of trial by a jury. And of course, Rule 38 said the same thing. And there was never any intent indicated by any decision of this Court that the mere adaption of the rule which now permits a litigant to bring actions of law and actions of equity, at the same time, to destroy the right of jury trial. So, that if blending couldn't be permitted to destroy the right of jury trial prior to the rules, surely, it is not permitted to destroy the right of jury trial under the rules. And the interpretation by the Court of Appeals here had that result because, looked at correctly in a sense, it can be -- if you're going to argue that there's any equitable features at all in this complaint, properly construed. That -- that pendente lite to equitable request will -- will be permitted to result in holding that all of the issues are to be tried with the Court and not with the jury. But if this rule were adopted, that it would be a serious -- have serious effect upon -- upon all litigants in the federal courts. The Rules of Civil Procedure would have become a trap. William J. Brennan, Jr.: (Voice Overlap) you are from this alternative arguments first that in any event, this is really only a declaratory judgment proceeding, in lieu of the law action and therefore the issue is to be tried to the jury and that the prayer for pendente lite relief does not but change -- Jack Corinblit: Yes, sir. William J. Brennan, Jr.: -- in that sense. And alternatively, if it does change it, then the argument you're now making (Voice Overlap) -- Jack Corinblit: Yes, sir. Thank you. You clarified it, sir. With respect -- of course, we think that looked at, the complaint correctly and often times, when these complaints are filed and deciding whether there's a right to trial by jury, there is a question of history to be analyzed. What is this complaint like? What would there have been prior to the rules? We urged in our brief and we think it's -- it's sound that -- that really this -- this complaint without the prayer for a moment, states no action for -- for equitable relief at all. That it's nothing but an action for declaratory relief. And that paragraph 12 does not have the result the Court of Appeals thought it had. Hugo L. Black: Was there any allegation of -- of the usually equitable nature that could not have been determined when a suit of law alleged in the petition declaratory judgment? Jack Corinblit: None -- none that I know of Your Honor. Hugo L. Black: No -- Jack Corinblit: There was an -- a statement of irreparable injury, an allegation made of irreparable injury. Hugo L. Black: If a suit should be allowed to be (Inaudible) Jack Corinblit: If the suit should be allowed to be made. Hugo L. Black: But was there any issue in connection with the transaction which was the basis of this previous lawsuit as to the substance of it which would -- whereby, it showed that they would be deprived of some relief that they could get in equity as a substantive answer to the charging -- Jack Corinblit: No, sir. Not in any way, shape or form. Speaker: May I ask if the construction of the Paramount was included? Jack Corinblit: They did. Speaker: That very question? Jack Corinblit: The factual question as to whether there is competition between theatres and as to whether there is unreasonable clearance, is in my judgment a jury question. Hugo L. Black: But what if it's a jury question or not is there anything to keep the Court from -- the question I ask if you will permit me. What I had in mind was, was there anything that the -- that the relief they sought either which required the interpretation by the Court, or a decision of fact by the jury which could not have been fairly tried out in the suit of law. Jack Corinblit: None at all. Hugo L. Black: That was what I have in mind. Jack Corinblit: The -- I was saying that -- that you could -- it -- it seemed to me as a classical matter here that this complaint, in no way, with substantive allegations, even alleged a proper suit in equity. Potter Stewart: You refer, Mr. Corinblit, to the necessity sometimes of making a historical analysis -- Jack Corinblit: Yes. Potter Stewart: -- and as I think it would -- I'd certainly agree with that necessity. What is lacking here from a traditional equitable suit what they called quia timet? I have the name right? I think I do. Jack Corinblit: You have the name right and my understanding was that quia timet or quia timet whichever it is -- Potter Stewart: You -- you pronounce it your way. Jack Corinblit: -- is -- was traditionally had to do with real property. And I must say that -- that this is, as about as much as I know, about -- about quia timet, sir. But I will say this, Your Honor. That with respect to the usual, to the attempt in this complaint to use the fact that we had warned somebody, they -- they called a threat. We can't do anything about it. It's in their complaint. But that we had warned somebody that we thought that what they were going to do, violate the antitrust laws. It has been the rule and was the rule at the -- almost the time of the adoption of the Constitution that that kind of -- an assertion could never form the basis of an action in equity unless it was asserted. That the man who made that claim was doing it in bad faith and was unwilling to test his right in court. These are cases which I'm sure, Your Honors, you're all familiar with. There -- it was -- there was a long bitter battle over the question as to whether equity could even do it -- could even enjoin the second situation. That is, where there was bad faith, but no court that -- that no court had held. That unless that you could have a -- a case in equity, unless you made that allegation in that assertion because it was fundamental. The argument was in the case, one case came to this Court that if you've got a right to file under the antitrust laws, you have a right to -- to warn somebody of your rights and that that warning by itself is not the grounds for -- for an injunction. That what makes -- what may turn that into a case, is if you're doing it simply. You're warning and then pulling back, you're warning and pulling back and refusing that -- to have that right tested. But this case, the complaint on its face demonstrates that we, that if the petitioner here was anxious to have the matter litigated. Not only does it fail to allege these facts that are simply described, but the -- but the contrary is directly shown because the allegation is, that the petitioner has threatened an antitrust case and Fox West Coast wants to keep us from filing an antitrust case by way of an injunction. And they say they'll be hurt by the filing of the antitrust case, unless we're enjoined. Charles E. Whittaker: Did you in your by warning, if I understand this complaint, say not only if they did do, but was anticipated, then a suit would be filed, isn't that right? Jack Corinblit: That is the complaint, Your Honor. You've got to understand that this was set up in the Fox's complaint. They were describing what we were alleged to have done. And as they described it, they're in your words, that -- that is to say that if they did what we thought was unlawful, we would sue under the antitrust laws for damages. Charles E. Whittaker: Yes. So, your contention then is, that they were entitled not to the adjudication of that status to relation but they had to go ahead and commit what you thought was a violation of the law before the right could be tested? Jack Corinblit: No, sir. We do not contend that these alleged warnings were not a sufficient basis to go in to a court for declaratory judgment. We think now, that this is what declaratory judgment is for and that paragraph 12 is part and parcel of the declaratory relief action. But doing that, we say, we're entitled to a jury trial. Charles E. Whittaker: Do you say the (Inaudible) cause of action alleged was legal in character and not equity? Jack Corinblit: That's correct. This is -- Charles E. Whittaker: That's all -- that's all there is to it. Jack Corinblit: That's all there is to it. And that's -- that's the theory that we have in this case. Potter Stewart: Well, now, doesn't paragraph 12 allege that their very threats of filing a suit -- that your very threats of file -- of filing a suit has in fact deprived them of their right to negotiate on a first-run clearance basis -- Jack Corinblit: Yes. Potter Stewart: -- with the distributors. And certainly, if that's true and it's understandable how that could be true. It wouldn't be necessary for you to file any law suit in order to -- in order to -- to deprive them of their right that they're asserting isn't that true? Just to -- the -- the mere threat of it could succeed. Jack Corinblit: Well, I -- this is an inference. This is -- is what you've got to do to infer. You've got to say that the threat has been made and they want to enjoin us from suing. Now, the -- the same paragraph has the allegation that they wanted to enjoin us from suing. Potter Stewart: Do you agree that it -- that it alleges there that the threat to sue has operated to deprive them of a right to their suit? Jack Corinblit: Yes, it -- it does so allege. I would come back to that point again on analogizing this to the historical case that it was always true that if you warn the man of the rights that you honestly believe you had, and I might say this complaint by alleging the dispute, certainly sets up that there is a dispute in good faith. There's not single word in this allegation that suggest that there's any bad faith on either side with regard to the declaratory relief allegation. That if you have a right to make that kind of a warning in good faith, that that may have some effect upon the supplier. Remember, if the Court please, that these suppliers whom they described are our suppliers as well as Fox's suppliers. The allegation is made on the complaint that they have the pictures. They -- we must go to them for supply of pictures as well as Fox West Coast. And so that when we made the alleged -- the alleged warning, the alleged warning might have had that effect. But again, there's no allegation of bad faith, no allegation that we are unwilling to test our right in Court. And we suggest that under the cases and under the general analysis that these -- these warnings were sufficient to permit Fox to -- to require us to test our claim in a court. But they were not sufficient to destroy our right of jury trial because the substantive issue was the same. Were -- was there a violation of the antitrust laws. Was there a clearance between theatres which were not competitive. Was there unreasonable clearance? Charles E. Whittaker: (Inaudible) the Paramount issue would be a determination with the question of whether or not you were in competition? Jack Corinblit: That would be a -- that would be a Paramount issue. Although, Your Honor, the issue of unreasonable clearance is, stated is, sometimes somewhat broader than merely the question of competition. That there are other factors of some kind. But I think this complaint primarily emphasizes the matter of substantial competition between the parties. That this was an issue triable -- triable at law. And I'm arriving to a conclusion that if their -- if there isn't substantial competition, clearance would be unlawful. If there's -- if there were no substantial competition, clearance would be unlawful under the cases. Charles E. Whittaker: The determination of that question in the setting of this complaint was a legal in character. Jack Corinblit: Yes, sir. This is our -- this is our contention. William J. Brennan, Jr.: Mr. Corinblit, what about the language duress and coercion? Jack Corinblit: Well, the -- again -- William J. Brennan, Jr.: (Inaudible) though of an implication in that allegation of bad faith in the -- Jack Corinblit: In duress and coercion which is stated by way of a conclusion in which, of course, no facts are alleged other than the mere making of the statements, Your Honor please. We submit (a), without the affirmative allegation of facts showing that they were in bad -- that there was bad faith. You cannot, we say, obtain an action in equity but -- and without these affirmative allegations. Historically, you never could. And the Courts were even concerned that you could even do it then. There were cases that held you couldn't do it even if there was bad faith there. The Courts were worried of whether -- whether equity was destroying the right of jury trials. But always, there had to be affirmative positive of allegations of fact. And I know of no case which has ever permitted an implication to be drawn from the conclusion and resulting in the right of jury trial being lost. But, and again we come back to the secondary point. That even if you grant that, if you give them the benefit of every doubt, that there is something in equity there, this had never have been the basis for deciding that the substantive questions are not to be decided by a jury. Even if the Court will want to decide the question of bad faith, if there is such in -- with respect to the injunction by the Court. Again, relating to the fact that our rules don't mean that you have to -- that it is all or nothing. Some matters can be decided but the jury (Voice overlap) -- William J. Brennan, Jr.: Well, actually this gets down to really the issue of competition, as you feel was decided by a jury even if all the other issues in the case were tried by the judge. Jack Corinblit: That's correct. William J. Brennan, Jr.: That's what it all comes down to. Jack Corinblit: That's what it -- and you said it as -- a lot better than I could. Speaker: (Inaudible) Jack Corinblit: We do put it -- someone to counterclaim, Your Honor. It's a kind of a third line of defense in this case. That is to say, we -- we argue and it is I concede a -- a little more difficult problem. Let's assume that the whole complain is an equity. Let's assume that our counterclaims at law and let's assume that there are common issues involved in the complaint and the counterclaim. That's the only way in which the counterclaim becomes a material. We say if you sue -- Hugo L. Black: But how would it be material then? Jack Corinblit: I beg your pardon? Hugo L. Black: How would it be material then? Jack Corinblit: It would then be material in that -- we say that in -- that a suit in equity in anticipation of a suit at law which raises common issues requires under the Federal Rules of that the Court procedure in such a manner as to protect our right of -- to jury trial. If I anticipate that you are about to sue at law and I sue in equity and I stated merely a good claim in equity I -- I put my pleading in -- in shipshape order, and then the counterclaim is filed at law that under -- in that -- Hugo L. Black: What is your counterclaim? Jack Corinblit: I beg your pardon? Hugo L. Black: What is your counterclaim? Jack Corinblit: Our counterclaim is for damages for violation of the antitrust laws. We do attach a request for injunction, as well. But, it is primarily a complaint for damages under the antitrust laws triable as of right to a jury. And we contend -- Hugo L. Black: Is that one of the grounds of your -- are you asking us to pass the fact here? Jack Corinblit: Well, we are asking Your Honor, we would of course ask you to take the -- the question if you -- if you rule with us on the first portion of it, we have no desire to have your rule upon the latter. But, I must say that each of those questions was raised by our petition for certiorari?That all three of the questions are avoided. Hugo L. Black: Are you raising your question in whatever the complaint charge and whether or not it was could have been adjudicated in equity when you filed your counterclaim raising precisely the same issues that it was the duty of the Court to try that counterclaim? Jack Corinblit: Duty of the -- Hugo L. Black: Are you raising that question? Jack Corinblit: Duty of the jury to raise -- duty of -- Hugo L. Black: Duty -- that it was the duty of the Court to try -- try the counterclaim for jury, are you asking that question? Jack Corinblit: We did raise it by our petition for certiorari, Your Honor. We -- I'm not -- these are alternative points. Each of them is raised by the petitioner. I have to concede that we did raise it as we came -- came up to the Court of Appeals, and we raised it here. Hugo L. Black: Are you abandoning? Jack Corinblit: No, sir. I will not abandon it. I -- I think their proposition is sound. Where the equity suit is -- is in anticipation of a suit at law, that you cannot anticipate a suit at law and substitute a suit in equity. And thereby deprive a litigant of the right to jury trial. That here, the anticipation is evidenced by the very complaint itself wherein it is stated that we warned of the filing with antitrust case and they want to enjoin us from the filing of antitrust case. And that therefore, since there are common issues in the -- in the complaint and counterclaim, we're entitled to a jury trial. Now, what are those common issues? They're precisely the same issues that were raised in the complaint. There's a question of competition, the question of clearance which are part and parcel of the counterclaim. As I pointed out before, the -- the -- those issues have been tried regularly under a plaintiff's -- in plaintiff's cases under the antitrust laws. They go to the question of the unreasonability of the restraint. They go to the question of conspiracy because if you find that there is uniform adoption of an unreasonable way of doing business, surely with other facts, a jury is permitted, not required, but permitted to infer conspiracy. And therefore, those issues are common to our counterclaim. And therefore, on that basis, we urge that the Federal Rules mean that if you had that -- that anticipatory filing of an equity case raising issues common with the counterclaim requires jury trial and the -- Potter Stewart: Don't you find this in a similar situation quite frequently in the patent field where -- where an alleged infringer will bring a suit for declaratory judgment for declaration that he's not infringing? Alleging that the patentee is threatening to sue for infringement? I suppose the answer -- the reason we haven't had this problem arise, the stricter problem is that neither side wants a jury trial in -- Jack Corinblit: In that -- Potter Stewart: -- those patent cases Jack Corinblit: Ordinarily, it -- Potter Stewart: Yes. Jack Corinblit: -- it happens sometimes. There's been a couple of patent cases are jury cases on the West Coast. But, in those cases where a counterclaim would be for -- for a -- by the patentee he would counterclaim for damages for an infringement, the right to jury trial would exist and it would be that patent. Potter Stewart: This case would be in theory if not in practical effect very similar to that case. Jack Corinblit: Yes. Yes, it was. On this last third portion of -- of our argument. Hugo L. Black: Why do say that (Inaudible) entitled to -- do understand that if the -- the controversy over the validity of a patent and the patentee comes in and asks for an interpretation of the patent in equity, and the other side says that -- I mean, not the patentee, the man who said there had been -- Jack Corinblit: Alleged infringer. Hugo L. Black: Yes. The other man comes in and says, “I want to sue him on there and not put in a counterclaim.” Do you mean that the cases have held that there could be a jury trial there? Jack Corinblit: Yes, sir. Hugo L. Black: Have you cited those? Jack Corinblit: No, sir. We did not -- we did not cite the cases. And I have -- Hugo L. Black: What's the basis of the jury trial there? Jack Corinblit: The basis is that -- that if the pleading show anticipation that this is being -- the equity is being made use of as a technique for avoiding what would otherwise be -- be a trial -- be a trial at law. And that's -- and a theory for example, some of the insurance cases which have held, the cases in which an insurance company anticipating a suit on the policy wants to set it aside for fraud and they sue in rescission in equity. And the courts say that if a counterclaim is imminent, not only filed, but imminent, the Court, the usual way of handling it in the past was, of course, even to dismiss the cause of action in equity on the grounds that the -- that the legal remedy -- that the legal remedy was adequate. Hugo L. Black: I think you have not cited it? Jack Corinblit: I think they are cited in -- Hugo L. Black: I didn't find them in your brief. I thought your adversary cited them as on his side. Those insurance cases -- Jack Corinblit: Yes. Hugo L. Black: -- Enelow and the others. Jack Corinblit: Enelow, Your Honor. Your Honor will find it's cited in our brief -- Hugo L. Black: Did you cite it? Jack Corinblit: Yes, sir. I think we've cited that was -- cited Enelow, specifically. That's at page 31 of our brief. And I think we cite the leading case on that subject the (Inaudible), a very important case on the subject. I think would like to leave sometime for reply and therefore will cease at this point. Earl Warren: Mr. Johnston. Frank R.J. Ohnston: Mr. Chief Justice, may it please the Court. I must confess at the outset that the complaint which is here for construction by the Court is not a model of pleading as -- as observed by Judge Pope in the court below. However, I think viewed fairly and liberally as pleadings must be viewed now, it does state a cause for equitable relief and states it clearly. Now, I would like to correct one misapprehension that may have been created, by my friend, Mr. Cornblit. And that is this, in the complaint, we sought not an award of first-run by the distributors but the right to negotiate for first-run with clearance, equally with, Mr. Cornblit's client, free of threats and duress. We couldn't demand that any distributor give us a first-run. All we seek -- all we ask for here is the right to not have the door shut in our face. That is the extent of the remedies sought. Now, I have a minute perhaps in which I can answer Mr. Justice Black's inquiry of Mr. Cornblit as to whether, and I maybe paraphrasing, traditional equitable allegations are made here. I will refer to page 18 of the record, paragraph 12 of our complaint and after having alleged that if clearance is granted, a treble damage action will be filed, we say further that said threats and the duress and coercion upon the distributors arising out of and resulting from said threats of litigation, threaten to and have in fact deprived plaintiff and its said California theatre of the right to negotiate for motion pictures upon their first-run in the San Bernardino area and to negotiate for clearance over theatres in competition with plaintiff's said theatre upon said first-run including defendants Bel-Air Drive-in Theatre. Then I come to this which is a traditional and conventional allegation in suits of equity, that plaintiff is without any speedy or adequate remedy at law and will be irreparably harmed -- Earl Warren: We'll recess now.

Warren E. Burger: We will hear arguments next in Dunlop (ph) against Turner Elkhorn Mining in the argument on the cross petition. Mr. McMahan. R. R. McMahan: Mr. Chief Justice and may it please the Court. The issue raised by these cross-appeals is one of the constitutional rationality of the means that Congress has chosen to achieve, clearly, the legitimate purposes of the Black Lung Benefits provisions of the Coalmine Health and Safety Act of 1969. The Coalmine Health and Safety Act, as counsel for the government no doubt will point out to you at much greater length, was originally conceived and enacted to redress some very real grievances among mineworkers. It was designed at its original conception to deal with health and safety aspects of mining, to control dust levels, to prevent accidents. Later, toward the end of congressional consideration of the legislation, provisions were inserted for providing economic relief to disabled retired coalminers, principally in the southern United States. Then at the very end of the consideration of the Act, provisions were inserted to create a Workman’s Compensation Program, a fairly elaborate three-part program, third part of which would impose liability on former and present employers of retired and active coal mine workers suffering from occupational disease, a single occupational disease known as Coal Worker’s Pneumoconiosis, a disease which is caused by breathing dust. The disease actually is a physiological condition that develops from breathing dust at certain levels in certain concentrations over given periods of time. The more dust that is breathed, the longer it is breathed, the more likely it is that the disease will develop. This appeal arouse out of a suit brought by 22 mine operators in the Eastern District of Kentucky to enjoin the enforcement of the legislation, the Workman’s Compensation provisions of the legislation. The Three-Judge Court in the Easter District upheld the major portions of the law against plaintiff's attack. Plaintiffs challenged to their validity under the Due Process Clause of the Fifth Amendment of the United States Constitution. The Court, however, did strike down two presumptive provisions that were included in the line. I will describe those in greater detail. That is why these cases are before the Court now on cross-appeal. The act benefits provisions of the Act, which is all that we are concerned with here today, create a three-part program, the first part ending in the end of June of 1973, under which former President of Coal mine employees could apply for benefits which will be paid by the federal government through the Department of Health, Education, and Welfare administered by the Social Security Administration. The six months following the end of that program, which will be referred to here, frequently, as the Part B Program, involved a dual administration of claims for benefits to be carried out by the Department of Labor and HEW jointly. The Department of Health, Education, and Welfare establishing the benefits of the diagnostic criteria, the medical criteria, for determining whether a miner or former miner has the disabling occupational disease, the Act was designed to cover. Claimants filing within that time would be paid by the government for six months and, thereafter, by a former employer or present employer or a coal mine operator. The crucial part of this legislation and the part that plaintiffs here consider constitutionally objectionable is Part C of the Act which imposes upon mine operators the former employers of former miners and the present employers of present miners the obligation to pay benefits in connection with this single occupational disease. Plaintiffs maintain that to the extent that this portion of the Act indiscriminately imposes liability for the claims of former employers based upon employment periods that had terminated long prior to the enactment of the legislation, that it constitutes a completely irrational means for achieving what is admittedly the legitimate purpose of providing economic relief to a large population of elderly, retired, and ill coal miners and their survivors. William H. Rehnquist: Mr. McMahan, are you talking now about those who were employed by a particular mining operator and who are presumed to have contracted the disease during the period of that employment although their symptoms showed much later? R. R. McMahan: I am talking about all applicants for benefits payable by a former employer whose employment terminated prior to the enactment of the law that imposed this obligation. It must be recognized in this case that this is not a typical workman’s compensation law that imposes liability in respect of occupational disease that develops after an employment relationship is terminated when there has been a workman’s compensation law in effect during the employment relationship. There is no question that that is a rational legislative program because an employer, if he knows that the potential liability is there, can insure against it and then it does not make any difference if the work-related disability results following termination of the employment. That is not the case here, what this law has been what Congress has done, has lost sight of the fact, that in attempting to accomplish two purposes here through the use of workmen's compensation type law, they have chosen a completely irrational means of delivering relief to former retired miners. William H. Rehnquist: Well, I do not see what is irrational about it. Certainly, the retired miners are getting the money. I take it your contention of irrational intents from who is based on the source of the money. R. R. McMahan: Yes, my contention and unless the Court is prepared to accept that the only question of rationality here is whether the money actually reaches the miners. I think that the means has to be examined more carefully and we say that it is irrational to single out former employers to deliver what is really economic relief as a result of disability due to a disease which no one knew existed in the United States at the time these men were employed, and that has been recognized repeatedly in the legislative history of the Act as being a national obligation and recognized as being a moral obligation by the government. William H. Rehnquist: You are just suggesting different ways Congress might have treated it. Is it not our scope of inquiry extremely narrow here so that we would have to say, in effect, that Congress just lost its head when it passed the statute in order to hold it unconstitutional? R. R. McMahan: I think that the scope of the inquiry here is narrow but not as narrow as it would be in the case of more conventional economic regulatory legislation. I think that the means chosen by Congress to deliver relief to these former and retired miners in this instance, deserve a closer scrutiny because it involves a suspect imposition of new rights and obligations on transactions and on basis of conduct, what closed in the past. William H. Rehnquist: What is suspect about it? R. R. McMahan: It is suspect because this Court has recognized that laws that have that effect are suspect, not necessarily unconstitutional but worthy of close examination. William H. Rehnquist: Well, are coal mine operators now in the classification of racial minorities and aliens? R. R. McMahan: No, certainly not, but coal mine operators to the extent that they are now being held responsible to pay benefits to former employers in connection with exposure in the production of a product in the past and the creation of a disease that could not be anticipated and could not be passed on in a pricing are carved out as a class. I am not-- Speaker: (Inaudible) R. R. McMahan: It is Due Process and Equal Protection. In this area they merge, as the Court well knows, it is Due Process in the sense that, our contention is that a Workmen’s Compensation Law is an irrational means no matter on what basis it is analyzed. It is an irrational means for delivering benefits to persons who were not in workforce at the time that the law was passed. It might well be irrational means to impose this economic burden on the industry as a whole. Speaker: This is as only constitutional argument, irrationality of the means to achieve this? R. R. McMahan: No, we also argue that carving out former employers within the industry as a class to bear the burden and, to bear the arbitrary consequences of that burden will have competitive consequences. It is an irrational classification because this Court -- Speaker: The rationality is your argument. R. R. McMahan: That is our argument as far as what would become to be known as the retroactive provisions of the (Inaudible). Speaker: So you, in fact, argue that you are being deprived of your property without Due Process of law? R. R. McMahan: Yes, that is implicit in the whole irrationality argument. We contend that the irrationality of the means chosen is what deprives us of our property. No, there is no contention that we are suffering any other deprivation for lack of Due Process but a definite property deprivation has occurred. Speaker: Are you saying that the government is relying on that other part of the Fifth Amendment that is saying that the government is taking your property without adequate compensation? You are not relying on that, are you? R. R. McMahan: No. I am saying that we are suffering a deprivation of property by the enforcement against us of irrational legislation and discriminatory -- Speaker: Being irrational about it. R. R. McMahan: That is correct. Speaker: As far as the irrationality the proposition, this is a question to you, that it is irrational to put all the liability in one place where it may be derived from many places, the responsibility, the fault? R. R. McMahan: The crux of the irrationality of the workman’s compensation approach to trying to serve these two different ends is that Workman’s Compensation Law cannot rationally function to spread that risk when you are dealing with former employers. Now, the reason that is irrational and, we think, unconstitutionally irrational as a means is that it will have an impact that is entirely unwarranted and unnecessary and competitive in fact on present mine operators, will impose economic obligations on them to pay very large benefits in respect of workforces in the past that may have been very much larger. Warren E. Burger: What happens to a coal mine operator who went into business, let us say the year, six months or two months before the Act took effect, and his workforce included men who have been in mining work for 20 or 30 years. To what extent is he liable for-- R. R. McMahan: I think, practically, under this Act he would become almost immediately liable to pay benefits to all of them because-- Warren E. Burger: He just went in to the mining business. R. R. McMahan: Yes, principally because anyone who has been in the workforce that long could qualify. Virtually, anyone could qualify under the Act for benefits and the Act attaches liability to active workforces on the basis of the present employer or the last responsible operators, the concept of the Act for whom the claimant has worked for a cumulative year. There is a second major basis upon which we object to the constitutionality of the Act and it applies not only to a liability imposed for paying benefits to former miners but to the present miners as well. And that is the elaborate presumptions and limitations on medical diagnosis and diagnostic criteria included in the Act which the Government concedes, this is one area where we agree although we might differ as to the extent, concedes as over inclusive in the sense that through the operation of these presumptions and the adjudication of claims, miners who suffer from non-work related disease, as respiratory diseases, and who are not actually, totally, physically disabled may qualify for benefits. Now, I will be frank that the legislative history here is voluminous and the question of whether there is any occupational disease arising out of the breathing of coal dust other than coal worker’s Pneumoconiosis was subject to dispute. We believe that if the record were analyzed and if the proper weight were given to all of the expert testimony that we would find that that dispute is more apparent than real. It is a matter of volume, and that all of the medical experts in the area including, principally, the Secretary of Health, Education, and Welfare and the Secretary of Labor, the defendants here agree that this is the only disease arising out of breathing of coal dust that can be defined as occupationally related and disabling, but there is evidence-- Speaker: One used to hear a video about silicosis in miners. Is that a generic term of which this is a specifically included disease or is that something else? R. R. McMahan: Silicosis, as I understand it, is what is much broader form of physiological condition and coal worker’s Pneumoconiosis until the 50's in this country was thought to be silicosis. There is a condition or conditions called the Pneumoconiosis which develop from breathing dust of various sorts. Coal worker’s Pneumoconiosis is an expressly identifiable physiological condition arising out of the breathing of coal dust as opposed to flax dust or stone dust. The presumptions in this Act are deemed rebuttable for the most part. There is one that the lower Court struck down which creates a presumption of total disability from a complicated form of the disease, and the Court found that an irrational presumption because the Act expressly set up determination, required determination of the existence of the disease and the total disability from it as two separate factors. I think the Court was clearly right in reaching that conclusion. I, however, think that the Court seriously misapplied the law and misunderstood the impact of these presumptions, of the rebuttable presumptions which are primarily responsible for the over inclusiveness of the diagnostic criteria that the Department of Labor is forced to apply in its adjudication of claims and it results in many, many people, we believe, being paid compensation for diseases such as chronic bronchitis and emphysema which exists in 25% of the general population. There were 6% of the social security disability benefits to the general public are payable with respect to respirable diseases. It was believed by the Public Health Service, by the government, that when this Act was first enacted that there would only be about 53,000 beneficiaries and that that would cost the government about $120 million a year and, to this point, there have now been 500,000 people found eligible for benefits and it is costing $1 billion annually. We do not believe that this is a paradox resulting from an epidemic of the disease. I think it results purely from the inclusion of great numbers of people in the benefits eligibility criteria who simply were not made ill by coal mining. Now, this Court has struggled in recent years with how to treat presumptions and especially irrebuttable presumptions and especially implicit presumptions. We really do not have that problem in this case. These are plain evidentiary presumptions. The question is, is there a rational connection between the fact to be proved to establish the fact to be presumed, and is that presumption, the fact presumed fairly rebuttable. We claim that it is not fairly rebuttable. That they are not fairly rebuttable in this case because the Congress has written in to the legislation limitations on rebuttal which make it impossible to distinguish non-work-related respirable diseases from this single work-related disease. Now, if this Court is going to-- William H. Rehnquist: Mr. McMahan, what if Congress had said “because of the difficult of distinguishing between all of these diseases, any former coal miner who comes up with any sort of a respiratory disease is going to have to be compensated by his former employer,” it might not be this coal mine Pneumoconiosis but there is some substantial chance that it might be, and we are going to resolve doubts in favor of the miner? R. R. McMahan: I think that you put your finger on the crucial problem here. I would agree with you completely that it would be within the power of Congress to pass a law saying that all coalminers, past or present, who have a respirable disease regardless of whether it is work-related should receive benefits, but I do not think it is within the authority of Congress to say that all such persons having such diseases should be paid by coal mine operators. William H. Rehnquist: Why not? R. R. McMahan: Because the coal mine operators would then certainly be singled out as a class to pay benefits to substantial numbers of persons who are suffering from a disease that they would have regardless of their employment, and it would be just as rational or irrational to single out any clients, as long as there is not that nexus. William H. Rehnquist: Not necessarily because these people, let us say, were employed by the coalminers for a substantial period of time. There is medical evidence that shows that Pneumoconiosis does develop in people so employed and it is very hard to tell from other respiratory diseases. Now, you are resolving many doubts against the coalminers but I do not see how that makes it irrational. R. R. McMahan: There, you have changed the question somewhat. You are saying if there is a possibility that their disease has developed out of coal mining, that that is sufficient to attach that liability through presumptions. Now, I think that that is probably a reversal of what legislative presumptions have always been designed to do. Far more often, except in cases of intent or subjective indeterminable questions, presumptions are only appropriate when they are used to forego evidence of a fact that is clearly inferable and for administrative convenience. We would submit, in this case, that if the Court should only find that the evidence is 50-50 on whether any other respirable diseases are caused by coal mining. That finding, in itself, should be sufficient to suggest that it is not appropriate for Congress to proceed by presumptions at all because there is no question, the government will admit that these same respirable diseases exist in non-mine employees, in the general population and, therefore, there is no way to determine actual causation and, in that case, it would seem sensible and it would not seem to impose this Court’s values on Congress at all to simply say this is a case where, instead of redefining a disease in a way that no doctor would accept absent the compulsion of law, simply say you will compensate for the occupational disease and those which may or may not be compensable. And then, we believe that if Congress is forced to do this it might examine more carefully the legislative means it chooses to achieve that in and, in so doing, might, we hope, discover that it is not rational to impose that liability on former employers of those people, that it might more rationally be imposed on industry and ultimately on the consumer of the product or that it might more rationally be paid out of public funds. Thank you, Your Honors. Warren E. Burger: Very well, Mr. McMahan. Mr. Wallace. Lawrence G. Wallace: Mr. Chief Justice and may it please the Court. This case brings before the Court issues for reexamination on plenary review which were decided last term in the Court’s summary affirmance of a Three-Judge Court decision in the District of Columbia, in a case called National Independent Coal Operators Association against Brennan. The chief difference between the two cases is that in the National Independent Coal Operators Association case, the Three-Judge District Court exercised pendant jurisdiction over challenges to the implementing regulations of this Act, as well as the statutory challenges and upheld both the statutory provisions at issue and the regulations. And that judgment was summarily affirmed by this Court. The Three-Judge Court in the present case declined to exercise, pending jurisdiction over the challenge and the regulations.T He issues with respect to the regulations have been remitted to a single District Judge and are presently being litigated before him, and reached only the statutory issues and, for the most part, upheld the Act although, in two respects, it ruled that the Act was unconstitutional subsequent to this Court’s summary affirmance last term. In a way, the case is reminiscent also of this Court’s decision last term in Weinberger against Salfi which we iterated and elaborated upon many of the governing principles which we think apply here. Congress was faced in this legislation with extensive medical and other evidence developed through a lengthy series of hearings, both in connection with the 1969 Act and in connection with the 1972 Amendments, which were concerned only with the compensation aspects of the program, with the problems of respiratory diseases among coalminers and, particularly, Pneumoconiosis which is a chronic disease, an irreversible disease which, in its later stages, becomes progressive and inevitably fatal. It is true that Congress first gave attention to these problems in the 1960s and found, at that time, the state workman’s compensation laws were grossly inadequate to take care of these problems, but the disease was not entirely unknown until that time. It was first recognized in England and elsewhere in Europe in the 1930s that the hearings pointed out. So, I do take exception to the statement that no coal mine operator could have known of these dangers for the miners and it came to be recognized in the medical profession in this country in the 1950s. Be that as it may, it was in the late 1960s and again in the early 70s that Congress attempted to find a legislative solution to these serious problems. And in doing so, Congress was concerned, first of all, to strike a proper balance of the burden between the Federal Treasury, the industry, and the victims of this disease in attempting to provide for the very large backlog of cases that had not previously been provided for. We have summarized some of the results of the balance Congress struck on page 25 of our brief. The figures at the top and the hundreds of thousands are figures that have been brought in to the part of the program paid for entirely from the Federal Treasury with respect to the compensation claims. 352,000 of these claims have been approved out of the 550,000 applied for. Then you get down in the second paragraph on page 25 to the portion of the prospective burden largely which Congress thought fit to assigned to the industry. We are talking about 70,000 claims that have been filed thus far with an estimated yearly rate to come of 5,000-6,000 claims and, of the 70,000 claims filed, only 21.6% have been approved for payment. The approvals are running at rates slightly above 20%. Many of them are claims that were already rejected under the federally financed portion of the program.Congress was solicitous toward the industry and particularly, as a result of the 1972 Amendments, set up the program so that it is doubtful if any truly retroactive claims will be made against any of the companies because of the three-year statute of limitations and the extension of the federally financed portion of the program to three-and-a-half years, followed then by a half-year transitional program partially financed by the Federal Treasury. We have, on pages 30 and 31 of our brief, noted that retrospective aspects to legislation do not necessarily invalidate it, far from it. There are numerous cases cited there and in footnote 29 of the brief in which the Court has upheld retrospective application of laws in appropriate circumstances. Speaker: I notice the top of page 26, you have a statement that 97% of these cases have been administering reviewed themselves? Lawrence G. Wallace: That is correct. Speaker: And only 12 have been reviewed so far by-- Lawrence G. Wallace: By the Review Board. Well, these proceedings can be lengthy. It was anticipated at the time they were established that the awards would not be contested in so large a percentage of the cases and, as a matter of fact, Congress was hopeful in enacting this legislation that it would be temporary legislation that state workmen’s compensation laws would be amended to make adequate provision for this disease and that a federal program would not be necessary. That is not happening, Your Honor, far from it. Speaker: Well, the national workman’s compensation could entirely take care of this problem, this is basically reparations, is it not? I mean, this is part of the legislation. Lawrence G. Wallace: For the former miners, yes. Speaker: Yes but future, of course, ordinary conventional workman’s compensation can take care of it. We are not dealing here with that aspect, are we? Lawrence G. Wallace: Well, we are not in the principle challenge here although, the figures that Mr. Justice Brennan is referring to are the figures from Part C of the program which has just taken effect quite recently-- Speaker: And that is? Lawrence G. Wallace: That is the part that is financed under workman’s compensation insurance by the former employers-- Speaker: Apply the Fifth Annual thing now being— Lawrence G. Wallace: That is correct, Mr. Justice. Speaker: 97% of all determinations being appealed? Lawrence G. Wallace: They are being administratively appealed. Now, this is the early administration of the Act at a time when the constitutionality has not been authoritatively settled even after one summary affirmance by this Court and perhaps there would not be quite as many appeals once the matter-- Speaker: Is there a particular reason, Mr. Wallace, why it takes so long to try one of these administrative reviews? Lawrence G. Wallace: None that I could give you. I cannot say I have looked into that question with any depth. Speaker: Well, it would be such a small number. Lawrence G. Wallace: Yes, I am sure they are progressing now. At the time the brief was written, this part of the Act had been in effect a relatively short time and the jurisdiction was moving over to the Department of Labor from-- Speaker: If the states pick this up as part of the state workman’s compensation system, would amendments of state laws be required? Lawrence G. Wallace: That is correct. Speaker: And the states have simply not amended the statute. Lawrence G. Wallace: Some amendments are being made but not amendments that meet the federal statutory standard that would remove the federal program. Speaker: Is this limited to a few states? Lawrence G. Wallace: No, it is quite a few and, as a matter of fact, it is a nationwide program when the miners, they may have moved to any state but-- Speaker: Well, is that I mean the current ones, 5,000-6,000 a year they would still be widespread throughout the -- Lawrence G. Wallace: There are about 25 states in which there is some coal mining that amounts to something. I have not really looked into that figure but I get an affirmative nod here. Speaker: Wallace, did I understand you say earlier that you thought it would be relatively few claims made retroactively? Lawrence G. Wallace: Well, truly retroactive basis-- Speaker: Where do you find the retroactive basis here? Lawrence G. Wallace: That would be a claim that against the former employer which had fully ripened before enactment of the statute. In other words, when the disease had become manifest. Speaker: Unless this precedes to be a matter before the effective date of the Act and he must have made his claim disability after the effective date. That is the way I understood your brief. Lawrence G. Wallace: Well, we would consider it a completely retroactive claim for purposes of the usual labeling a tort in workman’s compensation laws would be a claim by a former employee who knew he had the disease or he should have known it, that the symptoms arouse prior to the enactment of the Act. That is when the claim ripens. There is a long time between contraction of this disease and its detection and, because the Act is set up with a three-year statute of limitations and it is not until three-and-a-half years after its enactment that employer liability comes into the picture-- Speaker: There is a record in the brief to an employee who quit being a coalminer in 1920. When does the statute of limitation run as to him exactly, three years from the effective date of the Act? Lawrence G. Wallace: Three years from when the disease becomes manifest to him. That does not mean a medical diagnosis of it but it is when the symptoms become manifest that he would know he had the disease and it is very unlikely that he would have that long incubation period if he did not expose himself to coal dust. Speaker: Does these irrebuttable presumptions operate against the man who comes in with a claim 20,30,40 years old in his favor? Lawrence G. Wallace: Well, the presumptions would operate if he spent the requisite amount of time in the mines, but the presumptions are a matter of evidentiary proof to which I will turn in a moment. Speaker: And there are, according to the briefs, already claims being filed, as my brother Powell says, by people who left the coal mines in the 20s or in the 30s or in the 40s and the benefits run not only to these people if they are alive but also to their widows and children, do they not? Lawrence G. Wallace: Under the Act, until the Act’s expiration day which now is December 30, 1981. It may be amended. Warren E. Burger: Is that true if emphysema might be the disease they really have? Lawrence G. Wallace: Well, that is a matter of proof. If they meet the standards of proof, the Act rewards benefits only for Pneumoconiosis as defined and aided by statutory presumptions. Speaker: This allows x-ray evidence as exclusive reason for disallowing the claim. Lawrence G. Wallace: As the exclusive reason if the claim can be established by means of the other pertinent evidence which there is an opportunity to contest, x-rays have proven to have a 25% error rate based on the only really reliable evidence which is autopsy evidence as to this disease. Warren E. Burger: That would not suggest over a period of time this broad scale approach of Congress will have considerably more than a 25% error, if I understood the sum total of this argument. The presumptions are going to reach a great many people who are here. Lawrence G. Wallace: Well, if it will turn to the presumptions now, Congress was faced with the problem under this Act of a disease that is difficult to prove and difficult to disprove and it wanted to set up what it thought would be a fair system of compromising between bringing more people into eligibility than an ideal system might bring, make eligible for the benefits if proof were easier and denying benefits those that it felt needed them that it wanted to help. And so, it set up a scheme which we have tried to summarize briefly on pages 37 and 38 of our brief. And, let me talk, first, about the evidentiary presumptions which are the ones that begin in the bottom of page 37, and the first thing to be said about them is I do not think that scheme of the Act was fully understood by the District Court and it is concerned about these presumptions. It seem to overlook or fail to understand that Section 422c of the Act contains a proviso that is applicable to any claim for benefits against any operator, and that is on page 7a of the appendix to the consolidated brief of the plaintiffs in this case. That proviso says that no benefits shall be payable by any operator on account of death or total disability due to Pneumoconiosis which did not arise, at least in part, out of employment in a mine during the period when it was operated by such operator. So that there is always the possibility of making a defense to any of these claims to begin with by showing that the conditions in your mind were such that Pneumoconiosis could not have been contracted by the claimant in your mind. Second, the Court seemed to overlook that these evidentiary presumptions attach only after the elements that trigger them have been established in an administrative hearing in which the employer is free to participate and contest the existence of those elements. So, we are not talking about failure of an opportunity for the employer to contest any of these matters. Now, the first of the presumptions applying, as we summarize it on page 38a there, a miner who has worked in the mines for 10 years or more and shows that he has contracted Pneumoconiosis, and that proof can be contested as to whether or not he actually has that disease, and that is the disease that is occupationally related only to work in the coal mines. Then, there is a rebuttable presumption-- Speaker: Mr. Wallace, he has to prove any of that when he sues a particular operator that at some time he worked for that operator. Lawrence G. Wallace: Yes, that can be contested also. Speaker: Had he worked for some operator, long since disappeared, that is the only one, he could not recover from (Inaudible) Lawrence G. Wallace: That is a problem under the current Act and Congress has amendments under consideration now. They may change the whole scheme of it for the future. They are considering setting up and industry-wide fund. There have been hearings held this year on that, but -- Warren E. Burger: But to pursue that, if he had worked for one operator for 2 years and another operator for 30 years and the 30-year operator was out of business, who pays the bill? Lawrence G. Wallace: Under the regulations, he could still make a claim for liability against the one who is still in business. The question of who is liable is remitted by the Act entirely solutions and the regulations are now before the Court. The only thing that is established in the Act are methods of showing eligibility. The question of who then is liable to pay the benefits is a matter that has been worked out in the regulations and the-- Warren E. Burger: There are two. One of them was Wong. Lawrence G. Wallace: Yes, the regulations-- Warren E. Burger: It is not simple, is it? Lawrence G. Wallace: Say, the last one that you worked for is presumed to be the one that has to pay if you worked a year there but if he can show that you could not have contracted the disease in his mines because of the conditions of his mines, then it reverts back to the next one before him, if I understand the regulations. As I say, the validity of the regulations is not before the Court in this case. Speaker: Well, there is before the Court who is going to pay for this. We would not even have a problem if the Good Lord is going to pay for this. If people were hurt, who is going to pay? Lawrence G. Wallace: Congress has decided that eligibility for compensation from the industry can be established this way and who in the industry pays has been worked out in the regulations. Speaker: We know it is not industry-wide. It is not a charge on the industry as a whole. Lawrence G. Wallace: No, it is he particular former employer singled out in the regulations. But these provisions that are at issue are the provisions about how you establish eligibility for benefits. Speaker: Make it a claim against the particular employer when that employee proves was only a desk clerk, never exposed to any of these conditions. Then, he left that employer and went to another employer, worked for him for 30 years and was exposed, contracted the disease, could not recover if the second employer is out of business, is that it? Lawrence G. Wallace: Of course, this is always a defense to the award of benefits against a particular employer. That is a showing that he could not have contracted Pneumoconiosis from the work that he did for you. That-- Speaker: Mr. Wallace, thinking of examples like this, does the Act provide for this sort of situation, coal is a depleting product obviously, you could have a mining company that 20-25 years ago may have had 1,000 employees. It may have gradually depleted its coal and, today, may have 50-100 employees. Is it not possible that that miner might have more claimants than it has employees today? Lawrence G. Wallace: It is possible, Mr. Justice. Speaker: Is there anything that would protect that company from being put out of business by claims as against which it has had no alternative to set up reserves or carry insurance? Lawrence G. Wallace: It is possible an instance could arise in which a company would be put out of business. The main protection against it is the fact that the three-and-a-half year period of exclusive federal responsibility was set up to take care of the backlog of former employees, the principal part of the backlog, and it would have had to be a very rapid reduction in a company’s employment that would result in the situation that you are mentioning, and this problem has been complained of by the industry and it is one that Congress considered. And one may agree or disagree with the solution that Congress reached, but I think the Court’s decisions make it clear that putting someone out of business for an appropriate reason in the public interest is not a constitutional violation. That is exactly what Ferguson against Skrupa was, and a complaint by someone who was in the debt adjusting business that a new state statute saying that only lawyers could be in that business was depriving him of his rightful occupation and that he was a fine outstanding businessman providing a service to the community. The Court unanimously held that that is a legislative concern whether it, in the public, interest restrict that business in the circumstances that concern the legislature. So, I really think it is a legislative argument rather than a constitutional one that some companies will be hurt more than others. It is very reminiscent of the argument in Williamson against Lee Optical Co. that competition was being affected between the makers of the prescription glasses and the makers of ready-to-wear glasses by applying the regulation only to the maker of prescription glasses. William H. Rehnquist: Of course it may be one thing to put out a business just in the sense of not being able to carry on your traditional occupation where another thing to be put out of business by having a large indebtedness which you are unable to pay settled on you. Lawrence G. Wallace: But if it results from the fact that it was through working for you that these injuries were incurred through your profit-making activities it is a permissible legislative judgment that that burden should be placed on a company. Speaker: The proposition for which, by traditional Due Process standards, no recovery might be had in some of those cases. Lawrence G. Wallace: And then another legislative solution undoubtedly will be found for such examples, but I do want to point out that these are the moment highly speculative concerns. An amicus brief filed in our support by the United Mine Workers of America points out quite cogently, beginning on page 13 of that brief though page 17, that the economic impact thus far has been minimal and it cites hearings in 1973 that first began consideration of amendments in which it was reported that all of the companies have thus far been enabled to provide additional workman’s compensation coverage under the regular workman’s compensation insurance, and the increases in premiums thus far have been noticed in the case of Kentucky, non-existent thus far. Now-- Speaker: Mr. Wallace, the government takes on the whole financial burden for the first three-and-a-half years or a part of it. Lawrence G. Wallace: Yes, largely. Speaker: That itself has had the effect of minimizing the responsibility -- Lawrence G. Wallace: By and large, it has and, of course, the industry is in a relatively strong economic position now, as is pointed out in quite persuasively in a footnote in the same brief. That is footnote 37 on page 16 of that brief, dealing with the recent profits of some of the plaintiffs here, Footnote 37, yes, Your Honor. But in addition to that, there is some time lag involved here which is true of doing business under any workman’s compensation scheme and this takes us back to the retroactivity argument for a moment. The plaintiffs’ brief in this Court is premised on the notion that in order for a program to be fair, it must apply only to current employees so that while they are doing work the company can price its products in a manner that will cover the cost of compensating them, but that is not actually the way workman’s compensation laws work in the economy at all. The fact is, insurance rates are adjusted after claims experience will cause them to be adjusted upwards and it-- Speaker: The accountants who handle the work for these employers do not set up reserves to take this into account on the present. Lawrence G. Wallace: Undoubtedly, they set up reserves as best they can to anticipate these matters but, the fact of the matter is, if they have a large number of workers disabled through injury and the employment and who become no longer employees, it is only in the following year that what is known in the industry is retrospective rating will cause an increase in their workman’s compensation premiums and any impact that the company feels comes after these people are no longer employees. There is no extra cost that the company had to pay while they were employees. William H. Rehnquist: It is not true of a self insurer. Lawrence G. Wallace: It is not true of a self insurer but the prevalent practice is that there is a retrospective effect that is very similar to the effect under this statute. Not only that, but the argument by analogy would carry over to increases in benefits to be paid to former employees which Congress enacts periodically because of the severe inflation that we have had for workers who have been disabled under the Longshoremen and Harbor Workers Act. This program has an automatic escalator feature. It says that the compensation shall be one-half of what a disabled government worker grade GS2 will receive that goes up as inflation goes up and this is, by analogy, the same argument could be made with respect to any of these increases. The retroactivity argument would really be an argument that would freeze the benefits to be paid based on contributions that may be and the salaries that may be woefully out of date in terms of the living cost for disabled persons and that it is common place to have these increases under state workman’s compensation laws. They are not even challenged. Potter Stewart: I think the challenge here is not what the plaintiffs get but rather who has to pay. What do you concede to be the provision of the constitution that is an issue here? Lawrence G. Wallace: The only provision that has been referred to as the Fifth Amendment Due Process Clause, federal legislation, it seems to me that it basically is substantive Due Process. Potter Stewart: Well, it is not my question, is it? Lawrence G. Wallace: It seems to me, basically, a substantive Due Process claim of the kind that was made in Ferguson against Skrupa and Williamson against Lee Optical Co. An unfair burden is being placed on particular competitors in the economy. Potter Stewart: Do you think, when you say that, that is really an invalid constitutional claim, almost a frivolous one? Lawrence G. Wallace: Well, I basically think that the arguments are legislative arguments even if some of the premises of them were not faulty which seems to me they are, that workmen’s compensation typically has retrospective consequences and it has long been upheld in that context anyway. But even if the premises were not faulty, it seems to me to be a legislative rather than a constitutional argument. That is our position. Potter Stewart: What if Congress here had set up these benefits and the same presumptions and then said that the payments to be made, the people who are going to be financially responsible for paying these are all the corporations of the United States whose corporate names begin in the first 13 letters of the alphabet. Lawrence G. Wallace: That is better, but there is nothing arbitrary of that nature involved here. Potter Stewart: Let us take my hypothetical case. Would that be constitutionally invalid? Lawrence G. Wallace: Well, I do not like to concede away, the power of Congress, but it certainly would be a much more substantial argument in that case. Potter Stewart: Under what provision of the constitution? Lawrence G. Wallace: It would be under that provision, under the Fifth Amendment Due Process Clause because it is hard to see any other provision that would be valid. It might be upheld as taxing provision and I do not say it is necessarily constitutionally vulnerable but, here, you have got a system that is rationally based in the sense that it is compensation for a work-related disease by definition and the only people who can possibly be liable are employers who subjected the claimant to the risk of that disease and adjustments have been made in the kind of medical evidence that will carry various kinds of weight because of detailed medical testimony before a Congress that showed that certain kinds of evidence such as x-rays are not in themselves reliable, if through a contested other tests, it can be proved that you have this disease. And, there is an opportunity to contest all these other kind of medical evidence. William H. Rehnquist: Take Justice Stewart’s hypothetical and assume that instead of being paid by all the corporations whose names begin with the first 13 letters of the alphabet, it is to be paid by all corporations who have a net worth of $1 billion or more. Lawrence G. Wallace: Well, that might be less arbitrary and -- William H. Rehnquist: It is barely rational in the sense that these people are probably better able to pay than just every corporation in the country. Lawrence G. Wallace: Well, that may be a valid exercise of the taxing power in the form of a compensation system, but this is not that-- William H. Rehnquist: But, certainly, if you wanted to just impose a surtax, income tax on all such corporations of 10% and, ultimately, use pay out of the Public Treasury from general funds compensation to coalminers. There would not be much anybody could do about it. Lawrence G. Wallace: Well, that is correct, Your Honor, but-- Warren E. Burger: Is it true, Mr. Wallace, that if Congress now said or had said in this legislation that beginning on that date in 1973, a tax of $2 per ton of every coal mine in the United States would be put into a fund. That would -- Lawrence G. Wallace: That would be a permissible legislative means of taking care of this problem, but I do think it should be recognized that there is nothing novel in workman’s compensation about presumptions. The ordinary rule in workman’s compensation is that if you can show the injury, it is presumed that it arose out of your employment and it is up to the employer to rebut that. And, in a way, the first of the evidentiary presumptions cuts back on that rule by saying that you have to show also that you were employed for 10 years in the coal mine in order for that presumption to come into force. In the ordinary workman’s compensation case, all you would have to show is that you had the injury and it would be presumed that it arose out of your employment unless that were rebutted. There is nothing that novel about this scheme of compensating injured employees. Warren E. Burger: Do you have anything further, Mr. McMahan? R. R. McMahan: Mr. Chief Justice and may it please the Court. I would only feel compelled to clear up a very dangerous and mistaken impression that counsel for the government has left you with. The Part C Program, to answer Mr. Justice Stewart’s question, is not just a compensation program. Part C Program is a reparations program. This business about the three years statute of limitations is an illusion. It is an illusion for substantial numbers of these former miners’ claims because the Act has redefined the disease. Now that means, in effect, that a man could have had emphysema for 30 years. He could have quit mining in the 40s. He could have been diagnosed as having emphysema for 30 years, but he can come in and qualify for benefits under this Act because the three years run from discovery of the disease and, suddenly, his emphysema is diagnosed, under this Act, as coal worker’s Pneumoconiosis. They have many, many claims against the 22 plaintiffs in this case. Some 80% so far are from people who have not worked in mining for years and years prior to the enactment of the law. This is not at all comparable to retrospective rating or adjusting your insurance rates from year to year even, if you happen to be one of the few operators in one of the few states that allows that kind of a compensation, and this is purely reparations and we believe that it is irrational that this legislation is an irrational way of delivering those reparations. Thank You. Warren E. Burger: Thank you, Gentlemen. The case is submitted.

William H. Rehnquist: We'll hear argument next in 91-159, William Barnhill v. Elliot Johnson. Mr. Arland, you may proceed. William J. Arland, III: Mr. Chief Justice, and may it please the Court: We're here today on a petition for writ of certiorari from the Tenth Circuit Court of Appeals for Johnson v. Barnhill. The purpose today is to uphold the intent of Congress and to promulgate the policies... the public policies espoused by Congress in the bankruptcy laws, to promote unity of the law, equal distribution among creditors of equal priority of the property of the estate of the debtor, and to in fact bring the preference provisions of the Bankruptcy Code into conformity with modern commercial practices and the Uniform Commercial Code. The specific section which is being challenged at this time is section 547(b) of the Bankruptcy Code. We are asking this Court to uphold and to find that a date of delivery rule for the purposes of 547(b) satisfies and meets and promotes the three policies just mentioned as opposed to a date of honor rule. Section 11, or 11 U.S.C. 547(b) describes the purposes, or the events and transactions, by which a trustee may set aside transfers made by a debtor to its creditors. It does not define within 547(b) itself what a transfer is, nor does it delineate whether or not a rule... a date of delivery rule or a date of honor rule should be adopted in analyzing whether or not the transactions fall inside the preference window, which is the 90-day period immediately preceding a filing of the case. The facts in this case are essentially very short and very simple. On November 18, 1985, the debtor, Alan Antweil, delivered to William Barnhill, a creditor of Antweil, a check. The check was dated November 19, 1985. Harry A. Blackmun: Do you know why it was post-dated one day? William J. Arland, III: I do not know why it was post-dated one day, Justice Blackmun. I do know that it was delivered in the evening of November 18. Harry A. Blackmun: Would it be any difference if it were post-dated a month or so? William J. Arland, III: If it were post-dated a month or so, I believe it would be different, Justice Blackmun. It would in fact not be a contemporaneous exchange and would not be a cash transaction as a check is normally looked to. The post-dating here was only one day, and in effect it became a cash transaction the very next day on November 19. The check was presented for honor on November 20 and was honored by the bank. The November 20 date is the 90th date, so that for the purposes of 547(b) the transfer if a date of honor rule is accepted would be on or within the 90-day period, November 20 being the day-- Harry A. Blackmun: That's the final date here. William J. Arland, III: --I'm sorry-- Harry A. Blackmun: That's the final date here, November 20. William J. Arland, III: --November 20, Justice Blackmun, is the final date here, yes. William H. Rehnquist: Well, does your response to Justice Blackmun... is it based partly on 547(c) as well as 547(b)? William J. Arland, III: No, Mr. Chief Justice, it's not based on 547(c) itself. My response to Justice Blackmun was merely centered upon the effect of giving a post-dated check in a transaction, the difference being, I believe, when a check is considered a credit transaction and when a check is considered a cash transaction. Inasmuch as the post-dating was only one date, and that date, the November 19, was still outside the preference window, the date of the check being outside the preference window, it became a cash transaction on November 19, and so it had no application with respect to a credit transaction that would have fallen within the preference period. William H. Rehnquist: Is your answer based in part on the fact that the hypothesis of a 1-month post-dating would have brought the date written on the check within the preference period? William J. Arland, III: Yes, it would, Mr. Chief Justice. That would be the position, and I believe in that instance that in fact the transaction would have fallen within... if it was... quite frankly, according to the Uniform Commercial Code, had the post-dating exceeded 30 days, which I believe section 3503 of the Uniform Commercial Code provides that if a check is presented for honor within 30 days of its date of delivery, then it is essentially considered a reasonable period of time and essentially is a cash transaction. If it exceeds the reasonable time of 30 days, then in fact the transaction date is the date the check is honored, so that if the day that Justice Blackmun was referring to were 31 days or greater... the presentment date was 31 days or greater than the date of the check, then by all means it was a credit transaction and the transaction would have fallen within the preference period as long as the honoring was done 31 days after the date of the check. Sandra Day O'Connor: Would the same be true if a check were given as sort of a security deposit not to be cashed until certain events occurred, or unless certain events occurred? William J. Arland, III: In any... if... I believe, Justice O'Connor, speaking specifically about 547(c), in which it is as surety for it, I believe that it would be. To answer your question directly, yes, I think it would be. Sandra Day O'Connor: It would be what? William J. Arland, III: It would be a credit transaction until the date of the check, at which time it does become a cash transaction. We have another element there, Justice O'Connor, of the check being presented as security. Normally a check, in commercial practice when a check is presented it is considered a cash transaction as long as it is honored within a reasonable period of time and the date of the check is equivalent to the date of delivery. Antonin Scalia: Are you sure that the UCC considers it not to come within that rule if it's cashed within 30 days of its date but beyond 30 days after the actual delivery of it? You say that the-- William J. Arland, III: Justice Scalia, the two issues that are raised are, one, the reasonable period of time from presentment for honor from date of the check is 30 days. The second part is that if the check is presented or honored subsequent to the 30 days, is that the date of honoring? I am... my interpretation and understanding of the code is that the answer to the first question is 30 days is reasonable. I am not certain-- Antonin Scalia: --30 days from the date... the date on the check. William J. Arland, III: --30 days from the date on the check is reasonable. Antonin Scalia: Right, that's what I understand. William J. Arland, III: Subsequent to the 30 days if it is presented for honor that is not reasonable, and that is considered the day of the transaction at that point in time. Antonin Scalia: Right, but it doesn't matter for that purpose when the check is actually handed over. If I give you a check now that's dated 30 days from now, that becomes a cash transaction 30 days from now, does it not? William J. Arland, III: Yes, it does, Justice Scalia... it does. It becomes a cash transaction at the time that the check can be honored and is presented at that time. To that extent, if one presents a... does not present a check within that 30-day period, then the Uniform Commercial Code I believe tells us that in fact that is not substantially a cash transaction, because the giving of a check is a conditional transfer as defined under 101, section either 48 or 54 of the Bankruptcy Code. The condition is, is that it will be presented within a reasonable period of time, and that upon presentment it will be honored. Then it relates back to the date of delivery. Antonin Scalia: If you post-date the check there are two conditions. One is that the later date come about, and the second is that it be presented, and it becomes a cash transaction when the first condition is met, and then still subject to the subsequent presentation. William J. Arland, III: I would agree with you, Justice Scalia, only in the instance where the post-dating of the check exceeds 30 days. That's when it becomes a cash transaction... correction. If the post-dating of the check is within 30 days, the condition... and it is presented within 30 days, it is a... the condition is removed and it goes back to the date of delivery. If the presentment is made in... in 31 days or in excess of 31 days, then the delivery date is of no force and effect because we're beyond the 30-day reasonable time. John Paul Stevens: May I just ask a little different question on post-dating? Supposing that 93 days before bankruptcy a post-dated check was delivered dated 7 days later, just not a... forget the 30-day problem, just think about a 7-day problem for a moment. Would you say the date of delivery or the date of the check is the critical date? William J. Arland, III: I would... Justice Stevens, I think that in that instance the date of the check is the critical date. John Paul Stevens: So the date of delivery rule for which you're arguing is one... the date of delivery or date of the check, whichever is later. William J. Arland, III: Yes, Justice Stevens, whichever is later. I think as a practical matter, the way our commercial system is devised, until the date on the check arrives one has no claim to the funds that underlie the validity of that check, and therefore the date on the check, if it is beyond the date of delivery, must control... must control. 547(b) is... as I say, it doesn't define a date of delivery or a date of honor rule for us, and in fact to the extent that we can look solely to 547(b) to tell us whether date of delivery or date of honor rules should apply, it doesn't do that. However, we know that the Bankruptcy Code itself is a great statutory scheme, and we can look within the code when sections of the code do not provide us with a clear-cut answer. Section 101(48) and (54) defines what a transfer is, and I think that is where we have to begin. It in fact shows that a transfer is any mode of transaction or a transaction of transfer whether it is absolute, whether it is conditional... it is a very broad definition. A check is certainly a conditional conveyance. It is a conditional transfer. Antonin Scalia: What is conveyed? The principal point your opponent makes is it has to be transfer of property of the debtor. What property of the debtor is being transferred? William J. Arland, III: I believe, Justice Scalia, that the definition under 101(48) says the transfer of an interest of a debtor in property, as opposed to the transfer of interest to property. The interest that's being transferred between the debtor and the creditor... and those terms only apply if the payor on the check subsequently files for bankruptcy... is that the payor on the check is representing by giving this check on the date on the check that there are sufficient funds in his account to cover that check. There is an underlying principle of good faith under the Uniform Commercial Code which is specifically applicable to this case that I as payor of the check am representing that those funds are in my bank. Anthony M. Kennedy: But a representation by the payor is not a transfer of an interest, it's just a representation, and in fact UCC says, as I understand it... correct me if I'm wrong... that the check does not operate as an assignment of the funds. William J. Arland, III: We are not talking about an assignment of the funds, Justice Scalia. Anthony M. Kennedy: Well, the question is what interest in property is transferred, and your answer to Justice Scalia was that there is a representation made that funds are in the bank, but that doesn't sound to me like a transfer of any property. William J. Arland, III: Well, the transfer of the-- Byron R. White: The question here is if he can stop payment on the check. William J. Arland, III: --He may stop payment on the check, but I believe that once the check is delivered, Justice Kennedy and Justice White, and if I can answer Justice Scalia's question and consolidate my answer here, is that when a check is transferred that is the end of a transaction, a previous transaction, a transaction where you have a vendor or a vendee. Goods or services are delivered. Those goods and services are then paid for by a check. In the commercial world, when a check is delivered that transaction is terminated. That's the end of that transaction. Once the check is given, it is-- Anthony M. Kennedy: Not if the check isn't honored. William J. Arland, III: --If the... but it is a conditional transfer, Justice Kennedy, which is covered under 101(54). Anthony M. Kennedy: Well, then it seems rather odd to say the transaction is ended but it's conditional. William J. Arland, III: The conditional portion, Justice Kennedy, with all due respect is the check. The vendor-vendee transaction has in fact terminated. That is the termination. If, as Justice White has suggested... if a stop payment order is issued on the check prior to it being honored, then the condition of the transfer has not been met. There is no way for the check to be honored, and therefore you have no date problem because you don't revert back to the date of delivery. There is no honoring. John Paul Stevens: But if you look at the matter as a completed transaction under your analysis at the time of the delivery, it is a completed transaction which did not involve the transfer of an interest in property. William J. Arland, III: It transferred an interest in property-- John Paul Stevens: In what property? William J. Arland, III: --In the property that is represented by the cash in the bank. John Paul Stevens: Did it transfer an interest in the bank account, do you think? William J. Arland, III: It transfer... it conditionally transfers it upon honoring, but it relates back to the date of delivery, Justice Stevens. If in fact there's a dishonoring of the check for some reason, that is a separate cause of action. Uniform Commercial Code section 3122 tells us that in fact as of the date of the check, that is submitted, the cause... a new cause of action arises for the vendor on the check itself, and I believe that there's a separate question there. William H. Rehnquist: Well, wouldn't it be more accurate to describe the transaction that way, rather than as a transfer of property? The check gives the vendor, the drawee of the check, a different cause of action against the drawer. He now has a cause of action on the check and not just on the open account. William J. Arland, III: Mr. Chief Justice, in fact the Uniform Commercial Code under article 3802 tells us that the receiver of the check, the payee on the check, has his option. He may proceed under the underlying agreement, or he may proceed on the check. He may elect his remedy, sir. Antonin Scalia: Why isn't this a conditional transfer of a chose in action? Is there anything in the UCC that prohibits that? William J. Arland, III: No, Justice Scalia, there's nothing in the UCC that prohibits that. In essence-- Antonin Scalia: The person who has money in the bank has a cause of action against the bank for the amount of that deposit, right? William J. Arland, III: --Correct, Justice Scalia. Antonin Scalia: And he can assign to another person outright or conditionally part of his claim against the bank. It's not binding upon the bank, but as between the two of them it's binding. William J. Arland, III: Correct. The interest in property can be the chose in action. Antonin Scalia: So it's a chose in action that's been transferred. William J. Arland, III: Correct. Byron R. White: So if the bank chose to honor it, it's in trouble with the drawer. William J. Arland, III: Yes, Justice White, you're correct, the bank is in trouble... if it wrongfully fails to honor it the bank is in trouble with the drawer. I think the perception, Justice White-- Byron R. White: But not with the drawee. William J. Arland, III: --Not with the drawee, no, that's correct, Justice White. Byron R. White: So how come if it's a transfer, why isn't the bank in trouble with the drawee? He's got some right in that account. Why can't he sue the bank? William J. Arland, III: He cannot for wrongfully dishonoring. The payor is the only one who has the right under the Uniform Commercial Code to-- Byron R. White: Well, why can you ever say it was a transfer to him, conditional or otherwise? William J. Arland, III: --Because of the relation back doctrine. Byron R. White: I mean, what happened to his interest in the property that you say was transferred? What happens to it when the bank dishonors... wrongfully dishonors the check? William J. Arland, III: If the bank-- Byron R. White: It disappears into thin air. William J. Arland, III: --Justice White, if the bank wrongfully dishonors the check I believe that in fact the payor on the check would have a cause of action against the bank as well. Byron R. White: Why, sure, but not the payee. William J. Arland, III: The payee does not have-- Byron R. White: But you say that there was a transfer to the payee-- William J. Arland, III: --That's correct-- Byron R. White: --at the time of delivery of the check. William J. Arland, III: --There's a transfer of an interest in property, a conditional transfer. Byron R. White: Well, what happened to his interest? William J. Arland, III: The payee's interest is, by not-- Byron R. White: I mean the drawee... the drawee. There was a delivery of a check to the drawee, is that it? William J. Arland, III: --Yes, Justice White. Byron R. White: And you say that was a transfer. William J. Arland, III: Yes, it is. Byron R. White: A conditional transfer. William J. Arland, III: Yes, Justice White. Byron R. White: But then you would think that he had an interest in the property that he should be able to vindicate against the bank if the bank wrongfully dishonors the check. William J. Arland, III: I don't believe that's the case, Justice White, because the transaction... it's a three-party transaction. The emphasis in the Bankruptcy Code, and we must remember that's what we're talking about, is the Bankruptcy Code, is the relationship between the payor and the payee, or the drawer and the drawee on the check. That's who we're interested in, and we're interested in tolling a time of when this transfer takes effect, and commercial business practice just doesn't take place that way. As a matter of fact, when we give a check-- Antonin Scalia: So we know what we're talking about, isn't the drawee the bank? I always thought the bank was-- William J. Arland, III: --There is a drawee bank. The drawee... you have the payor. That's the person who signs the check. You have the payee, that's who the check's made out to. Antonin Scalia: --The bank is the drawee bank, right? That's right. William J. Arland, III: That's correct. Antonin Scalia: And the payor is also the drawer. William J. Arland, III: That's correct. Antonin Scalia: On the drawee. William J. Arland, III: Yes, that's correct. Byron R. White: I'm talking about the fellow to whom the check was delivered. You say there was a transfer to him-- William J. Arland, III: That's correct. Byron R. White: --At that time. William J. Arland, III: That's correct, Justice White. Byron R. White: And yet he cannot vindicate that interest that was transferred to him, you say, by a suit against the bank. William J. Arland, III: The transfer of interest was not the payor's actions against the bank itself for wrongful dishonor of the check. That wasn't the transfer. The transfer was of the liability that the bank owes to the payor. The payor transferred his liability, or the bank's liability to him to the payee. Byron R. White: Well then, why can't the payee sue the bank, then? William J. Arland, III: Because he-- Byron R. White: He's had something transferred to him. William J. Arland, III: --Because, Justice White, it is not an assignment. It is not an assignment in the classic sense. It is a conditional transfer. Antonin Scalia: It isn't perfected yet, and the Bankruptcy Code anticipates that some of these things could be perfected later. It becomes perfected when the bank gets the check and honors it, and before then it's good as between the payor and the payee, but it's not binding on the bank and the liability is between those two. William J. Arland, III: Justice Scalia, that is correct-- Antonin Scalia: And that's why the Bankruptcy Code talks about perfection. William J. Arland, III: --At 547(e), Justice Scalia, is where the Bankruptcy Code directs its attention to perfection. It has largely been held by most courts that that section applies solely to real property interest in mortgages and the relation-back doctrine is clearly stated in 547(a) to (b). Anthony M. Kennedy: Well, 547 also talks about a substantially contemporaneous transfer, which I take it at least can be interpreted as the attempt of the Bankruptcy Code to accommodate this delay between the time the check is given and the time that it is honored, and that language has the effect of showing that even if you wait till the time that it's honored it's substantially contemporaneous. William J. Arland, III: Yes, 547(c) adopts that, Justice Kennedy, that's correct, and for the purposes of (c)(1) and (c)(2) this furthers... we want to have a substantially contemporaneous exchange or a cash transaction represented by a check because the purpose of 547(c), the exceptions to 547(b), is to promote vendors doing business with a debtor or a vendee who's sliding into bankruptcy. We don't want to have a chilling effect on having nobody do business with this individual. William H. Rehnquist: But 547(c) deals with the normal course of business, doesn't it? William J. Arland, III: Yes, it does, Mr. Chief Justice. William H. Rehnquist: So how you would treat a check under the normal course of business section might not be determined, I would think, for 547(b) purposes. William J. Arland, III: That is certainly the position of the trustee in this case, and I would submit to the Court that to serve the purpose of the uniformity of the law as espoused in McKenzie v. Irving Trust, that in fact it makes no sense and it is illogical to have two different dates apply within the same section or subsection of the Bankruptcy Code. As a matter of fact-- William H. Rehnquist: If you're talking about two different purposes, one is to determine was this the kind of transaction you would expect in the normal course of business? If a person is paid by check presently dated for 10 years and continues to do that, it's the normal course of business, but I don't see why it would be illogical to say a somewhat different test might apply in determining whether there's a transfer. William J. Arland, III: --Mr. Chief Justice, if in fact the date of honor rule were to satisfy an equality of distribution among creditors, which in fact 547(b) is designed to do, then I could not quarrel with you. However, I can show this Court by a hypothetical example that a date of honor rule does not treat creditors equally. If we will assume for a moment that a check is delivered to two creditors dated on the same day which is outside the preference window, one of the creditors is an in-State or even an in-town creditor, the other is out-of-State. The in-State creditor receives the check on a given date outside the preference period, deposits it the next day as in this case, and the check is honored on that day. The date of honoring in that instance is clearly outside the preference period. However, the out-of-State creditor, by virtue of his location, is not quite as fortunate. He must take that check, deposit it in his bank, usually wait a 3-to 10-day clearing period on the check before it's then presented to the in-State bank. If during that period of time subsequent thereto that period of honoring of the out-of-State check falls within the preferential transfer period, we have not satisfied through the date of honor rule one of the stated policies of 547(b). William H. Rehnquist: I would think when you talk about treating creditors equally you mean treating similarly situated creditors equally, and on the facts you give I think a very good argument can be made those creditors are not similarly situated. William J. Arland, III: I think if they're trade creditors both based on antecedent debts, Mr. Chief Justice, that they are similarly situated creditors. They are of equal priority. If we assume, and we must assume for the purposes of the argument and the hypothetical, that they are of the same class... that is, they will be treated as in the same class under 1129 for the purposes of a plan, which is what we are attempting to resolve, it seems to me that there is a clear distinction, Mr. Chief Justice, that in fact they are between the treatment of two creditors of equal priority, just because one happens to be located out of the State, or out of the jurisdiction in which the transaction took place. If there are no further-- John Paul Stevens: May I just ask one little... your position is date of delivery, assuming the check is honored within 30 days. William J. Arland, III: --That is correct, Justice Stevens. The date of delivery is the date that satisfies all three of the public policy-- Byron R. White: And you can answer this question in a word, I think. Suppose the fellow who writes the check and delivers it promptly then writes... goes to the bank and withdraws his account so that the check cannot possibly be honored. Does the person to whom the check is delivered then sue on the check or on the original debt? William J. Arland, III: --I believe that the person to whom the check is delivered is faced with an election of remedies, Justice White, where he may either sue on the check or sue on the transaction. Byron R. White: May he sue on the check? William J. Arland, III: He may sue on the check, Justice White, or he may sue on the transaction at his option. Byron R. White: What would be his cause of action on the check, that there was an assignment, or what? William J. Arland, III: His cause of action on the check would be against the payor on the check probably for fraud. In other words, you delivered this check to me and you represented it to me that you had funds sufficient to cover this, and that-- Byron R. White: Is this an action for fraud, or what? William J. Arland, III: --Pardon me? Byron R. White: What is this, an action for fraud? William J. Arland, III: It would be an action for civil fraud. William H. Rehnquist: But the payor warrants that the check will be paid, does he not? William J. Arland, III: He warrants... yes, Mr. Chief Justice, Justice White's-- William H. Rehnquist: So you don't need an action for fraud, it's an action on the warranty that's implied by the drawing of a check. William J. Arland, III: --It-- Antonin Scalia: You have to have knowledge for fraud. You don't want to make people have to prove that the other person knew he had no money in the bank. William J. Arland, III: --Under the facts that were presented by Justice White, if you write a check one day and withdraw all the funds the next day before that check has had a chance to clear, you may have sufficient grounds for fraud. I don't want to get into that, but-- Byron R. White: I'm just really giving you an opportunity to say well, this shows there must have been a transfer if you can sue on the check. William J. Arland, III: --It's a conditional transfer, yes, it is, Justice White. If there are no further questions, I'd like to reserve the remainder of my time for rebuttal. William H. Rehnquist: Very well, Mr. Arland. Ms. Cusack, we'll hear from you. Nancy S. Cusack: Thank you. Mr. Chief Justice, may it please the Court: As Mr. Arland has already indicated, this case revolves around an attempt by a bankruptcy trustee to recover money as a voidable preference under section 547(b) of the Bankruptcy Code. The check which is at the center of this controversy is a check which was post-dated. It was dated and delivered prior to the 90-day preference period but in fact was honored on the 90th day, prior to the bankruptcy filing. It is in this context that the Court must decide whether, for purposes of 547(b), it is the date of honor or the date of delivery which controls, and in making that decision whether or not the bankruptcy court acted properly in dismissing our lawsuit, which had initially been filed-- Byron R. White: For purposes of this case it's irrelevant that it was post-dated. Nancy S. Cusack: --I don't think in fact it is irrelevant, because-- Byron R. White: Well, the check became a cash transaction the next day, which was before the 90th day. Nancy S. Cusack: --Well, Your Honor-- Byron R. White: Is that right? Nancy S. Cusack: --Well, under... our contention is that when a transfer takes place it is to be determined in accordance with State law, and under State law, in fact, a post-dated check is considered generally speaking to be effective as of the date of honor. Byron R. White: Is that the... that is the unmistakable law of New Mexico? Nancy S. Cusack: I believe it is, sir. Antonin Scalia: What do you mean, effective? When is a currently dated check deemed effective? Nancy S. Cusack: Our position is also that-- Antonin Scalia: On the date of honor, of course-- Nancy S. Cusack: --Currently dated check is also the date of honor. Antonin Scalia: --Yes. You're not saying anything as far as the difference between post-dated and currently dated is concerned. Your position is that the check has no effect until it's honored. Isn't there an assignment of the chose in action, though? When I write a check, am I not saying... am I not saying to the person that I give the check, you are entitled to my cause of action against the bank? Isn't that what the whole thing is? Nancy S. Cusack: Well, Your Honor, we would say that that's not what the whole thing is. For there to be a valid assignment or a valid transfer it's contemplated that there must be some kind of transfer of dominion or control over the property being assigned or being transferred, and in fact-- Antonin Scalia: Well, for the transfer to be perfected that has to happen, and that's why the code in a later section says what the rules are for perfection, and that occurred within the requisite period here, the honor. Nancy S. Cusack: --But... I'm sorry to disagree with you, but as... I don't see that there is an assignment, because of the fact that had there been a valid assignment, a valid transfer, in fact the transferor would have had no further ability to deal with those funds and the transferee would have had the ability to deal with those funds, and that's not what happens. A check is issued, and up until the time that that check is honored, the issuer retains the ability to stop payment on that check, to close the account, to issue other checks, which may in effect have the effect of depleting the account and rendering that check absolutely useless; in addition the account can be garnished, so in fact there is no transfer or no change in control or dominion over those funds, so that in fact there is no assignment, no transfer of interest in property, and that will not take place until such time as that check is honored. Byron R. White: Counsel, you really were suggesting that the word transfer as used in the Bankruptcy Code, and which is defined in the Bankruptcy Code, is controlled by State law. I thought that would be a Federal question. It may be that you might be persuaded that... you look around for probably any evidence of what it means, but you don't really think this is a question of State law. Nancy S. Cusack: Well, actually, Your Honor, I do think it's a question of State law. Byron R. White: The word transfer in all the-- Nancy S. Cusack: The Court... under the context of the Bankruptcy Code, first of all Congress has received constitutional authority to establish uniform laws on the subject of bankruptcies throughout the United States, and Congress exercised that authority by enacting the Bankruptcy Code. Under the terms of the Bankruptcy Code there were some general definitions given in terms of what a transfer was. 101 indicates that a transfer is a method or a mode of disposing of an interest in property. However, it's clear, and the McKenzie case makes it clear, that there are certain issues that have not been dealt with within the Bankruptcy Code itself and have not been specifically defined, and as a matter of fact there has been a policy to have certain issues determined in accordance with State law, and one of those issues is when the transfer takes effect, when a transfer is made, and so that in fact is an issue that is determined in the court-- Byron R. White: --Of course, that isn't what the court of appeals decided, is it? Nancy S. Cusack: --Well, in fact the court of appeals did refer to the McKenzie case. Byron R. White: I know it referred to it, but it didn't for a minute suggest that a transfer is... only takes place when State law says it does. Nancy S. Cusack: That wasn't the specific holding of the court of appeals, no, sir, you're right. The court of appeals indicated that a transfer only took place at such time as the check was honored, which in fact is consistent with what our State law indicates. Byron R. White: And it thought the... it thought that its holding was consistent with the Uniform Commercial Code. Nancy S. Cusack: Absolutely. Byron R. White: As adopted in New Mexico. Nancy S. Cusack: As adopted in the State of New Mexico, which again provides that a transfer takes place upon honor. Antonin Scalia: Mrs. Cusack, what do you make of subsection (e)(1), which is on page 33a of the petition... I'm sorry, (e)(2), which seems to make a distinction between two types of transfer, just a transfer plain and simple and a perfected transfer. It seems to me that your argument assumes that there's no transfer unless it's a perfected transfer, but (e)(2) says for purposes of this section a transfer is made at the time... A, at the time it takes effect between the transferor and the transferee if it is perfected at or within 10 days after such time. Now, it seems to me it's... that is meant to cover exactly this situation. If I gave you the money right now, that's a completed transfer... it's perfected. What does it mean to have a transfer which takes effect between the transferor and the transferee but is not yet perfected? What does that cover, if it doesn't cover this? Nancy S. Cusack: Well, let me remind the Court that in this specific instance what we're doing is attempting to recover the money, and with respect to money you cannot have a transfer made until you have it in hand. Likewise, you cannot perfect an interest in money until you are holding that money in your hand. This section, though, can also contemplate situations where, for example, a transfer is made as between two parties and yet it's not perfected until such time as to third parties. There is no creditor that can come in and take a superior interest. For example, a deed to a house. I may deed my house to you, but if the deed is not recorded, while the transfer may be effective between the two of us, it's simply not perfected until such time as that is filed of record. Antonin Scalia: I think your mistake is to say that this is a transfer of money. It's not a transfer of money, it's a transfer of a chose in action, which is property. It's a transfer of a claim for money. Nancy S. Cusack: But there's no enforceable... again, what... first of all, what we're seeking to recover under 547(b) is not a recovery of that claim for money. We are seeking within the parameters of the preference suit to recover that $157,000 which in fact was transferred and which Mr. Barnhill received. Getting the check back, which represents the chose in action, isn't going to do anything as far as the bankruptcy estate or the trustee is concerned. David H. Souter: You would agree that if the payee could enforce it against the bank, if the bank dishonors it, then your position would be different. Nancy S. Cusack: I think our position in that instance would be different if he could enforce it against the bank, but in fact he cannot. As I indicated previously, Congress has constitutional authority to establish uniform laws and has enacted that authority by enacting the Bankruptcy Code. What is a transfer and when it is completed is necessarily a Federal question because it does arise under the terms of the Federal statute, which of course is intended-- William H. Rehnquist: I thought a minute ago, Mrs. Cusack, you told Justice White that that was a matter of State law. Nancy S. Cusack: --The Federal question has not been answered, and consequently in accordance with the McKenzie case the Court has said that in the event that that question is not answered pursuant to law, then it becomes a matter of deference to the State. It's a State law in this case that governs. William H. Rehnquist: You mean if it's not answered by the Federal statutory provision. Nancy S. Cusack: If it's not answered by the Federal statute, and it's certainly... the issue of when a transfer is made specifically is not answered within the statute. Sandra Day O'Connor: Ms. Cusack, do you take the position that under New Mexico law when the check is delivered that it does not at least conditionally transfer a chose in action to the payee? Nancy S. Cusack: No. Sandra Day O'Connor: Would New Mexico recognize that it conditionally transfers a chose in action to the payee when the check is delivered? Nancy S. Cusack: What New Mexico recognizes is that when a check is tendered there is a conditional payment and there is a doctrine of relation back that is in effect in the State of New Mexico, and what New Mexico recognizes is that that conditional payment is subject to the condition of a transfer taking place. Sandra Day O'Connor: Is New Mexico's law substantially different from that of most other States-- Nancy S. Cusack: No, I think it's very similar. Nancy S. Cusack: --In this regard, or is it the same? Nancy S. Cusack: It's the same as the law in most States. Sandra Day O'Connor: And when you look at the definition in the Bankruptcy Code 101 of what a transfer means, it means every mode, absolute or conditional... or conditional... of disposing or parting with property or with an interest in property. Do you say that the delivery of a check does not meet that definition? Nancy S. Cusack: I think that the delivery of the check comes within the definition of what a transfer is under 101-- Sandra Day O'Connor: Under 101. Nancy S. Cusack: --Because 101 is a very expansive definition and it indicates, at least in my mind, that one way that an individual can make a transfer of an interest in property is indirectly through the delivery of the check. However, what's important for purposes of 547(b) is making a determination in fact when the transfer takes place so that the trustee knows and the other creditors know what assets ultimately will be available for distribution to those creditors and to the estate. Under 547(b) the trustee is allowed to recover any transfers of a debtor's interest in property so long as certain things have made... so long as those transfers have been made within 90 days and they have been payment for an antecedent debt, and it's again going back to the idea of dominion and control. There in fact is no transfer between the transferor or the transferee until those funds have been tendered and until... and in actuality those funds have been removed from the bankruptcy estate. John Paul Stevens: May I just question that, because perhaps it's the same point Justice Scalia made, but I want to be sure I understand your answer. Subsection (e)(1)(b) contemplates... it refers to transfers of fixtures or property other than real property, and surely contemplates that a transfer can occur before it has been perfected, because it talks about a transfer, when a transfer will be perfected, and then in (e)(2) it says it's perfected if it's within 10 days and another... you can't get another lien against the property. Now, if the transfer date and the perfection date are different, doesn't the date of honor establish the perfection date and the date of delivery establish the transfer date? Why isn't that a correct analysis? Nancy S. Cusack: Okay, our contention is with respect to money, the assets that we are seeking to recover, there is no transfer of those funds until such time as the transferor loses dominion or control over those funds-- John Paul Stevens: I understand-- Nancy S. Cusack: --And the transferee is able to exercise control and in this circumstance-- John Paul Stevens: --But would you not agree that the point you're describing is the point at which the transfer has been perfected? Nancy S. Cusack: --But it's also the point in time when the transfer has been made. John Paul Stevens: You're saying that with respect to checks, delivery of checks, there is no difference between the transfer date and the perfection date. Nancy S. Cusack: When you're dealing with a check, that's correct. Antonin Scalia: Mrs. Cusack, you're not seeking money any more than the payee of the check is seeking money. You are not seeking some particular dollar bills that the bankrupt owns. You are seeking to assert a chose of action against the bank on behalf of the trustee. Nancy S. Cusack: No, sir, we're not-- Antonin Scalia: You say that the bank owes the estate money, isn't that what you're saying? Nancy S. Cusack: --No, sir, we're not. As a matter of fact, what we're seeking to recover is $157,000 that was paid to Mr. Barnhill as a result of a settlement agreement that had been reached, so no, we're not seeking to recover any funds-- Antonin Scalia: Paid to him by whom? Nancy S. Cusack: --It was paid to him by the debtor, so we're not seeking to recover any money from the bank. We're seeking to recover a preferential transfer from Mr. Barnhill. Antonin Scalia: No, but to the extent you say that money that the bank gave to the petitioner here should have been given to the trustee, or should have remained in the estate, you're asserting a chose in action. You're not asserting a claim for particular property. Nancy S. Cusack: Well, we're asserting a claim for those funds once Mr. Barnhill's check is honored, which will in effect increase our estate. So long as that-- Antonin Scalia: Against the bank, for any money that the bank has, not any particular money. There's no segregated fund for your client in the bank... this is his money. You're just asserting a claim against the bank. Nancy S. Cusack: --That's correct, and if Mr. Barnhill issues us a check and it's not honored, then there will be no transfer of any funds and no increase for the benefit of the estate, that is correct. But I also might remind the Court that the drawer will retain full control over that chose in action until such time as-- David H. Souter: Yes, but that just means that it's conditional, doesn't it? I mean, it doesn't prove anything more than that the transfer is conditional. Nancy S. Cusack: --The payment is conditional, and it is conditional upon the transfer being made. In fact, there is-- David H. Souter: Well, but for that proposition you rely, as I understand it, on the position that the payee cannot enforce it against the bank. Nancy S. Cusack: --That's right, the payee cannot enforce it against the bank because again he has no right to exercise any kind of dominion or control. William H. Rehnquist: But don't you also rely on the proposition that the payor may stop payment or may also withdraw his funds before the check clears? Nancy S. Cusack: Absolutely, or that the funds may be garnished or levied against. So in other words, there are many things that can happen, notwithstanding the fact that these checks are outstanding. Under 547(b) in essence there is a mandate, if you will, that the trustee look not only what assets are there in the estate as of the date of the bankruptcy filing, but in fact that he take a backward look and look to see what assets were in the bankruptcy estate and make a determination as to what happened to those assets in the 90 days immediately preceding the bankruptcy. If the trustee, in doing that, and in doing his preference screening, looks on the 90th day immediately preceding the bankruptcy filing, looks to see what's in the account, regardless of how many checks may be issued and how many checks may be outstanding, the fact is that as of that period in time it is the debtor who has control over all of the funds which remain in the bank account. Again, the issue of control and dominion over those funds becomes material. Mr. Arland has indicated that a date of delivery rule will conform with modern commercial practice, and he has indicated repeatedly that when a transaction is... or when a check is given the transaction stops. In fact, that's an oversimplification of what happens. First of all, I think intuitively one can see that payment by check is not the same as payment by cash. For example, if I issue a check, I'm assured of the fact that I will be asked for an ID because of the fact that if the check is not honored the transaction will not stop. In many States, including the State of New Mexico, statutes prohibit certain transactions from going forward until cash or immediately available funds are in place, and in addition I think that one has to be aware of the fact that the UCC provides that a tender of a check, in and of itself, does not operate to terminate an obligation, but in fact only operates to suspend that obligation and to suspend until it's determined whether or not the check has paid the obligation which has to be collected. I think that under the terms of the date of honor rule there is certainly a unity of law that is presented, because of the fact that the Bankruptcy Code has consistently deferred certain matters to decisions under State law. For example, exemptions are decided under State law. The fact that a determination of when a transfer is made is to be decided under State law is also consistent with that unity, in effect helps to promote that by in fact ensuring that someone who does business in a certain State is not going to receive a windfall or be unduly penalized in the event that an individual goes into bankruptcy. He can also structure his or her commercial transactions in such a way so that he knows that in terms of consistency what is going to happen in the Federal court is going to be consistent with what happens in the State court. For these reasons, we would ask for an adoption or for a determination that in fact it is the State law that controls in making a determination when a transfer takes place, and that in fact the Court reject the implementation of a date of delivery rule. Anthony M. Kennedy: Are you aware of any States where the result would be different than it is under New Mexico law according to your view of the case? Nancy S. Cusack: I'm not aware of any States where that would be different. Basically, the States have all gone ahead and passed the Uniform Commercial Code, and basically it's in effect throughout all 50 of the States, so I'm not aware of any situation where any State is in a differing situation. I do think the cases that have evolved are consistent, that in fact a transfer of a debtor's interest in property when a check is issued, or when there has been a check issued, that transfer under the UCC takes place at the time the check is honored. Again, there is no assignment of any funds in the account, and there's no transfer of that dominion or control until such time as that happens. William H. Rehnquist: Thank you, Ms. Cusack. Mr. Arland, do you have anything in rebuttal? You have 2 minutes remaining. William J. Arland, III: Yes, Mr. Chief Justice, I'd like to take the 2 minutes for rebuttal if I might. David H. Souter: Mr. Arland, may I ask you one question? William J. Arland, III: Yes, Justice. David H. Souter: Why isn't your position that there's a conditional transfer here defeated by the fact that the payee cannot enforce that transfer against the bank if it's dishonored? William J. Arland, III: My position is that because the nature of a check is that it is a conditional transfer, and that it is recognized within the Uniform Commercial Code and in the bankruptcy courts. David H. Souter: Then why can't it be enforced against the bank? William J. Arland, III: Because the concept of how commerce works and how banks honor checks does not permit it. If we have a dishonor of a check within the preference period subsequent to delivery, you don't have a preference action, there's no question of that, because there's nothing... nothing has changed hands. It is the conditional nature, however, of giving of a check and its relation back to the date of delivery that puts it in a unique circumstance. It's much like the 547(e) provision, and the honoring of the check you can analogize, as we have in our brief, to the perfection of a security interest in either personal property or real property. There is a definite relation back doctrine that must be taken into consideration. David H. Souter: But isn't... you say it's a relation back, but doesn't the relation back occur only because the check is an authorization to pay, and if the person authorized accepts the authorization then the payment subject to conditions you've mentioned relates back, but it is not a chose in action in the sense that it can be enforced against the bank as the holder of funds. William J. Arland, III: The definition of property under 541 would cover a conveyance by check. The property itself would be that chose in action. David H. Souter: A nonenforceable authorization to a third party? William J. Arland, III: I'm sorry, Justice Souter. David H. Souter: A nonenforceable authorization to a third party would fall within the definition of property? William J. Arland, III: I do not believe it unenforceable. I believe that the check-- David H. Souter: Well, you can't enforce it against the bank. That's what's holding me up. William J. Arland, III: --You can present it to the bank for honoring. If it is wrongfully dishonored... and that would be the only reason it would be dishonored, in which the payee would have a cause of action or would want to enforce it against the bank if the bank wrongfully dishonored it. That's the only reason-- David H. Souter: If it's wrongfully dishonored, can it sue the bank? I thought you conceded that it could not. William J. Arland, III: --The payee can... if it's wrongfully dishonored, he cannot, but what he can do is he may sue the payor. The payor may then sue the drawee bank for wrongfully dishonoring the check. David H. Souter: Well, that's great, but it doesn't affect the transfer. You simply go back to your original-- William J. Arland, III: But it does affect the transfer, Justice Souter, with all due respect, if one looks to the Bankruptcy Code, and the Bankruptcy Code under section 101(54) provides for conditional transfer. The conditional transfer is a transfer in and of itself. The fact that the presentment of the check occurs within the period does not affect the date of transfer, which is the date of delivery itself. William H. Rehnquist: I think you've answered the question, Mr. Arland. Thank you. The case is submitted.

William H. Rehnquist: We'll hear argument next in No. 89-474, William V. Grady v. Thomas J. Corbin. Mrs. Steller, you may proceed. Bridget R. Steller: Thank you, Mr. Chief Justice, and may it please the Court: This matter is here on a writ of certiorari issued to the New York State Court of Appeals. And the issue raised is whether, within the constraints of the double jeopardy clause of the Fifth Amendment, a motorist, who causes the death of another person as a result of an automobile collision, may be subject to a prosecution for homicide and/or assault, even though, at the scene of the collision and prior to the death of the motorist he or she... prior to the death of the other person that motorist is charged with driving while intoxicated and failure to keep right, and then subsequent to the death, enters pleas of guilty to those vehicle and traffic violations, and is sentenced. In this case, on October 3rd, 1987 there was an automobile... there were... collision... an automobile driven by the Respondent, Thomas Corbin, was being operated in a westbound direction on Route 55 in the town of LaGrange. It first collided with an eastbound vehicle and struck the rearview mirror... or struck the sideview mirror of that car. It proceeded into the eastbound lane and struck a second vehicle in which Brenda Dirago was the operator and her husband, Daniel Dirago, was the passenger. Respondent Corbin and both Mr. and Mrs. Dirago were taken to the hospital, where at approximately 8:00, Respondent Corbin was arrested for driving while intoxicated and failure to keep right. He was issued traffic tickets for those offenses. He then consented to having blood withdrawn, and blood was withdrawn for the purpose of chemical analysis at approximately 8:25 p.m.-- The defendant was not arraigned that night. He was hospitalized. The tickets which were issued to him, directed to... him to appear in the Town of LaGrange Court, a justice court, on October 29th, a Thursday night. However, the Court did not sit on Thursday nights, it sits on Tuesday night. So the Court sent a letter to the Respondent Corbin directing him to appear on an advanced return date, that date being October 27th. No notice was given to the district attorney of the advanced return date. On the night that the defendant appeared, it was not a night scheduled for the district attorney to be in that courtroom. The defendant appeared with counsel, and entered pleas of guilty to both... both the misdemeanor of driving while intoxicated and the violation of failure to keep right. William H. Rehnquist: What is the jurisdiction of the justice court to which you refer, Mrs. Steller, so far as what kind of crimes can it hear pleas to? Bridget R. Steller: Chief Justice Rehnquist, it would generally hear misdemeanors and violations. It would have preliminary jurisdiction over felonies, but its jurisdiction would be limited to holding a preliminary hearing, and setting bail on a non-Class A case, which would be a-- William H. Rehnquist: Binding over, in effect? Bridget R. Steller: --Yes, Your Honor. I might also add that an assistant district attorney was called to the scene of the accident on the night of October 3rd. He was not there to assess what charges should be brought. There was one purpose for him being called, and that was to prepare a search warrant if one was necessary to obtain blood. When he arrived at the scene, the defendant had already been arrested and charged. He learned that the defendant had consented to having blood withdrawn, and he left. He had no further participation in the investigation that evening. And he did not help draw any charges. John Paul Stevens: Does all... do these facts make any difference to your legal argument? I mean, supposing the state's attorney had been fully advised all the way along the line, you'd still have the same legal argument, wouldn't you? Bridget R. Steller: Yes, Your Honor, because we rely on New York State Vehicle and Traffic Law Section 1800(d), and we have relied on it in the state courts. John Paul Stevens: Your position is, even if he pleaded guilty or was convicted of this offense, you could go ahead and prosecute him for the greater offense. Bridget R. Steller: That's right, Your Honor. John Paul Stevens: So I don't know, why... what relevance, all these facts have. Bridget R. Steller: Okay. I'm sorry, Your Honor, I'll-- John Paul Stevens: I'm just suggesting that I'm not sure I understand. Bridget R. Steller: --It seems to me in this Court in Blockburger and in Vitale has set forth certain rules to be followed, that being that-- John Paul Stevens: This Court. [Laughter] Bridget R. Steller: --Thank you, Your Honor. That being that a defendant may be charged with the greater... with a greater offense, or maybe charged with two offenses... where... and there can be subsequent prosecutions... where there are different elements involved in each. And in this case, we're here on an indictment which charged the defendant with manslaughter... or counts of the indictment pertaining to manslaughter, criminally negligent homicide and assault. Anthony M. Kennedy: But I... I take it from the opinion of the state court that the prosecution is bound by its pleadings in its bill of particulars. And so, we can take this case as one in which the only way the prosecution can prove its case is to prove the same matters that were shown in the earlier proceeding on which there has now been a judgment. Bridget R. Steller: Well, Your Honor-- Anthony M. Kennedy: Is... is that correct? Bridget R. Steller: --That, plus additional factors are listed in the bill of particulars, Your Honor. He was charged with driving while intoxicated and failure to keep right. Anthony M. Kennedy: Well, there are some additional factors but, really, the essential part of the prosecution's case is going to rely on the matters that were concluded by the traffic offense in the traffic court. Is that not correct? Bridget R. Steller: In large part. However, the accident reconstructionist's report... which was not available until January of 1988... also indicated the speeds... the respective speeds of the vehicles and the positions of the vehicles at the time of impact. This was not-- Anthony M. Kennedy: Oh, well, of course-- Bridget R. Steller: --known on the night of the 23rd. Anthony M. Kennedy: --there will be differences, but the state says the major part of the case is the same. That's what the state-- Bridget R. Steller: A large part-- Anthony M. Kennedy: --that's what your state court says. Bridget R. Steller: --yes. A large part. The court of appeals' majority opinion indicates that we are bound by the bill of particulars until amended, and it has not been amended, Your Honor. Anthony M. Kennedy: So... so don't we take the case as one in which in the second trial the proof is going to be of the same facts that were proven in the first trial? Bridget R. Steller: Yes, Your Honor. Plus additional facts. But you must remember, there was no first trial here. The was a plea of guilty at arraignment. And the defendant pled guilty to common law driving while intoxicated. The blood test results weren't even back at the time. The blood test results were not received by the district attorney until October 30th. Anthony M. Kennedy: Well, are you... are you suggesting the case would have different if there had been a trial and the prosecution had introduced all this evidence? Bridget R. Steller: It might present it in a different light, Your Honor. I recognize that-- Anthony M. Kennedy: Well, what's the legal... what's the legal difference? Bridget R. Steller: --In the sense that you would know exactly what evidence was... had been presented-- Anthony M. Kennedy: But we do know because your state court has told us. Bridget R. Steller: --The state court has told us that we are bound by our bill of particulars, which does include elements which were involved in the crimes to which the defendant pled guilty. Anthony M. Kennedy: So I think you have to tell us why that does not constitute a bar. Bridget R. Steller: Because, Your Honor, this Court has never held that we must try all offenses that arise from one series of acts or one acts in one trial. Sandra Day O'Connor: Well, what about Harris against Oklahoma? Does that have a bearing on this, do you think? Bridget R. Steller: I don't think so, Justice O'Connor, because in Harris there is a footnote that in the state's brief, the state conceded that both felony murder and the underlying robbery were the same. And also, in this Court's opinion in Vitale, this Court recognized... or this Court commented about the... it's cited or it's quoted at page 18 of the petitioner's main brief, "For the purposes of the double jeopardy clause, we do not consider the crime generally described as felony murder as a separate offense distinct from its various elements. " "Rather, we treat a killing in the course of a robbery as itself a separate statutory offense and the robbery as a species of lesser included offense. " Here, I don't think you can ever say that driving while intoxicated is a lesser included offense of manslaughter, criminally negligent homicide or assault because the homicide charges involve a death, the assault charge involves physical injury. Driving while intoxicated involves operation of a motor vehicle that is not is not necessarily involved in a manslaughter or an assault prosecution. Thurgood Marshall: xxx. Bridget R. Steller: Not in every manslaughter case, Your Honor. And this is not a vehicular manslaughter charge. This is a more traditional manslaughter charge. Thurgood Marshall: But you didn't have any trouble with Ashe against Swenson, did you? Bridget R. Steller: No, Your Honor, I didn't. Thurgood Marshall: You didn't even mention it in your brief. Would you mind mentioning it now? Bridget R. Steller: Certainly, Your Honor. I think that in... in the reply brief I did mention it, Your Honor. Thurgood Marshall: In your reply brief, you gave it one sentence. Bridget R. Steller: Yes, Your Honor, I did. Thurgood Marshall: But you didn't mention-- Bridget R. Steller: But I don't... I'm sorry, Your Honor. Thurgood Marshall: --You didn't mention it in your main brief. Bridget R. Steller: No, Your Honor, because I don't believe that we are... this Court has held that we would be collaterally estopped, or that res judicata would apply in this particular case. And I think that in this type of case we are governed by this Court's rulings in Blockburger and Vitale. Also, I think that this Court has recognized that there is a strong public interest in law enforcement and that the people should be given a full and fair opportunity to present their case. And I think that's something that arises with collateral estoppel and res judicata. That doesn't happen here. And I think the legislature of the State of New York has a right when they are enacting a statutory scheme to consider this Court's rulings, such as Blockburger, such as Gavieres, and decide that it is permissible to have vehicle and traffic offenses prosecuted separately because they are not generally lesser included offenses of assault and homicide. William H. Rehnquist: And that's because each has an element that the other doesn't have? Bridget R. Steller: On the traditional homicide and assault charges, yes, Chief Justice Rehnquist. And-- Antonin Scalia: Ms. Steller, if... if I may put in my candidate for things that aren't mentioned in the brief that maybe should have been, the earliest case I see cited by any side is, I think, 1871. These words were written about a hundred years before that. Is... is nobody have any interest at all at... at what... at the time the Constitution was adopted... being tried twice for the same offense was thought to apply to? Bridget R. Steller: --I think-- Antonin Scalia: Have you done any historical research in it at all... what... what... you know what-- Bridget R. Steller: --I think, Your Honor, this Court's decisions which are cited in our briefs, refer to Blackstone's Commentaries. And I think that traditionally in England you would not be prosecuted for two offenses in the same indictment. And I think you'd seen that in this Court in Thigpen v. Roberts because in Mississippi there was a DWI prosecution and a homicide prosecution. And I believe, during the argument... oral argument it was discussed that traditionally in Mississippi you were not allowed to join offenses. Antonin Scalia: Uh-huh. Bridget R. Steller: --And that results from the common law traditions. Antonin Scalia: And what does that prove? Bridget R. Steller: Well, Your Honor, you asked me about a historical analysis-- Antonin Scalia: Right, right. Bridget R. Steller: --and I believe-- Antonin Scalia: --well, now how does-- Bridget R. Steller: --that historically you would not have joined a minor offense with a more serious offense. Antonin Scalia: --Uh-huh. Bridget R. Steller: Obviously at common law we wouldn't have vehicle and traffic violations, but I think that anything of that nature would not have been joined. Antonin Scalia: But how does... how does that establish that the only application of this provision of the Constitution is to offenses that have different elements as opposed to later prosecution on the basis of the same facts? I mean, I have no doubt that there is... is substantial historical support for the position that you take that you can't try a person for an offense that includes the same element of an offense already committed and nothing additional. But the issue before us is whether it includes something beyond that, whether it includes using the same evidence as a necessary part of the later prosecution. Bridget R. Steller: I think that this Court has held previously that it is not... that it is perfectly permissible to use some of the same evidence. I think that that issue was addressed by the court in Vitale, where the Court indicated that it was permissible. In fact, part of Vitale's problem may have been the way it arose in this Court. Vitale came before the Court on a petition for certiorari. This Court granted the writ and remanded to the Supreme Court of Illinois for further proceedings to determine whether it was based on a Federal question... whether their decision was based on a Federal question. The Supreme Court of Illinois then indicated that it was... their decision was based on a federal issue. However-- Antonin Scalia: --But we said in Vitale, although the mere possibility that the state will seek to rely on all of the ingredients necessarily included blah, blah, blah, would not be sufficient to bar. It... it did suggest that if in fact it turned out that the evidence was the same, there might have been a problem. Bridget R. Steller: Your Honor, I believe the majority opinion in dicta says a substantial double jeopardy claim. But substantial should not be equated with dispositive. Because if it was dispositive, then there would have been no need for a majority opinion. And in the briefs in Vitale which were filed with this Court, the state indicated what its evidence was going to be. Also, although the Supreme Court of Illinois had indicated in its opinion that the failing to slow... which was the motor vehicle violation... was a lesser included offense of manslaughter... which is the charge that Respondent Vitale was charged with following his vehicle and traffic trial, during oral argument, Respondent... in this Court... Respondent Vitale's counsel conceded that it was not the lesser included offense. But I think the issue there... and I think we addressed it in our... our brief, if I may refer to it... at page 17, the term "the" in your opinion, immediately preceding the reckless act, implies that you might have been concerned based on the Supreme Court of Illinois's opinion that the prior conviction for failing to slow would always be an element of involuntary manslaughter. Here that's not the case. We are... we clearly have separate offenses with separate elements. John Paul Stevens: Ms. Steller, may I ask you two questions? One, do you know what happened in Vitale after we sent it back for the last time? Bridget R. Steller: It was my understanding, Your Honor, that the court's... the Supreme Court of Illinois did not permit the prosecution. John Paul Stevens: I... I just didn't know-- Bridget R. Steller: I think that was the decision, but their decision also was... in the case that was before you, the supreme court's decision was that the failure to slow was a lesser included offense of the homicide. John Paul Stevens: --Right. Bridget R. Steller: That is not the way this case reaches this Court. John Paul Stevens: No, I understand. In this case, as I understand it, we have four different offenses. DWI... I can't remember them... reckless manslaughter, criminally negligent homicide, and third-degree reckless assault... each of which has an element that none of the others do. So under Blockburger... if I understand... let me be sure I have your position. If the state elected to, it could take them one at a time, prove him guilty of DWI, then try the second case for reckless assault, prove him guilty of that, and prove him guilty of the third one for reckless manslaughter and then go ahead with the fourth trial. So, under your position, if I understand you correctly, you're entitled to four separate trials. Is that right? Bridget R. Steller: No, Your Honor, that's not quite my position. Because under state law I recognize that there is a joinder provision. I would concede that all of the homicide counts would have to be tried together. John Paul Stevens: No, I'm not talking about state law. I mean as a... there would be no Federal constitutional objection as long as you get four separate offenses each of which has an element different from the others, even though they have certain common elements. Under your view of Blockburger, I think, just as you could try one or two, you could also try all four. You could have four trials here. Bridget R. Steller: We would have to have... if I understand your question... there would be a potential for a failure to keep right trial, a driving while intoxicated trial, an assault trial and a homicide trial. John Paul Stevens: Correct. Because each has an element that... a statutory element that the other... that none of the others has. Bridget R. Steller: That's correct, Your Honor. John Paul Stevens: Yeah. Bridget R. Steller: However, I realize that New York has a compulsory joinder section which would have-- John Paul Stevens: Oh, I understand, and they've thrown out two of your seven counts for that reason... or three... or two or three, I can't remember. Bridget R. Steller: --Yes, Your Honor, the driving while intoxicated counts which were included, and I believe either one or two of the vehicular manslaughter counts. We're not arguing about the vehicular manslaughter counts here. Anthony M. Kennedy: But... but your answer is there would be no Federal constitutional impediment to the four trials? Bridget R. Steller: No, Your Honor. Under Blockburger and under Vitale I do not think there would be a Federal constitutional bar. Antonin Scalia: Even though the same evidence is introduced and... and the core of all of them is whether... really, whether, he was driving under intoxication. And he's acquitted in the first three... the first three juries find that there's... they just can't find beyond a reasonable doubt that he was, but you finally get a fourth jury who finds otherwise. That doesn't trouble you at all? Bridget R. Steller: Well, Justice Scalia, I think there is an issue here, and that is what was the issue before the jury. And I think you've already decided that. In a case where a person was charged with committing six robberies and there was trial on four of them, and the defense being that only... that the defendant had not participated. I think this Court said that the people could not proceed with that... with that additional robbery prosecution because the jury had necessarily found that the defendant was not the robber. However, that's not the issue here. The issue here, in a... in a potential for four trials, would be, did the defendant... number one, was he intoxicated, number two, did he fail to keep right. Antonin Scalia: Right. Bridget R. Steller: But assuming... even if you assume that he was not intoxicated, I think that the prosecution could still go forward on the homicide theories because there are other elements here. There is an element of driving his vehicle into the opposite lane of traffic, and there's a substantial overlap of vehicles. And I think it would be up to the jury to consider the other elements of whether the defendant acted recklessly or did he act with criminal negligence, and then, was the death the result of his reckless conduct or his criminal negligence. Similarly with the assault count. It would be did he cause physical injury and was his conduct reckless? This is not a case where-- Antonin Scalia: Well, what... what you are now saying gives me cause to wonder whether your response to Justice Kennedy was correct earlier. I thought we had established that it... under the... under the indictment here it was clear that the state was going to use as a principal part of its case the... the intoxication. Bridget R. Steller: --Your Honor, that would be some of the evidence introduced at this trial. However, the jury would be free to accept or reject it. Antonin Scalia: You're saying it's not an essential part of its case? Bridget R. Steller: No, I don't believe that it is. Antonin Scalia: That it can win its case even... even if he's... even if the jury doesn't believe he was intoxicated? Bridget R. Steller: The jury-- John Paul Stevens: But that's not what the court of appeals said. "Thus, unlike Illinois Vitale, there's no need in this case to await the trial to ascertain whether the prosecution will rely on the prior traffic offenses as the acts necessary to prove the homicide and assault charges. " Bridget R. Steller: --Your Honor, the evidence-- John Paul Stevens: It seems to me that's-- Bridget R. Steller: --that goes to the-- John Paul Stevens: --somewhat inconsistent. Bridget R. Steller: --evidence which would we... which the prosecution would intend to adduce at the trial. John Paul Stevens: Well, they said as the-- Bridget R. Steller: However-- John Paul Stevens: --acts necessary to prove these charges. That's what the court of appeals has construed it. Bridget R. Steller: --We would have to introduce evidence. The jury... it would be up to jury to credit the evidence. And that's part of the problem with analyzing double jeopardy after a second trial. Because you don't know what evidence the jury credited at the first trial in many cases, and you don't know what evidence they credited at the second trial. John Paul Stevens: Well, I think you may well be right that if there was an acquittal that would bar farther... future prosecutions. But my hypothetical was four successive victories by the state. They take the easiest... lowest one first, get a... a victory, and then I think under your theory there would be no bar of res judicata or collateral estoppel. You'd just... you'd just add another element and get another... another conviction. Bridget R. Steller: Well, that's just another-- John Paul Stevens: So I think you could get four separate convictions under your theory. Bridget R. Steller: --Well, it's not just another element, Justice Stevens, because we would be deleting other elements. John Paul Stevens: Well, not as I read the court of appeals' opinion. I mean, maybe I misread it, but I-- Bridget R. Steller: I'm sorry, Your Honor, but it seems to me that under the counts of this indictment, if you read the statutory language, as this Court has indicated should be done in its opinions in Blockburger-- John Paul Stevens: --Yes, but you have to read the bill of particulars too and the-- Bridget R. Steller: --Then you're-- John Paul Stevens: --construction that your state court puts on the bill of particulars. That's all part of the case. Bridget R. Steller: --Then you are looking at the evidence adduced, and that's the problem, we believe, with the state court's opinion. We are asking you to reverse that opinion because we believe they have misconstrued your opinions concerning double jeopardy, that being that you do not look at the evidence which will be adduced, you look at the statutory elements and conduct a statutory analysis. John Paul Stevens: But... but you're saying that when you do that, you can do it even if it's precisely the same evidence in each case. That's your legal position. I... I mean, it certainly... it's... it's a permissible argument. Bridget R. Steller: That's true. And this Court has said, even if there is a substantial overlap in proof it doesn't-- John Paul Stevens: Even if it's an entire overlap. That's the point. You can be completely overlapped, and you still... you still win under your legal theory. Bridget R. Steller: --As a general rule, yes, Judge. But here, this case that comes before you is not limited to the identical evidence. There are other elements here. Obviously, the speed at which the defendant was traveling would not be relevant on his failure to keep right charge. So there are different elements as you analyze the statutory elements, and some evidence, which is indicated in the bill of particulars, would not be included, just as the defendant's blood alcohol level would not be relevant at a failure to keep right trial. Antonin Scalia: But... but we have to evaluate your legal theory on the basis of what results it could produce, not just the results it might happen to produce in this case. And you acknowledge that... that your legal theory can produce the result that Justice Stevens described. Bridget R. Steller: That's correct, Your Honor. I would suggest to you that in the... you have indicated that society has an interest in law enforcement, and in enacting 1800(d) of the Vehicle and Traffic Law, the New York State legislature had a right to consider how the vehicle and traffic laws were to be enforced and how they would affect society. Now, vehicle and traffic laws can give rise to a variety of minor offenses. Not all of them require intervention of a prosecutor. In fact, the vast majority of New York cases would not require the intervention of a prosecutor. In most cases, the district attorney would not even receive notice of a vehicle and traffic offense. But if the prosecution for a homicide was barred by a prosecution for a vehicle and traffic offense, society would be at a loss because of that, and the defendant would basically be getting a windfall. And I don't believe that that was ever the intention of the double jeopardy clause. Mr. Chief Justice, I'd like to reserve my remaining time for rebuttal. William H. Rehnquist: Very well, Mrs. Steller. Bridget R. Steller: Thank you. William H. Rehnquist: Mr. Farrell, we'll hear now from you. Richard T. Farrell: Mr. Chief Justice, and may it please the Court: This is a case of bad draftsmanship. The Fifth Amendment was poorly drafted. It doesn't tell us what the term offense means. As a matter of fact, it even spells it differently than the modern spelling. We find ourselves in this case, once again, after lessons of Blockburger and Vitale; the nonlesson, if you will, of Thigpen v. Roberts; the recessed lesson of Fugate v. New Mexico, addressing before this Court, the question of what the term "same offense" means. If Blockburger is the sole test, I'll sit down. Because I'm through. I lose. Corbin goes to trial. Because the Court of Appeals of the State of New York acknowledged that if the Blockburger test, analytical approach... call it what you will... is the way that one determines what the Fifth Amendment proscribes, then as to the... I keep on losing track of the numbers of these things... three of the counts of the indictment survive a Blockburger-based analysis. In this case if Blockburger is the law, if Blockburger is all that the Fifth Amendment requires, then this case goes back to New York State Court of Appeals on remand and the court of appeals will do that voodoo that they do so well on remand from this court and decide the question on state constitutional law grounds, and they may come to the same result, they may not. The good Lord only knows. I sure don't. But insofar as the historical exegesis that one of Your Honors asked for, there are two things. Deeply rooted in the double jeopardy clause is the ancient... it must be an ancient maxim because it's in Latin "Nemo debet bis vexari pro eadem causa. " And if it's in Latin, then it's got to be old. William H. Rehnquist: Well, it may be Latin and old, but how do we know it's deeply rooted in the double jeopardy clause? Richard T. Farrell: Well, Your Honor, I'm going to have to take the word of the historical exegesis done on several occasions by this Court and by some of the law review writers that track the idea of a proscription against double jeopardy, as we call it now, back to at least Demosthenes' times, about the three centuries before the common era. And flowing from that and taking the well-known classical rootings of many of our Founding Fathers that they... we can assume that they were familiar with these deep historic roots, one could probably, even if you wanted to push it further, run the whole idea back into Scripture. When Daniel was released from the lions' den, the lions were not given a second chance at Daniel. Thomas Corbin went into the lions' den, and now the lions say we want to get another chance at him. These lions of the District Attorney's office in Dutchess County, taking an... a fatal accident that occurred on October 3rd of 1987... one of these lions, on October 14th, 1987 sent off to the defendant, Thomas Corbin, the document that appears on page 5 of the joint appendix, a document that was issued out the Office of the District Attorney in Dutchess County, signed on behalf of Mr. Grady, the Dutchess County District Attorney, by one of his assistant DAs, a Mark Glick, "please take notice that pursuant to Section 3030 of the Criminal Procedure Law that people indicate their readiness for trial in the above-captioned case. " The above-captioned case, on October 14, 1987 was the People against Thomas Corbin for driving while intoxicated as a so-called common law count under the VTL, and the People against Thomas Corbin for failing to keep right under another provision of the VTL. These are the two tickets he was issued. Having delivered themselves of this statement of readiness-- Antonin Scalia: Mr. Corbin had killed somebody, hadn't he? Richard T. Farrell: --Yes, sir, he had killed somebody and a member of the DA's-- William H. Rehnquist: Just... just... just a minute Mr. Steller. When a Justice answers... Mr. Farrell, when a Justice asks you a question, you... you don't say, yes, sir. Richard T. Farrell: --I beg your pardon. William H. Rehnquist: And I... I suggest you adjust your entire demeanor to that of a court. Richard T. Farrell: Yes, Your Honor. Thank you for your correction. Your Honor, the district attorney's office was aware, through the agent that was on the scene of the accident, that this accident had caused a death. It knew through its agent on the scene at the time... at the time... that there had been a fatality. Their office proceeded in one direction, and that was to prepare the case for presentation to a grand jury. But incident to that... incident to that... they indicated quite early on, within two weeks after the fatality, that they were prepared to prosecute on the tickets. Defense counsel appeared before the LaGrange Town Court on a date set by the court, set by the court, and entered a plea of guilty to driving while intoxicated. The town justice, not wanting to enter or make any sentence on that date, adjourned the case to a night when the district attorney's office was scheduled to have one of its representatives present. One of its representatives, Assistant District Attorney Sauter, showed up on the night set by the court for sentencing, unarmed with any information about case except what she could find in the court file, and in the court file all that was there were these two tickets. Justice Caplicki imposed sentence, a $350 fine, suspension of license, driving school. And six weeks later... six weeks later... the district attorney's office, or more precisely, the grand jury in Dutchess County, returned the indictment that gave rise to the initiation of the proceedings in this case, where the counts in the indictment were challenged both on state law grounds and under the double jeopardy clause of the state and Federal constitutions. The county court judge rejected the motion on the ground that somehow the defendant was guilty of procuring his own conviction, repelled division the second departments, Appellate Supreme Court of the State of New York, and proceeding in the nature of prohibition, dismissed, without any comment, and the case went to the New York State Court of Appeals. And then the New York State Court of Appeals, writing for a four-judge majority, Mr. Justice Titone held that although certain... the first... the manslaughter vehicular homicide or the vehicular assault charges in the indictment survived, a Blockburger-based analysis taking hold of the language in this Court's opinion in the Vitale case, the majority's observation that if the same evidence were to be used to support the prosecution on the homicide charges, there would be a substantial constitutional question. And seizing upon also, the language in the... excuse me... dissenting opinion, that to quibble with the characterization of the substantiality of the constitutional question, would rather simply be dispositive of the constitutional question held that Blockburger notwithstanding the prosecution in this case is barred under the double jeopardy clause as read by the court of appeals through its perception of the view of this Court as barring further prosecution. And it is on that holding that we come to this Court. It seems that of the protections of the Fifth Amendment this particular aspect... as I have mentioned... perhaps over-enthusiastically, and I apologize for that... this problem... this specific problem emerges in Vitale and has progressed through Thigpen where the Fifth Circuit in the Thigpen case in the decision below mounted the sort of analysis that we suggest ought be followed, that was followed by the New York State Court of Appeals, that was followed even more recently in a case we cite somewhat frequently in the brief, Connecticut decision of State v. Lonergan, to first parse the statutes themselves as written, the two statutes that are said to create the double jeopardy problem. If the two statutes do not survive a Blockburger-based analysis there, the double jeopardy inquiry ends, and the double jeopardy clause precludes prosecution... a second prosecution. The prosecutor, and I suspect, any prosecutor... certainly if I were a prosecutor... would look to have the inquiry end right there. And if that's where the inquiry ends, then that's where the inquiry ends. But it seems, from Vitale, and maybe perhaps by precursor language in the Brown case a few years before Vitale, that Blockburger is not the answer. Blockburger is an answer, an answer. The answer as to what the simple language, the simple, but as events since the adoption of the amendment indicates, complex problems presented by the double jeopardy clause lies in looking beyond the definitions, looking to the underlying idea, as this Court has said back in 1957 in the oft-quoted language of Green v. the United States, looking to the deeply ingrained idea that the state with all its power should not be allowed to make repeated attempts to convict an individual. Even earlier... I take that back... at approximately the same time that that statement was made by this Court in its opinion in Green v. the United States and a case decided a few years earlier, Brock v. North Carolina, writing at a time before the incorporation through the Fourteenth Amendment of the Fifth Amendment into the jurisprudence of the states, Mr. Justice Frankfurter in his concurring opinion said that in a due process analysis... in a due process analysis... fairness indicates that a prosecutor who has been incompetent or casual or even ineffective shouldn't be given an opportunity to see if he or she cannot do better a second time. It is the second time aspect that raises the question of whether there isn't even a third level beyond which the prosecution must pass before the prosecution is allowed the proceed to try the defendant again on a second charge where the factual matrix that gives rise to the second charge is sensibly indistinguishable from the first prosecution. Antonin Scalia: Of course, to agree with Frankfurter and Brock we don't have to adopt the rule that you're proposing. It's enough to... to support that, that you... if... if you're acquitted the first time, you can't then bring the same evidence that the jury has rejected the first time around back. Frankfurther says to see if the prosecutor cannot do better a second time. Richard T. Farrell: Well-- Antonin Scalia: The prosecutor is not trying to do better here. He won the first time; he's trying to win again the second time. Richard T. Farrell: --Mr. Justice Scalia, doing better does not necessarily mean trying to win again. But doing better can also, and as it does mean very often the civil context of res judicata cases, trying to get a better result, to enhance the outcome of the first case. Trying to do better in the kind of callous calculus of the criminal law, a... oh, good heavens... a conviction for a, let's say, second-degree crime could be considered not doing as well from the prosecutor's point of view as getting a conviction for the higher, the first degree, of that. And I think the language bears the fair construction that an attempt to do better is not only to try to convict the defendant who has once been acquitted, but to perhaps try to do better by convicting a defendant who's been once acquitted on a charge that arises out of the same operable set of facts, by convicting him over yet a higher degree of crime. William H. Rehnquist: Mr. Farrell, what if the death here had occurred several months after the... after the accident so that at the time your client was prosecuted for the misdemeanor charges in the justice court there had been no death? Richard T. Farrell: It's... it's quite clear, Your Honor, in the cases both of the state and in this Court, that if the prosecutor does not have available all of the information needed to mount the particular prosecution under attack, then the double jeopardy clause allows a prosecution as... as I understand your hypothetical, the so-called later-death cases. William H. Rehnquist: Now, how... how... how does that fit in under your version of the... the same-evidence test? Richard T. Farrell: The same-evidence test, as we would envision it being applied in this case, would be to take a look at the situation as the prosecutor knows it at the time that first guilt-imposing proceeding is ready to go to adjudication. And if we were to take that in this case, and look at what the prosecution knew... knew... when the defendant went before the court, the prosecution knew that it had evidence of intoxication. It knew that it had evidence of death. It knew that it had at least a pretty good reason to consider presenting this case to the grand jury. Because we are told by the prosecutor, Your... Mr. Chief Justice... that while these matters were percolating through the justice's court, the district attorney's office wasn't completely asleep in this case. They had retained an accident reconstructionist. They were having analyses done on the blood. They had impounded the cars that were involved in the accident. William H. Rehnquist: Under your theory, I take it, if the state were to have come several months later on evidence of intoxication which it didn't have at first, then there would be an exception for that too just like there would be for a later death? Richard T. Farrell: It would be difficult to imagine how that could happen, but I think that-- William H. Rehnquist: Well, just take it as a hypothetical. I mean, there seemed to have been enough slip-ups in this case so we can envision one more. [Laughter] Richard T. Farrell: --Okay. Including mine, Your Honor, which I apologize again. Antonin Scalia: They lost the blood sample and they find it. Richard T. Farrell: That one, Your Honor, I think I would have to say they had the information at the time. They had it. They had it, or they had it or they had it readily available. In the after-occurring death cases, the prosecution may have... and certainly no prosecutor's going to be sitting around saying, gee, I hope this victim dies so I can prosecute this guy for manslaughter. That's... that's horrible. But if this is what eventuates, if the prosecution moves ahead and moves ahead speedily and moves ahead intelligently and gets the conviction for what is... move it up from driving while intoxicated, let's move it up to a high-level felony assault... and then the victim dies, it's quite clear under the law of practically every state that I can confess to even some nodding acquaintance with... it's quite clear within the context of the cases decided by this Court that in the situation where the death of the victim whose injuries were the subject of an original criminal prosecution, the death occurs after... after conviction of the assault-level charges, there's no problem. There's no double jeopardy consequences, if for no other reason, there is no possibility of ever being put in jeopardy for that particular crime at the time of the original proceedings. That crime had one regrettable element that could not have been... could not have been asserted in the original proceeding. In this unhappy case, all the information that was needed was there or readily obtainable and sitting there ticking away in the criminal procedure law of the State of New York is CPL 170.20. CPL 170.20 gives the district attorney's office, so positioned as the District Attorney's Office in Dutchess County found itself with this case, the absolute right to go into a court like the LaGrange Town Court, move for an adjournment on the ground that there is an intention to submit the case for indictment. And the statute quite clearly says that the judge, Justice Caplicki, in this case, must grant... must grant-- William H. Rehnquist: Well, let me ask you another question. Supposing you're in a jurisdiction where the state was not obligated to or didn't in fact submit a bill of particulars. How would you handle your same evidence test on a double jeopardy argument if... if the state indicts on the... on the greater offense? Richard T. Farrell: --If we were to replicate this case in Illinois... in Illinois, where apparently this is not necessary because that is how Illinois v. Vitale got here... if we were to replicate this case, like your hypothetical case, Mr. Chief Justice, who are in Illinois, I would suggest that the approach taken in Vitale might have to be re-examined and to look at... and look for... look for... for this Court to look for in the proceedings in the lower courts the motion to dismiss, let us say, the second indictment, any hearings that are held on that second indictment... to look for the defense... the defense... to establish beyond at least any reasonable question... not beyond a reasonable doubt... but to establish clearly that the prosecution can move ahead only on the same evidence. William H. Rehnquist: Now, how would the defense go about establishing that? Would they call the prosecutor to the witness stand? Richard T. Farrell: I suggest, Your Honor, if we take it in this case I think we could probably call the investigating officers, we could call forth the blood-- William H. Rehnquist: Well, they... they could certainly give you testimony as to what happened, but I would think there would be no guarantee that the state would necessarily use all the testimony of the investigating officers. Richard T. Farrell: --No, Your Honor. But in a very simple, straightforward... on terms of the factual context... situation like the one presenting us in this case... I think the simple... I think that the defendant could probably meet my rather favorable standard in the course of the defense by demonstrating the reasonableness... the reasonableness... of the assertion that there is no rational conclusion to be reached except that the same evidence that the same evidence that has already convicted me will be part, parcel, if not all of the essential meat and potatoes of the prosecution's case against me on this second go-round. I'm quite mystified that the Illinois Criminal Procedure Law is equivalent... doesn't permit the kind of liberal disclosure in advance of trial that is permitted under, as I understand, in the Federal rules of criminal procedure. It certainly is required or permitted under Article 240 of the Criminal Procedure Law in New York. There might be a little preliminary digging that might have to be done by the defendant to make out the same evidence argument, but I don't think it is that terribly difficult a problem for... it would not be a terribly difficult burden to impose upon defendants to bear the... if not the onus probandi, at least the burden of persuasion that the same evidence will be used in the second prosecution. And then... and then... and then we have set the stage for the preliminary attack on the second trial which this Court has since Abne has indicated that it is the only successful or satisfactory way of resolving the problem confronting a defendant under the double jeopardy clause. And that is it's all very well and good to say that it was a double jeopardy clause, but if you want to establish the double jeopardy argument the defendant has to undergo the travail, run the gauntlet, if you will, to borrow off the language of this Court, of the second trial to make out his or her double jeopardy argument, the double jeopardy clause becomes a rather unhelpful piece of the Bill of Rights as to-- Anthony M. Kennedy: Well, it seems to me that's the consequence of your test. That we're not... unless you adopt the transaction test... but if... if you adopt something short of that, as you propose, you're not going to know about double jeopardy unless, one, you wait for the second trial to actually proceed, or, two, you have some sort of mandatory bill of particulars. Richard T. Farrell: --Well, Mr.... Mr. Justice-- Anthony M. Kennedy: And I'm... I'm not talking necessarily about this case because we seem to know in this case what's going to happen. Richard T. Farrell: --Yes, Mr. Justice Kennedy, if we were to be willing to rest on a Blockburger first, same... evidence test second, then the problem of the same transaction would not be solvable. But the thrust of our brief is that there are at least three identifiable in the jurisprudence of this Court... three identifiable tests... screens, if you will... filters, through which the prosecution must pass. William H. Rehnquist: What is the third? What is the third... was the third one the same-transaction test? Richard T. Farrell: The third one is the same transaction test, Mr. Chief Justice. William H. Rehnquist: That's never been adopted by the Court, has it? It's been rejected several times. Richard T. Farrell: No, sir, and it has been pointed out that the Court's declination to adopt that test has been characterized in one of this Court's writings as a steadfast refusal to adopt it. But I would like to take the time that's available to me in the argument to suggest that perhaps the steadfastness of that refusal might warrant some reexamination in this case adding a couple of... a couple of additional observations to what has probably been said better, and said, perhaps, more often, and perhaps more articulately than I can say it. But there is, underlying this whole double jeopardy problem a consideration of the fairness to the defendant, who is facing the somewhat awesome power of the court. And it would seem if one were to take general approach of a state statute like CPL Article 40 which says if you've got the material, put it all in one indictment and prosecute. Like the suggestions made in the model penal code that are cited in our brief in opposition to the petition of certiorari, like the cites in the American Bar Association... I think Project for Minimum Standards of Criminal Justice... that where there is, as we also say in the brief in the civil case, the reasonable expectation... the reasonable expectation that... by the bench and by the bar that these claims would all be asserted in a single vehicle, then that reasonable expectation is part of the reasonableness that is inherent in the term fairness. And the fairness that is inherent in the system is translated in this context into a... an adoption of principles of res judicata, collateral estoppel, borrowed quite clearly and liberally from the civil side into this specific problem presented by cases like this. Thurgood Marshall: Mr. Farrell, before you sit down, what case do you rely on? Richard T. Farrell: Ashe v. Swenson. Thurgood Marshall: Thank you. Richard T. Farrell: Mr. Chief Justice, I apologize, again, for my enthusiasm, my excesses. Thank you very much. William H. Rehnquist: Very well, Mr. Farrell. Mrs. Steller, you have five minutes remaining. Bridget R. Steller: Thank you Mr. Chief Justice, and may it please the Court: Mr. Farrell has discussed the issue with fairness to the defendant. In this case the defendant was on noticed by virtue of Section 1800(d) that he could be prosecuted for the assault and homicide in spite of his guilty pleas to the vehicle and traffic offenses. And this is a scheme which must be viewed as also fair to society. In fact, here, prior to sentencing, the defendant knew that the prosecution intended to present this case to a grand jury. This is the defense counsel, who may well have been the only person in the room who knew about it, but he knew about it. The judge and the prosecutor who was present did not. Mr. Farrell has also indicated that this case should be governed by New York State Criminal Procedure Law Section 170.20 which provides that the district attorney may stop any justice court proceeding. That is a general provision of the criminal procedure law of New York. The vehicle and traffic provision is a much more specific one. The criminal procedure law presumes that the district attorney will know about a case. The vehicle law recognizes that vehicle and traffic is slightly differently, and that because-- Byron R. White: Well, this hasn't got a whole lot to do with our double jeopardy question, does it? Bridget R. Steller: --I think it does, Your Honor. Byron R. White: Does it really? Bridget R. Steller: I think that this Court in deciding this case has to craft a rule which will be fairly simple and can be applied in all 50 states. And I think that there are many cases, not just in New York, but also in... I... I think Connecticut is specific to this... that it's possible in a vehicle and traffic charge for the district attorney to have no notice and to have somebody plead guilty by mail. Similarly, I believe, New Jersey can do this. But here, if you look at it, the district attorney had no notice that this case was on the calendar in LaGrange on October 27th. That is the day the plea was entered. And without notice of the date of the appearance that the defendant was supposed to be in court, there would have been no requirement that the district attorney present-- Thurgood Marshall: Well, isn't all of this, the people of New York? Bridget R. Steller: --If you are to presume-- Thurgood Marshall: You only have one state. Bridget R. Steller: --That's right, Your Honor. Thurgood Marshall: And... you... the state speaks with one voice. Bridget R. Steller: That's right, Your Honor, but the district attorney is charged with-- Thurgood Marshall: xxx all prosecutions? Bridget R. Steller: --That's right, Your Honor, and the district attorney-- Thurgood Marshall: So what is your problem? If he... if he makes a mistake? Bridget R. Steller: --It's not just a mistake, Your Honor. Even in the absence of a mistake-- Thurgood Marshall: If he doesn't know what's going on? Bridget R. Steller: --Even in the absence of a mistake, Your Honor-- Thurgood Marshall: If he doesn't know what's going on, who gets blamed? Do you... you don't think that the defendant is obliged to tell the prosecutor, prosecute me? Bridget R. Steller: --No, I'm not saying that, Your Honor. Thurgood Marshall: You don't put that on him, do you? Bridget R. Steller: I'm not saying that, Your Honor. But what I am saying is that the district attorney is entitled to a fair opportunity. And if he has no notice of the date on which the appearance is scheduled, or on the date that the plea is entered, he can't stop it. Thurgood Marshall: He did get notice. Bridget R. Steller: No, Your Honor, he didn't. Thurgood Marshall: He didn't for six months? Bridget R. Steller: Your Honor, he had no notice on the night the plea was entered that the case was even on the calendar. Thurgood Marshall: Well, wasn't it in the newspapers? Bridget R. Steller: Judge, I don't think you can presume-- Thurgood Marshall: Wasn't it in the newspapers? Bridget R. Steller: --Yes, Your Honor, but as a practical-- Thurgood Marshall: Well, did... didn't that tell him what was going on? Bridget R. Steller: --I don't think that this Court... I don't believe that this Court can presume on this record that anyone in Dutchess County read the newspaper on the morning of October 4th. And I believe, specifically-- Thurgood Marshall: Well, then did it... do you have news-- Bridget R. Steller: --There is a-- Thurgood Marshall: --Just to speak for myself, do you have newspapers in Dutchess County? Bridget R. Steller: --We do, Your Honor, but I-- Thurgood Marshall: Well, if you have them, I assume somebody read them. Bridget R. Steller: --Your Honor, on the morning of October 4th... this is referred to in the district attorney's answer in the county court to the defendant's motion to dismiss the indictment. There was a blizzard. There's a state of emergency here. And I don't think you can presume that anybody in Dutchess County read the newspaper, just as I don't think that anyone on this Court can presume that somebody in Charleston read the newspaper the morning after Hugo struck. Thurgood Marshall: There was a storm yesterday, and I read the newspaper. Bridget R. Steller: Your Honor, I don't... this is October 4th in the Mid-Hudson Valley. The leaves are on the trees. It's not just a snow storm. It was a blizzard. And if you think about the effect of a blizzard when you have leaves on the trees-- Thurgood Marshall: I am unwilling to write any constitutional law based on a blizzard. [Laughter] Bridget R. Steller: --That's correct, Your Honor. On the other hand, there's no constitutional law that you can presume that somebody read the newspaper. William H. Rehnquist: Thank you, Mrs. Steller. The case is submitted. The honorable court is now adjourned until Monday next at ten o'clock.

Warren E. Burger: We will hear arguments next in 1303, Bishop against Wood. Mr. Smith, you may proceed whenever you are ready. Norman B. Smith: Mr. Chief Justice and may it please the Court. I am Norman Smith from Greensboro, North Carolina, the counsel for petitioner in this case. Petitioner is a former member of the Marion North Carolina Municipal Police Force. He was dismissed on March 31, 1972 after nearly three years of uninterrupted service as an officer. He had achieved permanent employee status after successfully completing a six-month probationary period. Certain aspects of the Marion personnel ordinance relate to discharge procedure, which I will discuss in a moment, and certain reasons were given to Mr. Bishop for his discharge, which I shall also discuss presently. This suit was instituted in the United States District Court for the Western District of North Carolina alleging wrongful discharge without notice and hearing. Cross motions for summary judgment were filed. The District Court granted the respondent’s motion. The matter was brought to the United States Court of Appeals for the Fourth Circuit where a 2:1 carrying panel decision was in the respondent’s favor and it was reheard en banc and affirmed by an equally divided Court. This petition was granted and, now, the case is here. The case, we think, is very critical and that it involves applications of principles announced by this Court in Board of Regents versus Roth and Perry v. Sindermann, as further explicated in Arnett versus Kennedy. First of all, we contend that the petitioner had property rights grounded in statute which gave rise to procedural-- William H. Rehnquist: Mr. Smith, let me call your attention on page 19 of your petition for certiorari, a part of Judge Jones’ opinion in the District Court where he says in about the third paragraph on that page that the page, that one little sentence paragraph. “It further appears that the plaintiff held his position at the will and pleasure of the city.” I read that as an interpretation of local ordinance and the state law that was affirmed by the Court of Appeals. How do you get around that in view of the language in Roth and Perry that these kinds of things arise as a matter of state law and are regulated by state law? Norman B. Smith: I do not think this case has said that a United States District Judge is a Court of last resort as far as determining what state law is and-- William H. Rehnquist: But, here, you have got the District Judge in North Carolina who is presumably a North Carolina practitioner before he took the bench. You have got a panel of the Fourth Circuit which deals with North Carolina who are all much more regulated than we do. Are you asking us to second guess those two Courts on what Carolina law is? Norman B. Smith: The record is before the Court and we submit there is nothing intuitive about North Carolina law that it is written and whatever it applies is here and we think the Oral Court is manifestly wrong on the record of this case. William H. Rehnquist: But do you do want us to reach a contrary result on the question of North Carolina law as to that reached by Judge Jones? Norman B. Smith: Absolutely, we think there is nothing in the record that supports his conclusion that petitioner held his position at the will and pleasure of the city. The Court of Appeals wrote no opinion on the matter. The only opinion written by the Court of Appeals was Judge Winter’s, in my judgment, compelling a dissenting opinion. Four out of the seven judges in active service would have favored my position. Now, the statute in question-- John Paul Stevens: Before you leave that point, the respondent’s brief cites a couple of North Carolina cases at page 11 of their brief. Norman B. Smith: Yes, sir. John Paul Stevens: In which they say they stand for the proposition that the contract is terminable at will. You did not discuss those cases in your reply brief. I wonder if you plan to discuss today. Norman B. Smith: If Your Honor will please, our view those of cases as having to do with private employment and employment in the absence of one; a personnel ordinance, such as we have here, or anything analogous to it in the way of contract and, two, in the absence of a fixed probationary period with a maturation into a permanent employment classification and, thus, I feel the cases just deal with a common law of employment in the absence of agreement and ordinance to the contrary and are not controlled. John Paul Stevens: On the basis the statute is giving your plan some kind of-- Norman B. Smith: Primarily, yes, sir. The statute and practices of the city. Warren E. Burger: Mr. Smith, is it customary for the Fourth Circuit in the 4:4 affirmance by an equally divided court for some of the judges to write as the dissenting opinion of-- Norman B. Smith: If Your Honor please, the dissenting opinion was produced by Judge Winter when there was a hearing panel of three. No opinion came out of the 4:4 decision. We assume that Senior Judge Bryan was consistent. Warren E. Burger: When the en banc hearing was granted that washed out everything that had gone before in the panel, did it not? Norman B. Smith: I presume so. Nonetheless, I think Judge Winter’s opinion is very persuasive simply because of Judge Winter’s reasoning and I think that it should be regarded by the Court as being correct. The ordinance in question, it is very brief and I thought I would read it. A permanent employee whose work is not satisfactory over a period of time shall be notified in what way his work is deficient and what he must do if the work is to be satisfactory. If a permanent employee fails to perform up to the standard of the classification held or continues to be negligent, inefficient, or unfit to perform his duties, he may be dismissed by the city manager. To us, it is very clear that this ordinance establishes four causes for dismissal. One: work not up to standard, two: negligence, three: inefficiency, four: unfitness for duty. And, next, we think it is very clear that this ordinance establishes certain prerequisites to dismiss procedural prerequisites. One, that there must be a notification of the deficiency and, two, a continuance of the performance in a deficient manner and, three, a statement of explanation. John Paul Stevens: Now, that, you in fact read into the language that you read to us. Would the part of the ordinance, the last sentence of it, that you did not read to us rather cast in some question what you read between the lines because it explicitly says what a discharged employee shall be entitled to. Would that not indicate he is not entitled to anything else? Any discharge employee shall be given a written notice of his discharge setting forth the effective date and reasons for his discharge if he shall request such a notice. Norman B. Smith: That is correct, sir. We think that is an additional procedure that has to be undergone and I will undertake to discuss in a moment. I could now, if the Court wished. Why we feel that the very minimal procedures set forth in Section 6 are not binding in the determination of the substantive rights that are created by that Section. I feel that, at least the six justices of this Court in the Arnett case would so hold. Now, the respondent concedes at page 10 in their brief that the ordinance is mandatory as to notification. This concession is very important. They say it is mandatory as to notification of a deficiency in performance. Potter Stewart: In any event or only if requested by the-- Norman B. Smith: No, I am not talking about the police discharge notice. I think, I am interpreting the respondent’s brief correctly. On page 10, first sentence, “although the ordinance is mandatory with respect to notifying employees of areas of deficient performance, it is merely permissive as to their dismissal for failure to perform.” So, the mandatory provision conceded by the respondents is that requiring the pre-discharge notice. In other words, the notice that must be followed by an opportunity to reform and demand one’s conduct. The District Court assumed, on 15 of the certiorari petition opinion, that the ordinance had been fully complied with. Of course, we think that assumption is manifestly incorrect for reasons which we will state in a moment. But once it is established by the concession made by the respondents and by the assumption of the District Court that it is necessary to comply with certain procedures before terminating a public employee’s employment then we think the property rights are confirmed. The property rights that bring due process considerations into play are confirmed. We have an alternative argument which I will rely upon the briefs and will not take the Court’s time. The fact alone that this employee was classified as a permanent employee after six months probationary service, that, alone we feel gave him a property right to which the Fourteenth Amendment -- Warren E. Burger: (Inaudible) Norman B. Smith: Yes, Your Honor. Thank you, sir. Warren E. Burger: You may continue, Mr. Smith. Norman B. Smith: Thank you, Your Honor. May it please the Court. I would like now to turn to the Fourteenth Amendment liberty interest that we feel are identified in this case in which we think provide an equally alternative basis for procedural due process requirements. At the time of the discharge, the chief and the city manager refused to discuss their reasons with petitioner as to why he was being let go. Later, upon request and in accordance with the ordinance that we have cited, a written statement of reasons was furnished stating that petitioner’s work had been unsatisfactory and that he had refused to attend certain schools. Of course, the petitioner takes exception to these and says that these statements are false. William H. Rehnquist: Was this furnished to petitioner in private, more or less, just by a letter or was it publicly announced? Norman B. Smith: It was furnished privately in a letter, if Your Honor please. The ordinance says that one may ask for written reasons and the petitioner did so and they were furnished. Potter Stewart: And at the petitioner’s request? Norman B. Smith: Yes, Your Honor, and later on when-- Potter Stewart: Be it public record? Norman B. Smith: Well, under North Carolina law, I am inclined to think they would. We have a very broad public records statute which is not mentioned in the brief but it has only very narrow exceptions and, without going back and reading it, my inclination would be to say that, yes, this would be a matter of public record. William J. Brennan, Jr.: Is the record available to some new employer if he sought employment after his discharge here? Norman B. Smith: Yes, sir, certainly. William J. Brennan, Jr.: There is no prohibition against showing it? Norman B. Smith: None whatever. William J. Brennan, Jr.: No requirement that it be shown? Norman B. Smith: No requirement that it be shown except pursuant to our public records law and I am inclined to think it would be available. The public records law is very explicit and quite simple and quite short, and I am just sorry I do not have the citation in my mind. It is relevant but it, some way or another, did not get into the briefs. William J. Brennan, Jr.: Mr. Smith, while I have you interrupted. Norman B. Smith: Yes, sir. William J. Brennan, Jr.: I gather you make this argument as a reason for reversal apart from the finding of the District Judge that he was not a permanent employee even if he were only a temporary employee. Norman B. Smith: Precisely, even if he were only probationary or temporary or did not have any property interest, clearly, if his liberty interest was of a constitutional magnitude, he would be entitled to procedural due process. William J. Brennan, Jr.: Because of the nature of the reasons given at his request why-- Norman B. Smith: Well the initial reasons, no, Your Honor. The initial reasons are not, I think, of the kind that would require that unsatisfactory work, refusal to attend schools. At least, I do not argue that they are sufficient. Perhaps some would, but later when this action was brought in District Court, the Chief of Police under oath, by affidavit, gave his real reasons for discharging petitioner. These were much more serious and did implicate the liberty interest of the petitioner. William H. Rehnquist: So it was only at that stage, you say, that the liberty interest was implicated? Norman B. Smith: It was only then that it became disclosed to us, but we must assume that the Chief of Police was telling the truth under oath when he filed his affidavit and we must further assume that he has extra judicial statement not under oath was false, or else he would have been committing perjury. William H. Rehnquist: Then that leaves you in this position. There was nothing implicated of liberty interest at the time of the discharge or even in response to petitioner’s request for a letter. It was only when you sued them that this came out as a legal defense in their eyes. Do you think that is in the same posture as if they had simply announced it without any lawsuit? Norman B. Smith: I think whenever one reasonably suspects that his liberty interest have been violated, he can go to Court and ask the person who fired him, under oath, to say what the reasons were. William H. Rehnquist: But if your liberty interest has not been violated at the time you file a lawsuit and the violation occurs only as a result of another party’s pleading to the lawsuit that you brought against him, do you think that is on the same pleading as if they publicly announced it at the time of discharge? Norman B. Smith: Well in response to that, Your Honor, it is well known that a lot of times employers will not be candid with employees to their face and say the reasons but it must be assumed, I think, that for prospective employers and others who inquired about petitioner’s conduct I think it must be assumed that the chief would have given these real reasons. William H. Rehnquist: But is there any evidence that he did, in fact, give them to anybody else before the lawsuit? Norman B. Smith: No, sir, there is none. Warren E. Burger: You are confusing me a little now, Mr. Smith. What about that private letter? Do you claim that placed some kind of a stigma on him? Norman B. Smith: I think it could be argued there that it did, but in canter, I am not satisfied that it did. It said unsatisfactory work and refusal to attend schools. I am hesitant to say that that rises to a liberty interest. Of course, I would not argue with a majority of this Court if they would have not thought otherwise because that would be a very favorable result, but I am unable to argue that in good conscience. John Paul Stevens: Mr. Smith, what in the affidavit do you contend affected his liberty interest? Norman B. Smith: Well, there were four things: disobedience of orders, insubordination, causing low morale, and engaging in conduct unsuited to an officer. These are on pages 32-34 of the appendix. And these of course, I think, clearly rise to the level of liberty interest. You are saying that a person is deliberately disobedient. He is insubordinate. He is causing low morality and engaging whatever it is in conduct unsuitable to an officer has a certain moral tinge to it, I think. Now, I think it would be terribly unjust to allow the earlier and now admittedly false reasons to control. I think the true reasons ought to control and I think it ought to be assumed that prospective employers and others who inquired were given the true reasons-- William H. Rehnquist: But there is no evidence in the record that any prospective employer did inquire, is there? Norman B. Smith: No, there is no evidence. Of course, this case comes up on cross motions for summary judgment and, presumably, if we go to trial this is one of the issues that would be explored. Clearly, it is a relevant and an important issue. William H. Rehnquist: Did you have an opportunity to do any discovery? Norman B. Smith: We engaged in very limited discovery and, I must say, that is one line of discovery I did not pursue. William H. Rehnquist: Are you not supposed to think about it at the time it is in the District Court rather than the time it is up here? Norman B. Smith: Yes, sir, I concede that neither I or any other lawyer can think of everything in order to be thought of at the trial level and I feel that there are ample reasons for remanding this case for a determination on the merits and that this is one of the things that would come out in the end. Byron R. White: Arnett v. Kennedy have cited to the Court of Appeals in connection with the en banc request? Norman B. Smith: The Arnett case I believe, Your Honor, had not been decided at the time en banc consideration was granted. It had just been decided when we argued the case en banc. It was not cited, as I recall, in either of the briefs. I do recall-- Byron R. White: You do not recall the oral argument? Norman B. Smith: I do recall Judge Russell asking some questions about the Arnett case and I do recall that I was not, at that time, very able to deal with his questions because the case was very new. William H. Rehnquist: Well, it was reheard en banc, was it not? Norman B. Smith: That is right, Your Honor. Yes, sir. Byron R. White: It was actually argued. Norman B. Smith: Yes, sir, it was. Byron R. White: It was actually argued and you think Arnett was or was not cited? Norman B. Smith: Arnett was cited in oral argument. The record would not show that but the recordings of the oral argument in the Fourth Circuit would. It was discussed in oral argument. Byron R. White: It cited Arnett even on the petition for certiorari. Norman B. Smith: My memory is in, but if Your Honor says so, I assume it is great. Of course, we did rely on Arnett in our brief. I do feel that this clearly comes under Roth and Sindermann, and that is the reason we are here. I think that those cases should control the outcome of this case. Now, as to whether a mere -- Byron R. White: Could be viewed the same that under state law, even if you could only be fired for a cause, that nevertheless by failing to provide any procedure other than notice and reason that that define the procedural entitlement of the employee. Norman B. Smith: Yes, sir. Byron R. White: And that under state law, that is all he is entitled to. Norman B. Smith: Well, do you think that stands under Arnett. According to Your Honor’s opinion, six members of the Arnett Court and I suppose five members of this Court would hold that once the property or liberty interest is defined by state law that the procedural requirements are constitutionally defined and are not defined by state law. That is my reading of the opinions in Arnett, and we feel quite strongly that this is so that while state law, of course, creates certain rights, it is the Fourteenth Amendment, Due Process Clause that determines how these rights will be adjudicated and how they will be determined in the administrative process. So, we say that the full range of rights from Goldberg versus Kelly and other cases, in other words, a trial type hearing is what is required once the liberty and property interest of constitutional magnitude are identified. The respondents have shown no pressing circumstances such as those present in a prison disciplinary situation or a public high school disciplinary situation that would require any truncating of the due process requirements or any shrinkage of it. We think that there is ample time and proper place when an employee is to be deprived of a job to which he has a Fourteenth Amendment entitlement. We think there is time and place for a due process hearing to be held. Clearly, this was not done in the present case. Now, even if one were to look at the plurality opinion in Arnett and take the position that whatever source of the property interest at stake, that should also be the source for the procedural requirements even if one were to take that view, a view which I submit cannot be taken, still the respondents are deficient and were in violation of petitioner’s rights. In the first place, he was never notified of any deficiency in his work, at least on summary judgment that must be taken because that was petitioner’s evidence, although it was in dispute. Secondly, the written statement did not contain the true reasons for discharge. They contained false reasons. So, we feel that the very procedures outlined by the ordinance were not adhered to and clearly-- Warren E. Burger: Are you saying they are false or they were just not a complete statement of the reason? Norman B. Smith: Well, it would be-- Warren E. Burger: False? Norman B. Smith: It would be charitable to say that they were not complete, if one asked for a list of all reasons that he is terminated and he is told that he is terminated because of unsatisfactory work and refusal to attend schools, and later on he finds out that he has been terminated for all these things that implicate his morals and his-- Potter Stewart: Well, are all those detailed things no more than specific ingredients of the generic reason of unsatisfactory work? Norman B. Smith: I do not think so, Your Honor. I think one can be terminated for unsatisfactory work and get along and it probably does not give rise to a liberty interest, but if the unsatisfactory work consists of deliberate refusals to obey, or insubordination, hostility, all of these sorts of things-- William J. Brennan, Jr.: There is a stigma that unsatisfactory work is not. Norman B. Smith: Precisely. Warren E. Burger: My question is would they not be subsumed under the generic reason of unsatisfactory work? Norman B. Smith: Well, I-- Warren E. Burger: I am suggesting only that perhaps the responses were not mutually inconsistent but one was just a little particular, so to speak, and the other was a more generic reason. Norman B. Smith: Well, it is conceivable. I view them as being a change of approach and I view them as the Police Chief coming out with the real reasons and reasons which are basically inconsistent with those first disclosed, but they could be regarded as-- Warren E. Burger: Are these set of reasons false? Norman B. Smith: I think so, if Your Honor please. I think such a material difference makes it clearly incomplete and, in my view, false. I do not think the falsity of the first set is necessary. I think the incompleteness suffices, if those reasons which were not disclosed are liberty-implicating reasons or reasons which carry stigma and tend to degrade the petitioner’s good name, reputation, and honor. William H. Rehnquist: Well, under your theory, supposing you have a Sindermann type case, where the plaintiff sues claiming a guarantee of some sort of tenure plus a deprivation of First Amendment rights. He was fired for reason impermissible under First Amendment, and no reason is ever furnished at all for his discharge. He is simply discharged and nothing more is said. And then at the hearing on the motion for summary judgment of the case, in order to rebut the First Amendment argument made by the plaintiff, the respondent employer sets forth the real reasons that he discharged you which had not been made known to anybody up to now. Do you think that at point, the employee has an additional claim based on a deprivation of a liberty interest because some of the respondents followed the law? Norman B. Smith: Yes, sir. I think if the real reasons are stigmatizing that that brings the right to a hearing into play, I do not think that the employer should be allowed to benefit or to be shielded as a result of either his falsehood or his inaccuracy of his first description. I think that is manifesting unfairly. William H. Rehnquist: It never would have come out unless the employee had brought a lawsuit. Norman B. Smith: I certainly believe that, Your Honor and I think whenever and however it comes out, if it comes out in such a way as to come within the test set up in Perry and Roth, I think he needs to be accorded his rights. Potter Stewart: I rather thought that Perry and Roth, it was Perry specifically, that held that if government, the state or federal, terminated an employee upon the purported ground of some stigmatizing reasons such as you are being fired because you embezzled money, that the termination upon that purported and publicized ground is what made it a colorful liberty interests and that what entitled that employee to a hearing to show that although he might have been terminated he did not embezzle the money but here, as my brother Rehnquist suggests, you do not have that situation to describe. You do not have a termination of employment upon any purported stigmatizing ground according to your own submission. Norman B. Smith: But you have an employer who is covering up and-- Potter Stewart: And at that point that you brought your lawsuit. Norman B. Smith: When you have employer who is covering up and concealing the truth and you think he is and you bring him into Court and you get him to tell the truth, I think you ought to be able to benefit by whatever the truth is. Potter Stewart: If that is the truth, then that is the end of it. The only purpose of the hearing is to show that it is not true. Norman B. Smith: I am talking about the true state of the employer’s mind, the true reasons the employer had, and of course, the due process hearing would determine whether they are in fact true, and we most emphatically deny that any of these charges are true as is set forth in the record. William H. Rehnquist: What motive does an employee have, he was given no reason for his discharge, to sue his employer in order to induce his employer to libel, really which is what you are saying that he is doing? Norman B. Smith: If he feels he is being terminated because of his liberty interest, I submit that that is a perfectly valid reason for him to go to Court. Potter Stewart: He has been by definition under Sindermann if that was not the reason given. Norman B. Smith: Well, he thinks that is, although that is the reason, it is not but why should he not be permitted to go into Court and have the parties tell the truth about the situation. I feel that it would be just unjust to hold that. One should not be bound by what he says is the truth in Court. I see my time is almost run out and I will save whatever remaining time I have for rebuttal if I may. Thank you. Warren E. Burger: Mr. Burgin. Charles E. Burgin: Mr. Chief Justice and may it please the Court. I begin my presentation to this Court with an assumption. I am here in behalf of the City of Marion and its two officials who were sued in their representative capacities under the Civil Rights Act and under the amount in controversy statute 28USC1331. The first assumption that I make is about the reply brief filed by the petitioner. The petitioner has now conceded that the city cannot be reached under 42USC1983 and this case. The second concession that the petitioners made in this reply brief is that the state of the record, at this point, is not sufficient for a proper determination of whether or not jurisdiction exists under 28USC1331 and, unless the Court has some questions with regard to those two matters, and I shall attempt to confine my discussion of the case to other portions of the case. May it please the Court, Mr. Bishop, the petitioner in this case was hired as a policeman by the City of Marion in June of 1969. At the time he was hired, there was no personnel ordinance. This personnel ordinance that we are now talking about was adapted on April 4, 1970, some-10 months later. The petitioner was discharged after having been employed for two years and ten months. He was discharged on March 31, 1972. He, then after, brought suit against the city and he brought suit against the two officials in their representative capacities. Now, we made the point about that in our brief and we have, from the very start of these proceedings. Before I get into that, I have the permission of my brother, Counsel here to advise the Court of two more facts. The Chief of Police, one of the respondents of this case, Mr. Wood was disabled by a stroke and is no longer employed by the City of Marion. He seized working on November 17, 1972. The other respondent, the City Manager, left the City of Marion on November 30, 1972 and has taken a position as City Manager with another city in North Carolina. Potter Stewart: You represent these two individuals, I take it. You are their attorney nevertheless. Charles E. Burgin: Yes, Your Honor. Yes, sir. We have contended in part one of their brief that because this suit has been directed against the municipality and against two of its officers and their representative capacities, that the Federal District Court had no jurisdiction under 42USC1983 by its jurisdictional counterpart 28USC1343. We have contended throughout and we do still contend that this suit is not only informed but is in substance against the city, and that these officials who are named, the City Manager and the Chief of Police, are named only in a nominal capacities as representatives. William H. Rehnquist: What do you mean nominal capacity as representatives? Charles E. Burgin: That they were the agents of the city, Your Honor, they carried out the provisions of the ordinance. They are named to get to the city. William H. Rehnquist: Well, but if you take Monroe against Pape, a case like that where they held you could not recover against the City of Chicago, this Court held. You could, I take it, recover against the individual policeman in that case. I would think in your case, although you could recover against the city, you could recover against the named individuals if they were city officials. Monetary damages are sought, as I understand the complaint. Charles E. Burgin: Your Honor, we take issue with that point. We think that monetary damages are not sought. The Chief of Police, Your Honor, with the-- Thurgood Marshall: I would assume this suit, whoever filed it. Charles E. Burgin: Well, the-- Thurgood Marshall: Who filed the affidavit? Charles E. Burgin: The Chief of Police and the City Manager. Thurgood Marshall: Do you say they are not responsible for that? Charles E. Burgin: They are responsible for the affidavits, yes, sir. Thurgood Marshall: They are responsible for firing him. Charles E. Burgin: They are responsible for firing him only in the sense that they were acting in a representative capacity as only the city could have. They carried out the provisions of the ordinance which was their duty to do so. Thurgood Marshall: To fire him? Charles E. Burgin: Yes, sir. Thurgood Marshall: Are you saying he can call his representative capacity when you are suing them for damages for firing him and I understand the petitioner’s position to be that what he said in that letter might be liable? Charles E. Burgin: Well-- Thurgood Marshall: The city would not be responsible to be directly -- Charles E. Burgin: For the lie? Thurgood Marshall: Yes. Charles E. Burgin: No, sir, if there was in fact a liable - Thurgood Marshall: But if there was, who would be liable? Charles E. Burgin: Well, the-- Thurgood Marshall: They will be liable, would they not be? Charles E. Burgin: Absolutely, in his individual capacity. Thurgood Marshall: But he is not even in this case. Charles E. Burgin: He is not in this case in his individual capacity. Your Honor, to get back to your question, Justice Rehnquist, damages against these individuals as individuals, we contend, are not requested. William H. Rehnquist: Well, Mr. Burgin, in Judge Jones’ opinion on page 12 of the petition for writ of certiorari, the first paragraph of his opinion says, referring to the petitioner, he seeks an order requiring the defendant to reemploy him and a monetary award of damages consisting of his wages from March 31 ’72 to the date of judgment. Charles E. Burgin: Yes, Your Honor. William H. Rehnquist: Will you not regard that as a prayer for damages? Charles E. Burgin: No, Your Honor. I regard that as a prayer for back wages. I think that the petitioner regards it thusly also because in his brief, and we have put this in our brief and the petitioner’s brief. On page 6 of petitioner’s brief, he states that he is seeking reinstatement and back pay. William H. Rehnquist: What is the difference between back pay or back wages and damages in a case like this? Charles E. Burgin: Well in our mind, there is a great deal of difference. Back pay can only come from the city. William H. Rehnquist: Well, that may be true but Judge Jones opinion talks about damages, as I take it, if one of the individual defendants in this case wrongfully and unconstitutionally fired the petitioner he might be liable for damages even though he, not being the city, could not pay “wages.” Charles E. Burgin: That is correct. Potter Stewart: Damages would be measured by the loss of pay. Charles E. Burgin: That is right but we say, if Your Honor please, that that is not what they are asking for. That the word “damages” is not controlling, that the word “back pay” is. They do not say damages in form of back pay. They say damages consisting of the back pay. Potter Stewart: In any event, I hope you are going to save sufficient time to argue the merits. Charles E. Burgin: Yes, Your Honor. I will get to the merits at this time. I simply point out one case in support of our position which we think is that the principles enunciated in the case are in support of the principles which I have just stated and that was a case decided by this Court in 1949, Larson versus Domestic Foreign Commerce Corporation in 337US682, in which it was stated that the actions of an officer if not in conflict with the terms of his valid statutory authority or the actions of the sovereign. With regard to part three of our brief, the question of whether or not this policeman had a property interest, we start with the premise of the Federal District Court which we think is a correct premise that the respondents complied with this ordinance and applicable state law in discharging Mr. Bishop. We say that the course that-- Byron R. White: Would it apply to the state law in response to a request to give the reasons for discharge, the city said they did not have any? Charles E. Burgin: Yes, sir, I think it would. Byron R. White: So that you could be fired at will without a cause at all. Charles E. Burgin: Yes, sir. Byron R. White: Under the Fourteenth Amendment? Charles E. Burgin: Yes, sir. Byron R. White: Then that is the end of the case. Charles E. Burgin: I think so. Yes, sir. Byron R. White: The District Court cannot apply it, employees maybe fired at will? Charles E. Burgin: I think yes, sir. I think there is no question in my mind that that was the meaning and the intent by the words used by the District Judge. Byron R. White: What if, in response to the request that says that you required for inefficiency. Charles E. Burgin: Inefficiency? I think, if Your Honor please, that that is something that does not rise to the level of a protected constitutional property interest and it is something that should be handled purely and simply by the supervisor. Byron R. White: What if the answer was you were fired because you are habitually negligent? Charles E. Burgin: I still say that that has no more implication than inefficiency. If Your Honor please, I know you alluded to that weird thing in the Arnett case. I think this is a case somewhat like that. I think the principles would apply here. I think you also alluded in the Arnett case to an 1856 case Ex parte Secombe in which employment was conditioned upon maintaining proper respect for Courts and Court officials. And, we say that this man was discharged unsatisfactory work. Satisfactory work would be on a par with satisfactory respect that was to be paid to someone. Mr. Bishop has maintained throughout this proceeding, as I understand, his contentions that he had a property interest in his job because, number one: he was a permanent employee, number two: that during the entire term of his employment no other policeman on a 17-man police force had been discharged, and number three: because he reasonably believed that he would not be discharged. Now that, I understand from the pleadings in the case and from the briefs that they have filed, is his position. We say that North Carolina law disposes of his strongest argument in that respect, his strongest argument being the fact that he was a permanent employee. Our law in the State of North Carolina holds that permanent employment without more means nothing more than an indefinite general hiring power which may be terminable at the will of either party or irrespective quality of performance. We say that Mr. Bishop had no more than a subjective expectancy that he would continue to be employed and that that is not protected by a procedural due process of the Fourteenth Amendment. With regard to the liberty interest, we have maintained that the statute was followed and the District Court Judge, on page 15 of the petitioner for writ of certiorari, states there is no contention that the provisions of this article were not complied with by the defendant. Potter Stewart: What is the answer to the claim of deprivation of liberty? Let us say the statute provided that an employee could be discharged only on the basis of gross dishonesty or immorality and let us assume that that employee was terminated on the basis that he had embezzled some money and that would be, therefore, grossly dishonest. That would be unscrupulous accord with the statute but it still might deprive him of a liberty interest that would entitle him to a hearing to see whether or not he had been. In other words, following the statute does not really fully respond to a claim of deprivation of liberty without due process of law, does it? Charles E. Burgin: I concur in that statement completely but I do say that we had, in discharging him, implicated his liberty in no way. Potter Stewart: Different point? Charles E. Burgin: Yes, sir. I think that the time to determine whether or not a liberty interest is implicated is at the time of his discharge. Well, I do not think that the reasons for discharge implicated his liberty in any manner, and I point out to the Court this fact. When Mr. Bishop was discharged and at his request, he was given a letter setting forth those reasons. Now, he had that letter in his possession and if he wanted to show it to a prospective future employer he very well could. And the public record statute, I believe Mr. Jones’ statute is 33, would give any prospective future employer the right to see that. William J. Brennan, Jr.: Getting back to Mr. Justice Stewart’s question, if in the judicial proceeding rather than as the Police Chief testified, really, we discharged him because of embezzlement, you would still say that there had been no invasion of liberty interest. Charles E. Burgin: Absolutely, yes, Your Honor. I would say there had been no invasion of his liberty. William J. Brennan, Jr.: But because they did not tell him the truth when they discharged him for unsatisfactory work. Charles E. Burgin: Well, Your Honor, respectfully I think that that may be an assumption. William J. Brennan, Jr.: I am putting you a question, a hypothetical. Charles E. Burgin: Excuse me. William J. Brennan, Jr.: They gave him the letter they gave him. Charles E. Burgin: Yes, sir. William J. Brennan, Jr.: But the fact the Chief testified on the judicial proceeding that that was not the reason, the real reason was he was an embezzler? Charles E. Burgin: I do not think, if Your Honor please, number one: because it is a judicial proceeding, number two: because it would have been brought by the petitioner that the liberty interest would be implicated in that case. I think the liberty interests are implicated and I cannot recall but I believe there is some language in the Roth case or Sindermann case or maybe the Arnett case that at least implies that the time of discharge is what is important. If, at that time, his liberty interest were implicated that is one thing. In this case, they were not. William J. Brennan, Jr.: There are a lot of rumors around town that he had embezzled funds then the Police Chief takes hold of the situation. Then the Police Chief discharges him with a letter which simply says he is discharged for unsatisfactory work. Charles E. Burgin: There would be no difference in that hypothesis, Your Honor, than the one you posed earlier, in my mind. Warren E. Burger: After the new ordinance was passed, his termination occurred, was it 10 months? Charles E. Burgin: About two years, a little over two years. The ordinance was adapted in April of ’70. He was terminated in end of March ’72. Warren E. Burger: Do you say that his rights, his situation, is different from that of a person employed on the same job after the ordinance was passed or are they in the same boat? Charles E. Burgin: No, Your Honor, I would say that I have not contend that below this Court, I would not contend that Mr. Bishop is not a permanent employee and that the situation would be the same with regard to the hypothesis that you put to me, if the two individuals had passed the six-month period. Unless the Court has some further questions of me, that would conclude my presentation. Warren E. Burger: Very well. Mr. Smith. Norman B. Smith: If Your Honor please, I did save some time but I have no particular comment I wish to make. I think I have covered the points in the opening argument unless there are any remaining questions. We thank the Court. Byron R. White: Under the ordinance, the city need not have any cause for discharge at all. Norman B. Smith: I just think he is plain wrong. I think you can look at the ordinance and see that you have to fall into one of four categories before you can be discharged. Byron R. White: The Judge said that the employee may be discharged at will? Norman B. Smith: The Judge is just wrong. He is not reading the statue or not reading it correctly, but it just seems to me that any way-- Byron R. White: He did not say that he could be discharged without cause. He said he could be fired at will and could mean there was only notice without a hearing. Norman B. Smith: I presume that with “at will” and “without cause” is the same thing. It would be wrong to think that one had to have cause to discharge someone and then say you can do it at will anyway. That would negate the force of the cause. Byron R. White: Without notice. Norman B. Smith: I suppose that is a possible construction but none of this ordinance. Anyway you turn this ordinance it says that there must be one of-- Byron R. White: If the Judge said that, why are we here? Norman B. Smith: Your Honor, I respectfully contend he is wrong and that Judge Winter is right that this Court ought to reverse. Work not up to standard, negligence, inefficiency or unfitness have to exist. Byron R. White: I assume, on your reading of the (Inaudible), I take it that you would say that if we agreed with him that you will lose? Norman B. Smith: I think if you agreed with everything he said in that opinion, I would lose but-- Byron R. White: On the liberty. Norman B. Smith: He said that the liberty interests were not implicated. He covered the whole thing. He just did not do it right. Warren E. Burger: Thank you, Gentlemen. The case is submitted.

Warren E. Burger: We’ll hear arguments next in Number 75-1157, Town of Lockport against the Citizens Community Action. Mr. Fuzak I think you may procede when you are ready. Victor T. Fuzak: Mr. Chief Justice and may it please the Court. This is an appeal from a judgment of a Three-Judge District Court sitting for the Western District of New York. That court ruled that provisions of the New York State Constitution and of the New York State Municipal Home Rule Law relating to the procedures to be followed in connection with the effectuation of changes in the form or structure of county governments were unconstitutional as being in violation of the equal -- of the Equal Protection Clause of the Fourteenth Amendment. The provisions in question set forth the procedures which are to be followed in the event that the people of a particular county wish to change the form of their government. The traditional form of county government in New York State is a legislative form. That was the form in Niagara County with which this case is concerned. The constitutional and statutory provisions provide as follows: If the citizens wish to change the form of their government in any respect or to transfer functions of government between towns, villages, or the county, they can only do so if the county legislature adopts a local law for presenting those changes or providing for those changes, then that local law must be put to referendum of the citizens of the county as a whole, and then in order to have the local law take effect and become the law of the county, that local law must obtain the majority of the votes cast by the voters residing in the cities of the county, and it also must obtain the majority of the votes cast by the voters residing in the towns of the county, both taken as separate units. And whether or not the particular proposal obtains a majority of all of the votes in the county taken as a single unit is not determinative of the issue. The District Court held in this case that those provisions violated the Equal Protection Clause in view the fact that they denied the citizens of the county, the rights of the one man or "one person, one vote" doctrine. I might recite very briefly, if I may, the facts of the case to put the matter in perspective. In 1972, the Niagara County Legislature adopted a proposed local law, which would effectuate a new charter form of government for the Niagara County residents. That new charter form of government would have changed the county form of government from a legislative form to a combined executive and legislative form. It would have created the new positions, elective positions of county executives and other subsidiary county officials. It adopted that local law and it put the local law to referendum in November of 1972. At that referendum, the voters of the towns of -- residing in the towns of the county did not approve the proposed changes by majority. They disapproved of those changes. The voters who resided in the cities of the county on the other hand by a majority approved the proposed changes. William H. Rehnquist: Mr. Fuzak? Victor T. Fuzak: Yes sir. William H. Rehnquist: In New York State, are town simply geographical areas or are they small cities? Victor T. Fuzak: Well, they’re not small cities, they have different functions and they have different powers, but they do have internal government structures. The town will have a supervisor, the town will have a town board, and much like a city will have a Mayor and a City Council and that type of thing. William H. Rehnquist: But the whole State isn’t divided into towns in the way some New England States have. Victor T. Fuzak: Yes, I think it’s -- in point of fact, it is. The whole State is divided initially, the major super structure is the county, and then from there, you go to the city and the town, which have different rights and powers, and so on and, inclusive in the towns very frequently are villages, which was the case here as well. Byron R. White: Well, as you state -- does the county here was what was involved is a new county charter? Victor T. Fuzak: Yes sir, Mr. Justice White. Byron R. White: Now, would the provisions of the county charter be equally applicable throughout the county? Victor T. Fuzak: Yes sir, that's right. Byron R. White: Or, with respect to everybody. Victor T. Fuzak: Yes sir, that's right. Byron R. White: Inside towns and outside? Victor T. Fuzak: Inside towns, inside cities, everyone residing within that county is to be covered -- Byron R. White: Are they subject to everything that there is -- that’s in the charter. Victor T. Fuzak: Precisely right, yes sir. William J. Brennan, Jr.: How many towns are there, Mr. Fuzak, in this county? Victor T. Fuzak: 12. William J. Brennan, Jr.: And how many cities? Victor T. Fuzak: There are three. William J. Brennan, Jr.: And I gather, it is the aggregate, in other words, it must be a majority of the aggregate city vote and the majority of the aggregate county vote? Victor T. Fuzak: Each taken as separate units. William J. Brennan, Jr.: Yes. Victor T. Fuzak: That’s correct sir. William J. Brennan, Jr.: And there was a majority of the aggregate city, but not of the aggregate county? Victor T. Fuzak: Correct, and it was a majority -- William J. Brennan, Jr.: Even though there maybe of the 12 towns, maybe nine of them, majority there may have voted in favor if the total was not a majority in favor then it was not? Victor T. Fuzak: That’s correct sir. What you suggest is conceivable, I don’t exactly know how the voting went, but that is correct. What happened in the 1972 referendum was that if you took all the votes and put them into one basket, there was a majority in favor of the adoption of this new county charter. The proportion was 52% to 48% if you did it on that basis, but they did not get the complimentary majority votes that are required by the Constitution and by the Municipal Home Rule Law. Potter Stewart: And the county is either city or town, there’s nothing, no part of county that's neither city nor town, is that correct? Victor T. Fuzak: The County -- that’s correct sir, and then included on the towns, there are will be villages and there are villages. Potter Stewart: The town is what we call our township. Victor T. Fuzak: Yes sir, that is correct sir. So as the consequence of that failure to obtain approval, the County of Niagara commenced a suit in the District Court seeking a declaration by the District Court that those provisions of the State Constitution and the Municipal Home Rule Law were indeed unconstitutional on these grounds that they denied the "one person, one vote" rule under the Equal Protection Clause. The County of Niagara purported to bring that suit on behalf of all of its cities, all of its citizens within the county. The defendant in that suit was the State of New York. The District Court found that there was no substantial federal question, refused to empanel a Three-Judge Court and dismiss the complaint. That judgment became final. Thereafter, these individual defendants in this action, which the Citizens for a Community Action at the local level, the acronym for which is CCA, begun this action seeking precisely the same declaration of unconstitutionality and precisely the same relief. And that case proceeded now naming the County of Niagara as a defendant or those officials of the county who had official acts to do in connection with the certification of this proposed charter and also the officials of the State of New York who also had to do things in order to make the proposed charter of the local law of the county. There were no hearings in that proceeding, no proof was educed, instead cross motions were made for summary judgment. Potter Stewart: This was in our Three-Judge Court? Victor T. Fuzak: Now, there Three-Judge Court was empaneled in this instance, yes sir and cross motions for summary judgment were made. Potter Stewart: Was there any reference in the course of empaneling a Three-Judge Court to the previous action in which a single judge had not even found it substantial enough to ask for the convention of a Three-Judge Court? Victor T. Fuzak: Yes sir, the County of Niagara and the State of New York both asserted as affirmative defenses in their answers, the defense of res judicata based on that ground. Now, there was no particular reference in anything that I am aware of in connection with the empaneling of the Three-Judge Court to that previous determination. Potter Stewart: Of course that would be part of the res judicata, isn’t it? Victor T. Fuzak: Yes sir. Potter Stewart: The single judge had found it so and substantial is not even to warrant a request for the convention of a Three-Judge Court? Victor T. Fuzak: Right sir. So, the Three-Judge Court was empaneled and these cross motions for summary judgment were made, no proof was adduced and no testimony was taken. William J. Brennan, Jr.: Affidavits? Victor T. Fuzak: Some affidavits, Your Honor. The moving papers on both motions, I think would have to be characterized as extra ordinarily spare under the circumstances. There was no incisive review of the reasons for the passage of the constitutional provisions or anything of that nature in those papers. While the Court was considering those motions for summary judgment, the county legislature went ahead and adopted a new charter, or attempted to adopt a new charter in 1974 and before decision on this case summary judgment motions. In November of 1974, the county legislature put a new charter and a different charter up to referendum to the voters of the county, which, by its own terms, would supersede any previous charter or any previous form of government for the county and that was put referendum in the same fashion. William J. Brennan, Jr.: And the form of that government, did that differ from the 1972? Victor T. Fuzak: It differed in certain respects Your Honor, but not materially. There were some changes in it, I think made in order to accommodate some objections by some people in the town, that type of thing. William J. Brennan, Jr.: But basically, it would’ve been an executive legislative part. Victor T. Fuzak: That is correct. And essentially the same result. Essentially that same result and almost by the same percentages or proportions. Again, there was about a 52% total in favor if you took all of the citizens and put them in one basket, and 48% opposed but the citizens of the towns again reject the proposed change in their form of government, the form of county government. Lewis F. Powell, Jr.: Are the differences relevant to this decision, to this case at all? Victor T. Fuzak: No, I don’t think they -- I do -- I don’t think we can say that they are Your Honor. There are some different positions involved in the two charters, but I think for all intents and purposes, we ought to regard them here as being equivalent in their scope and in their application and their functions. Potter Stewart: In the two charters? Victor T. Fuzak: That’s right sir; that's right sir. After the November 1972 -- Potter Stewart: And then the two votes, regardless of the percentages of the non-precise numbers, the same, factually the two votes are identical? Victor T. Fuzak: The same result, exactly right, so the voters of the town did not give it majority of approval, the voters of the cities did. Potter Stewart: And there was an overall majority in this case. Victor T. Fuzak: There was an overall majority. And again in that situation, the question came as to whether that charter could be implemented. And an application was made, the decision of the Court on the first charter, the 1972 Charter came down shortly after the November 1974 referendum with respect to the 1974 charter. The Niagara County people made an application to the Court to have its judgment apply not to the 1972 Charter which was subject matter of the previous action or the existing action, but to have it apply instead to the 1974 Charter. The Court refused to do that apparently on the grounds that it not have jurisdiction over the 1974 Charter which was not subject to the lawsuit. So, a judgment was entered in January of 1975, declaring a 1972 Charter to be the law of the land on the grounds that the New York State Constitution was unconstitutional and Municipal Home Rule Law was unconstitutional, and that since in spite of the fact that there were no statutory provisions to support this kind of an approach, that since there had been an overall majority, that therefore, that these changes that were proposed could take effect. And so, the January 1975 judgment said, the 1972 Charter is the law of the land. The Attorney General had indicated that he was going to appeal from that judgment. Shortly before the time to appeal expired, he made an announcement that he was not going to carry forward the appeal, and so the town of Lockport, supported by the other towns of the county, made an application for intervention which was granted for the purpose of prosecuting this appeal, and that’s why we’re here today. After that, after the appeal was filed, the State and county officials purported to put into effect the 1974 Charter and not the 1972 Charter as was provided in the original judgment in order of the Court. We raised questions of mootness on the ground that the subject matter of the original action had been destroyed by the subsequent conduct of the party’s litigant. That matter was up before the Court on our original jurisdictional statement. The case was remanded to the District Court, the original judgment was vacated, the case was remanded to the District Court for further proceedings in light of the 1974 Charter referendum. And another proceeding was had, again no proof, but counsels were summoned to the District Court. The District Court found that there was no mootness. The District Court denied an application by the call, plaintiffs here. They had made an application to make sure that the case did in fact have jurisdiction over the 1974 Charter to amend their complaint so as to raise the questions of constitutionality as to the 1974 Charter which would’ve fine. We would’ve had a trial and we could’ve gone through the whole thing, but that was denied as well and the Court found no mootness. William J. Brennan, Jr.: Need to amend was denied? Victor T. Fuzak: That’s right sir. William J. Brennan, Jr.: Yes. Victor T. Fuzak: The Court found in effect that it was empowered to make its previous judgment which related to the 1972 Charter applied to the 1974 Charter. Byron R. White: And did it. Victor T. Fuzak: It did do so, sir. William J. Brennan, Jr.: Entered a new judgment, did it? Victor T. Fuzak: It entered a new judgment in October -- in December of 1975. Byron R. White: So there is no mootness problem in this case? Victor T. Fuzak: Well, we claim there is a mootness problem and we raise that on this appeal, I would -- Byron R. White: Even with respect -- even after the remand and after the changes in judgment? Victor T. Fuzak: Yes sir, because we -- our position on that is that prior to that happening the actions of these parties, litigants in fact destroyed the subject matter of the initial lawsuit which was a 1972 Charter. The 1974 Charter was never considered in the lawsuit at all. The record had closed and the matter had gone to appeal. Byron R. White: But the Court has now -- so, you must say the Court was in error in having its judgment apply to 1974. Victor T. Fuzak: Yes sir. Byron R. White: As long as you accept that, it’s not moot? Victor T. Fuzak: No. Yes sir. Potter Stewart: But the most -- you claim that the Court did follow procedures that were unusual, if not irregular? Victor T. Fuzak: Yes sir, I do. Potter Stewart: But they did -- we do have a decision before us affecting the 1974 Charter? Victor T. Fuzak: Exactly right sir. Potter Stewart: Which is the existing charter? Victor T. Fuzak: That’s right. William H. Rehnquist: Well, isn’t your complaint with respect to that really that the New York officials without any Federal Court order had already put into effect the 1974 Charter? Victor T. Fuzak: Yes sir. William H. Rehnquist: And therefore, there was no need to litigate with respect to that since the plaintiffs had already obtained what they wanted, putting that charter into effect? Victor T. Fuzak: Yes sir. That put us in a very peculiar position because, we then had to make -- take some action to protect our rights with respect to the 1974 Charter and that’s why we were required to start an action in State Court under Article 78 of our Civil Practice Law. Byron R. White: Well, I suppose you would have some relief if we reverse the District Court? Victor T. Fuzak: Yes sir, we certainly would. William J. Brennan, Jr.: Well, let's see, you’re saying there’s simply no predicate for the order relating to the 1974 Charter? Victor T. Fuzak: Yes sir. That’s one -- that’s what I am saying. William J. Brennan, Jr.: There is nothing and therefore it’s an utterly proper order? Victor T. Fuzak: Correct sir. What happened and point of fact was that when the matter was remanded to the Court, the Court on its own motion brought in the 1974 Charter and made it an exhibit in the proceeding and so on, and then proceeded from that standpoint to include it in the case and act on the 1974 charter, amend the original judgment to make it apply to the 1974 charter. Potter Stewart: On the reasoning of its original judgment? Victor T. Fuzak: Correct sir, exactly on the same reason. Potter Stewart: And, you’ve already conceded the two charters for these -- Victor T. Fuzak: Essentially -- Potter Stewart: -- purposes of this case are identical? Victor T. Fuzak: Quite Right, Mr. Justice Stewart. The issue here as we see it is whether or not the Equal Protection Clause among these issues, there are mootness and there are other issues concerning the relief that was granted by the Court, but I would like to address myself principally to the constitutional question of whether or not the Equal Protection Clause can require or does require a state to afford its citizens the right to determine by an election process compatible with the "one person, one vote" concept or doctrine, the form or structure of subordinate government instrumentalities within the State. And the appellant's position is that the state is not required to do that by any provision of the constitution, and that the intervention of the federal judiciary in this instance would be improper and was improper. And we say that for these reasons because what is at stake here is very clearly and purely State action within the proper sphere of State action; that is the establishment, the modification, the repeal, the amendment, the abolishment of the state's own internal government structures. Byron R. White: But do you think you could provide that in a referendum on an Amendment of a county charter that the people in the town get two votes and the people outside the town get one vote? Victor T. Fuzak: I think that there are -- in all, as in all of these cases, there are points that you reach where the situation is so apparently irrational that it calls for and would require and would merit some judicial intervention. I do not think, however, that the automatic application of the one person, one vote doctrine is proper in any sense. Byron R. White: And, you would say that suppose there is -- suppose the county charter provided for the maximum milady (ph), just suppose that and there was a proposal that was subject to referendum that the milady would be raised, and you would say this provision in New York the way it is would be proper, namely that the people in the cities would have -- people in the towns would have to have a majority in order to approve the -- Victor T. Fuzak: Yes sir. Byron R. White: Even though the provision applies to everybody equally? Victor T. Fuzak: Yes sir, I would for this reason because unlike the other cases where this Court has applied the one vote -- “one person, one vote” doctrine, this case deals strictly and solely and purely with the question of the establishment or change of the structure or form of internal state government. The other cases as you all recall of course, dealt with questions of representation whether or not someone was being deprived of his equal vote in terms of representation. Byron R. White: Oh! Yes, but just a while ago, you answered me and said that would even apply to milady change, that isn’t a structure? Victor T. Fuzak: No. Well, I am sorry Your Honor, that is a different thing. You’re talking about a taxation matter. Byron R. White: Yes. Victor T. Fuzak: I am sorry, I misunderstood you, I didn’t hear you properly. Now, that’s a different thing, that would not apply in that situation because the -- Byron R. White: You would think that everybody would have to have an equal chance at defeating that law? Victor T. Fuzak: No, that would not be an appropriate part of the charter. That would not be an appropriate thing for the local law to include as part of the structure of the government. That would be an action that would have to be taken by the appropriate representatives within the government after it was formed. I don’t -- Byron R. White: And some charters have set maximum miladies, I hate to tell him, but they do? Victor T. Fuzak: Well, those -- that is not in this case, that is not an issue in this case, and the only the -- what is the problem here -- Byron R. White: All you’re talking about is the structure then? Victor T. Fuzak: Exactly right. And that’s all that was done in this case, and as a matter of fact that's all that constitution or the Municipal Home Rule allows the counties to do is to change their structures in accordance with this complimentary vote, majority vote rule. So, I don't think we can get involved in the kind of problem that you raise Mr. Justice White. William H. Rehnquist: So, the kinds of things that the New York law permits to be done, are those that the Court has done in Hunter against Pittsburgh? Victor T. Fuzak: Yes sir, that’s right. It thus -- this case in no way involves any claim by anyone or cannot that anyone is being deprived of an equal vote in terms of the selections of governmental representatives, because whether there is a county charter or whether there is not a county charter, there is an appropriately constitutional republican form of government for the county, and there is no claim here of any discrimination in that sense. And, of course, most of the cases that the Court has applied, the “one person, one vote” rule too involve exactly that point as a matter of representation, the matter of portion, districting and that type of thing. This case does not involve that. Harry A. Blackmun: Do you feel that Gordon against Lance gives you any support? Victor T. Fuzak: Yes sir, I very definitely do because I think the Court there found that it was within the political process, political judgment, in effect, of the state to make a determination that instead of having a simple majority to approve additional municipal bond of indebtedness, there should be a requirement of a 60% majority, and the Court said that was perfectly alright, because in certain circumstances and situations, the “one person, one vote” rule does not apply. And, I think that’s very clear from the development of the cases because the Court has refused to have an automatic application of that rule, and that’s exactly what happened in this case, I am afraid, because I am afraid the District Court in rendering its judgment made an assumption that there was an automatic application of the “one person, one vote” doctrine and I take issue with that because I don’t think that is an appropriate assumption. I don’t think it’s appropriate constitutionally, and I don’t think it’s appropriate on the basis of the cases that this Court has decided, in which the Court has refused to apply it like Wells versus Edwards when you’re talking about the election of the judiciary and things of that nature. Potter Stewart: Originally, that doctrine originally arose of course in terms of what’s called Representative Democracy in the legislative area, and then it was expanded to include one? Victor T. Fuzak: It was expanded to some extent to include elections involving the incurring of public debt largely. Potter Stewart: Kolodziesjski against Phoenix. Victor T. Fuzak: Phoenix City or Phoenix versus Kolodziejski, City of Cipriano, Cipriano versus City of Houma, and that line of cases. Potter Stewart: Well, and then also in the School District? Victor T. Fuzak: Like Kramer against the Union Preschool District where there was an election of a representatives -- Potter Stewart: In the State of New York. Victor T. Fuzak: State of New York, but where there was an election of a representative board, and again I think the overtones there were that the Board that was being elected was fulfilling the functions of representatives of the people and that, I think that clearly fell was in the Avery line of cases, Reynolds versus Sims, Baker, Carr and so on. Potter Stewart: And, of course, Avery involved the town -- Victor T. Fuzak: Yes sir. Potter Stewart: -- or county. Victor T. Fuzak: County. Potter Stewart: And Hadley against the Junior College or whatever it was? Victor T. Fuzak: Hadley against the Junior College was another case involving, I believe -- it escapes from me at the moment, I’m sorry to say -- William H. Rehnquist: Junior College. (Voice Overlap) Victor T. Fuzak: Junior College, yes. Potter Stewart: You know that went pretty far away from legislative apportionment, didn’t it? Victor T. Fuzak: The Hadley case? Potter Stewart: Yes. Victor T. Fuzak: Well, it did to an extent, Your Honor, and so do in fact, the cases where the one vote -- “one person, one vote” principle has been applied when the subject matter of the elective process is the incurring of public debt. Potter Stewart: Rather than the structure of the governmental entity itself? Victor T. Fuzak: Quite right. William H. Rehnquist: And Hadley and Kramer were both elections to representative bodies albeit of lesser stature than State Legislature? Victor T. Fuzak: Yes sir, that's correct, and the Court as found -- William J. Brennan, Jr.: And your whole point as I understand it is simply that we do not have here anything that smacks in the slightest of choice of representatives? Victor T. Fuzak: That’s correct sir. William J. Brennan, Jr.: You suggest whether or not the county may or may not have a particular structure of government? Victor T. Fuzak: That is right. William J. Brennan, Jr.: And whether it can say, even though there’s a majority overall, if it’s not a majority of the aggregate of the voters of the townships, then the county may not have that formed? Victor T. Fuzak: Whether the state has that sovereign authority to do that in terms of setting up its own form of government. William J. Brennan, Jr.: Well, apart from that the whole theory as I understand you of Reynolds and Sims and that line, whole line of cases simply is inapplicable? Victor T. Fuzak: Exactly right. Potter Stewart: And is it clear, may I ask that the, that the new charter or charters affect the towns quite differently from the way they affect the cities? Victor T. Fuzak: I don’t think that’s exactly the case. Potter Stewart: At all. Victor T. Fuzak: No. Potter Stewart: So you have -- Victor T. Fuzak: There is no certain -- Mr. Justice Stewart, in answer to your question, there is no transfer of functions as between any of the subsidiary forms of government involved in this particular charter. Potter Stewart: But in this case that fact, it was not present? Victor T. Fuzak: That fact is not -- does not -- Potter Stewart: So there’s no real rationale behind this in this case, is that it? Victor T. Fuzak: Behind what sir? Potter Stewart: Behind requiring a majority of votes of the town and the majority of the cities separately? Victor T. Fuzak: Oh! I think there is a rationale behind it. Potter Stewart: What is it? Victor T. Fuzak: Your Honor, the rationale is that I think that people have, in different areas of a particular county, have different interests and have different requirements in terms of their county government. Byron R. White: Even though under the new county charters, you’ve said earlier in your argument that the provisions will apply equally to everyone? Victor T. Fuzak: They apply equally to -- Byron R. White: I mean , then everyone is subject to them to the same extent? Victor T. Fuzak: That's right, except insofar as cities and towns do have by State Law, General State Law, somewhat different authorities and powers. William J. Brennan, Jr.: Well, is it possible that if this is a valid system that the cities might override township interest because of the type of representation they get in county government? Victor T. Fuzak: As in point of fact, what we have here in Niagara County what the situation is that there happened to be some more residents in the three cities than there are in the towns of the county. William H. Rehnquist: Do town functions -- what are town functions in your view, is there any law enforcement function, do you have JPs or elector on the township basis? Victor T. Fuzak: Yes sir, they have JP’s, they have a town board, they have a supervisor. William H. Rehnquist: They have the constable. Victor T. Fuzak: They have constables, they have general governmental functions. William H. Rehnquist: Now is it possible that if the county develops an executive -- what do you have, a sheriff? Victor T. Fuzak: There is a county sheriff, that’s correct. William H. Rehnquist: Now, if the sheriff’s department expands a great deal might be need or use of the town constable be diminished? Victor T. Fuzak: Exactly right. William J. Brennan, Jr.: Well, you might end up with the county constabulary, is it a -- Victor T. Fuzak: Yes. William J. Brennan, Jr.: So, are you -- Potter Stewart: Is it possible that the status quo might be more greatly altered with respect to the towns than with respect to the cities? Victor T. Fuzak: Yes, I think that’s correct sir as a practical matter. Harry A. Blackmun: Are your (Voice Overlap) taxes entirely separate from towns and cities? Victor T. Fuzak: Yes sir. Harry A. Blackmun: They’re not coincidental in boundary or anything? Victor T. Fuzak: No, they are not. Lewis F. Powell, Jr.: I was going to inquire whether there could be any adverse tax consequences to the residents of the towns. Victor T. Fuzak: No, I don’t believe that’s true. Warren E. Burger: We’ll resume at this point tomorrow morning at 10 o’clock gentlemen. Victor T. Fuzak: Thank you very much, Your Honor.

Warren E. Burger: First this morning in number 71-1082 Askew against the American Waterways Operators, Incorporated. Mr. Dearing you may proceed. Daniel S. Dearing: Thank you Mr. Chief Justice, may it please the Court. This case is here on appeal from the Middle District of Florida wherein a three-judge panel struck the Florida Oil Spill Prevention and Pollution Control Act in 1970. With permission of the Court, the argument will be divided between myself and the Attorney General Robert L. Shevin, State of Florida and I understand that the argument will also be divided to the appellees. Essentially, the operating facts or the operative facts bring in this matter before the Court today of the passage in 1970 by the Florida Legislature of its Oil Spill Prevention and Pollution Control Act. Now this Act, like most legislation was a result of recent history. The Florida Legislature was not unaware of the serious and deleterious effects of oil spills, massive oil spills in state waters. They are aware, all too aware of the results in the Torrey Canyon Disaster and the English Channel in 1967. They are too aware also of spills up country. For instance when the P.W. Thirtle went down and spilled 31,000 gallons of bunker sea oil into Narragansett Bay off to close to Rhode Island was reported to have ruined the fishing industry in Narragansett Bay as a pertain to oils spillage. They were aware also that the United States Congress was considering the Federal Water Quality Improvement Act of 1970. They are aware of the laborious steps taken by the various committees and the passage of this legislation. The Florida Legislature had convened and had been in session for only a few weeks when this matter came before its attention. The real impetus to the Florida Act however was the collision in collision in Tampa Bay of the tanker dealing the pump, and the spillage of 21,000 gallons of bunker fuel oil into Tampa bay. This brought home adequately and clearly to the legislature the dangers involved and being vulnerable as the State is to the ravages of oil spill pollution of its territory waters and so the legislature met and passed this Act. The Florida Oil Spill Prevention and Pollution Control Act which provides for absolute and unlimited liability against the owners of vessels, in any event, other major spill and which also provides for certain mechanics for the -- before the fact enforcement of the Act itself. Shortly, before the Act was to go into effect that is to say the financial responsibility provisions which are going to the effect the appellees before the Court today, plaintiff below file suit challenging constitutionality of the Act on several grounds. The lower court, the state defendant on the grounds that the Act was a valid expression of the State’s police power. But the lower court decided that instead of being a valid expression of the State’s police power it was in fact an intrusion into an exclusive federal admiralty domain and although the Act was challenged on other grounds, the court below decided issue on that fact alone, in that decision alone. Now the Florida, I think it is absolutely necessary to bring the Court -- invite the Court’s attention to two sections of the Act. First of all, Section 2 which sets forth the legislative intent contains this very brief but important paragraph. It says the legislative further declares that it is the intent of this Act to support and complement applicable provisions of the Federal Water Quality Improvement Act of 1970 and in Section 21 of the Act states that this Act being necessary for the general welfare the public health, the public safety of the state and its inhabitants shall be liberally construed to effect the purposes set forth under this Act and the Federal Water Quality Improvement Act of 1970. Under the provisions of the Act the State Department of Natural Resources was to issue certain regulations going to the mechanics of enforcement. These regulations, it is submitted must reflect the intent as set forth in this two phrases, the regulations as well as all other enforcement provisions of this Act, it is submitted, would have to comply and supplement the Federal Water Quality Improvement Act of 1970 and this is particularly important to the position of the State of Florida before the Court today. Now, the court -- the lower court found that the Act violated provisions of uniformity absolutely necessary to the Federal Admiralty Maritime Domain. Now, we submit to the Court that this is not true. In the first place, we submit that the concern with prevention and control of oil spill collision of territorial waters is not a maritime matter at all. But if it is, it is certainly a non-exclusive maritime matter where there is concurrent jurisdiction between both the state and the federal governments and we would illustrate that fact. Byron R. White: You mean without any shoreside damage? Daniel S. Dearing: No, Your Honor we don’t mean without any shoreside damage. Byron R. White: Well, then what about when there is no shoreside damage does the state have any business in the area? Daniel S. Dearing: If there is no shoreside damage then the state may not have any interest in the area to protect. We would submit however in response to the question that the ecological balance which is interrupted by a spill even though the slick never touches shore has a very detrimental and adverse effect shoreside. Byron R. White: Well you mean on those people who are making their living at sea like in fishing? Daniel S. Dearing: Mr. Justice White it certainly has an application there but it also has -- Byron R. White: Do you think, I just to ask you again does the State get any business providing the rule of liability for an oil spillage at sea that have no immediate impact shoreside? Daniel S. Dearing: The State does not purport to have any responsibility -- Byron R. White: So your answer is no? Daniel S. Dearing: No, Your Honor. Byron R. White: Alright. Daniel S. Dearing: Our answer is no. The question is I think, in that instance whether there is any adverse effect shoreside and only then does the State purport to represent to have any concern or interest in the matter that would give rise to the police officer. Speaker: While you are interrupted, could I ask you if you read the District Court’s opinion as looking at the Federal Water Pollution Act as being an exercise of congressional jurisdiction in the admiralty area? Daniel S. Dearing: The State does not so interpret it, Your Honor. Speaker: What authority does the federal government have to adopt the Water Pollution Act? Daniel S. Dearing: The State -- Speaker: What congressional -- what constitutional authority was Congress exercising? Daniel S. Dearing: I believe the State that the Congress had authority under the commerce power to exercise and it did so exercises this power under in the Act itself, Mr. Justice White. Speaker: And you don’t think it has anything to do with the -- with admiralty jurisdiction or admiralty power? Daniel S. Dearing: No sir, we do not and we would -- Speaker: Does it make any difference? Daniel S. Dearing: Yes sir, we think it makes a considerable difference. Speaker: Well doesn’t if the question is a conflict with the Federal Act is it with the Constitutional Act? Daniel S. Dearing: I’m sorry. I beg your pardon Mr. Justice? Speaker: Well, let’s assume however the Water Pollution under -- whatever authority the Water Pollution Act was adopted. If the question is one of conflict with a valid Federal Act then it doesn’t make any difference of what the source of the congressional authority was? Daniel S. Dearing: No, sir. It would not make any difference at all if the Florida Act it conflicts with the Federal Water Quality Improvement Act. Speaker: If the District Court then did ascertain some conflict between the Water Pollution Act and the Federal -- and Florida law, didn’t it? Daniel S. Dearing: Yes, sir. To be more specific, they said that the Federal Water Quality Improvement Act was proof positive or strong indication in the area that of the conflict that their conflict existed and we construed that to be or we interpret that as being giving grasp to the pre-emption question which is -- Speaker: Well then, is it really important in this case to talk about the admiralty jurisdiction if we’re really talking about the question of pre-emption under the Water Pollution Control Act? Daniel S. Dearing: We believe it’s important not only because we’re appealing from an order that stated this was applicable that provisions of maritime law applied here. We maintained that they do not. William J. Brennan, Jr.: Just tell me, Mr. Dearing if the source was not -- the admiralty power what was the source? Daniel S. Dearing: Commerce -- William J. Brennan, Jr.: Commerce. Daniel S. Dearing: -- Mr. Justice Brennan. Yes. We submit that the reason. William J. Brennan, Jr.: Well, would it make a difference as perhaps I’m asking the same question Mr. Justice White did, would it make a difference on pre-emption whether it was the commerce power or the admiralty power? Daniel S. Dearing: Yes it would for reasons if I may just the address myself briefly to it at this point. William J. Brennan, Jr.: On the Jensen, I suppose. Daniel S. Dearing: This is what the Court said below and this is what we take issue with. We don’t believe that this is a matter of exclusive jurisdiction (a) if there is any admiralty jurisdiction at all it isn’t exclusive, it’s concurrent and in (b) we would suggest to the Court that the reason it is not admiralty or maritime is because of traditional view of this Court. This is based upon the premise that the Court and the Court alone can determine the limits of the maritime grant under the Constitution. Congress cannot determine those limits. Only this Court can construe the Constitution. This Court has so construed the Constitution and defined the limits of the maritime grant as being and applying the locality test, those occurrences which occur on navigable waters. A sea to shore toward being consummated ashore is beyond the purview of that low county test limitation. William H. Rehnquist: But Mr. Dearing if Knickerbocker Ice Company, the Court held that a land based employee’s workmen’s compensation claim couldn’t be enforced by the State because it was sufficiently closely related to the admiralty, surely the type of oil spillage you’re talking about here is a good deal more closely related to traditional admiralty jurisdiction and what the Court was talking about the Knickerbocker, wasn’t it? Daniel S. Dearing: Yes, sir. We would agree that the incidental effect of the legislation on maritime law would be much more emphatic than would be the workman’s compensation laws at issue in Jensen and reflected in the Knickerbocker case. William H. Rehnquist: What do you do with those cases? Daniel S. Dearing: We would ask the Court to continue the statement that appeared in the Standard Dredging case and severely limit the Knickerbocker, the Jensen doctrine to its facts of workman’s compensation cases which is what this Court said of course in the Standard Dredging case that Jensen is limited to its facts and if we may, there is an alternative to looking at this from the point of view of the strict point of view of maritime law and I would invite the Court’s attention at this time to what the Attorney General has to say and I respect. Thank you. Warren E. Burger: Mr. Shevin? Robert L. Shevin: Mr. Chief Justice, may it please the Court. You Honors, just as maritime law was developed to meet the crisis of developing industry with peculiar problems, so environmental needs of today we believed demand their own jurisprudence. The Federal Act, the Water Quality Improvement Act is reflective of this need to develop new concepts of legal responsibilities in crimes against the environment. The Federal Act sets the pattern. The Florida Act we contend is a legitimate response to the Federal Act to the awakening of a growing necessity by Congress and if conflicts the necessity to deal with massive oil spills which is not here before it had been dealt with and if it conflicts with the tenants of Maritime Law or any other body of law then we contend that the conflict is purely incidental and unfortunate. There’s certainly is no a reconcilable conflict between the Federal and Florida Acts. The two Acts speak to federals state relationship, cooperation and meeting the threats of massive oil spills. The Act speaks of joint cooperation between the state and the federal government to meet serious economic and environmental problem. The national contingency plan that’s outlined in the Water Quality Improvement Act of 1970 speaks to a coordination of effort with matters such as containment, dispersal and removal of oil with state and local agencies. In the Federal Act, when it speaks of a marine disaster, it talks of coordinating all public and private interest so the two Acts they interrelate rather than conflict and the implication in both statutes is not competition but cooperation. And as Mr. Dearing point out the Florida Act itself says that the intent of this Act to support and complement the applicable provisions of the Federal Water Quality Improvement Act of 1970. Now many environmental problems at the state of local level exist, Your Honors in the first instance. Speaker: Mr. Attorney General you -- just incidentally as you say as you put it is there a conflict between the Florida Law and the federal law? Robert L. Shevin: Oh! No, Your Honor, we contend there is no conflict. There is no conflict between the Florida Law of 1970 and the Federal Water Quality Improvement Act of 1970. Speaker: Is there a limitation of liability in the Federal Act? Robert L. Shevin: There is in effect in the Federal Act, Your Honor, an absolute liability but it’s somewhat qualified with certain defenses that can be read. Speaker: It’s limited liability? Robert L. Shevin: To a certain extent not the same that was the 1851 limitation. Speaker: But there isn’t any limitation on the Florida? Robert L. Shevin: There is no limitation and to this, Your Honor, we contend that the Federal Government and the anti-preemption clause specifically granted to the State the right to pass any requirement of liability and those are the words any requirement or liability or the terms, the words that are used in the anti-preemption clause so we contend that the Florida Act is simply an extension. With regard to the question of limitation, the Federal Act does allow certain defenses, the Florida Act also allows certain similar defenses of acts of God, and third parties that would be responsible for the negligence and so forth are provided within the Florida Act as well that they can be raised. Your Honors, many of these problems exists in the first instance because of pressures to continue traditional tenants of established jurisprudence. Time manner concepts and property law obstruct the State many times in an effort to protect the rights of beaches of inland waterways of natural resources and compound problems with sewage treatment, water purity and other problems severe water pollution. So we contend that the Federal Act, the Water Quality Improvement Act is a step forward. It’s a threshold upon which the state local governments can build together with the federal government a new system of laws and environmental jurisprudence to meet the crucial demands brought by the industrial system itself. We contend that this is federalism in the truest sense. If the law were to seek to limit or to extend damages to the federal agency involved which is what the Federal Act speaks to, then and only then where there be a conflict. There is no irreconcilable conflict between the two Acts that are being reviewed here. If the Federal Act were to address itself to state recoveries which it does not then such conflict might be found. On the contrary, the Federal Act invites the state to impose any requirement or liability with respect to the discharged of oil into the waters of the State and Florida has done this. The danger of a massive oil spill by pollution is both a federal and a state problem that District Court by its decision we contend has frustrated this expression of federalism and if federalism is to be more than an academic theory then it requires an expression in the instant case by reversal of the lower court and a declaration of the Florida law is valid in all respects. This is a matter of particular concerned to Florida. Speaker: Attorney General in your point, I think you stated in your brief that the District Court’s refusal to several portions of the state statute will not be disputed on appeal. Does this mean it is your position because I think you’ve just intimated that the Act is valid in its entirety and that you want the whole thing or --and would not be contend with any portions of it? Robert L. Shevin: Your Honor, we take the position that the Act is valid in its entirety. Quite obviously, it contains the severability clause, the Solicitor General in his amicus brief which supports the position of the State in many respects disagrees with the position of the State in one or two other respects here just the Court to strike certain portions and allow others to remain and of course the Court has this option. But its our contention and we take the position in this appeal that the entire Act spell it and that within the traditional police powers of the State, the State has a compelling and urgent and reasonable need to legislate in this field to complement with federal legislation that release is not obtainable in the admiralty courts when the limitation of liability is based upon the value of the vessel after the fact because if the vessel sinks we’re talking about the limitation being based upon the salvage value of the vessel that this will not give us the type of remedy that’s necessary to cleanup massive oil spills and to give a relief to third party as to citizens of Florida who have a justifiable cause and cannot obtained any justice in the courts if they are limited to going in through an admiralty proceeding. Speaker: Well suppose the Court should hold that the Florida Act in so far as it affects criminal facilities for instance is valid and the rest of it is not. Would you take at least that much if you could have it? Robert L. Shevin: Well, Your Honor quite obviously, I’ll be less than candid if I said that we would not want to see certain portions at least certain portions of the Act upheld but we feel very strongly that the entire should be upheld. Your Honor, on this point of the relief and the remedy, I would challenge the appellees to show us how a third person, a citizen, a hotel owner whose surrounding beaches that are available to the public and to his hotel guests if those beaches are ruined how he’s going to receive relief in the admiralty courts and how the State of Florida is going to cleanup a massive spill in the admiralty courts. Speaker: What about up to this day if a vessel sitting and appear are navigable waters causes a fire ashore and the hotel burns down? Now, what’s the governing law in that situation? Robert L. Shevin: I think the governing law in that situation it would again depend if we’re talking about a sea to shore tort. Speaker: I’m talking about the cause of fire that originates on the ship causing a shoreside injury now about the Admiralty Extension Act? Robert L. Shevin: Your Honor, I believe in that case that the hotel owner would have his third party rights common law rights and would not be limited to the relief that the Congress purports to give under the Admiralty extension because I don’t believe that the Congress could properly extend. Speaker: Then there must be a law in that area. Do you mean your answer depends on the constitutionality of the Admiralty Extension Act? Robert L. Shevin: My answer to that question would Your Honor. Yes, sir. Speaker: Let’s assume the Admiralty Extension Act is constitutional, what about the hotel owner then? Robert L. Shevin: Well, I think in that case that he would be limited by to go into the Court of Admiralty. He would be limited in his remedies to that extent. Speaker: So that this thing you’re talking about the people injured to shore by an oil slick, those people are like the hotel owner? Robert L. Shevin: Well, there’s the hotel owner people who -- Speaker: Multiplied many times. Robert L. Shevin: Many times citizens, the State in its cleanup processes. Speaker: But again, assuming the constitutionality of the Admiralty Extension Act, what about that? Robert L. Shevin: Well, Your Honor assuming the constitutionality of the Admiralty Extension Act. It creates a very serious problem except for the fact that the Congress and the Water Quality Improvement Act, we think founded that on the Commerce Clause specifically recognizes other responsibilities, other concepts of liability rather than the old 1851 Standards and specifically, Your Honor if the Federal Water Quality Improvement Act was considered by the Congress to be in the admiralty area dealing with oil spills then why would they have provided the Act that the remedies are in the Federal District Court? That would have been totally unnecessary. Speaker: Well you must then be arguing also that the Admiralty Extension Act has been somehow modified by the water pollution. Robert L. Shevin: Yes, we are arguing that the Congress -- Speaker: And that Congress has power to cede to that the State in effect that certain jurisdiction in this area in this zone. Robert L. Shevin: Yes we’re arguing that the Congress recognized an emerging new concept that jurisprudence that they legislated accordingly, that they clearly gave the states the responsibility and invited the States to pass similar legislation and to go further and this is what the State of Florida has done and if the Water Quality Improvement Act is to have any meaning in the field of jurisprudence to be able to react to and prevent a massive oil spill, then the State ought to be able to legislate in this field as well. Now, You Honors, the Federal Act does nothing more than set minimum standards. I gives the states the rights to adopt more stringent requirements, this is what the State has done just like in the Clean Air Act, just like in the Water Pollution Act in and of the Air and Water Pollution Acts the State had been given the right to move further just like the present cooperation between the Federal Government and Florida to save Florida’s coastal lands and tidal waters. The Florida Act is no more violative of the Water Quality Improvement Act than our Water Quality Standards develop by the States violative of another Section of the law 33 U.S.C. 1171 subsection (b) of which requires a party seeking a federal discharge permit to obtain certification from the State Water Pollution Agency that the anticipated discharged will not violate state water quality standards. And if the non-preemption clause of the Water Quality Improvement Act is to have any meaning as a Congress intended, surely it should permit the State as Florida has done to allow private claimants in the state itself to recover under strict liability principles rather than the Fault Concept of Maritime Law and they speak of uniformity. Certainly, uniformity would be something that the maritime attorneys would desire and perhaps the insurers would desire uniformity but the Solicitor General in his brief agrees and concedes that although the application of Florida standard of liability absolute might create a lack of uniformity that this is not a subject requiring uniform federal regulation, that there has been no preemption and even if negligence is considered to be the standard, there is no policy of Maritime Law opposed to liability without call for damages caused by oil spill from ships that Florida has a legitimate right and interest to legislate and to apply the standards of liability and view of the potential impact of oil spills on Florida’s environment and economy and that the Solicitor General in other words contends that this is an area of concurrent jurisdiction. Now, the lower court apparently felt that each course was dictated by a series of earlier cases Jensen, Knickerbocker, Dawson and these cases have been mentioned by Mr. Dearing. However, these cases are more than 48 years old. There are dubious logic this Court has severely limited their application and it is hope that this precepts will not be perpetuated simply by the inertia of the rule of President because if this Court affirms the District Court -- Speaker: Well, are you suggesting we overrule Jensen or that we -- Robert L. Shevin: Well Jensen, I am suggesting that Jensen has already been severely limited and as a result of the limitation. Speaker: I have said earlier it’s limited them largely to conflicts on personal entry case? Robert L. Shevin: Yes, on workman’s compensation. Speaker: And that’s the way you want to leave it? Robert L. Shevin: Yes, sir. We contend that that’s the way that you are to believe it. Speaker: Does Jensen have to do with the sewage cited against (Inaudible) isn’t it? Robert L. Shevin: Yes, it is. Speaker: Doesn’t it have anything to do with shoreside damage? Robert L. Shevin: That’s correct, it has absolutely nothing -- Speaker: What do you need to modify that at all? Robert L. Shevin: Well, I’m contending Your Honor, that the lower court based its decision basically are Jensen, Knickerbocker, and Dawson which we think is inapplicable. Speaker: As a general principle that anywhere there’s admiralty it’s exclusive? Robert L. Shevin: That’s correct, that’s was the basis of the lower court’s decision. Your Honors, we contend that if this Court affirms the District Court that will be tantamount to affirming 200 years of law but no justice. Thank you. Warren E. Burger: Mr. Healy. Nicholas J. Healy: Mr. Chief Justice and may it please the Court. The subject of this appeal if Your Honors please is not water and the need to conserve it as the state contends. There is no issue whatever between the appellants and any of the appellees concerning the absolute necessity of maintaining a clean environment particularly in the marine area. There’s only one genuine issue in our submission which is presented here and that is whether as the court below decided, the subject of marine oil pollution like other subjects of maritime law should remain within the federal domain within the domain of the Congress and this Court and the other Federal Courts or whether to borrow a phrase from Mr. Justice Frankfurter’s concurring opinion in the Wilburn Boat case. It should be left to the crazy-quilt regulation of the different states. In this connection, we respectfully call the Court’s attention to Table B annexed to the brief of appellees American Institute of Merchant Shipping and others which contains a sampling of the various state laws in this new field. This shows that the clients, if Your Honors please that there is a great deal of difference among the various States in their handling of the pollution problem. Warren E. Burger: Mr. Healy, historically about when did the oil spill problem become a serious problem in navigation? Nicholas J. Healy: I would say, Your Honor about 1924 or a little before. The 1899 Refuse Act makes no mention of oil allow although, I’m sure you are aware sir the courts have been applying the 1899 Act to include discharges of oil and have been finding ship owners for causing discharges of oil. But the first time oil was at the mentioned as such in a federal statute was in 1924 Oil Pollution Act which was amended in 1966 and was repealed by the Water Quality Improvement Act of 1970. Warren E. Burger: But historically is there some correlation between the development of the very, very large tankers and greater incidents of oil spills? Nicholas J. Healy: I don’t believe the size of the tankers has had much to do with it because there had been very few incidents of spills of large quantities of oil from large tankers. The Torrey Canyon of course is the most notable but there is no doubt that the increased need for oil in the more developed countries and also now in the developing countries has greatly increased the need for ocean tonnage in the tanker area. And many, many times more oil is being carried today by sea than it was carried just a few years ago. Another development, Your Honor is the tendency to refine or at destination rather than at the source. Now this increases the potential for pollution damage but on the other hand it minimizes the number, the tragedies that resulted from explosions and fires on the vessels carrying gasoline and so on. The admiralty clause if the Court pleases is not merely a constitutional grant of judicial power. It’s perfectly true that its couched in terms of judicial power but when read conjunction with necessary and proper clause, this Court has repeatedly held that it grants to Congress the paramount power to legislate in the maritime field and where Congress has not acted then it is for this Court and the lower federal courts to define the General Maritime Law which is to prevail throughout the whole country and not just in one area. Speaker: Did Congress purport to say what authority was being exercised with the Water Pollution Act? Nicholas J. Healy: To the best of my recollection no, Your Honor. There is no mention of the constitutional clause under which it was acting but is seems to me clear, if Your Honor please, that it must have been the admiralty clause rather than the commerce clause because otherwise what possible right would Congress have to pass legislation which would relate not only to vessels engaged in interstate commerce but even to local barges that may never leave the waters of the single State and which may cause damage only to the waters of that State and to the shoreline of that State. Speaker: What’s the consequence if it was the admiralty power, Mr. Healy? Nicholas J. Healy: If it was the admiralty power then it doesn’t make any difference whether the vessel concern was engaged and in interstate or foreign commerce. It would apply to a barge on a river which never left the confines of the particular State if it was the -- Speaker: But does it make any difference with respect to the issues of this case? Nicholas J. Healy: In this case it does, if Your Honor please, because of the innumerable decisions of this Court holding that uniformity in the maritime law -- Speaker: Well, does this go so far -- as essential suggest that if its admiralty then there’s absolutely no power of any kind in the States? Nicholas J. Healy: There is one exception, if Your Honor please, and that is the local concern doctrine. If the matter is purely one of local concern and it’s a matter concerning which Congress has not acted then the States -- Speaker: And whether it’s personally to use anything else? Nicholas J. Healy: That is right sir. Now it’s proved that the Jensen case has been criticized severely as the attorney -- Speaker: That’s none of the statement, I suppose is it? Nicholas J. Healy: But I’m wondering, if Your Honor please, whether the criticism of Jensen hasn’t been focused in the wrong directions. I can certainly sympathize with those who feel that the court in the Jensen case could if it had wished have decided that workmen’s compensation laws of a particular state applied to shoreside workers when on board a vessel loading or discharging in the particular state, should have been considered as a matter of local concern. I think that’s the advice of the Jensen case if there is any. But I think the philosophy behind the Jensen case is the best thing that has ever happened to the steamship industry and the people who depend on it for their profits because -- Speaker: Does Harbor Workers’ -- does a Harbor Workers’ Act preempt State Compensation Act? Nicholas J. Healy: Yes, Your Honor. Speaker: With respect to everyone whose covered by? Nicholas J. Healy: Yes, Your Honor, the Harbor Workers’ Compensation Act of course was passed in order to remedy the situation left by the Jensen Case and it applies to all workers when may all maritime workers engaged in maritime appointment when they’re on board the ships. Speaker: Jensen, wouldn’t have kept the State from giving a workmen’s compensation remedy to people who are injured on shore? Nicholas J. Healy: No, sir this Court so held -- Speaker: But the Harbor Workers’ Act provides the remedy for them if they’re in maritime pursuits, doesn’t it? Nicholas J. Healy: No sir, not if they injured to shore. Speaker: So it’s just in -- just on ship? Nicholas J. Healy: That is right sir, the employer must carry. Speaker: Could it have that done so? Congress? Could have coverage shoreside Harbor Worker injuries? Nicholas J. Healy: I believe it could under the extension -- the Act of Extension of Admiralty jurisdiction. Speaker: But it wouldn’t necessary have to been exclusive? Nicholas J. Healy: It would seem to me that if the Congress once chose to act it would have to -- Speaker: You have to say that, don’t you, on your brief please.[Laughter] Nicholas J. Healy: I think so but it seems to me that if Congress once chooses to Act, it occupies the field and there is no room for state action. Speaker: There’s no independent congressional intent or is it just a question of fact that the judiciary addresses itself to as where there’s been preemption. Meaning your Water Quality Improvement, you had this expressed negation of preemption. Nicholas J. Healy: Well the, if Your Honor please the Act simply says that nothing in this Section shall be deemed to prevent any state from enacting water pollution legislation or words to that effect. It doesn’t say that -- it doesn’t state in a positive way, it’s more in -- Speaker: Well suppose that it said is some areas but defining them, this Act does preclude concurrent exercise of power by the States. Would be any different? Nicholas J. Healy: I don’t think that Congress could consistently with the decisions of this Court -- Speaker: I guess you have to say that don’t you? Nicholas J. Healy: I suppose I do but I believe it. The Knickerbocker Ice Company has so held and as far as I’m aware there’s never been any decision to the contrary. Speaker: The Knickerbocker Ice and the rest have a personal entry cases. Nicholas J. Healy: Well, that’s right. William H. Rehnquist: And that wouldn’t be true if these were they’re just a commerce power on land, whether Congress wants to say the states can have concurrent jurisdiction. There is no principle of law that prevents the States from having concurrent jurisdiction. So your depending basically in the admiralty approached to it? Nicholas J. Healy: That is right sir. The line of cases has been quite different and of course, I suppose it’s largely historical when the Constitution has adopted the only interstate and foreign commerce of any account at all in this country was by water. We have no railroads or airplanes or trucks. Speaker: Well I suppose you would still be here even if there were no federal water improvement legislation at all would you? Nicholas J. Healy: Absolutely, Your Honor. Speaker: Just for the claim that Florida was without power to legislate in the area of admiralty? Nicholas J. Healy: Absolutely. We are not. Speaker: And that was the basic decision of the District Court, was it not? Nicholas J. Healy: Exactly sir. We are not arguing that the Federal Act preempts the whole field. It does not, the Federal Act applies only to U.S. Government clean-up costs and with reference to that, if Your Honors please, the Attorney General challenges these to explain how the poor hotelkeeper whose beaches were damaged could find relief in admiralty. Well, I think the answer is that under the Federal Act Congress has appropriated huge sums of money and has charged the Federal Government with the obligation of cleaning up an oil spill and no distinction is made between Government-owned property and private property if the shoreline has damaged, the Government comes in and cleans it up if the owner doesn’t clean it up and if the Government doesn’t it then the Government is entitled to reimbursement subject to a limitation of a $100.00 per ton with sealing of $14 million and subject to a four defenses: act of God, act of war, negligence of the Government itself and act or omission of the third party. Speaker: But the Government doesn’t quite -- doesn’t -- wouldn’t provide in a loss of profits -- Nicholas J. Healy: No, sir. Speaker: -- which might be recovered in the private suit? Nicholas J. Healy: No sir but in a private suit of course the hotelkeeper could sue and for his loss profits and if the spill were very bad one and the vessel were damaged so that you have very little value left, it’s true that the limitation of liability statute would be applicable. Speaker: Now an absent of the Water Pollution Control Act and absent the Admiralty Extension Act, you wouldn’t be here would you? Nicholas J. Healy: Yes, Your Honor because -- Speaker: Under the decisions of this Court prior to the Admiralty Extension Act? Nicholas J. Healy: Yes, because we are dealing here with liability not only to shoreside property but to the water and to ships. Speaker: I agree with you. I should have limited the question to shoreside damage. Nicholas J. Healy: As far as shoreside damage is concerned we will not be here. Speaker: Absent of the Admiralty Extension Act. Nicholas J. Healy: That is right, sir. Speaker: Yes, thank you. Nicholas J. Healy: With this reservation, if Your Honor please, the Florida Act of course applies to terminals as well as to vessels. Speaker: Right. Nicholas J. Healy: And if a terminal shoreside facility causes a spill and damages cause to another shoreside installation or shoreside property, there might be a question, a serious question of admiralty jurisdiction and federal substantive law the General Maritime Law applying but here the terminal is liable also for damage under the Florida Act for damage to another ship or for damage to the water and for the cost of cleaning up the water and thus, the Fifth Circuit -- the Court of Appeals said in a fairly recent case nothing is more maritime than the sea. Therefore, I think is quite conceivable that even a statute which was limited to damage caused by shoreside installations to water and certainly to vessels would be unconstitutional. Certainly, the damage to another vessel by shoreside installation is admiralty and was even before the 1948 Act. My colleague Governor Collins will continue the argument. Thank you. Warren E. Burger: Governor Collins. Leroy Collins: Mr. Chief Justice, may it please the Court. I respect very highly Attorney General but I find that some of his statements here to be frankly incredible. When he makes a flat statement that there is no conflict between the State Act and the federal laws, I think his badly wrong as I’d like to try to demonstrate. In fact, the District Court after considering this case found that there were so much in conflict and so much wrong about the State Act that if it were stripped of all of its conflicts there would be no viable act left and that is the reason why we have not considered that there was any question of severability the remaining of course I don’t deny that this Court would have every opportunity he did ask to deal with the case in that way. But the pilot himself in his brief acknowledges that there is no basis of severability here and we strongly make that contention too. There was no question raised in the jurisdictional statement regarding severability and so we do not believed that question is properly before this Court on the initiative of the parties involved here. The thing I would like first of all to emphasize is the fact that, what Florida really seeks to do here is to establish in the words of the Solicitor General, I comprehensive regulatory scheme. It’s not just an Act dealing with these couple of matters of liability without thought and limitation of liability. The State of Florida puts itself in the business of regulating, what is obviously, admiralty jurisdiction and it regulates it in a very comprehensive way. This involves to control and regulation of ships as State Act does. It involves terminals that exist for the purpose of servicing to those ships. It involves navigation in the navigable water of the United States very importantly. This total scheme is what the District Court invalidated and what we feel this Court should do. Let me refer to just a few of the provisions of this law that haven’t been mentioned here at all. The law provides of course for licensing of these terminals in the issuance of certificates of registration for them annually provided, the terminals demonstrate that they have certain equipment on hand and that they are disposed to cooperate completely with the State and in any program of prevention and correction of oil spills. And it follows this language, the Department that’s the State Department shall adopt regulations to govern operating and inspection requirements for facilities, vessels, personnel and other matters related to licensee operations under this Act and specifically requiring that vessels, transporting pollutants within state waters shall maintain on board such containment gear as may be required by the Department that it is to state with a crew trained in the use of such gear. Now this is what the state is seeking to do. The States further makes provisions under this law for the designation of support managers and take a look at some of the duties and obligations and rights of these port managers. They are to organize recover teams, that’s understandable although the federal law provides for what they call strike forces which is the same function really. These port managers are authorize to board vessels that out there they are going to come into the port to inspect these vessels for the seaworthiness and of course that can include a great many things and to decide whether in their opinion the port manager, the State manages a few it is seaworthy and decide whether it has a proper gear on it and decide whether its crews have been trained suitably to allow to them to enter one of Florida’s level deep-water ports. The port manager also has the right after he stops the ships out there to tell them that he must anchor, he can’t come in now because of whether conditions and if he does come in, he can tell him where to go and where to stop and other things at a purely operation and navigation limit completely covered by coast guard services and other federal services at the present time. The law also provide for the preparation of a contingency claim. Invite -- involving all the agencies of the State Government to help it enforce all of these provisions and to help provide remedies for spill if it occurs. This of course is patterned directly after the Federal Government. The 1970 Water Quality Improvement Act was passed to defense of this Act and obviously, the Federal Act was before the draft of this Act and was used as a model somewhat. What the State was just trying to do is do all the federal governments going to do and do much more in conflict with some of the things the Federal Government provided. Now, in doing all these things as port managers authorized to do, he runs squarely into the coast guard and its responsibilities. This is a comprehensive federal contingency plan and there is a federal contingency plan responsibility for recovery spills and strike forces and all of these things are all provided under that Federal law and the coast guard, the federal authorities of course have authority to prevent ships from coming in and giving them directions at which the state is putting itself in business of doing so. Here you have very specific conflicts but these conflicts are just the beginning. This navigational management of conflicts because both state and the federal require showing the financial responsibility, the state makes no provision for accepting and showing that the Federal Government requires a financial responsibility. This imposes its own making it a little tougher and there is a provision that and I don’t know just how this should be interpreted but in all these where the cost guard and the state teams move together while it’s a provision that the State shall act independently of the federal authorities. Warren E. Burger: Well Governor, is it your position that the regulation of the State under the State Act is so pervasive that none of it can survive? Leroy Collins: Yes sir, that’s absolutely sir. And of course we go and that there are all these conflicts regarding the extent of liability limitation and non-limitation of liability, the State deprives people of rights and defenses in very harsh terms that are in conflict with the federal terms, and all of these other things that are mentioned herewith. Now, and the State frankly insist that its law supersede those of the Federal Government in these respects. And we say that it is a Congress’ responsibility to regulate in this field and it must be the Congress’ responsibility to regulate in this field. We are proud about beaches and of course we want to protect them why therefore denying other States of the union who are equally proud of those that they have or may have and this is a matter that requiring uniformity of action and that action can only come through federal leadership and federal direction. A room for the States to cooperate but this is not any way for the State to seek to cooperate with the Federal Government in its comprehensive plan to deal with this very difficult problem. Now, I think the best of all the cases and very essentially that dealing with this matter of federal state relations and responsibilities in the admiralty field is Kelly against Washington. And there you have read pervasive state statute that sought to provide inspection of boats and ships that were not provided to be inspected by the Federal Government and do all kinds of boats, some of them foreign commerce, some in the interstate commerce, some in intrastate commerce. And the State Supreme Court there held that that Act was an improper innovation of the Federal Admiralty Domain though it did apply only to ships not subject to federal inspection. And the case came up here and Justice Hughes wrote the opinion for the Court and he sets out very clearly the three governing rules that apply and I think applied right here. First, he says is there a conflict with federal law? He says if there’s a conflict with federal law, the federal law prevailed because it is paramount and the state law fails. Secondly he says, if the subject is one demanding uniformity whether a conflict or not that the state action will not be permissible. Well, we submit here we have a proposition that does require uniformity of dealing. Then he said that there was room for a state to deal with purely local exigencies when there was neither conflict nor a necessity for uniformity and some very limited action was allowed the State to act in this area pending action by the Federal Government. Now, those are the -- that’s a modern rule for protecting the maritime, a jurisdiction and administration of this nation and it does belong to this country and if doesn’t belong to the several states because that has a countrywide responsibility and a nationwide responsibility and I submit that on all three of those considerations that this Act fails. They argued that hereon which cited the Kelly against Washington Case. The case of Michigan over there was a municipal coordinate dealing with smoke intensity and the Court allowed that to stand. They claimed that that where there’s a -- was a departure from Kelly against Washington. It was really an effort by the Court to adjust to that little local room there, a local exigency, the particular situation which provided the misdemeanor for a ship to be emitting smoke in the City limits of Detroit. Speaker: As I remember Governor, there was no federal statute on that wasn’t it? Leroy Collins: No sir, it was not. Speaker: Federally license to the vessels [Voice Overlap] that if somehow was an impairment of the federal license to court. Leroy Collins: Yes, it was claimed that federal inspections were required of this and this particular type of (Inaudible) met with federal inspections and there was a strong dissent in that case that my personal feeling would follow actually, that was by Justice Frankfurter and Mr. Justice Douglas. But even so that’s just a tiny, tiny island there that that cannot be possibly be a base of foreign act that this is as far reaching this as this went years. So we say it is up to the Congress to say what the (Inaudible) is and I would like to call the Court’s attention to the fact that the Congress had not been lax in its interest in this matter. It is move very importantly over the last 25 years that to meet needs that arising in this matter of greater and greater demand for more and more shipping of oil to meet the greater and greater demand for electric power this country and that same thing is true all over the world. This is a serious problem but it’s not one that the Congress is not aware of. It’s not one that the Congress didn’t moving very specifically and very importantly to meet. In our case, there is conflict, the United States is exercising its paramount power and the State is seeking in to supersede this. In our case, there is a necessity for uniformity. They argue about. They can’t possibly say that this matter of controlling this kind of navigational operation and experienced is a local matter. But we could have an oil spill at Pensacola that might not hurt Pensacola totally and might wind up in Mobile and it creates a problem in that state. Now supposed to use a hypothetical case we had a spill up near New York and it got to go stream and started drifting up the New England Coast there. Well, if they applied the law that the Attorney General is seeking to uphold here then you will have a New York State. A team out there trying to deal with this matter and telling the master of the ship what to do with the ship and how to handle it and trying to manage a team and then when did this spill across the Stateline and you got into Connecticut while here’s another state out there with another team and whole regulations and more controlled and different ones and so it goes the main you’ve have the same sort of thing. This is definitely an area which we require uniformity and requires the kind of action that the Federal Government is applied at the present time. In the national conventions of a dealing with this subject and importantly and of course this would supersede any state regulation. The ship as I represent do not seek to avoid regulation concerning oil spills. On the contrary, they had worked with Congress and continued to do so in relation to oils spill legislation. However, this ship was worked daily in the complexities of the federal admiralty scheme and they realized as a practical matter and impossible situation would exist if States were free to legislate within the area of oil spill control as Florida seeks to do. There is a better way now. There is a better way then for each state to try to outdo the Federal Government. We’re all in this together, the State Act should be found invalid here at the District Court has. And the interested state should then find ways to exhibit their effectiveness in the formulation support and execution of federal policy in this field and there is no lack of federal power, there is no disposition by our federal leadership not to move, there’s no lack of awareness of the States involved for Florida and all the sister states as well. So we submit the case, the decision should be affirmed. Thank you. Warren E. Burger: Mr. Attorney General you have about four minutes left. Robert L. Shevin: Mr. Chief Justice, may it please the Court? Governor Collins if that spill that you referred to ends up in Mobile then I would hope that the State of Alabama has a law similar to Florida’s because then they could take care of that spill. If it ends up in Pensacola then I want to be certain that the State of Florida can cleanup that spill and at the people who are damaged by that spill have a right of recovery in a court of law and are not limited by high bound traditions which do not speak to the question of massive oil spills. By the use of the words, any requirement or liability in the Water Quality Improvement Act, it is clear that the Congress fully intended to give broad latitude to the States to enact whatever requirements of liabilities and standards of the states deemed warranted in the exercise of their legislative powers to prevent and control and provide relief from oil pollution. Congress was not only acquiescing in the enactment of state legislature they were actually inviting the States to act to pass its legislation and pursuant to this invitation Florida passed its law and this law was based on direct and compelling interest that the State has urgent interest for the protection of its economy and its environment. It’s the proper exercise of the police power the State to protect our citizens and a such should be given the full weight despite the lack of uniformity which the Act -- which might result because of the Act. Now, if it please the Court, the Federal Admiralty Extension Act we contend was improperly extended by the Congress beyond the constitutional jurisdiction of the admiralty court. However, even if the extension Act were to apply and is upheld by this Court and even if the Water Quality Improvement Act was bottomed on admiralty rather than commerce there’s still would be room for state action. This is not in exclusive domain, there is still room for state action, there’s still concurrent authority and the Solicitor General in his amicus briefs says uniformity and we agree must yield to the overriding need for the State to legislate for the interests of its citizens. Florida has legislative within the traditional bounds of the State’s police power and to protect our citizens and to protect our environment. Warren E. Burger: To have uniformity yield would mean overturning a long, long line of authority, would it not? Robert L. Shevin: No, Your Honor, I think not because the Jensen, Knickerbocker, and Dawson cases have all been very severely limited and this Court has never dealt with this emerging law particularly with regard to massive oil spills and uniformity has yielded in the past where there’s been an overriding state interest to protect and I don’t think it requires the overriding of the long line of cases. Warren E. Burger: Is it conceivable that all of the coastal states had Acts of one kind to another that it might pass your inspection in Florida wherein they put in to Miami if they put in there in Pensacola but that they might not pass it Mobile or they might not pass it to other parts. Robert L. Shevin: Well I think Your Honor, Mr. Chief Justice you are now speaking to the argument that was raised as far as containment gear and inspection of the vessel or what type the gear it has on. Warren E. Burger: Equipment, generally. Robert L. Shevin: Well, let me speak to that because I think that would be the test. There had been no Florida regulations promulgated as to what type of containment gear this vessel must have to be able to prevent the spill and take it up as soon as it occurs. The coast guard has not yet promulgated regulations and to rule our Act or that Section invalid this Court must presume that Florida’s regulations will conflict with the federal coast guard regulations and we don’t think that this Court should presume that or speculate with regard to what the regulations will be. We think it’s entirely consistent with the Florida Act which says this Act was designed to complement the Federal Water Quality Improvement Act that certainly as to questions of containment gear and this type of regulations that those regulations would be promulgated to be consistent with the regulations of the Federal Government. If I may just end, Your Honor, I think my time is just about out. We asked them -- we challenged them to show us how Florida and its citizens would be able to receive damages for cleanup. And they said, well the Federal Government is coming and cleanup the beach but we don’t want to have to rely upon that. We are not certain that’s going to occur, that’s not part of this record if the Torrey Canyon went down 16 miles off from Florida rather than 16 miles off of London there wouldn’t have been no recovery. We have been limited to $50.00 salvage value and that’s why the Water Quality Improvement Act gives broad powers and directs the State to Act and why is they’re presently pending before the Senate of the United States a treaty which would be near to unlimited liability, $15 million and a contingency fund and absolute or strict liability, why is that treaty pending if existing federal law is enough to provide cleanup cost and damages? Obviously, existing federal law is not enough. The Water Quality Improvement Act seeks to speak in this field, directs the State Act. The State has acted constitutionally. We ask you to uphold this law. Warren E. Burger: Thank you gentlemen. The case is submitted.

William H. Rehnquist: We'll hear argument next in Number 93-1911, Cinda Sandin v. Demont Connor. Mr. Michaels. Steven S. Michaels: Mr. Chief Justice, and may it please the Court: This case comes to this Court from the Ninth Circuit's decision holding that Hawaii Administrative Rule 17-201-18(b), our burden-of-proof rule, creates a liberty interest entitling every inmate in the Hawaii penal system to a procedural due process review under the standards of Wolff v. McDonnell for every assignment to disciplinary segregation of 4 hours or more. In so holding, the Ninth Circuit ignored nearly a half-dozen decisions of this Court that characterize the Wolff case as applying solely to regimes that threaten the loss of good-time credit. The State of Hawaii has no system of good-time credit, nor does even our parole system make a disciplinary finding a necessary impact on parole. David H. Souter: But it does make it a relevant finding. Steven S. Michaels: It is relevant in the sense that a bad disciplinary record can be but need not be a basis for the denial of parole. David H. Souter: Right. They could say this person's record is terrible, he clearly is not a good candidate for a trouble-free life if released, so we're not going to parole, or they could say, this person's record is terrible, let's get him out of here as soon as we can. They've got that choice. [Laughter] Steven S. Michaels: Yes, and Justice Souter, I would say that the driving force for parole decisions today in our State would be prison overcrowding. That would be another reason for granting early parole. But it has no necessary impact, and inmates who have very good records in prison could be denied parole for any number of reasons, and inmates that have very bad records in prison could be granted parole for a number of reasons. The Ninth Circuit also ignored a lengthy summary judgment record that tells us what Demont Connor's assignment to disciplinary segregation actually meant in real-world terms. He was assigned, before he was assigned in disciplinary segregation, to Module A, and Module A was the most restrictive general population module in the entire Hawaii penal system. As a result, his assignment to disciplinary segregation meant only the loss of certain privileges, and was not a major change in the conditions of his confinement. We ask the Court, as it decides this case, to keep five things in mind. First, disciplinary confinement is only one stopping point along a continuum of penalogical responses, and is merely the combination of one set of privileges in lieu of another and we submit that, unless the court is prepared to federalize through the Due Process Clause all State-created privileges in prison, it must reverse the decision of the Ninth Circuit below. Ruth Bader Ginsburg: Before you continue with that, would you just step back for a moment? You said the only difference was the loss of certain privileges. Could you be specific about what it was, what the loss consisted of? Steven S. Michaels: Right, and Justice Ginsburg, I would refer Your Honor to the guidelines that begin on page 125 of the Joint Appendix. There are a number of provisions, and I'm prepared to discuss those. When the inmate was in Module A, he was subject to lock-down already for 16 hours a day. When he went to disciplinary confinement, his amount of lock-down time increased, but the inmate was also entitled to out-of-cell exercise time, shower five times a week, religious counseling, legal counseling, as well as a monthly visit with his family, non-contact visit. The number of visits went down. It would have gone down from eight to one. He would have lost the one telephone call that he could make of a personal nature, although he would have had the right to make legal, official phone calls to counsel or to the State Ombudsman. In addition, the inmate would have lost, when he moved from Module A, the right to watch television and to receive certain newspapers, but he would be entitled to have both religious and nonreligious reading materials in the disciplinary holding unit. David H. Souter: Is there a third alternative for us? You spoke of federalizing everything, of limiting interests only to those that affect prison time, and so on. Is there a third alternative of devising some kind of a de minimis rule here? Steven S. Michaels: Justice Souter, I suppose that because the concept of de minimis does exist in the law, that one could have that, but it would mean that a very large number of privileges that from a subjective sense to the prisoner would not be viewed as de minimis would be eligible for procedural due process protection. David H. Souter: Well, I presume we'd have an objective de minimis rule. Steven S. Michaels: Even then, in an objective test, I would think the category of de minimis, if the Court is going to treat it as it has been treated in the law, would mean that only a very small number of changes would be exempt from Federal judicial scrutiny. David H. Souter: It wouldn't be worth the trouble, from your standpoint, to have a de minimis rule? Steven S. Michaels: We think that the longstanding theme of this Court's decisions dealing with prison management, that-- David H. Souter: Well, would it... just from your standpoint, from your client's standpoint, would it be worth your while to have such a rule? Steven S. Michaels: --It would be better than-- David H. Souter: Would you rather have all or nothing, in effect, rather than have a de minimis rule? Steven S. Michaels: --We don't think that line is administrable, no, Your Honor. William H. Rehnquist: Okay. Well, what you're asking for is a form of de minimis rule, except it's not really de minimis. You're asking for a rule that says where there's no loss of good-time credit, and no necessary impact on parole, then you would not construe voluntarily adopted prison regulations as creating a liberty interest. Steven S. Michaels: In that sense, Mr. Chief Justice, yes. William H. Rehnquist: Yes. I dare say that's not what Justice Souter meant about a de minimis, and perhaps you wouldn't describe it as de minimis, but you're asking for some sort of a cut-off. Steven S. Michaels: Yes. Our position is that the line for eligibility for due process protection should be drawn at good-time credits, or a finding that has a necessary impact on a parole date. Anthony M. Kennedy: What is the underlying theory for that? That describes the test. It describes the line, but what is the theoretical justification for drawing the line there? Steven S. Michaels: Your Honor, we ask the Court in this case to look at the structure of cases such as Wolff v. McDonnell, as well as the extensive progeny in this area. The underlying theme of this Court's decisions is that prison managers need flexibility and discretion, and to the extent the Constitution intrudes upon that by weighing procedural due process requirements upon them, the Court has always been solicitous of categories of conduct that are meaningfully different from one another. For example, in the Wolff case itself, the Court distinguished between parole revocation, where the person is already out, and good-time credits where the person is in but has earned a certain expectation of getting out by a particular day. We think that this case is categorically different from even that situation, the good-time credit case, and that the appropriate constitutional response is to say that this is not an area... even where for management reasons we may have mandatory rules, that this is not an area, Justice Kennedy, where the Due Process Clause should be the constitutional protection. One of the points that I make, and I make it now, is that we do submit that there will still be backstop constitutional protection against arbitrary assignments to disciplinary segregation, but the source of that right should not be the variegated and sometimes complex requirements of the procedural Due Process Clause, but it would be the requirement of minimum rationality under the Equal Protection Clause. John Paul Stevens: May I ask you to test your position on Equal Protection, or, I suppose, the Eighth Amendment, too. Supposing that there's no necessary consequence of impact on parole on a particular decision, but your opponent could prove that 99 percent of the time, people who received a particular kind of punishment were denied parole for an extra year, and also that the... whenever they got this particular punishment, they were put in isolation for, say, 8 months, not cruel and unusual punishment, but a dramatically different situation. Under your rule, I would suppose there's simply no review of the procedures that would precede that. Steven S. Michaels: There would be review under the Equal Protection Clause-- John Paul Stevens: Yes, but I'm assuming no-- Steven S. Michaels: --for minimum rationality. John Paul Stevens: --no racial charge, nothing like that, just the person who made the decision, the argument would be, he acted arbitrarily because the crime... I mean, the offense was not nearly so... you know, whatever the reason might be, but you have to assume total discretion on the warden to use the kind of punishment I suggest, even if 99 percent of the time, in fact, it would mean an extra year in prison. Steven S. Michaels: Several answers, Your Honor. First, as to what the empirical result would be on parole, the Court has already held in cases like the Dumschat case, I believe, that that empirical evidence is not relevant to the procedural due process question. John Paul Stevens: You may be right as a matter... all I'm asking you, am I not correctly describing the situation that your rule would tolerate? Steven S. Michaels: Our rule would not tolerate it if this was a charge that was simply made up. Our position is that-- John Paul Stevens: Why not? Steven S. Michaels: --Because, as even this Court's cases recognize, although the equal protection line of arguments, the rational basis test, is a very lenient test, it is not a toothless test, and that, for example, City of Cleburne v. Cleburne Living Center, the Court actually will require some evidence to show that there is a rational basis for the assignment. John Paul Stevens: So there would be judicial review of the sufficiency of the evidence, under your test? Steven S. Michaels: Our position is that there would be only a minimal evidence requirement, but yes, there could be judicial review, so that-- John Paul Stevens: But it would be a procedural requirement in my case, of minimum evidence? That's not the position I understood your brief to advocate. Steven S. Michaels: --I believe the... in my discussion with you that we're at least clarifying our brief. I think that the brief was clear, but I'd like to clarify the brief in that regard. Because of the way the equal protection works, in court we would obviously have to produce some evidence, under our theory to justify the detention. The real-world consequence, though, for this case would be that other requirements of Wolff v. McDonnell, such as the contemporary statement of evidence and the particular problem we had with the Ninth Circuit in this case dealing with whether witnesses could be called or not, those would be eliminated, and those would be the consequence of adopting our opening argument in the case. Antonin Scalia: There's a lot less here than meets the eye. You're saying all of this litigation should continue, but it should be just a different standard... minimal evidence. That's all you're... I thought you wanted these cases out of the Federal courts. Steven S. Michaels: Well, the Court-- Antonin Scalia: But you want them in there just on different evidentiary standards. Steven S. Michaels: --Well, we certainly don't want... as a client matter, I'm sure that my client would be thrilled if they were never there at all. I think in terms of offering the Court one way to solve the tensions in the case-- Antonin Scalia: Well, it's a way to win the case, I suppose, but I just don't know how much you're winning. It's frankly news to me that the Equal Protection Clause is an evidentiary guarantee. Do you have any cases that-- Steven S. Michaels: --Yes. Antonin Scalia: --What's that? Steven S. Michaels: I can understand Your Honor's concern that as a general matter, when reviewing legislation, the court will use the imagined rational basis standard, but even cases like... but in cases where there are as-applied equal protection challenges, and these challenges could be brought now, but obviously the litigants don't do... the plaintiffs don't do that, because they have a howitzer with the procedural Due Process Clause. Under the Cleburne case, the Court actually required in an as-applied equal protection challenge some rational connection between a legitimate interest and what the Government was doing in that case. William H. Rehnquist: Isn't there a good reason to think that the Cleburne case was something of a sport, in view of our subsequent equal protection jurisprudence? Steven S. Michaels: Well, we do offer that as the support for what the constitutional backstop would be if the Court wanted to go in that way. Antonin Scalia: I don't think it's a backstop. I think you're asking us to jump out of the frying pan into the fire and create a whole new constitutional equal protection jurisprudence that allows all sorts of factual decisions by every State and locality to be reviewed on equal protection grounds. That's a whole new territory. I mean, maybe Hawaii likes it, but I don't view it as a great assistance to the problem of overintrusiveness of the Federal Government into these matters. Steven S. Michaels: Well, it would be a minimal test, and at the same time, Your Honor, we-- David H. Souter: Yes, but may I interrupt you? You say it would be a minimal test. I don't see why it wouldn't be a much more complicated test than the one that you've got now, because the issue now is whether certain procedural options were provided to the prisoner. That seems to me something fairly simple to litigate, even though it may provoke a certain degree of nuisance litigation for you. But if, in fact, a minimal sufficiency of evidence criterion is going to take its place, I would suppose that that was going to be rather more complicated to litigate, because you're going to have to establish what was there in the... before the parole... before the prison warden, or whatever the disciplinary committee is. It seems to me that you're asking for the substitution of a very complicated procedure in place of a comparatively simple one. Steven S. Michaels: --I'd respectfully disagree, Justice Souter, because the present system is not only as complicated as you make it, but even much more so, because under Superintendent v. Hill we do have to provide already some evidence, and so we already would have to meet that component under procedural due process analysis. David H. Souter: Well, is there any reason to believe things would be simpler on a sufficiency of... minimal sufficiency of evidence test? Steven S. Michaels: Yes, indeed, because there are at least several other aspects of procedural due process protections, namely the requirement of a contemporary statement, and there are all kinds of conflicts that arise as to what has to go in the statement, how specific the reference has to be to the evidence, and these provoke a great amount of litigation, and in this case particularly, the issue of witnesses. Those would disappear under our analysis. Anthony M. Kennedy: Well, suppose the prison authorities transferred the prisoner to solitary confinement, and he says, there's no reason for doing this, and they said, oh, we've heard a rumor that you're a troublemaker. Does that suffice? Steven S. Michaels: I would say that being a troublemaker per se is not governed by the specific rules that we have in our institution. Anthony M. Kennedy: No, I mean in this hypothetical regime, where we don't have procedural due process protections to any degree, but we do have a minimum requirement of some rationality, would the case that I put fit within that requirement and meet that requirement? Steven S. Michaels: I would have to answer that, Justice Kennedy, yes and no. Yes, if in the rational basis analysis one would be going outside of what... the specific rules the prison has in terms of defining the legitimate State interest. Anthony M. Kennedy: No, you don't have a rule. The rule is that the prison authorities can do what's for the best interests of the prison, of prison management. Steven S. Michaels: Then the answer would be yes. Anthony M. Kennedy: I'm trying to follow Justice Souter's point, which is to try to explore whether or not the regime we would be substituting is really much of an improvement, and so I put you the case of an assignment to solitary confinement based on a rumor that he's a troublemaker, and I want to know if that meets the minimum small core of rationality that's required for prison officials to act. Steven S. Michaels: Yes. We submit that that would suffice. William H. Rehnquist: What would be the inquiry, whether the person was in fact a troublemaker, or whether there was a rumor that he was a troublemaker? Steven S. Michaels: It would be whether the official genuinely believed that that rumor had basis. John Paul Stevens: But why is that? If your position is that there is no liberty interest at all, why does he even need to believe there's a rumor? Why doesn't he just say, I think I'll stick this guy in solitary for 6 months? It seems to me that was the position you were advocating. That's what I thought. There's no liberty interest here, so why should there be any procedural protection? We think he'd be better off over on... put him over on Molokai with the lepers, and that's okay. [Laughter] I thought you were saying-- --That's what I thought your position was. --Mr. Michaels, that essentially when you commit a crime and get placed in prison you become a ward of the State, and one of the punishments of being a ward, one of the bad things of being a ward is that you're subject to sometimes erroneous and even arbitrary decisions, just as a juvenile is when a father says, go up to your room, for something she didn't do. That's why it's the pits to be a ward, and it's one of the punishments that you're subjected to when you commit a crime. I thought that was your position. Steven S. Michaels: Justice Scalia, the Court could certainly decide the case on that basis, and frankly my client would be thrilled if it did. We have always, in our-- David H. Souter: Well, are you asking us to, or aren't you? Steven S. Michaels: --What we offered-- David H. Souter: Is that the basis upon which you want us to decide this case? Steven S. Michaels: --We have offered to the Court-- David H. Souter: Well, yes or no? Steven S. Michaels: --We would like that, but it is not necessary to decide it in that manner for us to prevail. Ruth Bader Ginsburg: Mr. Michaels, can you spell out your equal protection theory, because I'm not sure I understand it. Who are the... what are the groups that are being treated dissimilarly? Steven S. Michaels: Well, our position is that the Equal Protection Clause requires a rational basis for the decision with respect to a legitimate State interest, and it would go beyond, Your Honor, the type of suspect class analysis, and this is the way we presented it in both the cert petition and in our brief. Anthony M. Kennedy: And I take it that's based on the theory, but maybe I'm wrong, that the Government must always have some reason for what it does? I don't think we've ever said that, but that would be the underlying theoretical justification for this principle, that the Government must always have some minimum rationality for whatever action it takes. Now, we've never said that, but if that's what you want us to say, I assume that would be the reason. Steven S. Michaels: That may well be-- Anthony M. Kennedy: Other than that, it's because there is some kind of liberty interest, as Justice Stevens' question points out. Steven S. Michaels: --It is our position that, even in as-applied cases, that there has to be some rational basis. Litigants could bring these cases now, theoretically, under the Court's decisions. Sandra Day O'Connor: Mr. Michaels, suppose we don't adopt your proposed new rule, do you think that application of existing precedents requires affirmance of the judgment below in this case? Steven S. Michaels: No, Justice O'Connor, we do not. Sandra Day O'Connor: Are you going to talk about that at all-- Steven S. Michaels: Yes. Sandra Day O'Connor: --or not? Steven S. Michaels: Yes. One of the factors that this Court's existing precedents have focused upon is whether the constitutional rule that's been proposed by a litigant would be bad constitutional policy. The Ninth Circuit's decision in this case basically tells the States that we could eliminate all this litigation just by eliminating our rules. In response to the concern of Justice Stevens, if we simply wiped out our rules and said that we can send you to disciplinary confinement whenever we want, we would not have this case before the Court. David H. Souter: Well, if you really could do that, why don't you go ahead and do it? That way, we wouldn't have to decide a new body of law and you and your client would get exactly where you want to go. Steven S. Michaels: Because it would not get us exactly where we want to go, which is to have guidance to our lower level officials. It is important for us as prison managers to have rules that are of a mandatory nature, and to have those be instructions to our lower level. Antonin Scalia: You could... Hawaii could adopt all of those that it wants. We're not stopping Hawaii. Hawaii can have all the codes of guidance it wants. The only question is whether all of these things are going to be enforceable in Federal courts. Steven S. Michaels: Yes, and what we submit is that-- Antonin Scalia: You want them to be. You want us to... you can't do it yourself, you think. That's Hawaii's position. Steven S. Michaels: --Our position is that as a matter of constitutional doctrine this Court's decisions in Hewitt v. Helms have made statements that the Court should be sensitive to the State's incentives in this area, and-- Sandra Day O'Connor: Do you concede that Hawaii has created here a State-created liberty interest under the scheme you have here, under our existing precedents? Steven S. Michaels: --We disagree with that, Justice O'Connor, and with... and I'll address that now. Sandra Day O'Connor: And why do you disagree? Is it because it's discretionary, the imposition of sanctions under the Hawaiian scheme? Steven S. Michaels: It's a two-part argument. First, we believe that our broader ground for reversal does respond to existing precedent, because we believe existing precedent asks the Court to take into account the incentives that are created. But secondly, we also believe that the assignment is sufficiently discretionary that our case falls within the kinds of language in cases such as Kentucky v. Thompson and Olim v. Wakinekona, and I focus the Court on two of the aspects of discretion. First, the Ninth Circuit just read our rule incorrectly in saying that we have a sufficiency, a substantial evidence requirement. The mandate of Rule 17-201-18(b) is a duty to convict if there is substantial evidence of misconduct. Our rule says that there must be more than mere silence in order to send a person to disciplinary confinement. David H. Souter: Well, doesn't that mean simply it's like an administrative Fifth Amendment? In other words, you can't find substantial evidence based on the silence of the prisoners. Isn't that all that means? Steven S. Michaels: We respectfully disagree with that characterization. The purpose of the rule is to require disciplinary confinement if there is substantial evidence, but we can give disciplinary confinement if there is less. David H. Souter: Well, let me ask you a different question. Your... I take it there's nothing in your rules that expressly says, in the absence of substantial evidence you may still convict? There's nothing that says that? Steven S. Michaels: Not explicitly. David H. Souter: Well, you say it explicitly or you don't, and I take it there's nothing that says that. You have all sorts of variations about punishment, but about conviction, there's nothing more that is said. Steven S. Michaels: It's our position that the way the rule is structured, that the committee can convict on less. David H. Souter: No, but just tell me how the rule is structured, and on the question of conviction, as I understand, you say two things, the rule says two things: you shall convict on substantial evidence; silence is not enough. That's all it says, isn't it? Steven S. Michaels: It says that you must convict on substantial evidence. David H. Souter: Well, must, shall, it's mandatory, but that's all it says, isn't it? Steven S. Michaels: Right, and-- David H. Souter: Okay. So the Ninth Circuit says, if it says you shall convict on substantial evidence, most people reading that would say, you better not convict if you don't have substantial evidence. Is that an unreasonable reading of the rule? Steven S. Michaels: --That's one possible reading of the rule. David H. Souter: Well, is it unreasonable? Steven S. Michaels: In light of the overall purposes, we believe that it is, in light of the overall purposes of the regulation. Stephen G. Breyer: So is there a case somewhere... I mean, how many instances have there been in which prisoners were, in fact, punished under this rule, though there was a finding there was not even substantial evidence, and they didn't admit guilt? How many such instances have there been? Steven S. Michaels: I can't cite any to the Court. The other aspect of discretion that we refer the Court to is the authority of the administrator in 17-201-20(b) to modify any and all findings of the hearing committee, and this is without... this power is without limitation. It is there so that the warden can order assignment to disciplinary segregation when there's been an acquittal that he feels is unjust. Antonin Scalia: What a weird system. They're very careful to make this finding, and then they say, and by the way, at the end of the day the warden can do whatever it wants. Do you really think that's what it means? I find that very strange. Steven S. Michaels: It does vest-- Antonin Scalia: Don't you think it means he can, you know, review and alter the findings for some good reason? Steven S. Michaels: --It does... it vests greater discretion in the warden because that person has... is at the top of the system and hopefully has a better perspective on these questions. Ruth Bader Ginsburg: Isn't it an unusual interpretation of the word "modify"? That formula is used over and over again for appellate review. An appellate court can affirm or modify a decision below. Steven S. Michaels: Justice Ginsburg, our... the fact that our rule doesn't track all of the options that are available in the Federal statute governing appellate procedure is, in our judgment, not enough to say that that discretion is not just as unfettered as in cases such as Olim v. Wakinekona. Ruth Bader Ginsburg: I don't think that you're answering the question that I asked. I thought that... you say "modify" means in the end the warden can do whatever the warden wants. I thought that that's what you... your interpretation of "modify". Steven S. Michaels: Yes, that is our interpretation. Ruth Bader Ginsburg: But that word is constantly used to describe options for the appellate forum, court, and it doesn't mean that a court of appeals, for example, can do whatever it wants with regard to a district court decision just because it has authority to affirm, reverse, or modify. Steven S. Michaels: What we respond to that concern is that that word has a different meaning in the prison context, and at least this Court's decisions have given prison administrators leeway in interpreting their rules, and if one looks at the Thompson case itself, the Court went quite far in defining discretion where, frankly, even the State of Kentucky did not believe that there was any. John Paul Stevens: May I ask... I understand your interpretation in your brief, but has that interpretation been put forward in any judicial decision, or any interpretive bulletin, or anything like that? Steven S. Michaels: No, Justice Stevens. In fact, the only-- John Paul Stevens: Just plain language-- Steven S. Michaels: --decision in this area by the supreme court of Hawaii that is important, or that has even touched on this, is State v. Alvey. State v. Alvey says that the purpose of this system is not punishment, it is to regulate the good order of the institution. For that reason as well, and for other reasons-- Stephen G. Breyer: --Well, is there... how many instances have there been in which the administrator overturned? Has there ever been an instance of that? Steven S. Michaels: --There has been an instance in which the-- Stephen G. Breyer: Where they punished... the administrator punished a person for the high misconduct, even though the board had found no substantial evidence and he didn't concede it? Steven S. Michaels: --Yes, and actually-- Stephen G. Breyer: Do we have the cite? Is there-- Steven S. Michaels: --I don't have a specific cite, because our administrative decisions are not reported, but I can represent to the Court that there was at least one instance, and because of intimidation at the hearing committee level that does occur, Your Honor. I would reserve the balance of my time. William H. Rehnquist: --Very well, Mr. Michaels. Mr. Hoffman, we'll hear from you. Paul L. Hoffman: Mr. Chief Justice Rehnquist, and may it please the Court: We had thought this case was about the State of Hawaii's desire to be able to impose arbitrary punishment in the absence of Wolff procedures. We have three main arguments in response to the State's position. The first really is that the case is quite a simple case under this Court's precedents, that under Wolff and Hewitt it seems clear that these regulations create a liberty interest because they require that there be a finding of guilt, a finding of misconduct before punishment can be imposed, and that starts from the very beginning of the regulations in 17-201-4, that says that these whole regulations are about tailoring punishment for misconduct. William H. Rehnquist: What do you understand the test to have been laid down in Hewitt? Paul L. Hoffman: Your Honor, the test that... as I understand it in Hewitt, is that the State has to restrict administrative discretion in a way that would give a prisoner in these circumstances a legitimate expectation that the State is not going to act unless certain specific, substantive predicates-- William H. Rehnquist: Well, Hewitt certainly doesn't say that in so many words. Paul L. Hoffman: --What Hewitt talks about is whether there are substantive predicates that are laid out, and particular standards that control administrative discretion. William H. Rehnquist: But it ends up being something of an ipse dixit, doesn't it? It ends up talking about all the arguments pro and con, and then says, on these peculiar facts we find there was a liberty interest? Do you think that's much to go on? Paul L. Hoffman: Well, Chief Justice Rehnquist, I think it says more than that. The Court said that the substantive predicates were the need for control in those regulations and threat to security, and that unless there were findings along those lines, then administrative segregation in Hewitt could not be imposed, and that the Pennsylvania statute said that, and that if the Pennsylvania statute had said that administrators could impose administrative segregation for any reason, or if it left... as in Thompson, if it left the ultimate decision to the administrator, free from a substantive predicate that had to be met, then there was the kind of discretion that would not create a liberty interest under this Court's doctrine. Antonin Scalia: What was the outcome in Hewitt? Paul L. Hoffman: In Hewitt, there was a unanimous Court's finding that there was liberty interest created in those administrative segregation regulations. Antonin Scalia: And was that liberty interest violated? Was the finding-- Paul L. Hoffman: Well, in that case the prisoner lost, because the-- Antonin Scalia: --So you could really say, it really didn't matter whether they was a liberty interest or not. Paul L. Hoffman: --Well, I think it matters-- Antonin Scalia: You could really say that was all dictum, in fact, couldn't you? You could say, assuming there was a liberty interest, it wasn't violated in Hewitt. Paul L. Hoffman: --Well, Justice Scalia, I think that the Court engaged in extensive analysis. Antonin Scalia: I know that, but we sometimes do that, and later we find out that we really didn't have to go into all that discussion, because you know, assuming there was a liberty interest, it wasn't violated. Paul L. Hoffman: But in Thompson, after Hewitt, and in other cases that this Court has decided-- Antonin Scalia: We did it again in Thompson, didn't we? What happened in Thompson? Paul L. Hoffman: --I think that it would be difficult, given the line of cases-- Antonin Scalia: What was the result in Thompson? Paul L. Hoffman: --Well, in Thompson the Court went through the same analysis that-- Antonin Scalia: And who won? Paul L. Hoffman: --The prisoner did not win-- Antonin Scalia: He didn't win again. Paul L. Hoffman: --in Thompson. Antonin Scalia: He didn't win again. So you could really say we said assuming there was a liberty interest, it really wasn't violated here. Paul L. Hoffman: Well, no. In Thompson the Court did not find a liberty interest because it found, after reviewing the regulations, that there was ultimate discretion left in the prison administration-- Antonin Scalia: I find it very... I don't know, I think it's good that States ought to adopt rules, just as I think it's good that parents ought to adopt rules, you know, for their wards. If you come in later than 12:00, you get grounded, and then the kid comes in late... you know, a little earlier than 12:00, and an unreasonable parent says, makes a wrong decision and grounds the child. That's too bad, but that's not going to cause me to say that parents shouldn't make rules, or that courts are going to review what the parents do about it all the time, and it seems to me a sensible system for prisons, too. Paul L. Hoffman: --Well-- Antonin Scalia: There ought to be those rules. Instead of Hawaii trying to run away from them and misdescribe them as really not saying you have to make such a finding, you ought to have to make a finding, but that's a matter for the-- Paul L. Hoffman: --Justice Scalia-- Antonin Scalia: --for Hawaii to decide. They don't want to yank all that stuff up here. Paul L. Hoffman: --As a matter of empirical fact, all States that we can find, based on the regulations cited by petitioner, have adopted Wolff, more or less, and in fact there are regulations that are very similar to-- Sandra Day O'Connor: Well, maybe they won't. Maybe they'll repeal them if every case involving the provision of a sack lunch ends up as a due process violation. I mean, is there no line that can be drawn? Does the Due Process Clause get invoked when the prison decides somebody's too much of a risk to have a tray with a hot lunch, and we're going to give them a sack lunch? Paul L. Hoffman: --Well, I think that that raises the question that was asked before about whether there's some de minimis exception with respect to the creation of State-created liberty interests, or-- Sandra Day O'Connor: Is there? Should there be? Paul L. Hoffman: --Well, I have two answers, really. One is, I'm not sure whether there should be under the jurisprudence of the Court that says that it's the weight... the nature of the interest rather than the weight. It's Hawaii's decision to decide what's important enough to handle their prison in this way, because there clearly-- Sandra Day O'Connor: Well, a rule dealing with not allowing prisoners to watch violent television programs, or something of that sort, are we going to get all this stuff in the Federal courts? Paul L. Hoffman: --Justice O'Connor, what I'd say to that is it probably is the case that a de minimis line could be created. I believe that in this case we would not be covered by that kind of position. I think from this Court's footnote 19 in Wolff v. McDonnell, this Court's recognized that putting someone into solitary confinement is a significant thing, and I would take issue a bit with Mr. Michaels' description of what happens. I mean, it is true that module... that the module in which Mr. Connor was housed before was more restrictive than some other housing units, but in fact he lost the ability to work, he lost educational opportunities, he was put in lock-down more. There was a significant change in conditions because of an act of misconduct as to which there should be fair procedures to decide, so I think-- Antonin Scalia: Although they were all conditions that he subjected himself to by committing the felony he committed. Paul L. Hoffman: --Well, Justice Scalia, I think that if the... this Court has repeatedly stated over the years that a person does not lose all of his or her constitutional rights by being in prison, and-- Antonin Scalia: Exactly, and we're talking about how many should be lost. Paul L. Hoffman: --And it could be... it could be, as this Court said in Hewitt, that for reasons of institutional management or security, that administrative segregation conditions, which may even look a lot like disciplinary segregation, can be imposed without this kind of scrutiny under the Due Process Clause, if that's how the regulations are drafted. But I think there's a significant distinction, and this Court's cases, I believe, have recognized that. Even in Hewitt, the Court distinguished between disciplinary punishment and administrative reasons, that there's a difference when the State seeks to impose additional punishment on someone because of the specific thing that they did. That's not part of the bargain of being in prison. Ruth Bader Ginsburg: Mr. Hoffman, suppose the State had a rule that disciplinary sanctions are within the sound discretion of the warden, period. Would you have a due process claim, and what would be its nature? Paul L. Hoffman: We would not, I believe, have a due process claim based on a State-created liberty interest. In other words, I think the State would be able to do that, but I think-- Ruth Bader Ginsburg: Isn't there something anomalous about saying if the State has nothing at all... here are two people. They're both in prison. One is told, when you go to solitary is within the sound discretion of the warden, and the other is told that you have these procedural rights, and the one who has no rights at all is told, too bad you can't complain. There's something anomalous about that, isn't there? Paul L. Hoffman: --Well, I think the way that I would resolve the anomaly is to say that this Court would then be confronted with the question, or courts would be confronted with the question of whether the Due Process Clause itself provides protection against that form of arbitrary punishment. William H. Rehnquist: In Hewitt we said it didn't didn't we? Paul L. Hoffman: I don't think so, Chief Justice Rehnquist. In Hewitt the Court said that administrative segregation was the kind of event that was in the normal range or limits of confinement, and this Court at the same time it was saying that, in fact I believe in either the next or the prior paragraph, said that disciplinary punishment was different, and that there's a big difference between subjecting someone to a particular classification or to administrative segregation within a prison environment and putting them into adverse conditions because they've done something wrong, arguably, and this Court has recognized in many contexts that punishment is different from measures that would be taken for a regulatory purpose. Antonin Scalia: I'm sure it is, but where is it writ that that isn't one of the things that you subject yourself to when you commit a crime? I mean, you don't subject yourself to being put in confinement because of your race or because of your color or because of your religion. All those liberties remain, but one of the risks you take when you get sent to jail is unreasonable and arbitrary masters. I mean, that's part of the bad part... thing about being sent to jail. Now, why isn't that acceptable? Paul L. Hoffman: I think that the-- Antonin Scalia: You can't be tortured, you can't be discriminated against for all those liberty reasons that are set forth in the Constitution, but doggone it, one of the hard things about going to jail is sometimes you get a bad warden just like sometime children have unreasonable parents. Paul L. Hoffman: --Well-- Antonin Scalia: It's part of the punishment. Paul L. Hoffman: --I think that it's inconsistent with the many statements that this Court has made that there's no iron curtain between the Constitution and prisoners, because if the Due Process Clause means anything, I think the touchstone is protection of the individual against arbitrary Government conduct. Ruth Bader Ginsburg: Yes, but you say you... in answer to my question you said, somebody could be treated much more arbitrarily and has no rights, if the State doesn't have a code of fair prison procedure. The fairer the State is, the greater the right of the individual. There is something anomalous about that. Paul L. Hoffman: Well, I think under this Court's State-created liberty interest doctrine, one of the thing that the Due Process Clause protects, in addition to whatever it protects apart from what the State provides, is that when the State provides something that a person can reasonably rely on as an entitlement, that this Court protects that entitlement by fair procedures, and in this-- Anthony M. Kennedy: Well, in the supposition that Justice Ginsburg has put to you, where you have a State that says in the sound discretion of the warden you can be put in solitary confinement, suppose that were the regime? Paul L. Hoffman: --Yes. Anthony M. Kennedy: No rules. And the warden said, I think every fifth prisoner should know what it's like to be in solitary, and I put you all in solitary for the first 2 months of your confinements, one out of five. Is that within the sound discretion of the warden? Paul L. Hoffman: Well, I think that if-- Anthony M. Kennedy: And it sounds to me like it might well be, but would there be an underlying due process claim that you could bring to show that this was not within sound discretion as that term is generally understood under the law? Paul L. Hoffman: --I believe that this Court left open in Hewitt the question about whether there could be due process claims for that kind of arbitrary decision. I'm not sure about that hypothetical. I think if it was done to punish someone, I believe it would be different, and that one of the reasons it would be different is that the consequences of punishment, as this Court also recognized in Hewitt... in Hewitt, the Court distinguished between administrative segregation and disciplinary segregation in part because it found that the administrative segregation had no impact on parole, likely or otherwise. In Hawaii, and I believe it's true in many States, if there's a finding of misconduct that accompanies the decision to put someone in solitary confinement, that has an additional impact beyond the physical change in conditions of confinement, which I believe is where your question is coming from. If there's a decision made for other institutional interests that doesn't focus on a particular person that says one in five, or you start out your confinement in solitary confinement to see what it would be like if you break the rules, that was... that presents a different question, I think. Anthony M. Kennedy: But then it seems that even if there's a sound discretion standard there's going to be some litigation under the Due Process Clause. Is that what you're saying? Paul L. Hoffman: Justice Kennedy, I believe that if, in fact, States gave unlimited discretion... in fact, if we went back to the days of the hands-off rule before Wolff started, what would happen is, there would be a new generation of litigation about what the due process required in a variety of situations and I believe, and certainly I would be urging, that what the ultimate result of that would be, is something that looked a lot like Wolff v. McDonnell and, in fact, I think Wolff v. McDonnell layes out a set of procedures that are well understood in the prisons of this country that are applied every day in hundreds of different situations, that are accepted, and about which there's not a lot of controversy, and they are very deferential to the States. Sandra Day O'Connor: Well, counsel, after Wolff the Court decided a case called Vitek v. Jones in 1980, and this is what was said in that opinion: that changes in the conditions of confinement having a substantial adverse impact on the prisoner are not alone sufficient to invoke the protections of the Due Process Clause as long as the conditions or degree of confinement to which the prisoner is subjected is within the sentence imposed on him. Now, that language sounds to me like it would go a long way toward ruling out these claims. Paul L. Hoffman: But this Court also said in Wolff that solitary confinement should be treated in the same manner, and I think that... and in this Court in Wright v. Enomoto summarily affirmed a case in which the issue of disciplinary segregation that was the only one that was involved. Ruth Bader Ginsburg: Not just solitary, because you made a distinction between administrative segregation, so you could be in solitary and you wouldn't have this right, but one thing that puzzles me about this particular case, the 1983 action was begun at an interlocutory stage. The warden overturned the basic punishment. True, it's after the time was served, but there is no... on this record there is no disciplinary segregation. So it's just like... in this particular case it's just like it had been an administrative segregation. The terms are virtually the same, the terms of incarceration, so why should we treat this like a disciplinary segregation when the warden's own determination has in effect changed its character? Paul L. Hoffman: Well, I don't think that the warden's decision changed the character. What happened in terms of the procedure in the case was that this was a disciplinary punishment of 30 days that was made after the adjustment committee made its decision and found him guilty of misconduct under the rules. Ruth Bader Ginsburg: But didn't the warden, who has review authority and did review this, say that was wrong? The discipline is out of it. Isn't that the effect of the warden's decision to X out the discipline part of it? Paul L. Hoffman: Well, what happened is that after Mr. Connor filed a section 1983 claim in Federal District Court in March of 1988, the... Deputy Administrator Pikini expunged as part of the administrative review the 30-day sentence involved in the case, in May of 1988. Ruth Bader Ginsburg: So it's just like talking about a district court decision that's been vacated by the court of appeals. Paul L. Hoffman: Well, what is still at issue, although not in the questions presented, is whether there is any damage claim relating... for the wrongful 30-days in disciplinary punishment. That's what the remaining claim is... when it... if-- Ruth Bader Ginsburg: Would there be a damage claim for someone, let's say, who is incarcerated pending trial, and then that person is... it's found on appeal that the evidence was insufficient? Would there be a 1983 claim for the incarceration in the interim? Paul L. Hoffman: --Not, I believe, on those facts. Ruth Bader Ginsburg: Then why is this different? Here we have a disciplinary determination by the original board, and it's overturned by the warden. Paul L. Hoffman: Well, I believe what... the problem is that he served the time, and he served the time because the State violated its due process obligations under the law. Ruth Bader Ginsburg: But there was an appeal right and it was taken, and was successful. Paul L. Hoffman: But he still suffered the harm, and the harm... I mean, I think he would have to show, as a matter of fact when it goes back down, that the harm was caused by that failure to afford him with due process, and his-- David H. Souter: Well, you're saying that the essence of the harm is its disciplinary character. Your... I understood your argument to be that if this had been imposed purely administratively for nondisciplinary purposes there would be no liberty interest and no due process claim, so once the disciplinary character has been expunged, and there is no... presumably no chance of collateral consequences, e.g. in the parole decision, then what do you have left? Paul L. Hoffman: --Well, but I think that that... the question, as I understood it, presented in the case was whether there was a liberty interest created by these regulations so that he would get those benefits. I think-- Anthony M. Kennedy: I'm interested right now in Justice Ginsburg's question, and it seems to me that in answer to her question there is nothing left for you to complain about with respect to a due process violation once the disciplinary character has been taken away, because the mere... the mere, minor increase in discomfort would not in and of itself present a liberty claim, had it been done administratively. Paul L. Hoffman: --Well, it's not... first of all, it's not clear that it would have been done administratively. He was in the general population. He was working. He had a life within the prison of a certain kind. There's no basis in the record to believe that he would have been subjected to administrative segregation. Antonin Scalia: Your answer is that it was not done administratively. Paul L. Hoffman: It wasn't. Antonin Scalia: You cannot retroactively make it done administratively. When it was done, it was done as a punishment. Paul L. Hoffman: That's that. Antonin Scalia: And you can say later that was a mistake, but in fact it was done as a punishment. Paul L. Hoffman: Right. I mean, our position is that is what it was done for. Antonin Scalia: And there may be some question whether you can recover for that under 1983 or not, but that's not a standing question, it's a question of the merits. Paul L. Hoffman: That's our position. William H. Rehnquist: But it could be important, too, if the Court adopts some sort of calculus as to consequences for parole and that sort of thing. The fact that he served the 30 days can't be undone, but the fact that it may be treated much differently for parole purposes might make a difference in whether or not there's a State liberty interest. Paul L. Hoffman: Well, I think that that's true, Chief Justice Rehnquist, and I think that one of the problems, if I may just address the bright line proposal that-- Ruth Bader Ginsburg: Isn't there something like a failure to... the 1983 was at an interlocutory stage. You have to watch the entire State proceeding, and it ends up with the disciplinary sanction expunged. Paul L. Hoffman: --I think that... as I understand it, after Patsy at least, there's no requirement to have exhausted the remedy to begin with, and that the section 1983 action would not be changed simply because there was this particular action that was taken after the section 1983-- Ruth Bader Ginsburg: But in fact he did appeal, and in fact was successful on appeal. Paul L. Hoffman: --He was successful on that one issue, but he still served the time and suffered the punishment for no good reason, because from his standpoint he had a staff-- Ruth Bader Ginsburg: He didn't suffer the punishment. It's the collateral consequences. You differentiated administrative and disciplinary because of the collateral consequences, and now there are no collateral consequences. Paul L. Hoffman: --Well, there are no collateral consequences at this point, given what the administrator did with respect to this finding of misconduct, but what I would urge is that with respect to deciding what process is due, one can't know that in advance. I mean when a prisoner is subjected to the potential of a misconduct finding, that's when a decision has to be made about what process is due. He... as in... if the case... if he had not had this punishment expunged, then it would have been possible to consider it for parole. I would also say, in terms of the bright line rule, that I would certainly not concede for a minute that what happens in disciplinary punishment within Hawaii and within many States is not sufficiently important to fall within whatever bright line exists, and in Wolff, for example, this Court had passages that said that the fact that you could lose good time didn't have the necessary effect on the duration of your sentence. You might get the good time back, it might not affect your parole. The fact of being put in solitary confinement was viewed to be a fact of real substance, and I think within the context, if the issue is what kinds of rules can-- Ruth Bader Ginsburg: Mr. Hoffman, there's just one... you said... brought up the Patsy case, but that's going outside the prison setting. Suppose a guard had thrown somebody into solitary and the prison code said you can go to a disciplinary committee and review that, and the prisoner doesn't, he just runs right into Federal court and says, the guard threw me into solitary, I don't have to exhaust anything under the prison regime-- Paul L. Hoffman: --Well, but I don't think he... at that point, he had not even tried to take advantage of the due process that was afforded... he wouldn't have a violation at that point, because it's there. Ruth Bader Ginsburg: --Isn't part of the due process that you can go to the warden... it's certainly in that code that you're relying on for other reasons that says you can apply to the warden for review. Paul L. Hoffman: Well, but Wolff says that you also get a chance to call witnesses to prove your point, and so the due process violation that he's claiming is not that he didn't get something else that he could have gotten, but that he didn't get one thing that was central to his point, which was to try to prove that he didn't do what they said he did, and one of the things that Wolff does is say that unless there is some higher institutional interest in terms of institutional security, you get a right to call that witness in order to be able to prove your case. Ruth Bader Ginsburg: Wolff didn't present this situation of a warden having overturned the denial of good time at an earlier stage. Paul L. Hoffman: Well-- Ruth Bader Ginsburg: I mean, suppose that had happened in Wolff. Suppose the tribunal had said, we're taking away your good time, and then the warden reinstates it. Certainly there would be no due process claim. Paul L. Hoffman: --I think that there would still be a due process claim about whether you receive due process at the time. I mean, one of the problems about the facts of this particular case is that it's not clear how Mr. Connor would know whether in fact there was ever going to be any action on this claim. The events... this hearing was in August of 1987. He filed this case in March of 1988. The administrator's decision was in May of 1988. It was not clear at the point he filed this case that there was ever going to be any action, and in fact he had served his entire time by that time, and so if it was wrongful for him to have done that because he had suffered a due process violation, then I think he still has-- Ruth Bader Ginsburg: So it's a bad procedural right. I mean, if you take it in the Wolff context the Warden, after the 1983 action begins, reviews the decision and says it was wrong to remove his good time. He's got it back, so he's going to get out just when he expected to. He would still have a Federal claim you say because of the process? Paul L. Hoffman: --Well, I think that in truth the amount of damages that you suffer in a case like that if you're not, for example, put into solitary confinement but you've lost good time alone would be very hard to establish very many damages, but I think at least theoretically, if you've been denied the process due-- Ruth Bader Ginsburg: You could... you'd have your claim, you could get declaratory relief, and you could get, what is it, 1 in damages, maybe. Paul L. Hoffman: --I mean, you might get nominal damages, you might not get nominal damages. I mean, I think that the-- Ruth Bader Ginsburg: But it wouldn't... but the claim, you'd still have the claim, on your reasoning, right? Paul L. Hoffman: --Well, I think that the claim, if there's a State-created liberty interest, or a liberty interest under the Due Process Clause, you would have a claim if the proper procedures are denied you, yes. We... that would be our position, that you do have that claim. If I may on the, just to address the particular bright line that Hawaii has set forth, the line in this Court's cases has not really been about duration of confinement. I mean, they've tried... this Court has tried to talk about things that are, I believe, things of real substance, including administrative segregation. Where a State actually creates rules that limit the imposition of administrative segregation like Hewitt, this Court has found that that is certainly an important enough matter that the State can be held to its word, and it is an important matter and it may be that in some circumstances administrative segregation would also raise constitutional questions, but the line about duration of confinement would first of all not be a bright line, because in this case we should fall within it. His duration of confinement, at least from the standpoint of what the potential punishment is, clearly makes this an important decision that's going to be made about misconduct, and there are many different interests in a prison about which prison authorities could create regulations that might or might not create a liberty interest, and I think-- Stephen G. Breyer: What the Court has basically done, I guess in this area as in property, is that it's said that one way of looking to see if there's a liberty or property interest is to see if the discretion of the decisionmaker to remove the thing from the person is significantly confined or cabined by State rules or regulations, right? Paul L. Hoffman: --Yes. Stephen G. Breyer: And sometimes the problem is, that protects things that seem trivial, and sometimes it doesn't protect things that seem important. Now, have you a better way than that? I mean, I guess the main argument for that, particularly in the trivial area, is it's hard to think of a better way, and do you have a suggestion, if this is being written for something that would in a better way distinguish the important from the trivial for purposes of the Due Process Clause? Paul L. Hoffman: Well, I think it would be very difficult to draw the line. I mean, I've actually thought a lot about how you would draw that line. Stephen G. Breyer: Is there a better way, really? Paul L. Hoffman: Well, I'm not sure that there is abetter way to draw the line. I think that one of the advantages of the Court's doctrine in the absence of the better way is that it essentially leaves it up to the States to make a certain decision. For example, in almost every State regulation that we looked at, if there's minor punishment, relatively minor punishment, the procedures of Wolff are not applied. I mean, it's much more summary procedures that look a lot more like Hewitt, and it appears that there's not a lot of complaint about that, and so what we're talking about here is a significant punishment. It's significant both under this Court's cases, but also in Hawaii. Hawaii considers this to be an important punishment. Antonin Scalia: Well, why wouldn't it suffice if we held for those matters it's a denial of due process if the States do not provide State court review of the prison determinations? Paul L. Hoffman: Well, I think that this Court's cases, certainly the Perat line of cases seem to indicate that when there's random and unauthorized State action, that post deprivation remedies would be appropriate, but I think that in a case where there's an established procedure like this one, that's been in existence for more than 20 years, that the issue is really what process is due as part of this determination, not at some later point in a State court hearing on damages. William H. Rehnquist: Thank you, Mr. Hoffman. The case is submitted. Speaker: The honorable court is now adjourned until tomorrow ten o'clock.